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    Why Smart Executives Fail

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    Barry Hii
    This document summarizes key points from the book "Why Smart Executives Fail" by Sydney Finkelstein. It discusses common misconceptions about why executives fail and provides examples of failures from companies like General Magic, Iridium, Samsung Motors, and Webvan due to venturing into new businesses without understanding customer needs. It also examines failures from over-reliance on past strategies at companies like Johnson & Johnson, Rubbermaid, and Motorola. The document concludes by outlining seven habits of executives that lead to spectacular business failures, such as seeing themselves as dominating their environment, prioritizing their personal interests over the company, and stubbornly relying on past strategies.

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    Why Smart Executives Fail

    Uploaded by

    Barry Hii
    460 views35 pages
    This document summarizes key points from the book "Why Smart Executives Fail" by Sydney Finkelstein. It discusses common misconceptions about why executives fail and provides examples of failures from companies like General Magic, Iridium, Samsung Motors, and Webvan due to venturing into new businesses without understanding customer needs. It also examines failures from over-reliance on past strategies at companies like Johnson & Johnson, Rubbermaid, and Motorola. The document concludes by outlining seven habits of executives that lead to spectacular business failures, such as seeing themselves as dominating their environment, prioritizing their personal interests over the company, and stubbornly relying on past strategies.

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    Why executives fail and how we can learn from their mistakes

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    This document summarizes key points from the book "Why Smart Executives Fail" by Sydney Finkelstein. It discusses common misconceptions about why executives fail and provides examples of failures from companies like General Magic, Iridium, Samsung Motors, and Webvan due to venturing into new businesses without understanding customer needs. It also examines failures from over-reliance on past strategies at companies like Johnson & Johnson, Rubbermaid, and Motorola. The document concludes by outlining seven habits of executives that lead to spectacular business failures, such as seeing themselves as dominating their environment, prioritizing their personal interests over the company, and stubbornly relying on past strategies.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    460 views35 pages

    Why Smart Executives Fail

    Uploaded by

    Barry Hii
    This document summarizes key points from the book "Why Smart Executives Fail" by Sydney Finkelstein. It discusses common misconceptions about why executives fail and provides examples of failures from companies like General Magic, Iridium, Samsung Motors, and Webvan due to venturing into new businesses without understanding customer needs. It also examines failures from over-reliance on past strategies at companies like Johnson & Johnson, Rubbermaid, and Motorola. The document concludes by outlining seven habits of executives that lead to spectacular business failures, such as seeing themselves as dominating their environment, prioritizing their personal interests over the company, and stubbornly relying on past strategies.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 35

    Why Smart Executives Fail

    And What You Can Learn From


    Their Mistakes
    by Sydney

    Finkelstein

    Sit back and THINK!

    Major Misconceptions
    1. Executives were stupid
    2. Executives couldnt have known what was
    coming
    3. Failure to execute
    4. Executives werent trying hard enough
    5. Executives lacked leadership ability
    6. Company lacked necessary resources
    7. Executives were simply a bunch of crooks

    Great Corporate Mistakes

    New Business Ventures


    General Magic - PDAs
    Developed a Dream Team of executives and gained
    many licenses with partners to bring in major cash
    flow, but before the software was even developed.
    Internet, competitors, and debt doomed this company

    Iridium (Motorola) Satellite Cell Phones


    A constellation of 64 low-Earth orbiting satellites,
    allowing for subscribers to make phone calls from any
    global location.
    Even though they knew the difficulties they made the same
    mistakes anyway too big, costs too much, and cant use
    everywhere---like inside buildings!

    Samsung Motors (Korea)


    Created automobiles because head of company was a
    car enthusiast. He felt that since Samsung was atop
    other industries in previous decades, it would be top of
    this industry also.
    Builder to Imperialist

    Webvan
    Developed a internet grocery system that filled orders
    by machines and delivered products to customers with
    a 30 minute window delivery time (i.e. between 8pm
    and 8:30pm)
    Didnt realize low-margin of supermarket business and chose
    a strategy that was very complex versus the simple business
    model.

