Strategies for Learning from Failure

by Amy C. Edmondson

Seema Sawhney 04/15/2011 04:01 AM

Failures are the pillars of success.We do not accept failures because of the fear of how others will react .Accepting the failure not only gives us strength to move ahead but also brings us the much needed help from so called 'others'. 5 people liked this.

LLaier@aol.com 03/31/2011 04:33 PM

Studies have shown that a majority of successful entrepreneurs had one or two unsuccessful ventures before they succeeded. As a manager, I made a point after a problematic incident of asking my team members what they had learned from the incident. If a mistake teaches but is not repeated, it can be a valuable tool.

Sandor Heder and 4 more liked this

M David Corley 03/23/2011 12:39 PM

As I once was told "nothing beats a failure but a try". Just think how many ideas went from good to great because of a "few more failures"........ M. David Corley 3 people liked this.

Bcoker 04/18/2011 04:49 PM

15 years ago, my veteran boss said "Success has many fathers, but failure is a bastard!" So true! When something fails, it sure is hard to find the father! Sandor Heder liked this

Shmgdele 04/13/2011 09:40 AM

FAILURE IS A STEPPING STONE TO SUCCESS THE HARDER U PUSH FORWARD IRREGARDLESS OF THE FAILURES U WILL BECOME MORE SUCCESSFUL 1 person liked this.

varsha 09/29/2011 05:16 AM

Good article, i do so many mistakes in my job in the starting and my boss always say that do lots of mistake but learning from that mistakes will brigt your future its is an opportunity for u that how could u do better than earlier

Saeed N 09/09/2011 10:48 AM

Failure, if properly attended to and rectified is a great plus. It gives the much needed confidence to the customer, client or stakeholders in the product or service being used. As a customer experiments the first performance failure and the response to rectify the situation he makes a long-lasting decision about the product or service and supporting post sale services. Similarly, individual failures enable the sponsors of a project, service or product to determine the gap between the expectations and real performance. Furthermore, they will be able to assess their capacity to deal with the systemic and circumstantial deficiencies leading to failures and work out a way forward.

Muhammad Arshad 05/31/2011 07:01 AM

It is heart breaking for perfectionists to face failure in unknown ventures taken without proper calculations. With media blast worldwide, the number of factors affecting business prepositions have become manifold, thus complicating a realistic assessment before taking on a venture even by experienced professionals.

Kazuko Yonekawa 04/20/2011 09:11 AM

This is an amazing article giving the mind set opportinity and the correct skill of analizing the failure. Those failures I had in the past can be a chance to learn. Now all japansese are facing the most challenging task, and I am sure that we can learn from

failures to build the better future, Although this is a business field analysis, i think many hints are here.

Ihtisham18 04/20/2011 03:16 AM

FAILURE HELP US OUT TO GET KNOW ABOUT OUR DEFICIENCIES AND INCOMPETENCIES AND MAKE US REALIZED HOW TO CONQUER YOUR FUTURE AFTER RETREAT IHTISHAM UL HAQ MBA

Giuseppe 04/19/2011 05:14 PM

A boss once said to me that the is nothing wrong with failure as long as you can show a logical and sensible thought process in the planning and that you learn from the mistake. However, you can not excuse the same mistake twice.

Mr Duan 04/18/2011 09:19 PM

the first time they stumble is not easy to accept it. but time to time they fail more and more and when they look back and realize that it contributed to their success than st else. it is time blame game works. i want to make friend with everyone. contact with me : yahoo : giacmoviet89 gmail : apple.com.vn@gmail.com

Soluwebcolombia 04/13/2011 08:49 PM

Great article, many of us will have to learn that mistake is an opportunity, is not good but not as bad as you could think.

Vijaya kumar 04/10/2011 02:44 PM

I have personally observed that 'blame game ' culture often alters or hides the true information and hence the lesson learnt from such incident. Organisation/firms shall develope positive attitude among the workgroup and shall enhance the ability to share

such information.It is a very challenging role as a Manager to ensure true information sharing.

Bost 03/30/2011 10:00 PM

If at first you don't succeed, you will eventually.

Ethical Breakdowns
by Max H. Bazerman and Ann E. Tenbrunsel

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Tim P 07/22/2011 05:51 PM

I liked this article, and is even more relevant having just read it the week Rupert Murdoch was questioned by British MP's about the huge ethical breakdown at News of the World. However, the article is spolied by the early example and psychological white-washing of Ford, with the article saying about a decision to sell a car whose design was known to be dangerous "But looking at their decision through a modern lens... We suspect that few if any of the executives involved in the Pinto decision believed that they were making an unethical choice. Why? Apparently because they thought of it as purely a business decision .... they conducted a formal cost-benefit analysisputting dollar amounts on a redesign, potential lawsuits, and even livesand determined that it would be cheaper to pay off lawsuits than to make the repair." If this is a true reflection of what really happened then by any standards they really WERE callous, evil and not to be trusted: no matter what the corporate culture, decent people would be expected to recognise the awfulness of what they were doing, stand up and be counted.

KenSexe 06/17/2011 02:00 PM

I agree with Richard Condit in that it can be perceived that this article provides a way for individuals to deflect blame form their decisions. But, in countering, I would state that things like this (which has been known for some time since Janis did his studies) would

be helpful for people who are humble enough to learn that their decisions can be affected by biases and wish to learn how to minimize their impact on decision making. In my experience there are very few managers (in all levels) with the insight or humility to view it this way and who will view this as a convenient excuse.

Richard Condit 04/25/2011 06:11 PM

This article is making excuses for business leaders who care about little more than dollars! Saying that there was a "cognitive bias" that distorted decision making makes it seem like folks at Ford were not aware of the safety implications of their actions. Maybe some weren't, but it is a fact that many were aware of the implications of the the Pinto safety issues and some of the worst case scenarios. The fact that the executives and others in the know at Ford thought of the issue as "purely a business decision" was a conscious choice made based upon self-interest. This type of decision making is precisely what was wrong with business practices in the 1970s and continues in force today. Consider the negligence and/or criminal behavior of those on Wall Street that has caused world-wide economic harm. Until business organizations are forced to pay the price of losing their corporate charters or ability to legally operate as a business as a major consequence for reprehensible behavior, "ethical fading" will continue to be a significant force in decision making.

Why Leaders Dont Learn from Success

by Francesca Gino and Gary P. Pisano

Ronald S Woan 04/08/2011 02:24 PM

In the immortal words of Bill Gates: Success is a lousy teacher. It seduces smart people into thinking they can't lose. 11 people liked this.

Meghan Ennes, HBR.org

04/14/2011 09:53 AM in reply to Ronald S Woan

Hi Ronald, We're interested in using an excerpt of this comment in the Interaction section of the upcoming June issue. Can you contact me at mennes [at] hbr [dot] org with your title and company affiliation so we can use it as a one-lined bio? Thanks again! Meghan

Jamie Muskopf 03/29/2011 08:15 PM

Great article. We are about to embark on creating a "best practices" blog but now I'm reconsidering the approach. How do we capture what went wrong in a truthful way (ie pointing out failures) but still come out showcasing what went right? No one wants to reveal their shortcomings - is there a more masterful way of capturing that so that others can really learn the lessons? Michael O'Laughlin and 6 more liked this

Meghan Ennes, HBR.org

04/14/2011 09:53 AM in reply to Jamie Muskopf

Hi Jamie, We're interested in using an excerpt of this comment in the Interaction section of the upcoming June issue. Can you contact me at mennes [at] hbr [dot] org with your title and company affiliation so we can use it as a one-lined bio? Thanks again! Meghan 1 person liked this.

Navin Jha 03/17/2011 06:21 AM

Surprisingly Business school and business Magazines dwells on on only success stories and successful eminent personalities . The statement and thought process on this topic have relevance with practical aspects.Navin Jha - navinpharma15@yahoo.com Dalka and 4 more liked this

Phyllis Ezop 03/30/2011 07:57 PM

I have been researching business success and failure patterns for 20+ years and I find that it is important to understand both success and failure. Companies seeking insights into how to be successful should be looking at both. Phyllis Ezop Ezop and Associates Winning Moves Strategic Choices for Successful Business Growth www.ezopandassociates.com

Michael O'Laughlin and 3 more liked this

Ishwara Bhat 04/09/2011 09:22 AM

Most of the times, upon success we celebrate and move onto next task. Upon failure, we tend to introspect and move to the next task. So the process step of debating over the success is skipped most of the times. The term root cause analysis is branded to be tied to the analysis of failure. Michael O'Laughlin and 2 more liked this

Wayne Spivak 03/21/2011 10:46 PM

Management stifles itself from day one of the start-up to the last day the company is in existence by the sheer force of elitism. My definition of elitism is the focus management puts on why a person should be hired (school, degree,etc) over the person being hired. This that transforms itself into systems and processes and procedures that mimic the same thought pattern. It works,we're making money, so we must be right. Next stop on this self-deluding merry-go-round ride is that everything we do is correct, and not thinking the way we think makes you anti-team and wrong. Even on the slide down, mis-direction is used to find fault in systems and processes that aren't the cause of the decline, while ignoring the major symptoms causing the decline. Do we learn more from success or failure? Sometimes its very hard to tell... Wayne Spivak SBA * Consulting LTD www.SBAConsulitng.com

Michael O'Laughlin and 2 more liked this

Vijay 03/27/2011 04:35 AM in reply to Wayne Spivak

I think it is fair to say that we learn equally from both success and failure.The most important thing is how we handle both as it has its own implications.

To learn from a result lies in our hands, with the aim of perfroming better. Vijay

Loony2nz and 1 more liked this

Ronald S Woan 04/08/2011 04:36 PM in reply to Vijay

I think we could learn equally from both success and failure, but as the article indicates and pretty much consensus research shows we do not for all the reasons outlined. I think the military doing a review whether successful or not is important, like regular retrospectives in the software industry, as opposed to only reviewing massive failure as is normal with operations oriented organizations. 2 people liked this.

Atulwahi 04/14/2011 08:49 AM

Thank you for providing such a good insight on how success and failure are both important factors to be analysed in any walk of life to effectively evolve and keep up with changing times. 1 person liked this.

Greg Stone 04/08/2011 08:16 AM

Good article, one of the ideas I practice is " your team is only as strong as your weakest man " if you can get your team to help the weak link, instead of complaning.... you will have a strong team. 1 person liked this.

Stirling Draper 04/04/2011 05:41 PM

One of my first clients told me something I never forgot and for which I have always been thankful: the importance of knowing the exact reasons for success. Michael O'Laughlin liked this

drsharkey 03/31/2011 04:20 PM

While this crap-pile may contain information that I am interested in, I am unwilling to overlook it. 1 person liked this.

Diwakar Pandey 03/31/2011 07:55 AM

I have conducted challenges of CEO under Private Organization in Nepal Nepal and found that providing leadership is the first, meeting domestic competitiveness is the second and meeting quality managment is the third challenges of CEO. Regarding with public organization, challenges of CEO is managing industrial relations and giving new business plan are challenging part of CEO. 1 person liked this.

Jose8269 10/04/2011 02:34 PM

Sometimes the analysis of success is not important as the success itself takes you to next step of the organization. But a failure takes back to think and proceed further to reach the next step. Setting new internal targets with each success generate more auto analysis of revising the earlier factors contributed to the success. Definitely analysis on what contributed for the success is important to achieve a higher set targets

R.Y.Soomro 04/13/2011 02:09 PM

very nice article...overconfidence leads toward mistakes.

Michael O'Laughlin 04/11/2011 11:32 AM

Thank you Ms. Gina and Mr. Pisano for your article that shares excellent insights and practical suggestions on to avoid the insidious effects that success can bring. I can attest to the validity of your premise from my roles at a large pharma when I was a leader on a brand that became a surprise billion dollar success, to later when I joined a new product development team.

