Why Smart Executives Fail
Why Smart Executives Fail
The book by Sydney Finkelstein is an analysis of the different circumstances, thinking and actions that force executives, veteran and amateurs alike, to make mistakes. This is a very useful book to study and understand especially for those who are involved in the business industry. Readers of the book can easily understand the concepts written in it that it becomes a very good guide to what one should not follow. It also provides recommendations in so that readers would not have to suffer making the same mistakes that are showcased in the book.
The first part of the book is an introduction of the whole book where it explains to the reader the importance of studying other people’s failure in terms of business leadership. It is based on the study of various companies which, at first glance, does not give observers the hint of any kind of possible similarities between them. This can arguably be the case in the book especially since various companies were studied in order to come up with the data presented in it.
However, they have determined that many business failures come from a commonality that these businesses have: those individuals, who create, lead and manage the different aspects of the business. Also they have determined common situations in which companies are more prone to failure. The introductory chapter provides readers the background information and provides the understanding that one of the main reasons that business fail is because of poor leaders or leadership skills that executives might possess. It has also presented different theories or rather reasons why there are executive failures.
There were 7 cited in the book and it all ranges from incapability of a leader to lead, lack of foresight, failure to adequately execute programs, projects and plans, lack of motivation by the executives, Incompetence, corruption by the executives themselves and that the company was lacking in resources that are necessary for the completion or accomplishment of goals and objectives. The book presented the collected data from various sources and analyzed them in order to determine common reasons for the failure of businesses. They have determined some similarities in the instances in which companies are more prone to be at risk.
Four instances were presented in the book and these instances are creating/ embarking on new business ventures, when companies deal with new innovations and changes, when the companies decide new mergers and acquisitions and the last one presented in the book is that executives make big strategic mistakes thus, in effect directs the company towards the wrong direction. These four instances are said to be the most prone to failure since it forces the company into a situation in which they are not sure where to and what to do next.
These instances have many variables that need to be considered and are very complex. Instances of these happening make it more difficult for them to understand and adequately react to certain situations. Also these four instances also force the company to change or transform. This transformation(s) usually causes the companies to become unstable that decrease its ability to cope with the situations. New business ventures are seen as risks since it always usually entails uncertainties. New competitors may always be around the corner to the point where the market would be oversupplied.
The mindset of partners might not also be the same as executives which causes conflict of interest. In conflict of interests, executives might also fall prey to the idea that their product or service would become a success eventually led them to concentrate on the product and service instead of the customers. There is also usually a lack of system that will allow them to properly evaluate the progress of new projects. Innovation and change in business is the same as the debate from of conservatism and liberalism. However, in the business industry being too attached to one side could lead to disasters.
Executives must always look beyond the biases and must decide based on the instances that are good and beneficial for the company rather than an attachment to unproductive sentiments. Also, companies must also take into consideration the change that they will impose especially with regards to making a department independent. Independence is not always a good thing and all changes should be looked upon with supervision, evaluation and understanding. They should always be practiced to make sure that innovations and changes be always beneficial to the company.
Mergers and acquisitions also pose a threat to any company. Combining previously different organizations can cause conflicts that make it difficult to integrate them into one. Also executives should also first study the company that they are going to merge or acquire with in order to better determine each other’s strengths and weaknesses and make plans to capitalize and limit their losses. Companies that are willing to make this move should also be aware that, though uncomfortable, a degree of openness needs to be practiced in order to make the merger or acquisition stronger and more effective.
The last cause of failure presented in the book is that executives tend to misread the situation and competitive pressures that they decide on the wrong course of action. This primarily comes from the idea of competition and making sure that an executive’s company has the upper hand. The book tells us that executives should not only focus on the business aspect of the competition but also the individuals that the competition is composed of themselves. This gives the executives better insight on the way the competition thinks the way that they are to handle given situations.
Also, opinion of customers and those who are constantly in direct contact with them must be taken into consideration since they are the ones who probably know the demand and expectations they have towards the company. These instances may be a reason for a company to struggle but failure is still dependent upon the ability of the executives since they are the ones tasked to keep the company together and are given the very difficult duty of making sound business decisions. Their decisions are usually the ones that make or break the company.
Their leadership is a vital component in any business and thus they should be more aware of potentially dangerous situations primarily those situations that lie within themselves. Some of the common dangers that they are especially susceptible to are: their mindset and their delusions. These two are of vital importance since they are eventually the source of their actions. The mindset of the executive is usually a very important part of business. If one does not have the ability to grasp the situation fully, then the business or company is closer to ruin than any.
The strategic mindset of executives discussed in the book was given the names: the Magic Answer, the Holy Grail and a fixation on the wrong scoreboard. The magic answer primarily refers to the executive applying one method or model in whatever situation that arises, seeing this action as the only course of action that will work for all the situations they will be facing. Eventually this leads executives to focus on that one course of action where they no longer measure merits or disadvantages of other courses of action.
They become so focused on the one that they are using that no other alternative solution(s) will be considered. The Holy Grail on the other hand means that executives usually put out goals and strategies that are not attainable. They eventually create a situation in which nothing will ever be good enough since they will not be able to accomplish their goals. Executives are also at risk of using the wrong evaluating tool to measure whether or not their projects and activities are a success (wrong scoreboard).
This essentially means that they are being informed of the wrong things and usually this also means that the actions that they are taking are also probably wrong. Together with mindsets, executives are also prone into believing flawed assumptions about their work. These flawed assumptions usually have the following ideas as basis: Yesterday’s answer (assumption that what worked in the past would also work now), A different game (the assumption that the competition is still the same), A false image (overestimation of capabilities), and film producer’s error (the assumption that there is no one thing that made the venture successful. )
Companies and executives are also prone to create “zombie businesses”. Zombie businesses are those that remain stagnant because they no longer have the capability to grow since they have focused on maintaining a very strict and conservative work policy and develop company attitudes that prevent them from adapting to different situations. The book also discusses various reasons why companies are not able to act on warning signs.
These reasons range from the use and misuse of information, lack of leadership, excessive leadership, lack and excessive oversight, little or no cooperation, and the lack of communication channels. The book also discussed seven bad habits that executives are most prone to. These habits mostly consist of the executives being too confident and too arrogant about themselves and their abilities that they find it difficult to become a part of the group/company.
They could be described as business narcissist since they fall in love with themselves and their jobs too much that they also become to stagnant and eventually prioritize less important factors and aspects with regards with their work. The book provides information in order to be able to avoid making the usual mistakes in business. Executives must always look out for the four underlying reasons for failure and must always keep a level head always assessing and reassessing their actions as well as frequently evaluating actions done in the past.
They must work with the company rather than making it work for them in order to prevent failures from happening. There is no one way to follow when regards to successfully face and solve the problems. Executives must develop themselves to be able to cope with various instances and circumstances if they ever hope to prevent making dangerous business decisions that would eventually lead to failure Bibliography Finkelstein, Sydney. Why Smart Executives Fail: And What You Can Learn From Their Mistakes. New York: Penguin Book, 2003.