Doreen Rainey

Billion Dollar Lessons shares incredible stories about the most inexcusable business failures of the last 25 years.  It highlights how companies continue to make horrendous strategic decisions when there is historical evidence that shows that what they are attempting probably won't work.  This book researches over 750 company business failures that ultimately reveal the misguided tactics that mire companies over and over.  

The bookstore is full of resources on successful companies, but this book focuses on those that fail.   How big are the failures?  Between 1981 and 2006, 423 major companies with combined assets of over $1.5 trillion (with a “t”) filed for bankruptcy.  Hundreds more took huge write-offs or were acquired under duress and for far less that what they had been worth in their heyday.  

What does this have to do with you?  The lessons presented in this book can not only help you avoid business pitfalls, but you can also apply some of these lessons to your personal life.  Why did these businesses fail?  Here are some of the reasons presented in the book:

Reason #1: The nonexistent pursuit of “synergy” (a term used to describe a situation where different entities cooperate advantageously for a final outcome).  Quaker Oats purchased Snapple to capitalize on distribution synergy.  It led to a $1.4 billion dollar loss. 

Just because something looks good on paper, doesn't mean that it will materialize as planned in the real world.  The excitement of what “could be” overtakes the logic or what's realistic and financially feasible.

Reason #2: Moving to an adjacent market:

Avon decided its “culture of caring” qualified it to operate retirement homes.  The write-offs totaled $545 million.

But my favorite of all?

Reason #3 Staying the Misguided Course

Eastman Kodak ignored the advancements in digital technology and misjudged the growth of amateur photographers.  They hung on to the success of their past – working to improve a product (film cameras) that was on its way to being taken over by digital photography.  They ignored reports in Fortune, who wrote in 1995 that digital photography was becoming cheaper for people to capture and print at home. They ignored a report in Business Week questioning the challenges Kodak was having in reinventing itself. They ignored all the advancements that other companies were making in digital photography.  They ignored the price cuts on personal printers.  They ignored the growing popularity of camera phones.  

The result:  $500 million dollar loss developing a camera that was digital and used film (Why???).  

The result:  19,000 workers laid off. 

The result:  $100 million dollar loss in 1999.  

The result:  Between 2000 and 2001, profits fell 95%.

Another example of staying the misguided course?  Hundreds of retailers could see Wal-Mart coming, but failed to react. They refused to see the impact this discount retailer could have on their bottom line.

And the grandaddy of them all?  Who could forget the downfall of Big Blue – IBM.  Ignoring the personal computer development and holding on to their way of doing things, IBM predicted in 1981 that the personal computer – over the lifetime of the product – would only sell about 200,000 machines.  Well, Dell and HP sells that many computers every three or four days.

So here's my question to you.  What signs are you ignoring?  Are you refusing to change course when all indicators show you need to?  Are you refusing to learn new skills to do your job?  Are you ignoring your companies financial troubles hoping things will “work out”?  Are you holding on to a wing and a prayer that your relationship will change?  What information have you not accepted that will cause you future loss?

If you continue to stay the misguided course…what will be YOUR result?