REVIEW

Book Review: The Ten Commandments for Business Failure

September 18, 2008
Aaman Lamba

In this time of failing corporate giants, it feels appropriate to review a slim cautionary book called The Ten Commandments for Business Failure, written by the President of a company who has survived quite well so far. Donald Keough was former president of the Coca-Cola Company, and provides us an invaluable how-not-to guide, bolstered by a foreword by Warren Buffett, and reccomendations from the likes of Bill Gates, Rupert Murdoch, and Jack Welch.

As Warren Buffett puts it in the foreword, Mr. Keough is a human personification of the Coca-Cola Company, in all its multi-dimensionality, and has an ability to 'cut to the chase on an issue' and keeps his prescriptions simple, grounded in deep experience, and it is interesting to see how many of the dicta in this book were ignored or outright flouted by recent large failed corporations.

The very first commandment, 'top of the list' as it were, is 'Quit Taking Risks'. This might seem obvious, but as the examples of Xerox and many other giants shows, often enough, the companies that get complacent and believe themselves to be secure in their business model, stop trying to rock the boat, take risks, and bet the farm on the anti-thesis of their core ideas. This was illustrated efectively by Clayton Christansen in The Innovator's Dilemma, and more recently we have seen all the Indian IT Service majors continue to propagate their low-cost services model, venturing only marginally into alternative business models, purely because the current ones have served them well for so long.

The second commandment, "Be Inflexible" is an even more powerful mechanism for ensuring failure. The resitance of the auto industry to shed existing product lines has meant their return to near-bankruptcy. Other classic examples of inflexibility are the IBM PC, Digital Corporation, and as Mr. Keough acknowledges, Coca-Cola's own inability to move beyond the iconic bottle for years, losing market share to Pepsico. The movie industry's avoidance of television for a long time, and more recently, the music industry's Internet blind spot, are compelling examples of the power of inflexibility to destroy an industry's market positioning and value.

"Isolate Yourself" is equally effective, creating a culture where bringing good news is rewarded, and bearers of bad news excoriated. This ivory tower syndrome was observed most recently in the case of Dick Fuld, CEO of Lehman Brothers, who refused to see reason and sell out when he could have got at least a meaningful value for his firm, instead of pennies on the dollar, which will go to creditors rather than the stakeholders. Bringing bad news early is an invaluable skill that advisors must cultivate, and CEOs/leaders reward. The supporting corollaries to this rule are to only listen to those who agree with you, and take all the limelight for successes. As Mr. Keough puts it, "Watch out for bright lights who surround themselves with dim bulbs!"

"Assume Infallibility" means passing the blame for failure, typically on subordinates, but even more effectively on customers - after all, the boss is always right:) A grand alternative is Warren Buffett, who, as Mr. Keough notes, provides a full accounting of successes and failures in his annual letter to his shareholders, as opposed to CEOs who make their annual report 'an exercise in fingerpointing'.

The next commandment builds on the previous, "Play Close to the Foul Line", by highlighting the assumption that since one can do no wrong, whatever one does, no matter how gray, must be right. This enables effortless flouting of ethical boundaries to achieve one's goals, such as when loans were disbursed to people who patently did not qualify for them, leading, in part, to the subprime crisis. N R Narayana Murthy, the iconic founder of Infosys, is fond of saying that the softest pillow is a clear conscience, a dictum that might be the exact opposite of this one. The American International Group failure could be attributed to some extent to the rampant accounting irregularities in the 2000s, inculculated by then-CEO, Hank Greenberg. Mr. Keough notes the pressure for short term results at the cost of longer term perspectives, or outright fudging of earnings, as a pertinent example of 'playing close to the foul line'.

"Don't Take Time to Think" is another easy path to follow in the frenetic data-driven business stream. The author looks at the costs of such an attitude to business, from the Human Toll to the masking of reality, to finally the dangers and foolishness of not taking time to think about consequences. The volumes of data flowing through the corporate ecosystem do not necessarily contribute to more accurate decision making, and can cause leaders to overlook critical insights.

"Put All Your Faith In Experts and Outside Consultants" is a caution against the millions of con artists who have their own companies' interests ahead of your own. The compelling example used by Mr. Keough is that of New Coke, where the company made a famous and costly misstep, finding out before the Internet-driven meme age the costs of taking the word of consultants to switch the core product that consumers were used to. He notes research that shows 'experts' were 80% confident about their predictions, yet right only 45% of the time. As the old saying goes, we don't know which half was right. Statistics, that favorite tool of the marketer and consultant are counterpoised by the observation of the classical economist Ludwig von Mises, a personal icon, where he said "Statistical figures tell us what happened in a nonrepeatable histocical case."

The author segues into another, perhaps more dangerous constituency than external consultants - the bureaucracy in the organization. He recalls Jack Welch's final letter to General Electric stockholders, where he noted "Hate the bureaucracy in your organization" to coin the counter-intuitive commandment "Love Your Bureaucracy". The support systems and middle managers often enough become obsessed with micro-managing, sustaining their internal power centers, and perpetuating the rituals of their functions. He illustrates how these 'choke points' often become primary causes of attrition, and worse, stifle the company culture, leading to atrophied superstructures of busy workers producing little output.

"Sending Mixed Messages" is an extremely common phenomenon, almost inevitable in large organizations. An interesting example is sending the mixed message "It doesn't matter what you do, you will be rewarded". When a company harps on excellent customer service and delivers piss-poor service through multiple channels, it is sending the worst mixed message possible - that they don't care about their customers. Similarly, the same company, say Coca-Cola, is marketed in different geographies as a low margin, high volume product and at the same time as a high value product in others. A positive example touched on briefly in the book is that of IBM - its shift from a closed organization to an open, customer-friendly society is worth considering, in part, because it entailed the elimination of mixed messages and bringing a consistency to the entire global company on how they approached and engaged with customers.

Finally, "Be Afraid of the Future" is the anti-thesis of "Quit Taking Risks". This refers to the creeping malaise of pessimism that envelops organizations particularly successful ones. Fear-mongering and focusing on failure becomes the norm, leading to decision paralysis and demoralizing the organization.

A hidden eleventh commandment adds a final spice to these recipes for failure. "Lose Your Passion For Work - And Life". This essay goes into more mystical territory, dealing with notions of self-esteem, presentation, and making an emotional connection with one's work and life pursuits. The analogy of any food tasting better in a McDonald's box is an apt one, and tapping into the emotional aspirations of one's people is the critical factor in organizational or individual success.

This slim book is eminently readable and works best if the nuggets are mapped to one's own perspective and experiences. It should come with a handy flash card of commandments of failure. Surprisingly, they work more effectively when worded the way they are rather than in the positive sense.

Aaman Lamba is the Publisher of Desicritics.org, a Blogcritics network site. He also blogs, more infrequently nowadays, at Audit Trails Of Self
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#1
tanay
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September 20, 2008
07:18 AM

seems to be a good book, will give it a try...

he he he ....The support systems and middle managers often enough become obsessed with micro-managing, sustaining their internal power centers, and perpetuating the rituals of their functions.

a common feature in many of the IT services company. after all, the middle managers have to keep themselves busy in some form or the other ;)

#2
tanay
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September 20, 2008
07:22 AM

for #1, typo error, replace 'companies' for 'company' in the sentence.

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