From the book called Billion Dollar Lessons by Paul Carroll and Chunka Mui, Portfolio Books, 2008. The book is subtitled What Can You Learn for the Most Inexcusable Business Failures of the last 25 Years.

Deadly Strategy Number 4 is Staying the (Misguided) Course  – understanding it takes great work to achieve and maintain a company in the top tier. When the economic landscape begins to change,what should the company do?. For example, it you worked in the retail area and Wal-mart is coming to your town, what do you do? What profit margins do you hold on to? Can you look at the core assumptions and values of the company? If the solution is to sell the company, would you recommend it?  Those questions are not easy to answer, but the questions need answers.

Kodak and photography have always been in the same breath. Kodak was the dominant company in film. Then digital happened, what should Kodak do? Kodak made its money from film, the margins were in the range of 60%, Kodak was correct in their assumptions until the 1990’s when prices of digital equipment fell and people could do their own, and wanted to do their own. Then the cell phone with a camera was invented, a game changer for Kodak. Kodak’s position in the marketplace changes drastically, their biggest problem is they saw the world through the world of print film and consistently underestimated the speed with digital would overtake film and prints also digital’s margins were 38%. Why move from 60% to 38%?

The same story with the music industry, the paging industry, faxes as a business, MicroAge in computers retailing, Pillowtex in the manufacturing faced with overseas manufacturing.

Two questions to ask: does your industry have a favourable structure for decline? can you compete successfully on the remaining demand?

There are always more questions than answers, till next time – to raising questions.