As this book reminds us, when a company goes down the tubes, most of us jump to the same conclusions: "The executives were stupid" is a typical example. Or, if they weren't stupid, they were blindsided by circumstances: "They couldn't have known what was coming." And the list of reasons goes on. While some of these statements might indeed be true when applied to others, they don't give us much insight into avoiding our own predicaments.
Author Sydney Finkelstein, a chaired professor of management at Dartmouth College's Tuck School of Business, decided to probe deeper into the root causes of corporate failures. He focused systematically on the choices of individual decision makers at almost fifty failed or beleaguered companies, from AMP to WorldCom. His book ably sums up the results of that six-year research project. Its message is less about assigning blame than in identifying the early warning signs the companies had in common, in an effort to wake up executives elsewhere.
So, what are the warning signs? According to Finkelstein, all of the companies in his study suffered from one or more of the following six self-imposed handicaps: They chose not to cope with innovation and change; misread the competition; fulfilled the wrong vision; clung to an inaccurate form of reality; ignored vital information; or had executives who identified too closely with the company. The chapter-long descriptions of each of these problems are well-written and well-reasoned. One of the most important lessons, for example, is the necessity of listening to negative feedback. Team spirit and an upbeat attitude is all well and good, but not at the expense of facing bad news, says Finkelstein. Compensate for company pride, he says, by closely watching the competition and by partnering with others to reign in new ideas and practices.
This book was originally published in 2003; its paperback edition appeared in May 2004.