McGee’s Musings

Billion-Dollar Lessons: What You Can Learn from the Most Inexcusable Business Failures of the Last 25 Years, Carroll, Paul B. and Chunka Mui

Progress in science and engineering proceeds from the dispassionate analysis of failure. We learn more when we screw up than when we succeed. However, since Waterman and Peters In Search of Excellence,  the trend in business books has been to celebrate and analyze apparent success. In Billion-Dollar Lessons, Paul Carroll and Chunka Mui demonstrate the power of good failure analysis. They turn their attention to what can be learned from large-scale business failure. First, a necessary disclaimer; Paul and Chunka were partners of mine at Diamond Consultants in the 1990s. I already know how smart and insightful they are.

If they were to succeed simply in making failure analysis respectable, Paul and Chunka would be making a major contribution. They manage to do considerably more. First, they debunk the conventional wisdom that failure is the result of poor execution. The danger in attributing failure to solely execution factors is that it gets you off the hook from drawing useful lessons. If the failure is yours, you need only try harder the next time. If it belongs to someone else, you, of course, wouldn’t have made such foolish mistakes.

Instead, Carroll and Mui construct a compelling case that real failures stem from poor strategic thinking; identifying seven patterns of strategic failure ranging from unrealistic belief in synergy to a poor grasp of technology evolution and change. These patterns provide a valuable set of lenses to examine and assess strategic options.

There is a thread through much of the first half of the book that failure occurs when ego trumps evidence. But the authors avoid the temptation of settling on that as the underlying explanation. Actually, their awareness of temptation leads them to the another of the major contributions of this book. While ego and misdirected drive can be found in most strategic failures, ego and correctly focused drive are essential to strategic success.

The question becomes how to bring evidence to strategic debates so that it can be incorporated most effectively. Better due diligence processes can help. So can a deeper appreciation of our innate cognitive biases. While covering these topics, Carroll and Mui have a more provocative idea; they call for organizations to establish the strategic equivalent of the Catholic Church’s Devil’s Advocate. The role of the Devil’s Advocate is to argue against the proposal under consideration. Formalizing and structuring that role in organizations offers a potential counterbalance to the forces arrayed in favor of the strategic actions that Billion-Dollar Lessons call into question.

There is, of course, a website to accompany the book. There is also a Billion-Dollar Lessons blog. I’ve subscribed in the hope that it will become an ongoing source of lessons.