Why Some Companies are Being Dumb

A recent article in Strategy + Business attempted to address why some companies are making the wrong moves. Needless to say, after my recent dumb company and dead company series, it caught my attention.

According to the article, some of the reasons companies are making the wrong moves are:

  • Market Optimism
    They think they’re better off than their competitors and that the crisis will serve to elevate them by harming their competitors more.
  • Overestimating their Financial Strength
    They are not accelerating their cash generation and, more importantly, cash preservation efforts.
  • Pulling Back on M&A
    When now is the best time for strong and stable companies to snatch up struggling companies with innovative products.
  • Mistrust of Senior Executive Leadership
    A recent survey by Booz & Company in December of 2008 found that two out of every five respondents were skeptical of senior executive plans, which, of course, affects their ability to carry those plans out.

I don’t think it captures all of the reasons, from what I’ve seen and heard over the past few months, but it’s certainly an important set of mistakes to avoid.