Your Three Interrelated Impediments to Learning (i.e., fundamental attribution errors, overconfidence bias, and failure-to-ask-why syndrome) are mindsets that can permeate your thinking when you are riding the crest of unexpected success. And your Five Ways to Learn Strategies are practical approaches that I feel can be employed by leaders at any level. Thank you for the timely insights. Michael OLaughlin OLaughlin & Associates

Christine Maingard 04/05/2011 12:40 AM

Serious food for thought for organizations that believe a manager/leader is only as good as her/his last success and that there is no need to contemplate and celebrate with insight. Isnt this the usual modus operandi? An experimental approach that also investigates good performance and nurtures an environment that actually allows this to take place may require, however, a major shift. Often there isnt enough time to learn from failures. Understanding the reasons behind the good performance of successful employees may not only bring to light important lessons for others, but also help the one who is cruising along to become even better! Isnt this the secret of moving from good to great? The suggestion to adopt approaches/tools used in Six Sigma and TQM to propel success to the next level is an excellent one. Thank you for an outstanding article. Christine Maingard www.thinklessbemore.com www.mindfulstrategies.com.au

Meghan Ennes, HBR.org Maingard

04/14/2011 09:54 AM in reply to Christine

Hi Christine, We're interested in using an excerpt of this comment in the Interaction section of the upcoming June issue. Can you contact me at mennes [at] hbr [dot] org with your title and company affiliation so we can use it as a one-lined bio? Thanks again! Meghan 1 person liked this.

rajesh bhandari 04/03/2011 02:03 AM

the reading of this articles has been a great learning experience for me as a student, i hope the same could be followed in the business process and practices and both the failure and success would go together when considering the business performance,as a result the management will be aware of the fact that where they lack their abilities and bridges the same.

Cwatler 03/23/2011 10:02 AM

I read this with great interest. As the manager of a non-profit I find it hard to devote resources towards understanding failure, much less success. I appreciated Gino & Pisano's description of "attribution errors;" especially the inability of leaders to recognize the role that external factors play in a successful outcome.

Sheldon 03/20/2011 03:20 PM

This is a good article that touches on the heart of the business process. Whose role is it to learn from the observed performance and create robust business processes that are predictable, agile, and sustainable? I think lessons learned from success and failures are inherently being used to shape the organization, however a central repository to collect the learning and to update training material may not exist. Furthermore, and more importantly, I wonder if organizations are staffed to enable a role to ensure that this activity is constantly being monitored. What are your thoughts?

Dalka 03/20/2011 10:32 AM

Exactly. I have so many case studies of companies that have perished in the past ten years due to not realigning to the digital paradigm creating serious misalignment with prospects. I'd be happy to share this in more detail in a follow on article.

Few Tem 03/19/2011 01:35 PM

Nice article , pertinent to our human norms .

Why Leaders Dont Learn from Success

by Francesca Gino and Gary P. Pisano

Ronald S Woan 04/08/2011 02:24 PM

In the immortal words of Bill Gates: Success is a lousy teacher. It seduces smart people into thinking they can't lose. 11 people liked this.

Meghan Ennes, HBR.org

04/14/2011 09:53 AM in reply to Ronald S Woan

Hi Ronald, We're interested in using an excerpt of this comment in the Interaction section of the upcoming June issue. Can you contact me at mennes [at] hbr [dot] org with your title and company affiliation so we can use it as a one-lined bio? Thanks again! Meghan

Jamie Muskopf 03/29/2011 08:15 PM

Great article. We are about to embark on creating a "best practices" blog but now I'm reconsidering the approach. How do we capture what went wrong in a truthful way (ie pointing out failures) but still come out showcasing what went right? No one wants to reveal their shortcomings - is there a more masterful way of capturing that so that others can really learn the lessons? Michael O'Laughlin and 6 more liked this

Meghan Ennes, HBR.org

04/14/2011 09:53 AM in reply to Jamie Muskopf

Hi Jamie, We're interested in using an excerpt of this comment in the Interaction section of the

upcoming June issue. Can you contact me at mennes [at] hbr [dot] org with your title and company affiliation so we can use it as a one-lined bio? Thanks again! Meghan 1 person liked this.

Navin Jha 03/17/2011 06:21 AM

Surprisingly Business school and business Magazines dwells on on only success stories and successful eminent personalities . The statement and thought process on this topic have relevance with practical aspects.Navin Jha - navinpharma15@yahoo.com Dalka and 4 more liked this

Phyllis Ezop 03/30/2011 07:57 PM

I have been researching business success and failure patterns for 20+ years and I find that it is important to understand both success and failure. Companies seeking insights into how to be successful should be looking at both. Phyllis Ezop Ezop and Associates Winning Moves Strategic Choices for Successful Business Growth www.ezopandassociates.com

Michael O'Laughlin and 3 more liked this

Ishwara Bhat 04/09/2011 09:22 AM

Most of the times, upon success we celebrate and move onto next task. Upon failure, we tend to introspect and move to the next task. So the process step of debating over the success is skipped most of the times. The term root cause analysis is branded to be tied to the analysis of failure. Michael O'Laughlin and 2 more liked this

Wayne Spivak 03/21/2011 10:46 PM

Management stifles itself from day one of the start-up to the last day the company is in existence by the sheer force of elitism. My definition of elitism is the focus management puts on why a person should be hired (school, degree,etc) over the person being hired. This that transforms itself into systems and processes and procedures that mimic the same thought pattern. It works,we're making money, so we must be right. Next stop on this self-deluding merry-go-round ride is that everything we do is correct, and not thinking the way we think makes you anti-team and wrong. Even on the slide down, misdirection is used to find fault in systems and processes that aren't the cause of the decline, while ignoring the major symptoms causing the decline. Do we learn more from success or failure? Sometimes its very hard to tell... Wayne Spivak SBA * Consulting LTD www.SBAConsulitng.com

Michael O'Laughlin and 2 more liked this

Vijay 03/27/2011 04:35 AM in reply to Wayne Spivak

I think it is fair to say that we learn equally from both success and failure.The most important thing is how we handle both as it has its own implications. To learn from a result lies in our hands, with the aim of perfroming better. Vijay

Loony2nz and 1 more liked this

Ronald S Woan 04/08/2011 04:36 PM in reply to Vijay

I think we could learn equally from both success and failure, but as the article indicates and pretty much consensus research shows we do not for all the reasons outlined.

I think the military doing a review whether successful or not is important, like regular retrospectives in the software industry, as opposed to only reviewing massive failure as is normal with operations oriented organizations. 2 people liked this.

Atulwahi 04/14/2011 08:49 AM

Thank you for providing such a good insight on how success and failure are both important factors to be analysed in any walk of life to effectively evolve and keep up with changing times. 1 person liked this.

Greg Stone 04/08/2011 08:16 AM

Good article, one of the ideas I practice is " your team is only as strong as your weakest man " if you can get your team to help the weak link, instead of complaning.... you will have a strong team. 1 person liked this.

Stirling Draper 04/04/2011 05:41 PM

One of my first clients told me something I never forgot and for which I have always been thankful: the importance of knowing the exact reasons for success. Michael O'Laughlin liked this

drsharkey 03/31/2011 04:20 PM

While this crap-pile may contain information that I am interested in, I am unwilling to overlook it. 1 person liked this.

Diwakar Pandey 03/31/2011 07:55 AM

I have conducted challenges of CEO under Private Organization in Nepal Nepal and found that providing leadership is the first, meeting domestic competitiveness is the second and meeting quality managment is the third challenges of CEO. Regarding with public organization, challenges of CEO is managing industrial relations and giving new business plan are challenging part of CEO. 1 person liked this.

Jose8269 10/04/2011 02:34 PM

Sometimes the analysis of success is not important as the success itself takes you to next step of the organization. But a failure takes back to think and proceed further to reach the next step. Setting new internal targets with each success generate more auto analysis of revising the earlier factors contributed to the success. Definitely analysis on what contributed for the success is important to achieve a higher set targets

R.Y.Soomro 04/13/2011 02:09 PM

very nice article...overconfidence leads toward mistakes.

Michael O'Laughlin 04/11/2011 11:32 AM

Thank you Ms. Gina and Mr. Pisano for your article that shares excellent insights and practical suggestions on to avoid the insidious effects that success can bring. I can attest to the validity of your premise from my roles at a large pharma when I was a leader on a brand that became a surprise billion dollar success, to later when I joined a new product development team. Your Three Interrelated Impediments to Learning (i.e., fundamental attribution errors, overconfidence bias, and failure-to-ask-why syndrome) are mindsets that can permeate your thinking when you are riding the crest of unexpected success. And your Five Ways to Learn Strategies are practical approaches that I feel can be employed by leaders at any level. Thank you for the timely insights. Michael OLaughlin OLaughlin & Associates

Christine Maingard 04/05/2011 12:40 AM

Serious food for thought for organizations that believe a manager/leader is only as good as her/his last success and that there is no need to contemplate and celebrate with insight. Isnt this the usual modus operandi? An experimental approach that also investigates good performance and nurtures an environment that actually allows this to take place may require, however, a major shift. Often there isnt enough time to learn from failures. Understanding the reasons behind the good performance of successful employees may not only bring to light important lessons for others, but also help the one who is cruising along to become even better! Isnt this the secret of moving from good to great? The suggestion to adopt approaches/tools used in Six Sigma and TQM to propel success to the next level is an excellent one. Thank you for an outstanding article. Christine Maingard www.thinklessbemore.com www.mindfulstrategies.com.au

Meghan Ennes, HBR.org

04/14/2011 09:54 AM in reply to Christine Maingard

Hi Christine, We're interested in using an excerpt of this comment in the Interaction section of the upcoming June issue. Can you contact me at mennes [at] hbr [dot] org with your title and company affiliation so we can use it as a one-lined bio? Thanks again! Meghan 1 person liked this.

rajesh bhandari 04/03/2011 02:03 AM

the reading of this articles has been a great learning experience for me as a student, i hope the same could be followed in the business process and practices and both the failure and success would go together when considering the business performance,as a result the management will be aware of the fact that where they lack their abilities and bridges the same.

Cwatler 03/23/2011 10:02 AM

I read this with great interest. As the manager of a non-profit I find it hard to devote resources towards understanding failure, much less success. I appreciated Gino & Pisano's description of "attribution errors;" especially the inability of leaders to recognize the role that external factors play in a successful outcome.

Sheldon 03/20/2011 03:20 PM

This is a good article that touches on the heart of the business process. Whose role is it to learn from the observed performance and create robust business processes that are predictable, agile, and sustainable? I think lessons learned from success and failures are inherently being used to shape the organization, however a central repository to collect the learning and to update training material may not exist. Furthermore, and more importantly, I wonder if organizations are staffed to enable a role to ensure that this activity is constantly being monitored. What are your thoughts?

Dalka 03/20/2011 10:32 AM

Exactly. I have so many case studies of companies that have perished in the past ten years due to not realigning to the digital paradigm creating serious misalignment with prospects. I'd be happy to share this in more detail in a follow on article.

Few Tem 03/19/2011 01:35 PM

Nice article , pertinent to our human norms .

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Failing by Design

oon Jeong 05/05/2011 10:19 AM

Recording the assumptions would help as was suggested in the article.

Popo2 04/12/2011 03:51 PM

Interesting (partial) article as experiential failure is a key component of every success, but the fact remains that until organizations begin to truly foster an environment where experiential failure is rewarded, rather than punished, failure, even that which is necessary for success, will continue to be swept under the carpet at every opportunity and organizational level.

I Think of My Failures as a Gift

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paradox 03/23/2011 12:59 PM

I am surprised that the CEO of a company what is considered one of the most sophisticated marketers was surprised by Clorox's reaction and had not predicted all its moves, particularly as it is the leading bleach company. It seems to me failure because of arrogance rather than anything else. Bashar Zadeh liked this

Dathu 04/07/2011 10:24 AM

He clearly mention about leadership qualities,characteristic and how the decision can influenced by the other person in the organization when you are right.These are learning lesson for us.He also mention people management and about innovation and acquisition of other company in both case what are problem with the parent company..

