“Billion Dollar Lessons” Quotes

I recently read “Billion Dollar lessons: What you can learn from the most inexcusable business failures of the last 25 years” by Paul Carroll and Chunka Mui. Below are the quotes I found most interesting. As always, if you like the quotes, please buy the book here.

Billion Dollar LessonsIf a company followed one of these seven strategies it was far more likely to flop: synergy, financial engineering, roll ups, staying the course, adjacencies, riding technology and consolidation. Page 4 to 5

We found that companies that fail often do so because they overestimate the loyalty of customers. Page 6

Most analysis goes to support a decision that’s already been made, rather than to see whether it’s really a good idea in the first place. Page 8

It’s hard to explore options that attack core assumptions and values, such as those about what customers are actually buying, where profit comes from, the business model, and the very notion of being an independent, growth oriented company. Page 87

In 1986, Kodak produced the first working version of the type of sensor that is at the core of today’s digital cameras. But despite having a solid decade following 1981, Kodak did not take advantage of its early warning and did little to ready itself for the onslaught of digital technology because it consistently tried to hold onto the profits from its old technology and underestimated the speed with which the new would take hold. Page 93

There’s a long history in the technology world of people moving up the learning curve and doing things for themselves that they used to pay others to do for them. Page 95

As Kodak demonstrated ably, companies that face looming threat of makes three mistakes: They tend to see the future as a variant of the present and can’t bring themselves to imagine truly radical threats, the kind that might wipe out their whole market.

They tend to consider whether to adopt a new technology or business practice based on how the economics compare with those of the existing business-not accounting for the possibility that the new technology or approach to business will eventually kill the economics of the existing business and require an entirely new business model.

They tend not to consider all their options. They focus on shoring up the existing business and ignore the possibility that perhaps they should sell that business or at least cut back significantly. Page 100

The worse the current business looks, the more likely a company is to make a bad bet on an adjacent market. Page 123

Look at the differences. Be systematic. How do the sales channels different in the new market? How do the customers differ? How do the products differ? Are the regulatory environments different? Page 139

By the time a company gets to due diligence, it’s hoping to confirm that the strategy is a good one. Page 140

The key mistakes that lead companies to ride the wrong technology into disaster:

They evaluate their offering in isolation or at at a single point in time, rather than in the context of how alternatives will evolve over time.

They confuse market research with marketing, allowing their entrenched interests and hopes to color the analysis of true market potential.

They find false security in competition, incorrectly thinking that the presence of rivals equates to a validation of potential market.

They design the effort as a frontloaded gamble, foreclosing possibilities for adaptation and severely limiting the option stop. Page 153

There’s a saying in Silicon Valley that the worst thing you can do to a start up is to give it too much money. Page 162

Too often, companies fail to realize that, while their technology might be superior at a point in time, an alternative technology is on a clear trajectory to surpass it. Page 164

To get outside of your own biases, look at potential offerings through the eyes of customers. Page 166

The four kinds of issues that can be set a consolidation place:

You may not just be buying the assets you think you’re buying; you may also be buying problems.

While the focus is generally on getting bigger to generate economies of scale, there may also be diseconomies of scale because of increased complexity.

Although companies typically assume that they can hold onto customers of a company they buy, that’s often not the case.

If you’re just thinking about being the industry’s consolidator, you may not be considering all your options. Page 179

A Bain study found 80% of companies thought their products were superior to their competitors’-even though only 8% of customers agreed. Page 213

Even if assumptions have a 95% chance of being right, if you have to make 10 of those assumptions you have a less than 60% chance that all will occur. Page 228

Framing forecasts as personal bets forces those involved to be very clear. Page 248

Surowiecki gives four conditions for wise crowds: diversity of opinion, meaning that each person person should have some private information, even if it’s just an eccentric interpretation of the known facts; independence, meaning that peoples opinions are not determined by the opinions of those around them; decentralization, meaning that people are able to specialize in drawn local knowledge; and aggregation, meaning that some mechanism exists for turning private judgments into a collective decision. Page 250

Researchers at Intel, which also had success with prediction markets, named three factors that lead to strong performance: anonymity and incentives, which encourage honest, unbiased information; the averaging of multiple opinions, which produces smooth, accurate signals; and feedback, which enables participants to evaluate past performance and learn how to weigh information and produce better results. Patient 250

We often use an exercise we’ve dubbed “being your own worst competitor.” In it, we divide managers into small groups and give them a simple charge: Imagine you know everything you already know about your company and industry. You get a call from an investor with plenty of capital who offers to fund the competitive venture to your current business. Assuming no non-compete restrictions, how could you destroy your current employer and other competition and dominate the industry? We then send them off to develop business plans to do just this. Page 251

Liked the quotes? Buy the book here.

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