Archive for the ‘Strategic planning’ Category

Learning from Corporate Flops

Monday, October 26th, 2009

In an interesting article in today’s Wall Street Journal, an associate professor at Columbia Business School described some of her research in regards to how corporations struggle with new ventures.

Interestingly, she indicated that many of the new ventures which she studied “were all, by and large, beautifully planned.  And yet, the way they were planned caused the decision makers to make erroneous choices” which resulted in their demise.

Some lessons:

  • Don’t treat untested assumptions as facts.
  • Create an assumption checklist which captures: the source of the data for the assumption, why you thought the assumption was sensible and the date when you last checked the assumption.
  • Tie testing of the assumptions to the unfolding of the business.  At each checkpoint, stop and evaluate assumptions.
  • Test assumptions early and cheaply (before you make significant investments, such as in a plant and/or equipment).

In addition to the above points mentioned in her article, it is also wise to:

  • Identify in advance the critical metrics and milestones which would indicate success or failure for your endeavor.
  • Track your metrics on an ongoing basis.
  • Identify in advance actions which will be taken if the venture is not favorably performing in regards to its metrics.
  • Identify worst-case scenarios, and make realistic plans which will be executed to minimize negative ramifications if a worst-case scenario occurs.  (Note: It is a mistake to assume that the worst-case scenario will never occur.)
  • Take action, fail fast.  Don’t procrastinate when the situation calls for change .

Since no one can completely predict the future, your goal is to minimize the cost of your venture-learning as you adapt to the real-life scenarios which unfold before you.

The complete WSJ article can be found here.

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