Queryjackquess 04/07/2011 07:26 AM

All ideas come from and for human needed.include about mistake,that is important also.

Preet Sahota 04/06/2011 10:26 PM

This is so much true. From bottom to the top of the organization, we all learn from our mistakes.

Vish Mahajan 04/05/2011 03:25 AM

It is intersting that Lafly finds failures in acquisition as some of the most critical failures. No surprise because the stakes are high and very few executives at the top call the shots. The balance of emphasis between the 'deal making' ( aka structuring / valuation, which is essentially short term / opportunity driven ) and 'Value Realization' ( aka strategy / executing for integration success, which is long horizon, execution activity ) is critical.

The Earplug 03/15/2011 04:05 PM

Compare with the POV in Rework by Jason Fried and David Heinemeier Hansson at 37Signals: http://goo.gl/rvwY3

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How to Avoid Catastrophe

The Slippery Slope In the course of my work with Nova Trust Advisors, I have helped several clients tackle serious governance issues, including ethics violations and accounting fraud. Such problems often occur because people gradually deviate from normal behavior. In fact, when people do not perceive small changes, they do not realize how things accumulate over time and the consequences of their unethical or flawed behavior. This is the concept of the Slippery Slope. It implies that people are more likely to accept others unethical behavior when ethical degradation occurs slowly rather than in one abrupt shift. Numerous studies have highlighted that, when people do behave unethically or carelessly, those who were supposed to monitor them do not notice the changes when they are small ones. This was the case with the auditors at Enron, where asset values were inflated or hidden off the books, and at WorldCom, where earnings were grossly inflated. And this was the case again with BP and the oil rig disaster in the Gulf of Mexico.

It is clear that a lot of the ethical issues observed at these companies should be interpreted as the result of intentional policies but it is also true that a significant portion of it was the result of unintentional misconduct. Therefore, I believe that the unintentional aspects of ethical misconduct are worthy of more study in order, perhaps, to determine how small and how slow the erosion in others ethicality has to be in order to remain unnoticed? Ramesh Yash and 20 more liked this John Tennenbaum 03/16/2011 12:44 PM in reply to Herve Pourcines I would tend to agree with Mr. Herve Pourcines and I suggest to include as a good "Slippery Slope" example the housing market collapse that began in 2006 when defaults started to increase on subprime and adjustable rate mortgages. The subprime crisis then exacerbated and turned into a Wall Street crisis when hedge funds went belly-up and banks started to report large writedowns in 2007. In March 2008, Bear Stearns became the first major investment bank to fail, requiring a bailout and acquisition by the Fed and JPMorgan. This turned out to be just the beginning of a slippery slope... with IndyMac being seized by US regulators in July of 2008, while Fannie and Freddie were taken over in September. A week later, Lehman Brothers filed for bankruptcy, the government took an 80 percent stake in AIG and Bank of America gobbled up Merrill Lynch. Shortly after that, the last two remaining publicly traded U.S. investment banks (Goldman Sachs and Morgan Stanley) filed for change of status to bank holding companies while JPMorgan absorbed Washington Mutual. Century-old institutions evaporated from the financial markets as the credit crisis turned into a crisis of confidence!!!

Lisa Ong and 9 more liked this Samy Najib 03/16/2011 12:54 PM in reply to Herve Pourcines In the end, BP's announcement that they're taking responsibility for the response to the Gulf of Mexico oil spill, not for the accident, sounds more like they're patting themselves on the back. It seems that BP is not yet aware of the extent of their unethical misconduct... Surayya El Sherbini and 5 more liked this The CMI 03/16/2011 08:25 AM I read a study recently that suggested we don't tend to react to risks unless they cause us to personally suffer. Seeing others suffer isn't enough to jolt us into action, and neither is a near miss. Last year we did some research into business continuity management and found that less than half of companies have any plan in place to hedge the risk of bad things happening. We have some new research coming out next week, but you can read last years report if you're interested here http://www.managers.org.uk/BCM... Stash Heckman and 5 more liked this Meghan Ennes, HBR.org 04/12/2011 03:13 PM in reply to The CMI

Hello CMI, Thanks for your great insight. We're interested in using an excerpt of this comment in the Interaction section of the upcoming June issue. Can you contact me at mennes [at] hbr [dot] org with the name of who left this comment, as well as his/her title and company affiliation that we can use as a bio? Thanks again! Meghan Roy Woodhead 10/11/2011 05:49 AM Sorry, the formatting messed up again. I will not post a third time Best wishes Roy Roy Woodhead 10/11/2011 05:43 AM I would like to question whether the way we calculate risk is appropriate. I accept it is mathematically logical and valid. I just don't feel deep down I believe it is an accurate picture and suspect neither do most people. I ask this question here in this thread as there seems to be a call for people to be more sensitive to risk (I agree!!!). I wonder whether the way we characterize risk is appropriate for our day to day experiences in organizations. The classical way to understand risk is to multiple the likelihood of an event by its consequence and treating them as independent of each other then we total the individual expected value to find the total expected value. For example, ScenarioLikelihoodConsequence ($K)Risk ($K)A30%10030B50%2010C20%30060D25%4010E60%5030Total EV140 I fully accept the total EV in this example is $140K but I am not convinced it is right. I wonder if this method either under or over states the true risk? What if we perm the risks and then find out that maximum EV we should set aside, would that still be $140K? (E.g. one or more or all risks materialize in the same period) If someone could help me 'feel' more confident in the calculation I would love explore it further (I understand how it is done today and do not disagree with the validity of the procedure, just the answer does not feel right). Please help this old fool put this nagging doubt to bed (;-) Best wishes Roy Woodhead (roy.woodhead@hp.com) Sorry, Roy Woodhead 10/11/2011 05:47 AM in reply to Roy Woodhead

The last posting lost the format (A risk I did not anticipate !!! (;-)) It should have read: I would like to question whether the way we calculate risk is appropriate. I accept it is

mathematically logical and valid. I just don't feel deep down I believe it is an accurate picture and suspect neither do most people. I ask this question here in this thread as there seems to be a call for people to be more sensitive to risk (I agree!!!). I wonder whether the way we characterize risk is appropriate for our day to day experiences in organizations. The classical way to understand risk is to multiple the likelihood of an event by its consequence and treating them as independent of each other then we total the individual expected value to find the total expected value. For example, Scenario Likelihood Consequence($K) Risk ($K)A 30% 100 30B 50% 20 10C 20% 300 60D 25% 40 10E 60% 50 30 Total EV140 I fully accept the total EV in this example is $140K but I am not convinced it is right. I wonder if this method either under or over states the true risk? What if we perm the risks and then find out that maximum EV we should set aside, would that still be $140K? (E.g. one or more or all risks materialize in the same period) If someone could help me 'feel' more confident in the calculation I would love explore it further (I understand how it is done today and do not disagree with the validity of the procedure, just the answer does not feel right). Please help this old fool put this nagging doubt to bed (;-) Best wishes Roy Woodhead (roy.woodhead@hp.com) Mi 03/16/2011 10:33 PM people is the most difficult to manage in all affairs.......

Building Resilience

BumbleBee 05/21/2011 10:14 AM

Experienced it first hand and I completely agree with your argument. I never knew I had the courage and strength to bounce back after the back breaking (academic) failure since I had never known failure prior to this. This was simply unthinkable and I slipped into post traumatic depression. The only thing that kept me from committing the unthinkable was a voice within me, that somehow kept telling me "You can overcome this. Keep Moving On" Ever since that episode, I have become so much more stronger. I don't fear failure anymore and I am doing reasonably well in my job, probably much better than I would have, had I not been through this rocky period of my life. 4 people liked this.

David Kaiser 03/26/2011 02:25 PM

Great story, I am looking forward to seeing the results from the larger study. This is a great boost to those of us who wish to promote Emotional Intelligence in corporate America. If hard-as-nails drill sergeants can embrace this "touchy-feely" stuff and it makes or combat troops more resilient, we can roll this out to the sales team or IT staff too. I love your work, Dr. Seligman, it's great to see attention being given to actively creating a positive and powerful life, rather than just alleviating symptoms and pathology. David Kaiser, PhD Time Management Coach to Authentic Leaders www.DarkMatterConsulting.com 3 people liked this.

MRTinthefield 04/11/2011 07:19 PM

As an MRT implementing this training in the field, I am amazed at the reception by our Soldiers and their families. During our first training session, a pre-deployment presentation, I had hoped to see 1 or 2 Soldiers have that"Ah Ha!" moment and buy in. Of 85 Soldiers trained, all but 2 had positive feedback and wanted to go more in depth. Fortunately, I will have 12 months in country to do just that. This is a great program which has already enabled my Soldiers to open their eyes to the Icebergs, thinking traps, etc which stand betweeen them and better relationships and better productivity. That single training session was enough for the BN Commander to commission me to train our entire deploying formation the breadth of the MRT material. Keep up the great work Dr. Seligman and Dr. Reivich. It is making a difference. 1 person liked this.

Archna Khurana Sharma 04/06/2011 04:19 AM

Good write up..the story tells a thousand similar tales happening all over...the idea is ti inculcate positive thinking in our people, even when you are telling them to leave make sure you don't break their confidence. every human being has a different personality type, some may take the negativity and become more strong and some can go in to the shell... Lets start working on these things in our respective companies.. 1 person liked this.

Nabarun 03/24/2011 01:03 AM

Inbteresting reading....lot to learn and implement at my workplace 1 person liked this.

subrata goswami 11/01/2011 11:22 AM

Good insights. Would like to incorporate some of it myself. Going through a program like MARP is not an option for everyone. Would strongly urge the authors to provide reference to follow on for " do it at your own place".

SSgt Joe Starbuck, USMC 06/22/2011 11:35 PM

You are well known for your research, Doctor, and there's no argument here on your approach to those in "crisis and extreme stress," especially in the military with deployments and family sacrifices. However, there are conflicting views with approach to those who have experienced trauma: combat, loss of limbs, seeing a close one die next to you, car accidents, rape, natural disasters. Is it exclusively psychological in nature that simply requires training in steps to overcome; or is PTSD a neurophysiological injury where circuits break? Dr. Judith Herman 1993, "Trauma and Recovery," Perseus Book Group, NY NY contends that the four components arousal, emotion, cognition and memory that work in unison are torn from each other during trauma. If this is not addressed within that 30-60 day window, the condition is total and permanent. Given this hypothesis, it would appear reasonable that resilience training before deployment (building strength in the circuitry) may have greater affect in overcoming trauma. Then your program coinciding with this is believed best for overall mental health. As the VA has recently cited, up to 95% of those returning from war have some form of PTSD, an epidemic the VA certainly cannot handle, leaving vets to suffer for years or commit suicide; as personally witnessed. Is it possible that Dr. Herman's hypothesis is accurate? Thank you for extreme dedication, Doctor. Sincerely, Staff Sergeant Joe Starbuck, USMC (Ret), 100% DAV, PTSD.

Soniyav 05/13/2011 02:17 AM

ya, it is really very good ...

Letty_pl 04/30/2011 09:57 PM

Dr. your study is very intresting, I am worry about those people who dont count with the emotional instruments to get out of the hold. My question is why some people decide not to move and let depresin fill their life with negative thoughts? What is happening that every day are more people who are sad, mad and leaving only because it part of life.

Onno Hamburger 04/24/2011 05:07 AM

Great article! I love it that positive psychology is tested in such an important and difficult surrounding! The collaboration of different people from the positive psychology field (e.g. Fredrickson, Peterson and Cacioppo, etc.) and also gives me an idea that the work is developing. Wonderful news! Onno Hamburger Happiness@work coach & psychologist Leiden, The Netherlands

Rorymarsh 04/17/2011 09:43 PM

I am sure most people can relate to this article. I would recommend these practices to my fellow realtors who constantly face disappointment from sales that have fallen through and need to be continiously motivated. Every realtor has to be like Douglas in the article above. Rory Marsh Meldam Realtors Ocho Rios St. Ann Jamaica

Tjustice42 04/15/2011 12:01 PM

Great article. However, the US Army has been doing this since 2004 and West Point for more than 30 years. Check out an Army Center for Enhanced Performance (ACEP). Where this focuses on Drill SGT's who teach only incoming enlisted personnel ACEP teaches Army units which obviously include all ranks. They are also at 10 different Army posts running similiar programs. Its great to see the Army really focusing on the mental development. Hopefully this article coming from HBR will allow corporate america to open their eyes to the need.

