Failure™ Magazine

Going Out of Business Tales

Learning from inexcusable business failures.

Written by Jason Zasky   Filed under Business

Paul B. Carroll and Chunka Mui have impeccable timing. When the pair began work on “Billion Dollar Lessons” (Portfolio) three years ago, the American economy was relatively healthy and catastrophic business failures were few and far between. But in the three months since the release of their new book the economy has been in meltdown mode and “bailout” has become, quite literally, “Word of the Year.” Never has a detailed examination of business failures seemed more apropos.

In “Billion Dollar Lessons,” Carroll (author of “Big Blues: The Unmaking of IBM”) and Mui (co-author of “Unleashing the Killer App”) review what they have identified as the most “inexcusable” business failures of the past 25 years, identifying patterns and providing readers with the intellectual tools to avoid repeating the same mistakes. It’s the kind of after-action analysis that is often given lip-service, but rarely receives serious consideration. With this in mind, Failure interviewed Carroll about mistakes of business past, and how we can learn from them.

Why did you decide to focus on failure when most business books focus on success?
That’s pretty much the reason. Lots of people draw good lessons from success, but there have to be lessons from failure as well. I’m also a bit of a contrarian, and when we started work on this book it just seemed like everything in the economy was too good to be true. And you know what? It was.

The subhead of the book refers to “inexcusable mistakes.” How do you define an inexcusable mistake?
We tried to be pretty careful about that because anybody can be a Monday morning quarterback. We started with 2,500 of the biggest failures, which we defined as bankruptcies, big writeoffs and discontinued operations. To make sure we had a representative list by industry and timeframe, we cut it to 750 using various screens. Finally, we had a research team of almost 20 people who spent a year-and-a-half going through the data.

We also tried to be careful to make sure it was possible to see at the time that an idea was a non-starter. For instance, when Blue Circle [Cement] decided it would make lawnmowers on the theory that cement is used in homes and homes have lawns … to me that’s a stupid idea. On the other hand, we didn’t ding the airlines for not understanding that 9/11 was going to happen.

We started out thinking that maybe one out of five failures could have been foreseeable. In fact, almost half should have been foreseeable.

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