    Innovation and Change


    Johnson & Johnson in Stent Business
    Bought patents for Palmaz-Schatz stents and then
    bought out Cordis, an angioplasty balloon maker. Had
    a virtual monopoly on a product customers
    desperately wanted.

    Rubbermaid
    Created many products with great speed, giving itself
    a monopoly on many products. Did this with little
    market testing and quick innovations.

    Motorola Cell Phones


    Created first major analog cell phones and owned 60
    percent of the market in 1994.

    Why These Companies Failed


    None of these companies listened to the
    customer. All of them had major market share
    and dominated their competitors. They felt this
    was good enough and did not have to make any
    changes in their product while the competition
    did. (Icarus?)
    Johnson & Johnson
    Continued production of same stent, even when cardiologists
    were saying that these stents were not good enough.

    Rubbermaid
    Continued producing low-quality products at high price even
    when economy shifted into more-for-less mindsets.

    Motorola
    Continued producing analog cell phones even when
    customers were telling them they needed to switch to digital

    Mergers and Acquisitions


    Quaker Acquires Snapple
    Snapple had poor sales with Coke and Pepsi entering
    the tea market, so Quaker bought them.
    Problem
    Quaker also owned Gatorade, and therefore thought they
    could sell the Snapple just like Gatorade

    Sony Acquires Columbia Pictures


    Sonys Betamax video recorder was booming and so
    Sony bought Columbia to produce movies that would
    work with the Betamax.
    Problems
    When the CEO of Columbia did not transfer with the
    merger, Sony did a poor job of hiring. Did not do their
    research on Peters and Guber. Peters-Guber spent way
    too much of Sonys money.

    Saatchi & Saatchi


    Was one of the leading ad agencies
    Began buying companies acquired 37
    Then continued buying to become number one
    in everything (bought consulting firms and
    banks).
    Problems
    Went on acquiring companies without proper
    techniques, just so they could have more growth
    Debt caught up with them
    Ended up only caring about how many
    acquisitions it could get
    Builder becomes Imperialist

    Bad Strategies
    Wang Labs
    Wang ran his company as a dictator, controlling all
    facets of the business. This characteristic of the
    business that made it great also was the thing that
    made it fall. (Icarus)

    Snow Brand Milk


    Snow Brand Milk had an outbreak of staphylococcus
    linked to its milk and never learned from its first
    mistake.
    Snow Brand then let its quality fall so that it could
    produce over capacity and once again had an
    outbreak of sickness linked to spoiled milk.
    Snow Brand also sold beef, and tried to disguise its
    Australian beef as Japanese beef because of Mad
    Cow disease and pocketed the difference.

    Boston Red Sox and Integration


    It took the Red Sox twelve years before they put an
    African American into the game once there was
    integration. (It was only as a pinch runner .)
    While the Red Sox were a team in decline they did
    nothing to fix it. Other teams were becoming better
    because of integration, but the Red Sox still went
    along in their ways.

    The Causes of Failure

    Brilliantly Fulfilling the Wrong Vision


    Strategic Misintent
    The Magic Answer
    When an executive thinks he can find the secret to success
    in one principle or model. It encourages one big bet that is
    often the wrong one. Usually a valid principle or model, but
    too incomplete. If you bet the company, you bet too much.

    The Holy Grail


    A strategy that remains forever unattainable.
    i.e. First mover advantage Internet boom

    The Wrong Scoreboard


    An inappropriate measure of success.
    i.e. Market Share McDonalds example (Boeing)

    Negative Transfer: Good Intellect, Bad Place


    Yesterdays Answer
    Where a business is concerned with a picture of reality that once
    worked, but is no longer valid.
    Boston Red Sox not integrating sooner.

    A Different Game
    Companies perceptions become obsolete not because times have
    changed, but because it has moved into a new area where its
    version of reality is no longer valid.
    Toro expanding into snow blowers. Grass always grows, but it
    doesnt always snow.

    A False Self-Image
    Being wrong about what you are good at.
    L.A. Gear thinking it was a shoe manufacturer, when really it was a
    girls fashion manufacturer.