Shenablomgren 04/05/2011 03:51 PM

I'm so glad I have a Mary Kay business--it's a business where "touch-feely" and treating everyone as if they have a sign around their necks that says, "I want to feel important" has been in place since the company began. Mary Kay Ash was a pioneer!

Dan Bowling 03/28/2011 08:43 PM

Outstanding summary of the groundbreaking work being done under Marty's leadership with the U.S. Army. This work, and this article, is making the "water safe" for those of us laboring to introduce positive psychology into the workplace and professional firms. Thanks, Marty.

Kwesisena 03/28/2011 01:12 AM

Very interesting read, I was actually trying to fit myself in the continuum. I become self aware about how I respond to failure as a person. I have one question though Dr Seligman, you beautifully made the point about how people are divided into different categories when it comes to reacting to failure, what I would like to know from your years of research is, how do people come to be in these categories? Is it due to enviromental factors or through innate factors, that some people are born with stronger will than others. I will be very glad to hear your view on that.

Failure Chronicles
by Doug Rauch, Linda Rottenberg, Anthony Tjan, Roger McNamee, Wayne Pacelle, Peter Guber, Whitney Johnson, and Dave Strubler

.com/watch?v... The Power of Failure. JK Rowling is keynote speaker for Harvard University Commencement June 5, 2008.

Adam Robinson, MBA 03/24/2011 09:36 PM

I absolutely loved this issue of HBR! I have failed in business before and bankruptcy was the end result. As difficult as this was for me the lessons that I learned were the catalyst that taught me how to successfully manage a business and today I am a portfolio entrepreneur with three businesses and a fourth on the way! -Adam Robinson

http://www.strategexe.com

John 03/18/2011 05:42 PM

In light the dramatic failures in Japan in the past week, any chance you will follow up with another issue on the facts of failure and bungling??

Jerry 03/22/2011 11:31 AM in reply to John

What failures and bungling in Japan are you referring to?

The Globe: How China Reset Its Global Acquisition Agenda

by Peter J. Williamson and Anand P. Raman

Managing Yourself: Can You Handle Failure?

/2011 11:35 PM

I agree with the above comment. Simply put, the people described have failed to mature. I am unimpressed with the authors' descriptive typing. To make such judgments about people, to fit them into types, suggest an unbiased and value-free position of objectivity. The authors are either unaware or willfully ignoring inter-subjectivity. This is rudimentary stuff. I would hope for more in such a magazine. 1 person liked this.

Ben Dattner 03/21/2011 03:35 PM in reply to ghostwriter

You raise an important point, ghostwriter- how different "types" will behave in a given situation depends on many factors, intersubjectivity being one of them, social pressure being another. Economic incentives and organizational culture also impact how people behave. 3 people liked this.

ghostwriter 04/04/2011 11:25 PM in reply to Ben Dattner

Ben, Yes, social pressure in the workplace can (and often does) easily lead to groupthink. Many organizations can't tolerate constructive criticism. When this happens, they foster destructive assent. A company of yes-men and women detaches itself from reality. By the way, I meant to say that I agree with the comment below, meaning Freedassoc's rather cryptic message.

Philipjpsmith 06/23/2011 11:31 AM

Here's a presupposition of NLP. "There's no such thing as failure, just another opportunity to learn". Learning what doesn't work is just as important as finding that right solution.

V P Kochikar 06/23/2011 06:06 AM

Most of us see failure as something aberrant, something to be "handled". I think this perspective is wrong. It's wrong because it fosters a sense of entitlement - "I deserve to succeed, but am unfortunate enough to fail". IN this view, failure is something negative, and when it happens, sets off a whole chain of negative reactions. It's also wrong for another reason. Perhaps the most important lesson to learn about failure is this: "If you're not failing, you're probably not trying hard enough". Seen this way, failure is not something "wrong" - it's an integral part of any initiative !

Tbird05 04/13/2011 12:36 AM

Excellent article. Thanks.

Mike4 04/09/2011 11:09 PM

Thank you all who responded to my questions. As a young person (millennial) in the workplace, it is often difficult to understand these cultures, however I would like to further understand and be more organizationally literate. Can anyone post any suggestions as to how I can become more organizationally literate? I consider the workplace very dynamic and many times very difficult to understand. Thank you.

Ben Dattner 04/10/2011 08:58 AM in reply to Mike4

Hi Mike4There is a presentation on my website about organizational politics that you may find informative: www.dattnerconsulting.com/pres... Ben

Mike4 04/04/2011 10:25 PM

I liked this article very much. I have completed 4 major projects in my organization and all have been pretty successful. I am a very detail oriented and conscientious worker and occasionally suffer from analysis paralysis. My 4th project was very important to me because it affected all my co-workers and enterprise. When I was ready to deploy the software package my heart raced because I was thinking about what impact it would make if it was a failure. In the end, it was highly successful. It was beautiful with no glitches. The system did everything I imagined. It was silent. Nobody complained that it wasn't working. What really bothered me was nobody said congratulations, nobody offered a pat on the back, nor was there any praise in our meeting. It was like nothing ever happened. What happened here? Can anyone please give me your insights?

Ben Dattner 04/05/2011 06:27 PM in reply to Mike4

Thanks, Mike4- I'm glad you liked the article. Some organizations have "entitled' cultures, where significant contributions, like the one you made, go unacknowledged. The downside of that kind of culture is that people become less likely to expend "discretionary effort" if they feel like their efforts are not appreciated by others.

ghostwriter 04/04/2011 11:39 PM in reply to Mike4

Mike4, This is quite normal. In fact there is an episode of the IT Crowd that addresses this topic. Check out the episode called Aunt Irma Visits in series 1. A search on YouTube will get you there. As for insights, think about entitlement. Don't we expect things to work? How appreciative are we that we have roads to drive on that are not full of potholes? Who do we thank for having clean water and sewage? It's only when we don't have these things that they impinge on our consciousness. But having said all that, what was your part in communicating the value you produced? Hope this helps, at least it should give you a laugh and not make you feel alone in your situation.

Yael Rozencwajg 04/04/2011 04:15 PM

Great points over here ! worth a read.

Freedassoc 03/18/2011 01:20 PM

nothing new under the sun

Crucible: The Would-Be Pioneer

5/05/2011 10:58 PM

The experience that @Dr Linda Myer's had in SK Group does not surprise me. Your article illustrates that the phenomenon of foreign executives appointed to headquarter positions by local organisations in culturally distant countries is significantly different from expatriate postings in the subsidiaries of foreign multinationals.

The acronym FELO (Foreign Executives in Local Organisations) has been introduced to clarify that distinction. See website: http://FELOresearch.info http://FELOresearch.info

The term 'inpatriate' is unsuitable for the specific FELO phenomenon, as that term was developed to describe the relocation of foreign employees/managers to the parent country within an organisation's existing multinational/subsidiary structure (see e.g. Michael Harvey's work).

Some of the FELO reseach findings are included in a refereed paper and will be presented at the 2011 Academy of Management Annual Meeting , August 12-16, San Antonio, Texas. Further academic journal articles focus on particular aspects of the FELO phenomenon.Research conducted to date elucidates why FELOs are appointed, what FELOs contribute to the local organisations for which they work, and how cultural distance is bridged in those workplaces. The findings include typologies FELO combinations produce successful outcomes (and those which are likely to fail).

Dr Linda Myer's experience in the SK Group of Korea fits neatly into the research typologies and findings about FELOs in other Asian countries. My very best wishes to her! FELOresearch 05/05/2011 11:08 PM in reply to FELOresearch

I don't know what happened to the formatting of my post above, but do hope that HBR can put it right. Thank you. The second-last sentence should read:

The findings include typologies of FELOs and local organisations. These typologies assist in identifying which FELO combinations produce successful outcomes (and those which are likely to fail). Dr Linda Myer's experience in the SK Group of Korea fits neatly into the research typologies and findings about FELOs in other Asian countries. My very best wishes to her!

HBR Case Study: A Rush to Failure?

by Tom Cross

Synthesis: Constructive Confessions

by David Silverman z 04/07/2011 03:45 PM Failure makes us human and ultimately connects us in ways that most other things, ideas, and strategies couldn't. Recently I had a meeting with a high powered executive. I prepared for days for this meeting researching deep into the topic, exploring the latest trends, even looking into this executive's personal philosophies on the idea. In short, I wanted to speak intelligently and engage him at his level. On the day of the meeting everything fell apart. While I prepared to pull out all the stops for this meeting I ended up acting completely different: raw, vulnerable and honest. Because of this we engaged in a true and candid conversation. I prepared to be perfect for the meeting and failed. That failure created better conversation than we would have had if I suceeded. 2 people liked this. John Lusk 09/10/2011 02:47 PM Hi David, Just running across this post now. Thanks for the MouseDriver Chronicles call out! We're always thankful when others find the book informative. We wrote that thing with a goal of educating other aspiring entrepreneurs on what it's really like to start a business.

One point of clarification though. The business didn't fail. Quite the contrary. We became profitable in month 15 (7 months later than expected) and sold the company in Month 46 (14 months later than expected). The sale was always part of our strategy and ended up providing us and our investors with a nice little return. We didn't absolutely crush it in terms of silicon valley speak, but we did quite well....especially considering how naive we were going into ti! John Judith Kunisch 04/07/2011 09:38 AM My motto is a Japanese proverb - "Fall seven times, stand up eight."

Lifes Work: Ricky Gervais

3/30/2011 09:51 AM The theory of boss as fascist is a dying paradigm. We now know that it's exactly this consciousness that produces the kind of office dysfunctions that hit home for the millions of The Office viewers who are demoralized by a lack of dignity in their own workplaces. Just because so many people identify so strongly with questionable leadership issues doesn't mean we should promote them in prestigious places like Harvard Business Review - quite the contrary. Recently Jack Bogle, who started Vanguard, lamented that in all the years he's been working with MBA programs, he's never seen the words "human being" mentioned in texts or talks (www.leaderful-edge.com). He was making the point that the loss of respect for the person in the business world has led to the downfall of our economy and of our national psyche. The emerging paradigm of leadership is co-creative, has a more profound understanding of accountability and has unhinged accountability from hierarchical power plays, is values-driven, and it creates a culture of compassion and justice along with more sustainable profits, higher share prices, and a more robust platform for stakeholder loyalty, innovation, teamwork, and more. New leaders build cultures of authenticity that are dedicated to greatest good because they know that that's the best insurance for maintaining a strong financial bottom line. And they know that kind of culture can't be built on the decrepit pillars of our old leadership paradigm because that m.o. has set new benchmarks on the scale of failure. Shame on you, Harvard, for lifting up dinosaurs. Dr. Joni Carley, progressive leadership and organizational development 5 people liked this. Keenan 03/31/2011 01:15 AM in reply to Dr. Joni

I agree Dr. unfortunately the term "respect" has lost it's core element and that is respect is earned. Far too often today, respect for the person is attached to entitlement. In an office setting or the workplace respect for the peson as a human being can be expected and is an entitlement. That means respect for beliefs, space, and personal differences. Respect for these things does not blend into respect for knowledge, contribution, understanding, execution, respect for the worker. This respect must be earned and should not be bestowed upon anyone, no matter where they are in the hierarchical structure. Just because we exist in the work place does not mean we are entitled to workplace respect. It is incumbent upon us, as individuals to leverage respect for the person into respect for the worker. We are not entitled to both. Don't confuse the person with the worker/the employee. They are entirely different. Jon 03/30/2011 12:34 PM @Antonypayne -- he's likely joking. It's a Brit thing. 2 people liked this. Mike H 03/30/2011 08:31 PM In his comment regarding fascist leadership he clearly states is in regard to ART. Not business. He wants his art done the way he envisions it. And he only gets that latitude based on his success record. Believe me, there are plenty of compromises and decsions by committe made when it come to production and distribution of his creations. lilfella 03/30/2011 05:10 PM Ricky Gervais is a unique talent and he is outlining here, I believe, what works for him. And what he believes works for him, clearly works for him. Whether any of us want to work for, or with, him is another matter. Kym D 03/30/2011 02:37 PM Ahem. People. Look at the publication date! Antonypayne 03/30/2011 11:25 AM Sounds like success has gone to Ricky's head. Yes he nailed it... but there's also luck involved. And never underestimate the contribution of Stephen Merchant.

