What I watch for

Why Companies Fail

Five ways companies lose contact with reality, and five signs the correction is coming too late.

  1. Destructive defaults become the company.

    What is rewarded gets repeated. What is ignored becomes acceptable.1

  2. The CEO loses contact with reality.

    The story stops being tested against the facts, and the distance compounds.2

  3. The CEO delegates past the point of judgment.

    Expertise can be hired. The CEO still needs enough command to evaluate the work, test the explanation, and know when to intervene.3

  4. Truth does not become action.

    What cannot be said cannot be fixed. What no one owns does not change.

  5. Correction comes too late.

    A strategy that stops nothing prioritizes nothing. Time and money run out, or the company becomes a zombie.4

Five warning signs

Correction is failing when:

  1. The CEO cannot state the key numbers, explain G&A or major vendors, or show the source.
  2. The CEO cannot judge competent work in a core function.
  3. The candid account exists only in private conversations, or reaches no owner.
  4. Milestones describe activity, but no one can say what risk has fallen.
  5. The same small group keeps rescuing critical outcomes, and the system never improves.

The reversal

Return to the facts.

Say the thing. Assign the owner. Stop what is not a priority. Break the default. Act, then verify.

Return to My Blueprint

Notes

  1. Example: Dishes left in a communal sink. The dishes are not the point. What is tolerated becomes the standard.
    Atrophy signals: Good people leave. G&A, consultants, and management layers grow while product and engineering shrink. Process earns status over outcomes.
    Related: Kaz Nejatian interview. Back
  2. Real constraints: Markets, customers, investors, partners, and employees.
    Self-deception: Starts when those constraints explain everything and leave nothing to act on.
    Testing the story: Company state and evidence standard are defined in My Blueprint, note 4. Back
  3. Core domains: Finance, HR, legal and governance, product, technology, and operations.
    Enough command: To recognize competent work and ask the next question. Back
  4. Capital: Buys decisive evidence and reduces risk. Dollars raised, headcount, and activity do not prove either happened.
    Zombie: Alive, but no longer compounding learning, capability, or value. It spends its people’s time and its investors’ capital to preserve the conditions that prevent correction. Back