    The Film Producer Error


    Failing to take sufficient account of the specific and often unique
    attributes that made a particular venture successful.
    United Airlines trying to copy Southwests low fares, but what made
    Southwest successful was its employees

    One-Track Mind(-set)
    Its A Small World
    When people in a company base their assessments of reality on
    experiences theyve had that are simply not representative of
    the larger world.
    Iridiuim: could solve worlds cell phone problems!

    Home Field Rules


    When executives assume that their counterparts elsewhere will
    play by the same rules that they play by at home.
    Sony-Columbia: Sonys Japanese bosses assumed American
    businesspeople would be operating with the same ethical codes
    as the Japanese.

    Expansion Fever
    Its what a company is suffering from when it pursues rapid
    expansion at the expense of profitability and without controlling
    liabilities.
    Saatchi & Saatchi

    Delusions of a Dream Company


    Zombie Businesses
    Businesses that are stuck in their ways:
    Watch us and see how its done.
    Were better than you are. Period.
    Trust us we know what were doing.
    We dont need customers telling us how to run our business.
    We have a positive attitude here.
    No negative feedback, please.
    Telling everyone will just make things worse.
    Never settle for less than perfect.
    Whatever happens, its not my fault.
    Too much team spirit.
    I speak for the entire company.

    Tracking Down The Lost Signals


    The delusional policies and attitudes that
    make for a zombie business will help
    support the mistaken picture of reality,
    encouraging employees to ignore any vital
    information that would threaten it.

    7 Habits of Spectacularly
    Unsuccessful People
    From the book: Why Smart Executives Fail

    Habit # 1:
    They see themselves and their companies
    as dominating their environment
    They feel that theyre successful and that their

    companies are successful because they made it happen


    They believe they can do it by their own personal genius
    and personality
    As far as they are concerned, everyone else is there to
    carry out there personal conception of what should be
    going on.

    Failure Because
    They may feel as though there is not
    need for other qualified personnel
    Lack of communication

    Habit # 2
    There is no clear boundary between their
    companies interest and their personal
    interests
    They identify too much with the

    company
    Too large a stake too much power

    The Downfall
    Begin to make unwise decisions
    Cause the company to do things that
    would make sense for a person but not
    a company
    Become extreme risk takers

    Habit # 3
    They think they have all the answers
    Hasty decision making
    Taking short cuts

    Problem.
    Dont consider the ramification of their
    actions
    Dont allow room for new
    learning/answers

    Habit # 4
    They eliminate anyone who isnt 100%
    behind them
    Their job is to instill their vision

    throughout the company


    If someone doesnt rally around them,
    they feel their vision is being
    undermined

    Whats Wrong with this


    picture?
    Limit the companies abilities
    Eliminate chance to correct problem
    ASAP

    Habit # 5
    Act as the company spokesperson,
    obsessed with the company image
    Love to cause a media frenzy
    Constantly in the public eye

    giving public speeches


    appearing on t.v.

    This Causes
    Their management efforts to become
    shallow and ineffective
    Best energies go toward crafting public
    image rather than running the company

    Habit # 6
    They underestimate major Obstacles
    They become so caught up in their

    vision, they overlook the difficulty of


    getting there
    Assume all problems are solvable

    This leads to
    Loss of edge
    Complacency
    Competitors success

    They may top your success


    Lessen the gap

    Habit # 7
    They stubbornly rely to what worked for
    them in the past
    Get stuck on the tried and tested
    Develop tunnel vision
    Lack the ability to change

    What happens
    Market outgrows the company
    Stop being able to meet customers
    demands
    Company is at a stand still and on
    the fast track to failure

    Learning From Mistakes

    Predicting the Future


    Early Warning Signs of Failure
    Unnecessary Complexity
    Tends to create a bigger problem than it solves

    Speeding Out of Control


    Make costly mistakes because executives are overwhelmed

    The Distracted CEO


    Leadership from the top, distracted CEO can have severe
    consequences

    Excessive Hype
    Can hide problems or mask intentions that if known would lead
    people to make different decisions

    How Smart Executives Learn


    Smart Executives Step Up to Learning and
    Open-Mindedness
    Learning From People
    Employees (suggestion boxes)
    Customers

    Get to Worst Practices, Not Just Best


    Practices
    Look at what didnt work, worst practices

    Spread the News

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