Intro to the Failure Issue: The F Word When We Fail at Failure

Lschmier 03/29/2011 09:19 AM

What a theme for an entire issue! I am not in the business world, but I am in a people business. I am an educator. My official title is "Professor of History," I pride myself, however, as being a classroom teacher. In formal parlance that makes me a classroom manager. That being the case I feel I have to learn about managing. One of lesson I have learned over the decades is that I must allow my students to exercise their birthright to achieve. But, it is crucial that they also learn to exercise their second birthright: the birthright to make mistakes and learn from them. So, I incessantly ask of my myself and my colleagues if we really teach students how to achieve by allowing them, without lethal penalty, to take the risks of making mistakes. Yeah, we inundate them with a flood of information. Yeah, we say we develop their critical thinking skills. Yeah, we say we train them in problem solving. Do we teach them that mistake is a gift? Do we teach them more about the weakening and discouraging aspects of making a mistake that makes them cringe and shrink in fits of incompetence than we do the encouraging, strengthening, and courageous aspects of making a mistake? Do we teach them that the ability to learn from mistakes is one of the most important capacities they can learn? I wonder. I wonder because in the course of four decades, I have seen the extent to which we in academia don't cotton mistakes of ourselves or others. But, why? Why do we think of mistakes as cosmic warps. Why are we so often startled and angered by mistake. Why do we accuse and condemn, and at times even burn in effigy those who misstep? Why do we see mistakes in ourselves and others as signs of being "weak" and/or "no good at," certainly having fallen from grace? Why do we applaud an "aha" and hiss at an "oops?" Do we platitudinously celebrate mistake as a learning tool while in reality treating it as disgrace? Is it that we're really hypocrites, seeing mistake as a badge of honor while on the hand treating it as a scarlet letter? Do we treat mistake as a taboo because we're afraid of vulnerability, our hidden imperfections, a revealed weakness, a sense of inadequacy? Is it a haughtiness and arrogance we attach to our titles and degrees? Are we in fear for our reputation, authority, our precious selves, our image, our ego, our carefully constructed identities? Are we afraid to be shaken from our complacency, our pride, our position? Why does the prospect of making a mistake strike terror in our hearts? Why do we cling so tightly to our lesser half? Why do we deny that mistake is the cost of achievement, that is, if we don't have the confidence and courage to make a mistake, we won't strive to achieve. Do we really know how to accept mistake; do we really know how to learn from mistake; do we really know the difference between the "bad mistake" that we let hold us back and "good mistake" that we use, in the phrase of Charles Kettering, to "fail forward." If we don't, we're in big trouble, higher education is in trouble, and we may mistakenly not even know it! 1 person liked this.

Pushpahas Umadikar 04/01/2011 04:47 AM

This issue would gives us lot to reflect on ourselves and look for learnings . Ultimately name is everything . I totally agree with the statement of yours "Pay close attention to anything that goes out under your name, because youre responsible for it".

Parag Mahulikar 03/26/2011 05:56 AM

I liked the Editor's last line.It's simple and therfore more powerfully touching the heart.

Suhail Alidina 03/20/2011 12:49 AM

Well said "Pay close attention to anything that goes out under your name, because youre responsible for it"

Dipta Bhanu Gupta 03/16/2011 08:44 AM

I liked the last line, but want to change it: "If you like it, let your friends also know, if you don't, let us surely know"

Why Most Product Launches Fail

ven_haines 03/27/2011 07:57 PM I've studied and written about this topic. There are a several areas of concern (especially in B2B organizations) that I would like to point out: 1) The Launch Plan is usually started way too late in the process - if there is one at all. The Launch Plan needs to be integrated within the Business Case for a new product or important upgrade. (This means the Launch Plan can actually be a 'section' of the Business Case) 2) Important players from vital business functions are not on-board at the right time. This is because roles are misaligned, inter-dependencies are not identified, or capabilities are unavailable from within those functions. 3) A 'market window' is not clearly established. Products "appear" or "leak out" when they're ready. You would be surprised at how often this happens. 4) In technology firms, rapid application or rapid product development techniques are causing the organization gears to spin wildly out of control. Product development, in many cases, is becoming a "vortex" of the firm. This makes developers happy but drives product managers and marketers to distraction.

Steven Haines Author: "The Product Manager's Desk Reference" (McGraw-Hill, 2009) Author: "Managing Product Management: Empowering Your Organization to Produce Competitive Products and Brands." (McGraw-Hill, 3Q 2011) Geoffrey Anderson and 30 more liked this Julie Hall, article co-author 03/29/2011 02:46 PM in reply to steven_haines Steven, you must have read our books! You are absolutely right about launch deserving its own section in the Business Case. We advocate for that in our first book, Launch: 10 Proven Strategies. One thing we have learned is that having a market window is sometimes out of your control. For instance, when Heinz was launching its new green ketchup in October 2000 and got a call from a trade publication asking for comment, they werent preparedand had only 10 bottles of the stuff! What did they do? They controlled the launch. Even though it was ahead of their market window they sent the 10 bottles to NBCs Today Show, The Rosie ODonnell Show, The Wall Street Journal, USA Today... you get the idea. The resulting press was incredible and the product flew off store shelves. Being nimblein CPG and technology launchesis paramount. 1 person liked this. steven_haines 03/30/2011 09:39 PM in reply to Julie Hall, article co-author Hi Julie - I haven't, but I will. Regarding the market window topic, there are many variations on the theme. Better firms at least have notion of a time to be on the scene. Some have seasonal windows. Others do so to fulfill a competitive strategy. To wit, firms like Apple or Microsoft create anticipatory windows as they attempt to stall competitor sales as customers wait for new stuff. Auto companies have model year changeovers. The B2C firms offer many interesting examples. However, B2B firms still need to do a much better job. - Steven GeoM 03/22/2011 01:22 PM There seems to be a few reoccurring soft spots in every product development process communication. Production wants to tell the market folks what manufacturing is willing to manufacture; they have excess line time to fill. Finance works in concert with production to cut cost and conserve capital and resist funding because they just know advertising and marketing have not payback. Sales want it cheap and easy to sell and logistics wants it compact, dense and in a bullet proof container. By the time every empire defends their turf, the reason for being or the market fit has been overshadowed. One of the biggest hurdles is overcoming individuals career goals. The personal desires of a few individual can kill a potential great success for a company. Self interest and protection of ones career becomes more important than the well being of the endeavor. A person agenda is often the assassin in waiting. Market research, focus groups, test markets cannot disclose the failures that are incubated within. 6 people liked this. Guest 03/25/2011 10:28 PM in reply to GeoM Well said. While your points are quite true with the big organizations, small businesses (a) don't believe in market research (b) don't allocate sufficient resources for marketing, (c) don't believe

in product branding, and (d) lack professional approach. I have seen several companies trying to market products with very badly done marketing collateral, and trying to push products through the team who lack sufficient education about their own product. At a time whenever one is trying to talk about the social media strategies, this article is a very important reminder towards the basic and first approach in marketing. Ram - http://blog.epmworld.in 2 people liked this. Julie Hall, article co-author 03/27/2011 01:09 PM in reply to GeoM @ GeoM We couldnt agree with you more. One of the things we learned in our first Launch study with Boston University in 2001 is the critical need for a launch champion" to own the launch and bring the various disciplines together to ensure success. Many times that person is a brand manager or a member of the R&D team. Youre absolutely on target with your thoughts. Maybe someday companies will have a CLO chief launch officer who can put new product launch where it belongs, in the C suite. New products contribute significantly (one figure was 34%) to revenue growth in major CPG companies, so creating effective approaches to launching these product innovations is key to success. We spend a lot of time in our book talking about the new launch plan and the kind of integrated approach it takes to make a product launch memorable and successful for increasingly distracted customer audiences and a fragmented media environment. 1 person liked this. StartUpJerkFest 03/22/2011 10:58 AM Flaws 1 & 2 sound more like management issues than issues of incorrect timing. Management overseeing quality control from manufacturing in China, and the same concept of quality control for Windows Vista. But wait, all of these issues stem from bad management. So what can we conclude? Either the founders / management are smart enough to do it right, or there's no hope for them? Or is it not so black & white? Can they learn from articles like this? The pressures of launching before you run out of runway probably cause most of these problems. And that usually means the founders / management could not persuade investors to invest enough to have the correct length runway, and founders could not stand up to pressures from the investors who wanted growth NOW without understanding the natural growth cycle. Well, at least the robots won't be taking over soon. We still need people, smart people, to do things right. 1 person liked this. Wayne Spivak 03/21/2011 10:29 PM Most small business, as you said, never do the research, because they believe the research to be very expensive. It's not, nor does it need be. Talking with your customers is research. Taking a booth at the local shopping mall and talking to consumers, is research. Repeating this process several times and in different location and you have research. But listening to the results and acting upon them, well that a different animal. Now we're getting

into management and business/marketing plans and thinking outside our little boxes, and that's the difficult part - why product launches failed, which you aptly describe. Good article! Wayne Spivak SBA * Consulting LTD www.SBAConsulting.com StartUpJerkFest liked this Meghan Ennes, HBR.org 04/12/2011 03:16 PM in reply to Wayne Spivak Hello Wayne, We're interested in using an excerpt of this comment in the Interaction section of the upcoming June issue. Can you contact me at mennes [at] hbr [dot] org with your title and company affiliation so we can use it as a one-lined bio? Thanks again! Meghan knowledgenotebook 10/05/2011 11:44 AM I'd love to read more on "Flaw 4: The product defines a new category and requires substantial consumer educationbut doesnt get it.", thanks. Laxman 08/22/2011 09:13 AM Wow very nicely stated post! Very Good Article and Thanks for the great advice! Thought I would share with you something

If Lifebuoy can innovate continually and reinvent itself, so can the advertising industry....Advertising is all about innovation and clever representation. There are many young leaders and thought provokers, who can change the very nature of advertising.They want new challenges, new opportunities to upgrade themselves and acquire different skill sets. If we all will think little more most of the Product Launches will never Fail.Thanks & RegardsLaxman Heather @ 8 Women Dream 07/29/2011 05:39 PM Many of your points can be used for online product launches that fail. It seems too many forget about the pre-launch marketing side of the equation. Although there are those that believe that, "Ready, Launch, Aim" is the way to run a successful launch of anything.

