Review of Billion Dollar Lessons by Paul Carrol and Chunka Mui

Filed in archive risk on January 13, 2010

In business, there are no new mistakes. It's just the same ones made time and time over again. That's the lesson from Carroll and Mui's book which examines the most inexcusable business failures over the last 25 years.

The authors identify seven core mistakes that keep getting repeated time and time again. 1. pursuing non-existent synergies. 2. moving into an adjacent market that really isn't adjacent. 3. misguided consolidations. 4. faulty financial engineering. 5. buying up businesses to create a monopoly. 6. staying the course instead of adapting. 7. chasing the wrong technology.

Some good data and stories here. Tales for example of retailers who could see Wal Mart was coming after them, manufacturers who failed to see that outsourcing to China would reshape their business, and technology companies that refused to see they were going to become obsolete. Only a handful of managers felt their companies could react quickly enough to threats. Part of that also comes from the nature of corporate reporting: companies only report what they do and not what they don't do.

Some good examples in the book include Kodak which has been totally marginalized by the digital photography revolution. That's despite the fact that Kodak had made a detailed and accurate analysis of the threat back in 1981.

Although the writers don't mention it, a good example of moving into adjacent markets that aren't there, in combination with a bad merger, is AOL-Time Warner.

The writers propose a model where companies develop systems that allow people to ask hard questions. That might be easier said than done. But the book is worth looking at to see how companies keep making the same mistakes.