Seven Ways to Fail Big Review

While reading 7 Ways to Fail Big by Paul B. Carroll and Chunka Mui, I came across numerous points that were worth mentioning. The article analyzes 7 risky strategies and offers advice on how to not go down these paths. The first strategy was The Synergy Mirage. This is when two companies join together in hopes of helping each other achieve goals and objectives. This doesn’t work however because businesses don’t have the same business models or customers.

Quaker Oats acquired Snapple for 1.7 Billion dollars and sold it for 300 million 3 years later (pg.4). The second strategy was Faulty Financial Engineering.  This is when a company participates in aggressive financial practices that can be misleading. The two problems with this strategy are they can produce flawed products and they encourage further hopelessly optimistic borrowing to finance more investment (pg. 4).  The third strategy was Stubbornly Staying the Course. This is basically reinvesting in your firm with your current strategy in response to the market. This happened to Kodak and led to them filing for bankruptcy. You need to be able to innovate with the changing times. If a company doesn’t innovate, they cannot survive. The fourth strategy was Pseudo-Adjacencies. This is when adjacent marketing strategies build on an organization’s strengths to expand into a related business. Ogelbay Norton, which was a steel producer, tried to expand into the limestone business. They didn’t know anything about the limestone business and expected its customers to purchase this product as well. They ended up filing for bankruptcy. The fifth strategy was Bets on the Wrong Technology. Everyone is always looking for the next best invention or company that they can invest in. Motorola invested in a $5 billion Iridium satellite telephone. They filed for Chapter 11 only a year after the phone was in the market. I believe companies should take risks but do your research!  The sixth strategy was Rushing to Consolidate. The problem with consolidating is you may be buying an asset, but every company comes with problems as well. For example, USAir bought Pacific South West Air and Piedmont to expand into the West.

The company tripled in size, but it’s information systems weren’t able to keep up (pg. 9). Service ended up suffering and computers broke down on paydays. Another great point was that companies might not be able to hold the same customers of a company they decide to purchase. The seventh and last strategy was Roll-Ups of Almost Any Kind. This is the idea of taking tens, hundreds, even thousands of small companies and forming one giant company with them to create power and brand recognition. Roll ups have a hard time maintaining their fast rate of acquisition. Also they fail to account for tough times, which are inevitable (pg.10). The stock price of the company needs to keep rising, other wise they cannot keep building the company. Instead debt begins to start building up leading to bankruptcy. Loewen Group owned 131 funeral homes in 1989 and acquired 135 more the next year expecting the coming “golden era of death”, which was the demise of the baby boomers (pg.10). A small decline in the death rate finished Loewen. Don’t be blinded by the idea of growing so fast that you tend to overlook the risk. Knowing these 7 strategies is a necessity to survive!