Heather M Dinesh_gbpec 04/30/2011 12:38 AM Most of the decision making failure occurs due to not involving right persons to the extent it is required.It may be due to the time pressure which is always unrealistic.Launching a new product is a second phase and little can be done at this phase.A proper market planning is a must before execution of any new idea and ofcource basic principles need not to be ignored.Ignoring even a small step or not following proper sequence of decision making leads to most of failure. Bdbhorizon 04/21/2011 08:44 PM Success or failure is often due to quality of the design effort....... you may have underestimated the role of good design in new product success. I could argue that Febreze Scentstories was a design failure. The product (design) led people to expect that "music" was part of the experience and the value set because the product design was borrowing heavily from visual cues that consumers associated with CD players. The product was speaking to them visually through its form and function and establishing misleading expectations. This kind of failure happens all the time. Good design can prevent these kinds of product failures. As far as the Segway is concerned- it was a great invention but a poor innovation. Sucessful innovations can provide solutions to previously unexisting problems, but it has to provide the solution in a way that fits the environment in which it will be used and at least meet the expectations of the intended market. Successful innovation has to include how the solution is designed; otherwise it's just an interesting invention. Thinking that there might be a demand for an innovative form of personal transportation is not flawed. The Segway was flawed because people need to ride up and down curbs and be protected from the elements, and so forth. The price might not have been a deterrent if it had been designed to consider the actual needs of a new form of personal transportation. Poor design creates pain and poor design can lead to product failure. Products are evaluated by the experience of use. Good design delivers an enjoyable experience. Great design creates great products people will desire, great value will be measured by a great user experience. Harvard G 04/19/2011 01:17 AM The article about Microsoft was a perfect example of large corporations getting unorganized and hard to controll. When Bill Gates came up with Windows 95 , everyone were focused on quality , performance and reliability of the Windows OS. Apple totally did his homework, so when they launched iphone , they knew it will change everything, but they are missing the whole picture. By producing countless devices , which will end up somewhere in landfields, poisoning the environment , they were able to juck up the stock prices and open more stores. In the same time, applying preasure to Chinas manufacturers who are producing 10 times more waste now to COPY yes COPY and use lead and other toxic materials to benefit from it.How about Ebay , The

largest company in the world that supports shipping. Once was sad ...If ebay decided to close its doors the USPS will buncrupt. And than we have to ship by Fed Ex.to much $$$ Good Job Apple for Destroying the Earth. Oh yes Microsoft , I dont want to miss a word about you. Thanks for making people smarter so they can destroy dhemselves faster. According one inteligen study as human technology grows and expandsas as much we waste and destroy natural resources that supply our way of life . in 100 years from now, you wont find a park or wildlife where there is no Coca Cola buttle laying around nor some dad Mouse. Tragic, but reality . and I am only a human. Bob 04/15/2011 03:03 PM so, what do you do it you have a great product, have identified and tested the market but lack in every other area... finance, production, marketing, other resources..? it's not that the small business doesn't believe in branding and research and all these great concepts but, most likely lack the necessary knowledge, resources, time etc to take the product to a higher level. Their are tons of great products that never make it to market because of these incompatencies... It seems the companies looking to market these products should use a different criteria besides how great a businessman the aartist needs to be to qualify as a viable product line.. base the product on the product alone... the manufacturing, finance timing, branding "should" be all handled by the professionals in those fields... not the guy working late at night in the shop banging out the prototype... Of course, I understand you professionals would want the product handed to you on a silver platter with all the details worked out, a fat market biting at the hook and you can "take it from there"... you want the easy money I understand but jeeez, how easy does it have to be?...(given your professionals) Wayne 04/14/2011 01:26 AM Thanks for the tip on Revolution technology, our iBrownie - the Parental Control solution with Psychology concept of Cognitive Behavior Theory faces many setback when customers compare us with typical Parental Control software. Our message: iBrownie is to influence kids on positive internet use, not forcing them to revolt with nasty "NOT-AUTHORIZE" message. Again, thanks for the tip. kkrom 04/13/2011 08:35 AM What is the source for 40,000 new products are launched each year? Thank you. MikeG 04/07/2011 02:34 PM

Do you have any comment on why the products pictured in the article failed? The only picutred product mentioned is C2. I'm particularly interested in the products that are not food or drink (BrushUps, Cutting Sheets, Simply White). Asesh Sarkar 04/01/2011 01:29 AM I am curious to know whether you have identified those flaws by doing Root Cause Analysis of failed product launches or by similar analysis of successful launches. Two aspects did not come out clearly -- risk taking ability ( referring to calculated risk only ) of the organisation and the absence of passion of the people who are key to launches.... many a times the marketers wants to strengthen their resume by showing that I have launched so many products ! asesh Richard Meyer 03/27/2011 11:42 AM Interesting article in the April issue of Harvard Business Review on why most new product launches fail. While I agree with the author of the story I also believe that there are a host of other reasons why new product launches fail and fail badly. It begins and ends with a lean organization and improved communication. Today's managers are often inundated with back to back to back meetings and endless Power Points to even do the simplest of tasks to support a new product launch. According to the article the reasons why most new product launches fail are; 1. The company cant support fast growth. 2. The product falls short of claims and gets bashed. 3.The new item exists in product limbo. (i.e. there is no product differentiation) 4. The product defines a new category and requires substantial consumer educationbut doesnt get it. 5. The product is revolutionary, but theres no market for it (i.e. Segway) I can't argue with any of these reasons but I would also add the following to this list; -Someone within the company knew of a potential problem with the product, the launch strategy or packaging and did not raise their hand to put on the breaks because they were either scared or were not heard. -More time was spent in meeting talking about how to launch the product than actually concentrating on the execution of launching the product. -If the product is going to be sold at brick and mortar retailers these retailers were advised of the new product too late thus delaying distribution into retail chains.

-The product launch communicates product benefits but consumers cannot connect those benefits to "how does it make my life better" or tie the benefit to an emotional need. Julie Hall, article co-author 03/29/2011 02:49 PM in reply to Richard Meyer Richard, you are right. There really are countless reasons for why a new product launch can failand new ones emerge all the time with the proliferation of new media. You can email us at Launch@schneiderpr.com with your list and well add it to ours. Our current list has 40 reasons, and is available on the HBR website here: http://hbr.org/2011/04/why-mos... Tejas Lagad 03/26/2011 11:33 AM A recent example of Flaw 4 was Google Wave. Though innovative, it couldn't describe how it could ease the way users work now. Julie Hall, article co-author 03/29/2011 02:52 PM in reply to Tejas Lagad Tejas, yes and currently we are watching their app Colors launch closely, too. Sometimes the technology can be so superior, yet difficult to demonstrate how it can easily change behavior. KS 03/25/2011 04:22 PM How does this advice fit in the online/mobile world where the conventional wisdom is to launch early and iterate often? Julie Hall, article co-author 03/29/2011 02:57 PM in reply to KS KS, we are watching a lot of app launches closely and while, yes, the beta launch is adopted and supported, there are still some tried and true launch tenets we counsel our clients to adhere tobe they technology, services or products clients. Tenets such as motivating your base while developing your product and using them to grease the skids for your launch, involving the influencers and thinking about launch early on in the development process are all key to success. Philcorse 03/23/2011 03:17 PM I have worked on hundreds of new product client engagements and the missing ingredient has been the lack of successfully integrating basic marketing principles like positioning, branding and messaginbg in an iterative resarch process that shows 2D and 3D concepts vs. category leaders early and often in a stage-gate process. Too often the focus is solely on feature set and functionality in the research. Phil Corse Kellogg School of Management www.pcorse.com PhilCorse@hotmail.com Julie Hall, article co-author 03/29/2011 03:00 PM in reply to Philcorse

Phil, do us all a favor and start teaching the importance of integrating marketing principles in the launch process to your MBAs! We will send you our Stage-Gate Process and Launch Confidence Diagnostic so you can help us change the launch paradigm! NotaryNow 03/22/2011 12:10 PM While most of this makes perfect sense for many companies, if you are a small company you will not really know the answer to some of these questions until you launch. If you are not Coke or Microsoft, then your "launch" will probably consist of getting some early adopters who will tell you if you are on track. The smaller the company, the more chances at a first impression. So if you are big, I saw follow this advice. If you are small, launch sooner rather than later and listen closely to your customers. Chris Meghan Ennes, HBR.org 04/12/2011 03:14 PM in reply to NotaryNow Hello NotaryNow, Thanks for your great insight. We're interested in using an excerpt of this comment in the Interaction section of the upcoming June issue. Can you contact me at mennes [at] hbr [dot] org with the name of who left this comment, as well as his/her title and company affiliation that we can use as a bio? Thanks again! Meghan Julie Hall, article co-author 03/27/2011 01:12 PM in reply to NotaryNow @ Notary Now Many of the new product launches on which we have worked and have studied were small companies. Two of the failures illustrated in the article are small businesses, or startups, that underestimated manufacturing and launched too soon or too quickly. In a social media world, it's more important and easier than ever to involve your target customer in new product development whether you are big or small. Launching with confidence -- one of the new metrics of success were looking at -- is size agnostic. We are currently working on a new Launch Confidence Diagnostic that every company, big or small, should use in the product development phase. Its never too early to start thinking about launch especially when that early thinking can shape the product and launch for the better.

How to Deal with Customer Shakedowns

Guest 03/21/2011 11:18 PM

What you've addressed is really the exception rather than norm. And, in that respect, companies are equally to blame. There are ample stories floating of companies having duped customers through unfair means. This has led to the general perception among

customers that companies are not to be trusted, and given a choice, will go to any means to sell you something. As for why opportunists target large versus small companies, the other thing I might add is that small companies generally have a more human face to them, given that the owner is still very actively involved in all parts of the business. In general, its easier to exploit something that doesn't have a face (large companies), than something that does (small companies). Finally, most firms have a reactive stance when it comes to identifying and addressing customer complaints. This is more so the case with large organizations that have multiple customer touch points and can't monitor every customer interaction. The problem is that most customers do not complain unless there is a huge mismatch in what was promised and delivered (since the effort required to complain is often not worth the reward). This is a larger problem for companies, as it would seem that customers have switched for no obvious reason, without giving the company an opportunity to rectify their error or even know that there is something going wrong. 4 people liked this.

Jochen Wirtz 04/29/2011 05:29 AM

I absolutely agree with Brads comment on the wonderful working of service guarantees if used right. Also, as guest pointed out, most firms face the real challenge of getting service recovery right rather than worrying about cheating customers, and I fully second both your comments. I have conducted a significant amount of research on service guarantees and service recovery and you can download some of this work for free from my website at jochenwirtz.com. Nevertheless, many service firms do encounter escalating customer claims and outright opportunistic behaviors (ranging for shoplifting and insurance fraud to piracy of intellectual property and professional complaint letter writing), and they are asking for help on how to deal with this clearly tricky issue. Firms seem to be in a catch 22 situation, where on the one hand many service recovery attempts fail (past research showed that 40% to 60% of customers reported dissatisfaction with a service recovery experienced) with serious implications for customer satisfaction and retention. On the other hand however, generous service recovery policies are open to abuse. This short piece in HBR is based on an extensive, multi-prong research project and was the first academic study to explore opportunistic claiming behaviors in service recovery contexts. What I like about it is that we could develop some clear recommendations for firms on how to recover service failures effectively, while at the same time keeping an eye on abuse. I believe that best practice in service recovery systems must encompass both, as denying the existence of opportunistic, unfair or even abusive customers erodes the ethics of fairness and respect upon which great service organizations are built.

Tore Roen 04/25/2011 10:54 AM

I have worked with this challenges for some time and do recognise and value the previous comments. Brad Lohner method is good, but I do not believe it is suitable for all businesses. The Guest comment points out a dilemma that needs more focus. Most customers do not complain and do not bather to take the time or effort to communicate their likes or dislikes. You end up with either comments from very satisfied customers or the one who are very dissatisfied. Both are important feedbacks but they are not necessarily what the business need to develop more customer focused service. What you need to know is what the majority of your customer thinks of your services. They are the one that will give you a good lead on what direction your service focus should be. But how do we get their opinion? They are not the ones writing letters, mail, posting face book comments or logging on to surveys online. They might get upset there and then, but will not carry this engagement with them for a later confrontation. They might spread some bad comments on you, but they will not spend any time or energy on you and your business after this. Next time, they will seek out another provider, one of your competitors. You need to catch their attention right there, when they are in the middle of experiencing your service qualities. You have to make it easy for them to give feedback. You have to lower the barrier. Make it easy for the customer to contact you, to approach your staff, to express their likes or dislikes. (Only to contradict my point of .not responding customers, I would like to debate this or to get comments on this through mail or web page. tore.roen@siira.no or www.siira.no )

Brad Lohner 03/22/2011 12:28 AM

My firm uses trust as our service guarantee. If we screw up, then we treat the customer and a guest to dinner. We trust them by not stating a maximum dollar value. Customers then send me the bill and we immediately reimburse them. The client must decide the extent of the "damage" caused by our service glitch; however they have to trust us that we will remit payment. We use this whenever we can and our clients feel it is very reasonable.

