Success Secrets | Giving up on a bad business

Success Secrets | Giving up on a bad business
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First Published: Mon, Jul 30 2007. 12 20 AM IST
Updated: Mon, Jul 30 2007. 12 20 AM IST
If you’re part of a diversified company, when do you give up hope on fixing a broken business?
—Ron Adner, Fontainebleau, France
Big companies hold on to failing businesses for all kinds of reasons: sentimental value, false hope and culture, to name just three.
For many decades in Japan, for example, every business was treated like a shrine—untouchable. Similarly, citing “tradition”, Pan Am sold off its profitable hotels in the mid-1980s and kept its struggling airline business. We all know the end of that story: By 1991, Pan American World Airways fell apart.
In most cases, though, inertia is what stops companies from letting go of broken companies. It’s just so hard to sell an old operation—and so messy. After all, getting rid of a fixer-upper takes patience and often the willingness to take a loss. Who has the time or wherewithal for that?
Which is why letting go of a business has to be a corporate discipline for it to happen at all. Companies should only keep trying to fix businesses as long as they serve a strategic purpose. And they should face reality and “give up hope”, as you put it, as soon as they don’t.
Look, there will always be times when companies will pour money into a floundering business to establish a position in a developing country.
China was just such a place, and few companies which bought or built businesses there, especially in its early days of open-door commerce, escaped a few years of “learning curve” losses. Similarly, a fundamental belief in an emergent technology often means years of struggle before achieving profitability. In such cases, you have to hang on. Your strategy depends on it.
But prolonged attempts to fix a business where that purpose is gone rarely make sense.
Without corporate life support—which peripheral businesses usually don’t get, for obvious reasons—such businesses have no option but to fend for themselves. It’s a slow death for everyone involved.
How much better, then, to give your people their best hope for a better future. The company buying your “failure” usually has grand plans for its resurrection. Fight your inertia, and let them go for it.
What can America do to improve its brand in the world?
—Julie Meyer, London
It can start winning.
Basically, that’s the only choice for any organization, be it a company or a country, that wants to repair a damaged reputation.
For instance, imagine if US policy and military action finally managed to install a peaceful democracy in Iraq. Such a victory would no doubt change a lot of minds about America’s “brand”. We would go from incompetent, arrogant bullies to brave, persevering heroes in about the time it took to report the news.
But before we go too far down this path, let’s get clear about the kind of trouble the American brand is really in.
Yes, a boldly pro-American president, Nicolas Sarkozy, was recently elected in France, and the leaders of Britain and Germany are also supporters of the US. And, yes, the number of people trying to get into America has never been higher. But, broadly speaking, the US has undoubtedly lost respect on the world’s political stage.
Leaders from countries such as Venezuela and Iran, emboldened by the changing geopolitical balance of power, feel no compunction whatsoever in denouncing America. Sarkozy’s opponent, Ségolène Royal, made anti-American sentiment a cornerstone of her campaign, and 47% of the populace apparently thought she picked the right villain.
Even Russia, which held hands with United States while it was in the process of returning to the global economy, has started treating the US government with the impudence of a teenager towards his dumb, blundering dad.
But if America’s political reputation is faltering, its business reputation decidedly is not.
Today, American companies and entrepreneurs operate around the world with unparalleled vitality and access. Europe is still the largest investor in the US, and the US is the largest foreign investor in France.
Indeed, in all of our travels over the past several years in literally dozens of countries, we have never heard of a single business deal, joint venture or acquisition that has fallen through because one party said: “I just can’t. They’re American.”
Maybe the simple reason is that business people are mercenary. They care more about profits than politics. It doesn’t matter. The end result is that business has become part of the glue that keeps the world from blowing apart. Most people agree, for instance, that India’s nuclear restraint against Pakistan in 2002 had as much to do with international economics as it did with international diplomacy.
Now, we’d never suggest that America’s strong business reputation will totally wipe away the country’s geopolitical tarnish. But we would assert that the American brand is multifaceted—and thanks to that, hardly ready to be junked.
Write to Jack and Suzy
Jack and Suzy are eager to hear about your career dilemmas and challenges at work , and look forward to answering some of your questions in future columns. Jack and Suzy Welch are the authors of the international best-seller, Winning. Campaign readers can email them questions at winning@livemint.com. Please include your name, occupation and city. Only select questions will be answered.
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First Published: Mon, Jul 30 2007. 12 20 AM IST