The Lesson of Lost Value

---

A 2012 Booz & Company study , “The Lesson of Lost Value”, took a look at the biggest business failures between 2002 and 2012. What they found agrees with numerous other studies before and since.

In the business world, very few failures are due to operational problems, regulatory or compliance issues, or external events. Instead, the vast majority of failures stem from errors such as misunderstanding changing markets, failure of new products, or being caught flat-footed by industry shifts. What’s more, they are usually errors that could have and should have been foreseen.

The study describes these errors as “underestimation of strategic risk,” but that can be said a lot more clearly. When businesses fail it is usually because the world turned out to be different than someone thought it was!

In short, failure is almost always rooted in a failure of knowledge.

The Lesson of Lost Value: Success begins and ends with knowledge.

The authors of the study go on to make a host of recommendations. Managers should “think broadly about what could occur and constantly layer new risks into their calculations.” They should “integrate risk awareness directly into strategic decision making.” Managers need to “be on the lookout for more strategically resilient alternatives.”

The authors stress that risk must be managed “at the top levels of the company, looping in key individuals as needed,” the need for “full understanding of the uncertainties inherent in strategic decision making,” and the importance of being “always on the lookout for more strategically resilient alternatives in order to build greater corporate agility.”

The list goes on, and there is a lot of wisdom and value in those recommendations. But at the same time they dance around the real point. All of that advice really amounts to the same thing.“You are missing things that you should be seeing, so stop missing them!”

What is true for corporations is true for small businesses and individuals as well. The key to success is knowledge.

Of course, the real problem isn’t knowledge itself. In a changing world, knowledge is an ephemeral thing. What really matters is the way that we approach knowledge. What is knowledge in the first place? Where does it come from? What are its limitations? How can we tell the wheat from the chaff?

Answer those questions, and the rest will fall into place.

The Lesson of Lost Value  © Dr. Jeff Hester
Content may not be copied to other sites. All Rights Reserved.