WHY BRANDS FAIL
THE 10 DEADLY SINS
Letting stocks price Dictate Strategy How many dot-coms were launched with all the best intentions, only to find themselves going public far too quickly in order to cash out investors while the boom was still in progress? Similarly, how many companies have cannibalized their own future operations in order to achieve the short-term performance numbers needed to satisfy an ever-more-fickle investment community? Letting stock price dictate strategy is the first deadly sin because it leads to so many others. The perceived need to build earnings leads to misbegotten alliance that result in failed synergies. It result in overly aggressive accounting that will only turn around and hunt the company when it is discovered.
Likewise, it results in quality shortcuts in the company’s product or service that alienate customers.
Growing Too Fast
Many companies contain the seeds of their own destruction within their business plans. Like armies that advance beyond their capacity to supply themselves. They pursue a growth strategy that inevitably leads to saturation. For brick-and-mortar companies, this can simply mean overbuilding too many stores or apartment complexes within a given region. It can also manifest in sales. Companies unable to demonstrate a record of ever-growing earning often pursue a path of ever-growing revenues instead. In lieu of actual revenues, companies may also adopt strategies to boost market share. Airlines, for hope example, built new hulbs or sought merger candidates in hopes that the increased passenger load might eventually lift the bottom line. This strategy proved especially popular with dot comes. Web sites merged or created subsidiaries in order to gain visitors they hoped would someday be converted into paying customers.
Ignoring customers
During the 1970s and 1980s, the poor quality of U. S. manufacturing goods allowed aggressive, nimble, and well- capitalized Asian firms an inroad into a lengthy list bedrock American industries. Today, lapse in quality on the part of new Economy Companies are causing them to fail. Excite @Home is but one example, plagued by problems, its broadband interest service folded, leaving thousands of customers summarily disconnected.
Ignoring paradigm shifts
In a world where knowledge and technological know-how many double many times within a single generation, companies must look into the near and the distant future for signs of trends they must reckon with if they are to remain profitable. Companies must also devise ways to adapt their products and services to reach as yet undefined customer groups. Most important of all, they must gear their strategy to the singular fact that earth –shattering upheavals are part of the “new normal”. The September 11 attacks tragically revealed how events can change everything, sometimes overnight. The corporate battlefield is littered with examples of companies that have failed to adopt. Whittle Communications. Once a company that pioneered new media – everything from magazines customer for large advertisers to TV news programs beamed into high school classrooms –field to capitalize on the explosive growth of online media. And so the company folded – ironically, on the eve of the biggest new communications medium since the debut of the printing press, the internet.
Fighting Wars on Attrition
The multibillion- dollar meltdown I the telecom sector is but one example of how companies in a race to build market share and colonize new territories find that the product or service they plan to offer has been commoditized by the market place. When that occurs, companies frantically wrestle to become low-cost producers.
Ignoring Liabilities. Threats and Crises
Litigation once nearly destroyed America’s small aircraft industry. It now threatens to topple powerful brokerage firms because of the conduct of their analysts. Church has shown itself to be frighteningly vulnerable to an onslaught of litigation. No one knows how many hundreds of millions of dollars it may be forced to pay out, due to the rash of alleged abuses by its priesthood.
Indeed, perhaps nothing can bring a company down with such amazing speed as misconduct. The classic example, of course, being Arthur Andersen. Though relatively few employees were the subject of the Justice Department’s allegations, the suspicion of improprieties caused massive customer defections. To quell losses, the company was forced into fire sales of many of its operating units.
Over Innovating
Pioneers face arrows, and the leading edge all too often translates into the bleeding edge. These many be well-known business axioms, but companies continually choose to ignore them. The entire New Economy revolution was built on the idea that consumers would radically change their habits within months of the introduction of a new product or service. And while this was the case with some Internet products, such as online brokerage firms, the companies that hoped to entice consumers into buying their pet supplier, wine and garden tools over the Internet quickly found themselves out of business.
Poor Succession Planning
Successful companies go to great pains to demonstrate that they have built long-term continuity into their management team. Key promotions are announced with a degree of fanfare, allowing rumors to circulate that the person chosen is being groomed for the eventually top position.
When companies do look outside for top talent, the process is often made deliberately long and complex to signal to investors and other stakeholders that it is the subject of much deliberation.
Failed Synergies
In the 1980s leveraged firms sought to unearth “hidden value” within companies by selling them off one division at a time, often those divisions were cobbled together a decade or more foreband, when it was believed that diversified conglomerates provided the best protection against the vagaries of the business cycle. During the 1990s, companies were meshed together for different reason. For example, to quickly build market share in a fast- growing sector as the Internet. As always seems to be the case with alliances and mergers, what looks good on paper can turn into a devilishconundrum as the two organization cultures resist converging.
Arrogance
This book serve the worst corporate sin for last, because it is all too common. Moreover, the public has grown accustomed to arrogance on the part of corporate chieftains, even as they steered their companies aground. Shareholders and others are also increasingly hostile to executives who reward themselves with generous salaries and huge stock options while their companies lose million and sender thousands jobless.