Why Serial Entrepreneurs Dont Learn from Failure

/2011 03:59 PM I find the article's distinction between serial and portfolio entrepreneurs problematic. Most full time, executive entrepreneurs take on one project at a time. Getting one project off the ground is likely to take 150% of your time if you are an executive. "Portfolio entrepreneurs" who have several projects going at any one time are most likely to be investors in some shape or form. The two groups play different roles, and you can't meaningfully compare the performance of the ventures in which they are involved. 1 person liked this. seanrox 03/17/2011 02:23 PM Success is in the eye of the stakeholder. Some projects are experiments... Does your model allow include Research & Development? 1 person liked this. Joe Fanara 03/17/2011 09:42 AM Over-optimism can push someone to achieve that which would be otherwise impossible. It's when this confidence crosses over to cockiness that a serial entrepreneur forgets to reevaluate himself and his strategy before pushing forward once again. Its a thin line between success and failure, and the best can tip-toe that line in stride. 1 person liked this. Rbschob 03/17/2011 10:09 AM in reply to Joe Fanara Success is a critical yet fleixible balance of applying the "what can be" against the gruntwork of the due dilligence. KenelmTonkin 05/18/2011 01:14 AM Building on these themes, I'd add that there are three entrepreneurial types: "One-time entrepreneurs", the class who only ever start one enterprise. In the rare group of people who actually ever go into business, this is biggest group; "Serial entrepreneurs", those who engage in two or more ventures consecutively, never concurrently. There is an ending to each involvement before the next is pursued, whether by IPO, trade sale, orderly shut-down or insolvency.These people are the second largest grouping of a rare breed; "Portfolio entrepreneurs", the rarest of the rare, who learn the art of making themselves redundant in their daily managerial capacities. They create the enterprise, construct systems to propel it, recruit managers to work within those systems, then step back from executive responsibilities. The result is free time to start another venture, all while owning the existing one. These are the genuine business builders with the capacity to transcend the small business status. They have that rare range of abilities from incubation to acquisitive listed entity.

The distinction between "serial" and "portfolio" seems real to me. In a sense, Bill's instincts are right though in that the latter category can be investors. Yes, but investors in their own creation, with the canny skill to build to a point of making themselves redundant from the day to day. As for "over-optimism", there is a little hint of salesmen in all entrepreneurs. Optimism is essential. However, this article asserts this promotional, never-say-die trait can cause us to be blinded if unchecked. We all make mistakes. How we learn from these mistakes is the key to future success. I concur with the article and found it interesting. Amanda Boyle 03/17/2011 09:00 AM Interested in the definition of "overoptimism". In my experience, entrepreneurs are more likely to brush themselves off and move on, which is not the same. Equally, I've not yet met an investor who has not, in some way, challenged the optimistic and necessary assumptions of a start up. Re-reading this, my conclusion is the debate is around the use of the term "entrepreneur" and whether serial startups can justifiably be called entrepreneurs. Kumar Ravishanker Singh 03/17/2011 02:02 AM I'm very much agree with these sentence that "Spending your time thinking about what happened is a ticket to the graveyard" because when one starts their career as entrepreneur that time he or she is just an entrepreneur not a serial entrepreneur and this attitude makes him or her a serial entrepreneur as i believe. Time given on the process what goes wrong doesn't bring clear picture instead focus on what didn't went right.

Stat Watch: The Gift that Keeps on...Getting Lost Research Watch: First, Do No Harm Defend Your Research: Hurt Feelings? You Could Take a Pain Reliever...

aiser 03/30/2011 10:42 AM

I am curious how this interacts with resilience. On the one hand, pain is a signal, and we want to respond to it to take corrective action, and we don't want to ignore that signal. On the other hand, that signal can be overwhelming and it can reduce our ability to respond to it, perhaps the Tylenol can help here. I am definitely interested in learning about the behavior and the outcomes here, especially since I am working with my own feelings of

rejection in one part of my life. David Kaiser, PhD Time Management Coach for Authentic Leaders www.DarkMatterConsulting.com 5 people liked this.

RobynMcIntyre 04/12/2011 04:25 PM

Early humans banded together to increase survivability, so it makes sense that we would fear exclusion from groups. Some people spend all of their lives looking for their "tribe." I wonder if a daily dose of acetaminophen would ease their distress until they find who they're looking for? 2 people liked this.

Amol Deshpande MD MBA 04/17/2011 02:30 PM

While the biopsychosocial model of pain is well known, I find this particular aspect very interesting. What role does this research play in injured workers who are subsequently 'rejected' by their employers and unable to return to work? How much is the physical versus the social aspect of suffering responsible not returning to work? A major economic issue in many countries.

J Colman 04/13/2011 02:08 PM

This seems like a very well balanced piece of research. Even though the author begins with demonstrating a correlation between the daily ingestion of acetaminophen and mitigation of feelings of rejection, the paper goes on to explore non-medical methods of increasing feelings of social acceptance. A number of cases of mass killings (particularly in American schools) have been linked with feelings of social rejection. Maybe it's time it was taken more seriously.

Arif Rizwy 04/12/2011 10:43 PM

This is great finding. This should save lot of sensitive people who faced social rejection from entering depression and its related trauma. The flip side to be avoided is excessive consumption of analgesic.

Vision Statement: When Failure Looks Like Success

by Andrew Zolli, Ann Marie

_mirchi 04/05/2011 04:01 AM

hey nice article... more in-depth analysis will be appreciated... 1 person liked this.

Laura 06/08/2011 04:41 PM

The biggest problem, from the author's perspective, is that UNICEF delivered the solution instead of designing it with the community. That may be true, as our textbooks would tell us, but if the people were already drinking and bathing in contaminated groundwater, they may not really understand what the goal is in designing a solution. And I don't know if we can say for sure that UNICEF didn't partner with members of the community; I mean, there must have been some sort of collaboration in order to put the wells in place, right? This also took place in the early 70's, when management style was very different even in business; collaboration wasn't really valued and diversity was unheard of. If this is our biggest lesson learned, I'd say the author missed the boat. Would the people have known about the naturally occurring arsenic in their soil? I'm going to guess they wouldn't, so collaborating with them would not have prevented this major failure. Perhaps it would have helped with the social problems associated with the red wells, but that's about it. Certainly, collaborating with the community could not have prevented the issues of marrying people with arsenicosis; if they already have the disease, I can't imagine there would be any happy solution. That's not to say they are doomed, but what is UNICEF going to do? Lie and say the disease doesn't kill people? The early symptoms are described as "black raindrops" in the article, which doesn't sound too bad, but do a quick picture search on arsenicosis and you'll see pretty quickly how ugly the disease is. Its really a tough situation. We saw similar social treatments in Hiroshima; the young people closest to the nuclear explosion, even if they didnt show signs of radiation poisoning yet, had severe difficulties in getting married. Arsenicosis is much more severe, from what I gather, so it's hard to expect anything less than similar treatment. This doesn't address the root cause of the problem, and implementing it wouldn't fix it. To me, this is a plug for collaboration, thrust on a situation in the past that clearly failed, insinuating that they should have known better. I think it's hard to propose better strategies once you know the result. Anyone in hindsight could see that they did something wrong. It's seeing the failure before it happens that is really tricky.

I would say the bigger problem is a lack of "whole measurement", as the author put it, as his second biggest problem. Maybe not even whole, but at least, more measurements. I struggle to believe that UNICEF only counted the number of wells and claimed victory, but there does seem to be something lacking in their process if they failed to identify the high levels of arsenic. Perhaps, after installing each well, the water should have been analyzed. And if there was a concern from doctors, the people should have been taught to analyze their water regularly themselves. This would also possibly prevent the need to paint the wells red, saving the owners their embarrassment and the social implications of contracting arsenicosis. I may be getting a little ahead of myself here, but at the very least, testing the water doesn't seem like it would have been an unreasonable action plan before the mass failure was known. The article states that 1 in 5 wells is unsafe, so if you installed 25 wells in a month, and five of them came back with significant levels of arsenic, you'd realize pretty quickly that there was a problem.

Column: Cultivate a Culture of Confidence

They key point of wisdom for me, when we relate this to us, gaining more confidence are:

1. Embrace failure from the perspective of learning and nothing else. Its not an opportunity to berate yourself.

2. Create strong support networks for yourself. Family, friends, colleagues. When we drop the ball they can be there to pick it up.

3. Take action. Its great having a vision of success but it takes effort, practise, patience and more effort to get there.

4. Dont rest on your laurels. We can find ourselves in a comfort zone, we its nice, easy and then well miss the opportunity to be even better. And people will just pass us by.

The other key thing to support ourselves, is find what give us a sense of satisfaction. It could be anything from, listening to music, exercising, reading, socialising and make sure we have enough of that on a daily basis to ensure we have enough energy to do the above. Coach Karen http://www.coachkaren.com/ 2 people liked this. Mitch McCrimmon 03/30/2011 08:52 AM There is no doubt that winning and coping well with losing contribute to confidence. But what about the individual manager whose results aren't so measurable or at least not as high profile? In my experience, I find that too many managers suffer from low confidence but the reason has nothing to do with achieving results. Their lack of confidence is based on a fear of not knowing enough, not being able to answer tough questions, especially as asked by their team members who expect them to have the answers. I have often advised such managers that it is a lose-lose strategy to base your confidence solely on your ability to generate solutions - not possible when faced with increasing complexity and rapid change. I advise them to base their confidence on facilitative skills instead, the asking of a repeatable, small set of questions, all of which are variations on "What do you think?" This is supposedly what level 5 leaders do, after all, draw ideas for new strategies out of their teams. See my article "How's Your Confidence Today?" for more on this approach: http://www.lead2xl.com/hows-yo... - it's about fostering dialogue with the aim of generating joint solutions as opposed to needing to be a lone solution generator yourself. 3 people liked this. John R. Bell 04/17/2011 02:09 PM Rosabeth, I read your stuff in HBR 20 years ago when I was a CEO and now again via twitter 'in my CEO afterlife'. You haven't lost a step. 1 person liked this. Jane White 03/23/2011 12:37 PM Love the comparison between winners and losers. As always reading her material is thoughtful, sensible, and right on point. 1 person liked this. TPapadop 09/21/2011 01:12 PM True - lets relate it to the cinematic hero "Rocky" for a more visual appeal. In "Rocky Balboa" - "Its not how hard you hit, but how hard you get hit and keep getting up."

