How to Stop 5 Catastrophic Corporate Practices

Companies regularly make these five mistakes with the false belief that they are best practices when they are, in fact, anything but best, writes Rob Enderle.

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Credit: Thinkstock

All too often I have seen businesses repeat catastrophic mistakes when implementing strategic initiatives. Here are the five most common mistakes that companies regularly make thinking they are best practices.

1. Integration Mergers

Integration mergers where one company gets slammed into another at speed forcing the weaker firm to accept the rules and regulations of the stronger and generally destroying any value you thought it had. There are two obvious reasons this is favored, it puts the acquiring firm’s managers in a superior position because they already know the rules and regulations and it puts much of the stress on the executives that were acquired.

The reason it does not work is that it destroys what made the company uniquely successful and voids the reason the acquisition was made in the first place, because the acquired company was able to do something the acquiring company wasn't able to accomplish. The result, rather than learning and integrating whatever secret management sauce the acquired company had this practice destroys it.

This practice alone is why most mergers fail, yet it remains the most popular way to do an acquisition.

2. Not Doing the Hard Stuff

You can accomplish anything if you know what needs to be done and you are willing to do it. Years ago a friend of mine wanted to do an Iron Man race, which requires swimming, running and biking, but he hated swimming so he figured he’d just work on the running and bike riding, which he was good at. He nearly drowned. Typically, to accomplish a complex task there are a number of critical steps and several are often identified as being nearly impossible.

Firms will determine that they don’t want to do these difficult tasks yet still proceed with the project assuming they will still be able to succeed. In fact, they should instead pull the plug because without doing these difficult tasks they are simply setting themselves up to fail.

In the 1990s IBM knew what it would have to do to beat Microsoft with OS/2 and actually had better resources, it just didn’t want to do it. Then a decade later Microsoft knew what it would need to do to beat the Apple iPod and it decided it didn’t want to do it. Both projects should have been killed at the start and instead wasted hundreds of million dollars because they couldn’t succeed because neither firm was willing to do what it had identified needed to be done. For IBM, OS/2 had to be spun out of the company because peer vendors didn’t trust IBM, and for Zune, Microsoft’s iPod competitor, it had to migrate the iPod playlists seamlessly.

3. Not Learning From the Past

This comes up a lot in Internet of Things (IoT) conversations. Working on smart connected devices goes back to the 1960s and the area is littered with the bodies of failed companies. Yet many firms are approaching this new opportunity as if these old experiences didn’t exist and therefore, will undoubtedly repeat many of the same catastrophic mistakes.

This is kind of like trying to navigate a new city without using a map or GPS device, it rarely ends well. George Santayana’s famous quote says it best, “Those who cannot remember the past are doomed to repeat it.”

Learning from the past can be scary but it can also point out landmines and provide a much more inexpensive way to learn a new area than by trial and error. At the very least, you can often hire people that have been through some of these painful mistakes and use them kind of like you’d use a canary in a coal mine, to identify a problem before you run head on into it.

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