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Catastrophes don't just happen. Virtually every disaster is the result of a
series of overlooked mistakes - each one set in motion because people simply
refused to believe the evidence right in front of them. Will a mistake be
fatal to your organization? How you deal with mistakes will determine
whether your organization is successful and survives in the long run.
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It's called the Mistake Chain, a series of compounding errors that can
bring about crisis and front-page status. You will make mistakes, but you
can make fewer, less serious mistakes by recognizing a mistake or failure
and breaking the mistake chain before it results in a major mishap.
All disasters large and small have in common a string of mistakes - the
Mistake Chain. From the Titanic to Firestone Tire, Three Mile Island to "New
Coke", all were preventable and the mistake chains that caused them could
have been broken.
To avoid a fatal blow to your business, keep in mind these vital
strategies:
1. Learn to Recognize the Pattern of Mistakes.
Prepare your organization
and its employees to recognize these patterns before a disaster happens.
Damage from a crisis tends to grow exponentially. It can take the form of
lost customers, lost sales, lower employee morale and higher costs�and lost
companies, so taking action to eliminate the threat early on can help avoid
full-blown crisis management down the road.
2. Fly the Airplane.
This is an old adage in aviation. Airplanes have
crashed simply because of pilot distraction in the cockpit. This is what
happened when Eastern Airlines flight 401 crashed in the Florida Everglades
in December 1972. In preparation for landing in Miami, a light bulb
indicating �gear down and locked� failed to illuminate. As the crew became
absorbed by what they thought what could be a nose gear problem, the plane
lost altitude, going unnoticed until it was too late. After the crash, it
was determined a burned out light bulb started the sequence of mistakes.
Businesses can get caught up in a similar chain of execution mistakes.
For instance, Webvan - the now defunct Internet grocer - took on expansion too
fast. It failed to work out operational problems in its initial markets in
California, before taking on Atlanta and Dallas. As a result of many
execution mistakes, the company ate up more than $1 billion in capital,
before declaring bankruptcy in 2001 and laying off 2,000 employees.
3. Establish and Enforce Standard Operating
Procedures . Aviation and
complex manufacturing operations do this. You need to look for everything
that can be standardized and make the procedures known. Employees must be
trained and those who do not follow them must be held accountable.
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4. Avoid Ignoring Data or Misrepresenting
Customer Data.
Intel's new
Pentium computer chip was tearing up the processor market in 1994, but a
math professor discovered it produced incorrect results for a computation
beyond eight decimal places. The company was slow to admit the problem and
offer a free replacement chip to customers who asked. That only irritated
many customers and ignited criticism in the media, making things much worse.
Here was a case of executives not learning from other industries.
Communications and public relations fiascos are often part of the mistake
sequence that increases the damage in business disasters.
5. Create a Culture with a Purpose . Most corporate cultures develop by
accident. Yet those that are designed to accomplish a purpose are more
effective. They understand what they need to focus on and reinforce it
repeatedly. McDonald's Corp. in 2003 posted its first quarterly loss in its
history. The company rebounded by going back to basics. It closed
underperforming stores and sold off brands not central to the core business.
It focused on clean stores, friendly service and hot food. It slowed
expansion and stopped pricing wars. Overall, it found out its core
competence is in operations and marketing�in a fairly narrow area. Extending
those competencies to similar but different product areas was more difficult
than imagined.
6. Beware of Economic Forces and Laws.
Industry changes are real. The
mistake chain in which entire industry changes occur is driven by a failure
to recognize the need to make fundamental changes in a business model early
enough to avoid being consumed by the natural laws of economics. Eastman
Kodak Co. lost its dominance in the photography business by being slow to
recognize the impact of digital technologies.
The U.S. auto industry is in a mistake sequence that has been achieving
momentum and destroying value for nearly 50 years. Mistakes include:
believing profitability and market share were inalienable rights, failing to
modernize manufacturing and strangling suppliers by demanding concessions.
You will make mistakes. If you don't, you are not taking enough risks.
But you can make fewer of them. Catch them early and keep them from
spiraling out of control.
About the Author:
Author Robert E. Mittelstaedt, Jr. is Dean and professor of the W.P.
Carey School of Business, Arizona State University, and former, Vice Dean
and Director, Aresty Institute of Executive Education, The Wharton School.
He has consulted with organizations ranging from IBM to Weirton Steel,
Pfizer to the U.S. Nuclear Regulatory Commission and is a member of the
board of directors of three corporations in electronics and healthcare
services businesses. His book
Will Your Next Mistake Be Fatal? Avoiding the Chain of Mistakes That Can
Destroy Your Organization is published by Wharton
School Publishing September 2005;$25.95US/$36.95CAN; 0-13-191364-6
Reprinted with permission.
January 2006
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