Billion Dollar Lessons: What You Can Learn from the Most Inexcusable Business Failures of the Last Twenty-Five Years

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Product Description
In the 1960s, IBM CEO Tom Watson called an executive into his office after his venture lost $10 million. The man assumed he was being fired. Watson told him, “Fired? Hell, I spent $10 million educating you. I just want to be sure you learned the right lessons.” In Billion Dollar Lessons, Paul Carroll and Chunka Mui draw on research into more than 750 business failures to reveal the misguided tactics that mire companies over and over. There are thousands of books about successful companies but virtually none about the lessons to be learned from those that crash and burn.

Lesson One: The cold hard facts are that between 1981 and 2006, 423 major companies with combined assets totaling $1.5 trillion filed for bankruptcy.

Lesson Two: The number one cause of failure was misguided strategy – not sloppy execution, poor leadership, or bad luck. These strategic errors include pursuing nonexistent synergies; moving into an “adjacent” market that isn’t really adjacent and
buying more problems than efficiencies through misguided consolidation.

Billion Dollar Lessons provides proven methods that managers, boards, and even investors can adopt to avoid making the same mistakes. It draws on vivid examples to help you thoroughly assess potentially disastrous strategies before they bring your company down. Think of Billion Dollar Lessons as the flip side of Good to Great, but just as eye opening and essential as that business classic. Billion Dollar Lessons will keep you from going from good to gone.

Customer Reviews: Read 17 more reviews...

5 out of 5 stars

Does your company need "failure insurance"? September 11, 2008
9 out of 9 found this review helpful

Two of the business thinkers I admire most are Jim Collins and Jason Jennings. Collins has written two books in which he explains how certain companies are built to last and how other companies have been able to make a "leap" from good to great. Jennings has written several books in which he explains what all high-performance companies share in common, with two of their attributes being that (a) they have a bold, compelling vision but also "nail the fundamentals, and (b) produce more and better with fewer resources and do it faster. There are important lessons to be learned from business success but, as Paul Carroll and Chunka Mui explain in their book, there are valuable lessons to be learned from business failures. For example, rather than because of lack of execution, poor timing, or bad luck, "many of the of the really big failures stemmed from bad strategies. Once launched, the strategies were doomed to fail, and these failures probably could not have been prevented by even spotless execution - unless the implementers were licensed to kill the strategy itself." That said, are doomed strategies avoidable or are fatal flaws only recognizable in hindsight? To answer this question, Carroll and Mui embarked on rigorous research the "billion-dollar lessons" they learned are provided in this volume.

Among their most interesting revelations is that failures tended to be associated with one of seven types of strategy. "Failures could certainly happen for other reasons, but if a company followed one of these strategies it is far more likely to fail." Here's where it gets really interesting. For as long as I can remember, all of these strategies have been included among those that organizations are most likely to select: synergy, financial planning, rollups, "staying the course," adjacencies, "riding" technology, and consolidation. Carroll and Mui duly acknowledge the merits of each and the fact that they have served many organizations well. So what's the problem? In many instances, excess is the root cause. For example, overestimating the potential benefits of mergers (e.g. AOL Sears, Time Warner, UnumProvident,), aggressive accounting that crosses the line into illegality (e.g. Conseco, Green Tree Financial, and Spiegel), buying dozens, hundreds, and even thousands of local businesses and combining them in a regional or national "behemoth" (e.g. AutoNation, Tyco, and Waste Management), and ignoring or underestimating a serious threat to "business as usual" and then making insufficient adjustments (e.g. Kodak, Mobile Media Communications, and Pillowtex).

Carroll and Mui devote a separate chapter to each of the seven categories of corporate strategy involved in what they assert are avoidable failures. "We aren't saying that these seven strategies are doomed to failure. Far from it. In the right circumstances, all of these strategies can succeed splendidly. All we're saying is that these strategies are danger zones. If you are pursuing one of these strategies, you need to be extremely alert to what could go wrong, and ready to react before your business is flirting with disaster." In Chapters 10 and 11, they explain several processes by which to "build disagreement into the formulation of strategies." On of them is identified as the "devil's advocate review" to bring all possible objections to the surface, to enable those involved to consider every possible risk and reward and then cross-rank them in terms of relative importance and degree of probability. The objective is not to generate an alternative to the proposed strategy. Rather, to subject that which is proposed to rigorous scrutiny. "The process isn't designed to produce the best answers; it's designed to produce the best questions." For these and other reasons, Carroll and Mui view the information, insights, and recommendations they offer in their book as "failure insurance."

Throughout most of their narrative, I especially appreciate their brilliant use of real-world mini-case studies as well as their strategic application of two reader-friendly devices, "Red Flags" and "Tough Questions," that serve two very important purposes: they help to create and then maintain what is (in effect) an early-warning system for those engaged in a strategy planning process or who have only recently embarked on executing a strategy; also, the "Red Flags" and "Tough Questions" material facilitates, indeed expedites frequent review of key points later. Redundant verification is imperative, especially in a competitive marketplace in which change is the only constant.

