Why Do Good Companies Fail?

Looking back to the global market in recent years enterprise In the history of development, we will find that many famous, excellent, and even in the top of the industry have gone unexpectedly to decline or decline. From Enron, WorldCom to Lehman brothers, and all sorts of troubled TOYOTA and BP... Those once brilliant business empire, or overnight collapse, or a scandalous scandal, or because of minor things suffered heavy losses. Whether in Europe or America or Japan, the life expectancy of enterprises is much shorter than before, and the average life expectancy is less than ten years.

Why do many excellent enterprises fail? From the surface, the trigger of failure comes from different minor events. But "freezing is not a day's cold". After delve into layers of appearance and go deep into it, we can find some common characteristics and regulations, which is enough for enterprises and entrepreneurs to mirror.

The road to failure: four challenges and five steps

According to Professor Finkelstein of the Dartmouth School of business, most failed businesses fail to meet four challenges: creating new businesses, implementing mergers and acquisitions, and coping with them. innovate And change and face new competition pressure.

Business model innovation and business The expansion of borders is an important way for enterprises to continuously enhance their competitiveness. But in those attempts to open up new businesses, there is no shortage of stories. The Motorola iridium communication system project is a painful lesson. M & A is usually an important means for enterprises to achieve leapfrog development. But since mergers and acquisitions can almost expose all possible weaknesses of a company, "buying annoyance" has become a nightmare for many companies, and there are not many enterprises that can really succeed in mergers and acquisitions and achieve their intended purpose. Daimler Chrysler and AOL Time Warner have suffered billions of dollars in losses during the acquisition drive. Technological change has benefited many companies, but when a new round of innovation demand is emerging, some companies are suffering from "change immunity", which is not suited to panic and fear of change. They adopt defensive attitudes, avoid reality, and wait for death. Both Johnson and Motorola have been in a similar predicament. In the face of the threat of new competitors, there are also few examples of the invalidation of the carefully designed competitive strategies of some excellent companies, such as the failure of Wang an computer company and the decline of general motors.

It can be said that the most successful enterprises are easy to ignore the trap of failure and step into the five trilogy of Collins's corporate decline: arrogance, blind expansion, ignoring the crisis, finding straws, being forgotten or dying.

The omen of failure: the inert trap brought by success

Success not only brings honor and satisfaction to enterprises, but also brings a lot of "by-products". For example, success conceals many problems of the company, brings the manager's conceit, and makes the company indulge in past victories and relax its vigilance. Finkelstein called this enterprise that is blind and confident and rigid because of its past success. They generally ignore facts and reject negative information, and the more successful companies are, the easier they are.

Donald Shar, a Harvard Business School assistant, found that "success is the mother of failure". These successful books can not be changed easily, and eventually form an "inert trap" within the enterprise: If enterprises do not rely on these successful experiences, they will not be able to make decisions. Enterprise managers also frequently render their success "Bible" to employees and media. They believe that they also try to convince more people that enterprises will keep alive along the road of success in the past. However, the seeds of failure have been sown. The way of success in the past is a "double-edged sword", which can not only guide the success of enterprises, but also make enterprises rigid in the new environment.

The old revolution will encounter new problems. Although old experience has brought success in the past, it can not guarantee success forever. When the world is changing, the way to success is to keep pace with the times and constantly change. Goodyear tires were able to get rid of the trap in the crisis by replacing the old with new ones, and making changes.

Causes of failure: bad habits of enterprises and their managers

Why do smart managers fail? In Finkelstein's view, the key factors can be classified into four categories: the cognitive bias of managers, the protective mechanism for errors, the failure of information and control systems, and the personal weakness of managers.

The cognitive bias of top management is the reason why many companies fail. In the face of new opportunities and environment, enterprises need to accurately grasp the consumer value demand and follow the inherent laws of the industry, while some executives choose the wrong direction or fail to make the necessary strategic adjustment.

The protective mechanism for errors is manifested in the atmosphere of "reporting good news without reporting bad news". This kind of atmosphere makes employees "bow their heads and do things less well," which destroys the soil of germinating new ideas and new thinking. Before the scandal, the board of directors of Enron and WorldCom did not question the company's rules and regulations. Before Motorola iridium business failed, no one questioned the technology and business logic behind the project.

The blind trust of executives in information and control systems is also likely to lead to failure. Seemingly perfect information and control systems will become invalid due to the serious distortion of internal information flow. When executives think they can sit back and relax, the safety firewall of enterprises may have been seriously eroded. {page_break}

In addition, the role of leading leaders in decision-making is also very important. CEO is not an absolute rational person. Their weaknesses in personality and personality are likely to lead the company to failure. Under the pressure of severe and complicated situations, some CEO's reactions are even different from those of ordinary people. Those leaders with value defects are more likely to lead to strategic derailment. Therefore, when discussing the company strategy, we must consider the specific person making the decision.

