Seven Ways to Fail Big, by Paul B. Carroll and Chunka Mui, a companion article to Billion-Dollar Lessons, appeared in the September 2008 issue of Harvard Business Review.
Here is the idea, in brief:
“Giant investment write-offs. Shuttered business lines. Bankruptcy. The culprits behind these flameouts? Strategies so alluring they blinded executives to their dangers.
“It’s tempting to embrace a strategy that helped another company strike it rich. But not every strategy works for every enterprise. To avoid falling sway to the wrong one, first understand the seven “sirens” accounting for most business failures, suggest Carroll and Mui. These include attempting to move into adjacent markets, using mergers to try capturing synergies, and staying the course when market signals point to the need for a new direction.
“Then, when considering your next strategic move, designate devil’s advocates (people with no stake in the decision) to ask tough questions: “Is this idea realistic for long-term success?” “Has important information about the strategy’s limitations reached the right people?”
“By objectively evaluating potential strategies, you stand the best chance of choosing the right one for your firm.”