The 11 types of business failure – and how you can learn from the mistakes of others

Founders and business professionals can learn a lot about the failure landscape from Robin Banerjee’s new book, Who Blunders and How: The Dumb Side of the Corporate World. The eleven chapters are written in a conversational style and span 265 pages, full of examples, analysis and tips. 

From startups to established brands, many companies have made serious mistakes, and decayed or disappeared. There are examples abound from India and around the world: Kodak, Ambassador cars, BlackBerry, Lehman Brothers Kingfisher Airlines, and many more. 

Here are my key takeaways from the eleven chapters of the book. See also my reviews of the related books The Other ‘F’ Word, Adapt, The Up Side of Down, The Wisdom of Failure, Fail Better, Fail Fast, and Failing to Succeed. 

Missing the innovation bus 

“Innovation is about anticipating the future, responding to changing customer needs, or creating a new need for customers to consume. Organisations need to rekindle the innovation magic of entrepreneurship,” Robin emphasises.

He advises companies to be flexible, inspire creativity, encourage employees to experiment, cultivate talent diversity, and design a career path for innovators. Successes in this regard include Google, 3M and Microsoft Xbox.

Incorrect business models 

Robin documents a number of failure reasons for startups. They include demand-supply mismatch, inadequate capital or cash burn, poor marketing, co-founder conflict, lack of professionalism, competition, operational challenges at scale, and being ahead of the time.

Founder and CEO blunders

Charismatic leaders have fared much better in this regard, Robin explains. Leaders should be open to hearing diverse opinions and even bad news. They should guard against slips of the tongue and antagonising remarks.

As solutions to such issues, Robin recommends that CEOs and boards focus on teambuilding, develop new competence in a changing world, keep a keen eye on governance, stay focussed on the customer, and build solid governance processes. Capability, credibility, and compassion are key success factors in this regard.

Skimping on quality

Growth ambitions should never overtake quality consciousness, Robin warns. The perception of quality is decided not just by the manufacturer but the customer as well. “Quality concern erodes the edifice of trust,” he adds.

Family businesses: infighting and succession

To become more professional, Robin advises family-run businesses to stay away from arbitrary management styles, nepotism, and sticking to the laurels of past glory or to outmoded practices. He recommends more foresight, clarity on business values, and willingness to negotiate over disputes.

Business disputes

Disputes over IP, contracts, business partnerships, and employee relationships can cause serious damage to a company. Examples include patent and design disputes (between Microsoft and Samsung; Kellogg’s and Nabisco; Britannia and ITC), labour unrest (Maruti Suzuki India), acquisition-exit terms (NTT DoCoMo and Tata Teleservices), and business partners (Jamie Dimon and Sandy Weill of Travelers and Citigroup). 

Some rivalries between business groups have led to allegations of unethical advertising practices (Tesco, Heinz India) and even corporate espionage (P&G on Unilever). Robin advises dispute resolution (through mediation or arbitration), written documentation, ethical communication, and adherence to contracts as appropriate practices in this regard.

Mergers and Acquisitions

For successful M&A, Robin recommends a ‘give and take’ approach, assessment of fit, and combination of complementary offerings. Each company should be open and willing to learn from the other. Respect, trust, and willingness to negotiate are key success factors.

Public relations fiascos

Examples of PR debacles have been documented during Volkswagen’s deceit in under-reporting emissions from 2006 to 2015, Bridgestone’s denial of Firestone tyre problems, BP’s oil spill in the Gulf of Mexico, News International’s phone hacking, FIFA’s repudiation of corruption claims, United Airlines’ “re-accommodation” of a passenger, and Uber’s handling of accusations about its toxic culture.

Corporate governance ills

Micro- and macro-level issues (at employee and leader levels) need to be fixed. Robin recommends internal controls, independent directors, splitting of the CEO and chairperson roles, third party audits, and enforcement of legal and ethical guidelines.

The debt trap

Over-reliance on borrowing leads to less room for manoeuvre. Failure to meet payment obligations can lead to penalties, lower credit ratings, reduction in market valuation, and negative employee morale, Robin warns.

Human error

Robin advises professionals to have a sound management system, an attitude of realism, relevant data and dashboards, requisite talent in the firm, and a focus on cashflow. Plans should be action-oriented, and assessed regularly.

The author finally concludes as in sum, this is a must-read book for all startups and corporates, and offers a wealth of insights and tips into the world of business blunders. The author ends with the adage – “Tough times don't last; tough people do.”

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