Issue link: http://www.e-digitaleditions.com/i/63421
driveway of the company chasing 3i's money. Through the trees we could see the corporate HQ in a beautiful- ly restored country house with several exotic cars parked in the driveway. "And there are the flags!" exclaimed my pas- senger. "A whole United Nations of them." The company did not get We turned off the road into the 3i's money, but it did receive funding from other sources. Within months, it went from dot-com to dot-bomb, taking its inves - tors' money with it. Lloyds TSB was unusually humble in explaining how it became the world's most highly val- ued retail bank. Lloyds TSB floated to the top, representatives said, because everyone else was making silly mistakes, diversi- fying overseas and into lots of businesses that Lloyds did not understand. It turned out that the other banks did not under- stand the new businesses either. They lost their shirts, jobs, bonuses, and tower blocks by following each other into a series of copycat international misadventures. What makes businesses blow it? Lloyds TSB's competitors Incompetence Is Flourishing Like tulip mania and the dot-com bust show us, business incompetence is in perennial bloom. Enron, WorldCom, Allied Irish, ITV Digital, and Consignia are just the latest in a tragic history of business failures. While business schools concentrate on developing "competen- cies" and "doing things right," it some- times seems that, in business, success also is based on making the fewest catastrophic mistakes. In an article in The Economist, there are patterns and clues to follow. It is important to understand what conditions are precursors of business incompetence—and how we can teach business school stu- dents to recognize and avoid them in their own careers. The following syndromes, like the flags waving before a corporate headquarters building, should alert anyone to the possibility of incompetence in bloom. and the dot-com bomber both give some clues. It is not lack of competence, because both concerns were full of highly trained and motivated staff. It is not lack of strategy—they had that in abundance. Business incompetence is caused by a bundle of circumstances that in themselves are innocuous but that—given the wrong time, the wrong market, and the wrong people—can combine to cause catastrophic failure. when they fail to concentrate on the business itself and instead focus on outward symbols of prestige, such as huge buildings. Yet deposed British Airways CEO Bob Ayling changed the BizEd NOVEMBER/DECEMBER 2002 Both had huge central London headquarters more befitting a government department than a retailer. Moreover, the way they retailed demanded huge operations. They focused on their own high-end brands, disdained sales promotions, and—in the case of M&S—refused to accept any credit cards but their own. Eventually, Sainsbury's arch rival stole its No. 1 slot as Britain's lead grocer, and M&S lost ground to mar- keters who attacked it from both the high end and the dis- count end. Neither retailer realized that it had to adapt its own way of doing business to the way business was currently being done. Monumental mistakes: Corporate executives are also in trouble Yet, both became more like state institutions than stores. respectable middle class flocked to them. The Signs of Incompetence The delusion of omnipotence: Some com- panies fail when they become institutions. They become less of a business and more of a national treasure. Two British retailers that fell foul of such delusion were Sainsbury's supermarket chain and Marks and Spencer. Both were market leaders with a comfortable, noncommercial feel about them. The staff cared about their customers, and the Business incompetence is not just a random alignment of unfortunate circumstances; 47