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Stupid Corporate Moves


Mistakes are one thing, but when you simply could have known better, let’s call it what it is—stupid. Many business problems today are not the result of software bugs or other factors outside our control. They are self-inflicted, the result of “mind-bugs” in the critical internal processes that occur in the space between our ears. The pervasiveness of mind-bugs in corporate decisions is the product of human nature—hard-wired and highly resistant to feedback. Mind-bugs can affect fact gathering, analysis, insights, judgments, and decisions—and, as you’ll see from the examples below, they increase risk accordingly. By the way, this is the short list. It doesn’t include now classic missteps such as Neflix reversing its decision to separate its DVD rental and streaming business; the subprime mortgage crisis; and the BP Gulf of Mexico oil spill, to cite just a few.

Shortcoming Denial at Toyota
Automaker Toyota’s slow awakening to an accelerator problem resulted in congressional hearings and incalculable damage to its once stellar reputation. It went from discounting early reports of problems to overconfidently announcing diagnoses and insufficient fixes. Akio Toyoda, the chief executive of Toyota, issued the following statement: “Quite frankly, I fear the pace at which we have grown may have been too quick … priorities became confused, and we were not able to stop, think, and make improvements as much as we were able to before.” It sounds like Toyota was infected with both data rejection and informed leader fallacy mind-bugs.

Hewlett-Packard: Were Palm and the TouchPad a Blind Investment?
After buying Palm for $1.2 billion in 2010 and announcing the TouchPad in early 2011, HP killed these products six months later. On an earnings call, the CFO said, “To make this investment a financial success would require significant investments over the next one to two years, creating risk without clear returns.” Shouldn’t HP have known this market would require an investment beyond six months? One mind-bug HP likely had is competency blindness. It seemed to believe unreasonably that it could pull off a win in six short months.

Amazon Assumes Your Books Can Be Removed
Amazon discovered that a third party put 1984 and Animal Farm for sale on Amazon.com without the rights. Amazon deleted the files from its website and from Kindle customer devices with a refund but without prior disclosure. Shouldn’t Amazon have known that people would get upset? CEO Jeff Bezos apologized by saying, “Our ‘solution’ to the problem was stupid, thoughtless, and painfully out of line with our principles.” Amazon employees failed to challenge their assumptions—a deadly mind-bug.

Borders Books Rejects Data It Is Dying—and It Dies
For a decade, Borders’ market share had been almost static while Amazon experienced double-digit growth. Borders even outsourced its website to its competitor Amazon. Should Borders have recognized that a permanent 15 percent cut in revenue from store sales would greatly affect margins and operations? Yes, the evidence was there for a decade. There is no question that a disruptive technology is a hard thing to fight, but Borders fell victim to two mind-bugs: a) It rejected data that showed this outcome was possible; and b) it stuck to the status quo.

Did Cisco Lose Its Flippin’ Mind?
Cisco bought the Flip video camera maker in 2009 and shut it down two years later. Flip’s revenue was less than 1 percent of Cisco’s $40-plus billion in sales. Should Cisco have known that competing with existing camera makers and smartphone devices was going to require substantial, ongoing investment? Should it have chosen to spend money on an acquisition that was more strategically aligned? It is quite possible that Cisco had the conforming error mind-bug—subconsciously conforming to the thinking of the group. Somehow, it became enamored with Flip.

Larry J. Bloom is the author of The Cure for Corporate Stupidity: Avoid the Mind-Bugs that Cause Smart People to Make Bad Decisions, adviser to several business leaders, a board member, and an owner of a startup media and software company that promotes better thinking. For more information, please visit www.curecorporatestupidity.com


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