The 3 Commandments for Business Failure

Posted by Patrick Clouden

I recently finished reading Don Keough’s (former President of Coca Cola) The Ten Commandments for Business Failure and there were three points in particular that resonated with me.  I think you may get something out of them too.

The tongue-in-cheek premise of the book is “if you want to fail in business, absolutely make sure you do these things” so that’s how I’ll write this article.

1. Quit Taking Risks

“He that is overcautious will accomplish little.”

-Friedrich von Schiller

Risk aversion has been the prevailing mood for mankind throughout history.  The hunters and gatherers of old roamed far and wide in order to survive, but the agricultural revolution allowed us to settle down and most people did.  People chose to live as their fathers and grandfathers before them, never venturing far from the village.  And it made sense.  The world was dangerous.  Just look at the old maps with vast areas labeled “terra incognita”—unknown lands–and even drawings of serpents and monsters.  Who would want to sail to such places?

Many of history’s great achievements, however, started with a great risk.  Look at the formation of America.  It was about risk taking from the beginning.  From Columbus to Jamestown to the Second Continental Congress to the seminal Declaration of Independence, this country was built on one risk after another.

How does this apply to business?  Well, many people are prone to achieving something–sometimes very little–and quit taking risks altogether.  I guess it’s human nature.  “I’ve got something.  Why risk it?  Who knows what’s on the other side of that mountain?”

“The world belongs to the discontented.”

-Oscar Wilde

My first real business success started with a risk.  I had just gotten promoted to the head of a sales office for a long distance carrier.  Things were starting to get comfortable, but I wasn’t content with it.  I knew that the only way for me to really achieve the success I wanted was to own my own  business…something I had never done before.

One side of me was saying that I just got a raise, I could live comfortably and provide for my family…why risk losing that?  The other side, though, was telling me that I had everything it took to build a business myself and that I wasn’t achieving my full potential.

I went with my gut and decided to quit my job, get a partner and start my own business.  I figured that the worst case scenario is the business fails and I had the skills and resume to find another good job.  The risks, when viewed objectively, weren’t that outrageous after all.  The prospects of failure were just uncomfortable.

Well, that business turned out to be a rocket ride; my partner and I spent four years building it and then sold it for a multi-million dollar sum.

The moral of the story is don’t be so afraid of taking risks that you miss any and all opportunities.  Be smart with your time and money, don’t just throw money at every get-rich-quick scheme that flies around here, but be willing and ready to take calculated risks.

2.  Be Inflexible

Not taking risks and being inflexible are close relatives, but not the same.  Inflexible people aren’t necessarily avoiding risks; they are just so set in their ways, so sure that they have the formula for success that they simply can’t see any other way of doing things.

“For this is the tragedy of man–circumstances change, but he doesn’t.”

-Machiavelli

Flexibility as I’m referring to it means the ability to quickly adapt to changing circumstances.  Just four years ago I had to drastically adapt my business to save it from dying a slow death.

In 2003, when the DNC Registry was instituted, my business—an energy consulting company–was severely impacted.  For nearly 7 years, we specialized in residential sales and now our lead pools were cut by as much as 70% in certain markets.  Sales crashed to an all-time low.  I could either severely downsize and play the drastically reduced residential game–which many companies did—or I could completely alter the course of the ship and go into our own “terra incognita”…commercial sales.

We knew very little about building a successful commercial sales team in this industry.  We were experts at the residential side, and my previous business was all residential sales too.  But, just like when I started my first business, I knew the risk had to be taken.

I formulated a plan to transition the entire company–about 130 salespeople at the time–into commercial sales.

The transition was rough and required a complete revamp of our training, but to make a long story short, it actually unlocked the real potential of my company and it’s doing better than ever before.

Inflexibility and aversion to risk would’ve prevented me from making that transition.  It would’ve led to me take the “safe” route of “what we always have done,” which probably would’ve killed my company in the end.

3.  Be Afraid of the Future

This is especially relevant in these tough economic times.  The most debilitating malady out there is fear.  Nothing shuts a business or economy down faster than overriding fear of what might happen.

“The only thing we have to fear is fear itself.”

-Franklin D. Roosevelt

The pessimism industry has grown exponentially as time has gone on.

It really got kicked into high gear with Thomas Robert Malthus’s An Essay on the Principle of Population.  In it, he predicted that all of mankind was doomed because population would inevitably outrun food supply.  He thought it would happen sometime within 100 years of his time.  Many “Malthusians” welcomed famines and epidemics because they felt it was population “correcting itself.”

To this day, Malthus is the foundation and inspiration for much of the contemporary pessimism industry.  Paul R. Ehrlich, the author of The Population Bomb, predicted in 1968 that hundreds of millions would die of starvation in the ’70s and that life expectancy would plummet in the ’80s.  It didn’t happen.  The infamous Club of Rome report in ’72 said we’d run out of raw materials by the ’90s.

Wrong.  They were assuming that human beings were like sheep, grazing on the grass until it’s all gone.  Well, we’re a bit smarter than sheep.

The best example is Chris Goodall, the British author of How to Live a Low-Carbon Life and prominent member of the Green Party.  He informed us that if we walk to the store, we create more CO2 than if we drive because we have to eat in order to walk and raising the food consumes so much energy that–well, I guess the only solution to the now-debunked “global warming” theory is that we all sit in dark rooms with everything unplugged and the air conditioning off, doing nothing and eating nothing.

The point is, there is always a ready supply of despair and more often than not, it never turns out as bad as people want us to believe.  You would think that we would simply grow tired of it all.

Well, I say that we need to be aggressively pessimistic about the pessimism industry.  Turn off the news.  Stop focusing on failures.

The old couplet comes to mind: “Two men looked out through prison bars.  One saw mud one saw stars.”  A tilt of your head, an attitude, it can make all the difference how you shape your world.

If you believe the fearmongers, there never is a good time to start anything.  Something is always wrong.  There are always holes in the business model, always problems lying below the surface.

But if you believe in the essential creativity of entrepreneurs, then almost any time is a good time.  Just ask, “Are there people there?  Is there some kind of economic activity going on?  Is there any means of exchanging goods and services?”  If so, then that’s a good time to start a business!

Be an optimist and get pessimistic about the pessimism industry.

Pat

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