One of my favorite New Yorker cartoons features two parents in formal wear seated at one end of a long table in a vast dining hall, their son seated at the other end of the table. High above them, chandeliers hang from a cathedral ceiling. Elaborate tapestries adorn the walls together with family portraits in lavish frames. Several uniformed attendants dutifully stand nearby. The child stares at the dinner plate that has just been placed before him. "I say it's spinach and I say to hell with it."

I thought of that cartoon as I neared the conclusion of this book when Carroll and Mui make a point worthy of special attention and emphasis: The need to establish and then sustain what could be characterized as a "culture of candor," one in which principled dissent is not only strongly encouraged but indeed required and (yes) gratefully acknowledged. Many corporate strategies resemble a naked emperor. Its benefits are analogous to a wardrobe that doesn't exist. In Hans Christian Andersen's tale, only a child speaks up. Who will do so in a corporation about to commit to a flawed strategy, one that is doomed to fail? "We're willing to bet that in every failure that we studied, there were critical thinkers in the heart of the organization who saw the dangers of the proposed strategy. We hope to legitimize their voices [especially of those in middle management] to question and, when appropriate, to quash doomed strategies while they are still on the drawing board." It is a result devoutly to be wished.

5 out of 5 stars

Billion Dollar Lessons September 11, 2008
7 out of 7 found this review helpful

This is one of the best business books that I have ever read. While I knew parts of many stories in the book, I never realized WHY certain events happened. When I have read about big corporate blunders in the past I always asked "Why did this happen?" The authors answer that question and put the huge blunders into several categories that are easy to understand and relate to.

I liked the "Tough Questions" found at the end of each chapter. If business executives pay attention to just those questions, then they won't be involved in one of these huge mistakes.

I also want to say that when I sat down to read it, I expected to read for 30 minutes and put it down. This was a page turner and I didn't stop reading until I finished.

Great book! Well written! Needed by the Business Community!

5 out of 5 stars

Other people's lessons, as important as other people's money September 22, 2008
6 out of 6 found this review helpful

I enjoyed reading Billion Dollar Lessons. Many business books read like school texts, but these authors connect with each example and the story to easily teach each lesson.

Also, while so many business and leadership books on the market focus on what worked well, these authors bring attention to how those same strategies can backfire. Each of these strategies can play a role in a successful enterprise, but Mr. Carrol and Mr. Mui elucidate nicely how managment can fool itself into believing that any one strategy can serve as the panacea to create business success.

I recommend this book.

5 out of 5 stars

Billion Dollar Lessons September 12, 2008
5 out of 5 found this review helpful

At last a book that fills an essential part of business literature that heretofore has been neglected. Traditionally the focus has been on success stories; but that is only one side of a more complex picture. The authors describe Tom Watson's charge to one of his executives to learn from a recent $10 million business failure. How much more learning is available from similar failures in other organizations over the past 25 years! The book provides ready access to that rich collection of experiences together with the authors' sage counsel. The difference between wishful desire and a clear, robust and actionable strategy is clearly shown. Without the latter, success is at best a "crapshoot.".

The book is well-organized and well-written. I highly recommend it for both the seasoned professional and business school student.

5 out of 5 stars

Trillion Dollar Lessons September 26, 2008
2 out of 2 found this review helpful

Amazing, how quickly, with a string of Government bailouts of financial institutions, billions have become trillion.

Learning from failure builds experience, but to date that has been mostly lip service. How refreshing, the authors have taken a giant step to begin excavation of the corporate landfill. Sometimes in business we seem to declare victory, and move on, (to possibly much bigger failures.) This book gives us reason to think deeper about the reasons behind our individual leadership values, and confidence - actual or perceived.

I was hoping for a bit of a comedy, and the book does read with a light sense of humor, and has tragically humorous examples, but if we read it for fun, impersonally, as case studies of what corporations did, we lose the benefit and significance of this book. While the organizing structure of the book is seven strategies, and analyses are detailed, I think the greater value of this book comes from, in the authors' own words - "...this book is more about human nature than strategy - how we humans are flawed, how those flaws show up in business..."

Don't declare the book read and move on. Each of us has clung to some, if not all, of these strategies and we need to deeply reflect on our own styles and perceptions that can contribute to the negative consequences so well described in this book. We need to personalize the authors' discoveries and spend at least a little time contemplating our personal daily behavior in business. Corporations don't make decisions, people do. I'm particularly fond of Chapter 8 "Why Bad Strategies Happen to Good People," and Chapter 9 "...to Good Companies."

I await the sequel "The 7 Habits in Failed Leadership."

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