Professor Xie Xie of Emory University points out that in the seven crimes of destroying the best companies, companies will unconsciously form bad habits when they are successful, such as self deception, arrogance, complacency, competitiveness dependence, competition myopia, quantity addiction and territorial guardians. Once these bad habits are formed, it will be very difficult to quit. Continuing will not only seriously hamper the healthy development of the company, but also lead to self destruction.

In the bad habits of enterprises, there is also the decline of collective rationality. Enterprises need to rely on culture to enhance the cohesion of enterprises, but too much emphasis on cultural significance is likely to stifle the creativity of enterprises. The solidification of culture is quiet, and under the surface of prosperity, it is likely to obscure the serious internal crisis, so that people will be amazed by the rapid collapse when they fail to fail.

The root of failure: the loss of professional spirit and business ethics

Hobo, an American entrepreneur, believes that in today's world, nutrition that helps create a good working environment comes from the continuity and diffusion of history and belief, that is, the work philosophy, lifestyle and entrepreneurial experience of Protestants who moved to North America more than 400 years ago.

For a typical Protestant, work is not just to live or show their talents, but a "vocation" or "call", that is, the call and guidance of the creator, to fulfill the mission that he receives, and to bring benefits to himself and others. This pure and thorough professionalism can make workers shine with great creativity, maximize their potential and create fruitful results beyond imagination. The inheritance of history and belief is embodied in the inheritance of professional spirit and commercial ethics values. This inheritance brought the United States to the throne of the world's first power, and also gave birth to a large number of famous enterprises and world brands after World War II.

But in recent decades, business education has no longer emphasized traditional values. People's motivation to study and work is more practical than that in order to find a good job or to earn money, and no longer has the fundamental motivation from the bottom of their hearts. The occupation spirit gradually loses, the work creativity is difficult to display, even goes astray. The false accounts of Enron and other companies reflect the desire for management expansion and moral anomie. This is the reason why enterprises in financial crisis are too much in pursuit of virtual profits. In Japan, Inamori Kazuo worried that before 1990s, people no longer valued hard work, hard work and rigorous lifestyles. Young people were more interested in obtaining a degree from American Business Academy, so that they could climb to a higher position.

In the final analysis, the loss of professionalism is the root cause of all kinds of crises in enterprises. The lack of professional spirit of ordinary employees leads to disorder, inefficiency and lack of understanding, and develops various bad habits of enterprises. Without the professional spirit, the managers of enterprises directly lead to the deviation of business philosophy and business philosophy, and push the enterprises to the mire of failure. In his later years, Drucker believed that the improvement of the company needs the revival of the whole society. Reshaping professional spirit should be the proper meaning of the topic.

The lesson from failure: the revelation of "Chinese failure"

In the list of the world's most famous failed enterprises, Chinese business enterprises have their own characteristics. Wang An computer company is a typical case. Since the reform and opening up, the unique landscape of "Chinese failure" has also appeared in the tide of economic development. Many enterprises are rising like fireworks and falling apart overnight. Wu Xiaobo's "great defeat" summed up the "failure genes" shared by China's pioneering entrepreneurs: lack of moral and humanistic care consciousness, lack of respect for laws and order, and lack of systematic professionalism. Due to cultural and social reasons, Chinese enterprises are "congenital deficient", and entrepreneurs lack self-consciousness of continuous self-improvement.

In the long history of China, the policy of emphasizing agriculture and restraining commerce can not produce professional spirit that adapts to commercial civilization. Since the reform and opening up, with the rapid development of economy, the impact of social values has brought about the distortion and anomie of business ethics. It has presented many negative characteristics in social life: falsification, taking advantage of all kinds of means, pursuing profits and ignoring profits and ignoring the public welfare and social bottom line. This leads to the lack of sufficient trust among the public in the business community, which has become an important reason why many Chinese enterprises are hard to grow and be respected.

In the era of globalization, domestic entrepreneurs can easily share the successful experience of the world's best companies. However, compared with "success study", it is equally important to learn "Failure Study". Failed enterprises have negative educational value. From learning about the collapse of Enron, Lehman brothers and so on, nothing is learned less than from Welch and Gerstner. In China's local context, there are also some cases of failure worth learning. But entrepreneurs can not afford to learn about it. They learn from Zeng Guofan and Hu Xueyan as a way of doing business. As we all know, if we can not fundamentally examine, reflect and abstain from the inherent "cultural vices" and the system's badness, Chinese enterprises will also miss more opportunities in their wandering and hardship.

To pursue excellence and become world class, Chinese enterprises need to learn and develop real professional spirit and shape healthy and orderly business ethics values. On the bottom line of ethics, only follow is not created. As long as we can identify and take action to deal with those habits that may lead to self destruction, most companies can achieve everlasting success. It is the meaning of "Failure Study" to turn failure into knowledge, learn from past failures, draw lessons from it, guide current actions and predict future, and strive not to make the same mistakes.

If Chinese entrepreneurs can learn valuable things from "failure learning", perhaps one day they will not need to read the reasons for Zeng Guofan or Hu Xueyan again, even if they do not read the present mentality or motive.