In Europe these days, a lot of peo­ple are talk­ing about “too big to fail”. For exam­ple, Denmark’s biggest banks recent­ly asked the gov­ern­ment to tell them exact­ly how far it would go to bail them out of a finan­cial cri­sis, if one occurred. An anal­o­gy would be, rough­ly, ask­ing one’s par­ents how much mon­ey they would trans­fer if a child falls too deeply into debt.

But this is big­ger than just banks. David Miliband, soon to be Pres­i­dent and CEO of the Inter­na­tion­al Res­cue Com­mit­tee, pub­lished a piece on 10 May that talks about the chance that the entire con­cept of the Euro­zone could fail: “The EU isn’t too big to fail, but it is too impor­tant to”. Imag­ine the list of coun­tries which now share the euro as a com­mon cur­ren­cy some­how hav­ing to go back to the way it was 25 years ago.

Between big banks and geopo­lit­i­cal struc­tures are all those busi­ness­es that must wor­ry about sur­viv­ing. Just in case you think your firm is way, way too big to ever flop, I have a sober­ing assign­ment for you. Go to this Wikipedia page and see the names of all the com­pa­nies that were at the top of their game — till they died. What’s one com­mon link between Motor­wa­gen­fab­rik Excel­sior, Lionel Cor­po­ra­tion, All Met­al Prod­ucts Com­pa­ny, Waltham Watch Com­pa­ny and Miran­da Cam­era Com­pa­ny? They all had to learn to pub­licly say “adios” in their respec­tive home lan­guage.

failureAh, but per­haps you are small (or an opti­mistic start­up) and feel­ing a tad more secure because you are feel­ing too nim­ble to fail. Dream on. Bri­an Solis, author of What’s the Future of Busi­ness?, gives an inter­est­ing stat on his web­site: “In the Unit­ed States alone, over 500,000 new star­tups emerge every year. Of that, 50% are like­ly fail with­in the first year. And, with­in the first five years, anoth­er 56% are expect­ed to fail.”

Melin­da Emer­son has a short list of good points to con­sid­er about “Top Pre­ventable Caus­es For Small Busi­ness Fail­ure”. It was pub­lished at the end of April on the Huff­in­g­ton Post. I com­mend it to you.

In a past post, I wrote about “Suc­cess. Fail­ure. Boom. Bust.” I’d like to repeat the advice I gave there. These four points are some­thing I think about on a dai­ly basis:

  • Find­ing your next is a chal­lenge even for the biggest and most suc­cess­ful com­pa­nies — and per­haps more so as the chal­lenge of con­tin­ued growth on a large base is daunt­ing.
  • Today’s advan­tages (such as Apple’s retail stores) can become tomorrow’s lia­bil­i­ties and “sens­ing” when to shift orga­ni­za­tion­al pri­or­i­ties is crit­i­cal. A sub­tle dimen­sion of find­ing your next is the abil­i­ty to know when to redi­rect invest­ment from wan­ing assets class­es (like retail).
  • Fore­sens­ing is about iden­ti­fy­ing pos­si­ble pro­duc­tive oppor­tu­ni­ties for the future and not about iden­ti­fy­ing sure things. The mantra “fail often, fail fast, and fail cheap­ly” holds true when it comes to nextsens­ing.
  • Your upend­ing may not come from a big and known com­peti­tor. Thus, con­stant­ly observ­ing — espe­cial­ly on the periph­ery — can help you get an “ear­ly sense of things” before oth­ers. It is not a ques­tion of whether a new com­peti­tor will emerge but, rather, when and from where. The big­ger you are, the far­ther you have to fall. As one of the com­ments post­ed on the blog (by Michael Long) notes, “Apple? Maybe, but are we for­get­ting just how quick­ly the world switched from Alta Vista’s search engine to Google? One day AV was — quite lit­er­al­ly — at the top of the heap. Google knocked them off in less than a year. All you need is a major dis­rup­tion in search, one that gives quan­ti­ta­tive­ly bet­ter results, and a new search engine is just a click away. And with it go Google’s ad rev­enues. Boom.”

Whether you are fret­ting about being too big to fail or too small to fail, I would urge you to think about the best anti­dote for either: new think­ing. In busi­ness, many giants and many dwarves have stum­bled, fall­en and died. Yet, I can­not think of one finan­cial obit­u­ary that report­ed that a busi­ness failed because it was too smart.

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