This is why Rocky movies are American favorites. Its about a fundamental truth. Stallone is brilliant behind his rugged persona. SJS41 09/16/2011 02:07 AM Reminds me of the aphorism "there's very little distance between a pat on the back and a kick on the ass". Lj Besker 05/03/2011 06:57 AM I do like this vision; Tomorrow is the new day! Thanks for the decision to share the Confidence with us! Kevin Kane 05/03/2011 12:31 AM Sharp and to the point! Shriram 03/30/2011 01:33 AM That very nice

Column: Entrepreneurs and the Cult of Failure

06:34 AM I have come across many people who think entrepreneurs, who failed but still pursue on other opportunities, are unreliable and reckless risk takers. They usually believe that learning from their failures should be to take a secure job and leave the adventurous entrepreneurial dreams aside. However, on the other hand, many employers don't want to recruit retired entrepreneurs. It amazes me how these people can't appreciate the determination, passion and strength that entrepreneurs have to create new ventures, services and products. At the end, the entire world benefits from entrepreneurs and lessons from their failures. NaturalistBent and 6 more liked this Red 03/29/2011 03:33 PM in reply to Evrim >many employers don't want to recruit retired entrepreneurs. It makes me wonder why too. Perhaps the hiring managers out there can share what reservations they have? On behalf of all the entrepreneurs out there, I would like to say that the demands of work, interpersonal relations, and the necessity of being humble are much higher as a freelancer / soleproprietor than as a full-time employee. 1 person liked this. Evrim 03/30/2011 07:01 AM in reply to Red

Re the employers, indeed, it would really be great to hear from hiring managers on this platform. My opinion is that most people don't like uncertainty and change as they feel threatened and insecure. Entrepreneurs and people with history of playing with uncertainty, change and risk imply threat to stability and security to other people in most big enterprises. This insight is limited with my personal experience. I want to share a paragraph from Nassim N Taleb's book The Black Swan: "In some strategies and life situations, you gamble dollars to win a succession of pennies while appearing to be winning all the time. In others, you risk a succession of pennies to win dollars. In other words, you bet either that the Black Swan will happen or that it will never happen, two strategies that require completely different mindsets." Marquita Herald 03/19/2011 05:56 PM I think the only true failure is when we fail to learn from mistakes and take the opportunity to grow. 4 people liked this. Gavriel Meron 03/17/2011 01:52 PM As an entrepreneur who has succeeded and failed I fully agree with this analysis and applaud its messages. Entrepreneurs need to be risk averse and focus heavily on risk management and perform objective and painful risk analyses and put dollars to work on risk mitigation - even when dollars are scarce, to reduce the risk and cost of failure. The earlier there is recognition that a failure is "final" the less losses incurred. 2 people liked this. Raul 06/20/2011 01:50 PM Dan, I read your article and agreed completely; coincidently, since 1996 I am using an acronym I created for the word FEAR: F for friendly, E for enemy, A for achieve, R for results. FEAR is a Friendly Enemy to Achieve Results. Risk taking is a function of the will to win divided by the fear of failure; if the earlier is higher than the latter, the result will be positive. I also liked the analogy of the chimney and your comment about labor laws; I wrote an article about it a couple of years ago. The only job security comes from good results. 1 person liked this. Clemtony 03/17/2011 09:42 AM I am trying to develop a robot arm-hand but need help 1 person liked this. iCouldntResist 03/31/2011 12:00 PM in reply to Clemtony Me, too, but I am still looking for a hand... Simda183 03/29/2011 11:34 PM

I am trying to build a social network based on Busines to Business Marketing (B2B), any one interested? Marco Scanu 03/21/2011 12:07 AM Dan, I couldn't agree more. Another interesting aspect is understanding how each culture values failure. In some Latin American countries, failure is socially unacceptable. It requires a paradigm shift to have entrepreneurs embrace failure as an fertilizer for success. Guest 03/16/2011 04:20 AM An excellent and thought provoking reminder to all the entities connected with entrepreneurship development. Failure is part of every business. We know how many big enterprises went into oblivion incurring huge losses. Government, Banks, EDCs and industry promotion agencies should impart required training and conduct periodical workshops to the start-up owners as a mandatory provision. Every start-up should be considered like a child that is nourished, mentored and encouraged at every failed attempt. This will save the efforts of all the stakeholders. The effort will help the banks make more business and giving push to the economy. As Daniel has rightly mentioned, failure shouldn't be considered so seriously without addressing the causes of failure. Probably, EDCs or Universities should have an exclusive education module addressing the risk mitigating and fail-proof areas so that we contribute truly in the entrepreneurship development. This task otherwise could be taken up by NGOs. Ram, http://www.blog.epmworld.in @epmworld_hyd

How I Did It: Blockbusters Former CEO on Sparring with an Activist Shareholder
by John Antioco ort by Subscribe by email

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Ben Cooper 03/23/2011 10:44 AM

As employee #1 at Blockbuster Online, I feel obligated to share my opinion. Blockbuster hired me to help build, launch and run marketing for their Netflix competitor. John understood that it would be crucial going forward to have an online/digital relationship with customers. He committed significant resources to Blockbuster Online taking a bold step that most CEOs dont have the guts to take. We were very successful from the start: - From go we built and launched the service in 9 months. - Less than 10 months later we passed 1 million subscribers (at the time making us the fastest growing subscription business in history).

Then Carl Icahn got involved and our vision was seriously compromised. I was in the room at the shareholder meeting in 2005 when the results of the vote were tallied and I knew at that moment that we wouldnt be given the opportunity to fulfill our vision. So just what was the vision and why was it important? I have a unique perspective. I grew-up in the video rental industry. My parents opened one of the first video rental stores in the US in 1980. My father served as President of the Video Software Dealers Association (VSDA) and my first job ever was at a Blockbuster store in high school. In the early 90s Blockbuster provided two great values to consumers. First, a place to actually rent a movie or game, but more importantly it provided expertise. Back when Blockbuster had fewer than 1,000 stores, most store employees were true movie geeks. The job only paid minimum wage, but you also got 10 free rentals per week and access to screeners of movies before they hit the shelves. When a customer would walk in the store, 75% would walk straight to the counter or an employee on the floor and ask one of the following questions: Whats new? I liked movie X, can you recommend another movie I might like? A friend told me about a movie about XYZ, but I cant remember the name. Do you know what movie that is? Blockbuster employees back then gave customers significant value through their expertise. Fast forward 10+ years. With DVDs, digital, smart phones, etc. access to getting the movie you want is pretty ubiquitous. Additionally, you can now turn to IMDB.com, Rotten Tomatoes, Facebook, etc. to find info, reviews, and recommendations. John saw the change coming when he approved the budget for Blockbuster Online in 2003. He also had the foresight to understand that a digital relationship with the customer would be critical in the future. We couldnt predict when streaming would become mainstream, but like Netflix, we knew the best way to develop that digital relationship with consumers was with an online-based subscription service. I disagree with Carl Icahns response that Blockbuster turned out to be the worst investment I ever made. Instead, I think his meddling with Johns strategic vision at Blockbuster might have been the biggest investment mistake he ever made.

JonathanW and 46 more liked this

DVD Investor 03/23/2011 04:39 PM in reply to Ben Cooper

2003 was 4 years after Netflix launched - and that was only approving a budget for the service not actually going live. I'd say he was a little late in seeing the change coming and that allowed Netflix to build a position that was practically impregnable without Blockbuster incurring life threatening losses to buy share.

2 people liked this.

John Antioco 03/18/2011 01:12 PM

Editor's note: Carl Icahn responded to this article in the pages of the magazine. Below, John Antioco answers Icahn. Im sure glad Carl likes me Id hate to see what he would say about me if he didnt. I like him too. Once, I even sent him a Valentine with a couple of beagles singing Ive Got You Babe and he must have liked it because it was on display the next time I visited his office. Regarding Carl's comments: My Compensation When Viacom's CEO Sumner Redstone (also a billionaire) hired me to run Blockbuster in 1997, I had successfully run or turned around 3 companies. He needed the same done at Blockbuster and was willing to pay me generously to do so. I accomplished the turnaround and he paid the money. Sumner was obviously happy about it based on what he wrote about me and my time at Blockbuster in his book "A Passion to Win". And, its easy to understand why given the increase in the price of Viacom stock at the time. Carl is very proud of the money he makes doing what he does. Just as I am of what I've been fortunate enough to earn (I wish it was as much as Carl)..God bless America and free enterprise. Carl may not have wanted to pay me the bonus since he ran on a platform of containing executive compensation. He may have been a bit embarrassed by the amount I was entitled to receive under the plan, but he was a member of the Compensation Committee that unanimously approved the bonus plan. Its always struck me as strange that its okay for Carl and others to make billions on their version of truth and justice, but CEOs making a lot of money, usually on stock appreciation, is "egregious" (one of Carl's favorite words). Work Ethic I'm not sure what lead to his assessment, but of all the criticism I've received in my life (much of which was justified) I have never heard that one before. To use another one of Carl's favorite expressions "I take umbrage at that remark". Carl works hard (in his unique style and fashion) and so do I. Hollywood Video Our rationale for trying to buy Hollywood Video was for Blockbuster to orchestrate an orderly downsizing of the store based rental business while we developed our online

business. In the end it was the FCC that quashed the deal because they believed it would give Blockbuster monopolistic power (wacky). We told them at that time that their denial might cause the bankruptcy of one or both companies. Guess what happened? Directors The only directors I heard from around the time of my departure were ones that wanted me to accept the reduced bonus and stay - a non-starter for me. If any of Carls directors ever voted against him, I must have been absent that day. I hope Carl invites me back to have dinner at Il Tinello so we can reminisce over a few martinis and some Pasta alla Icahn. It might be fun since I largely agree with the assessments contained in the last paragraph of his comments - especially the part about not knowing what would have happened if we had avoided the big blowup.things might have turned out differently. 41 people liked this.

Sunil Mithas 03/21/2011 12:59 PM in reply to John Antioco

John Antioco My colleague Hank Lucas and I wrote an article lamenting the absence of digital business srtategies and related discussions in corporate boardrooms that you may find interesting and timely--it seems to echo some of what I see in Carl's and your recollections: http://www.computer.org/portal... I am curious to see your comments on the article. Seems that bith Carl and you agrees with our premise that it is time boards thought out digital savvy or what we call as the ITracy of their key executives and CEOs. Regards Sunil Mithas Associate Professor and Associate Chair Department of Decision, Operations and Information Technologies Robert H. Smith School of Business 4357 Van Munching Hall University of Maryland College Park, MD 20742-1815 smithas@rhsmith.umd.edu http://terpconnect.umd.edu/~sm... (Edited by a moderator) 1 person liked this.

Cammyfloyd 03/22/2011 04:16 PM in reply to John Antioco

Thanks so much John for the extended insight on the article. I just finished it while sitting here in my cubicle taking a lunch break to educate myself on real-life leadership trials and experiences. I followed the battle of the giants, Hollywood and Blockbuster, over the past 10 years or so, not as an investor, but as a customer. With the termination of things like "no more late fees" with sub-sequential returning, i became permanently aggravated. A good friend at Sony pictures and I deliberated about the future of Blockbuster, Hollywood, and Netflix. I was advocating Netflix while he advocated Blockbuster's online service. The truth came out that Blockbuster was fighting an uphill battle- against disgruntled customers (like myself) and the loss of the first mover advantage. I think the Blockbuster online service was a failure before it began due to Blockbuster suffering from a case of "born of hubris" like many corporate giants. Circuit City suffered a similar demise for very, very similar reasons. This story will live on in intellectual centered board rooms and business college discussions. I thank you for your honesty and candor in this article. Your relationship with Icahn is equally fascinating due to the bad feelings that do exist because of the prior circumstances coupled with a fundamental shared mutual respect, if not friendship. Good luck in the future!

Meghan Ennes, HBR.org to Cammyfloyd

04/21/2011 03:13 PM in reply

Dear Cammyfloyd, We're planning to use an excerpt of this comment in the Interaction section of the upcoming June issue. Can you contact me at mennes [at] hbr [dot] org with your real name, title, and company affiliation so we can use it as a one-lined bio? We're working on a tight deadline, so I would appreciate your prompt reply. Thanks! Meghan

Cammyfloyd 04/21/2011 05:46 PM in reply to Meghan Ennes, HBR.org

sounds great Meghan! i just sent it to you via email. take care!

Sunil Mithas 03/21/2011 01:18 PM in reply to John Antioco

HBR Editors I mistyped John's last name (Antonio in place of Antioco) in my previous post-could you fix that or repost by replacing Antonio by John Antioco. Thanks Sunil Mithas

Meghan Ennes, HBR.org Mithas

03/21/2011 01:50 PM in reply to Sunil

Thanks for alerting us. The comment has been edited. Cheers, Meghan

Dtravieso 03/21/2011 02:25 PM

This article just affirms my belief that the rich in this country are completely out of touch with the poor- and middle-class. Just imagine how "normal" employees feel when they put their heart and souls into businesses and then lose their jobs because of the corporate mis-management and executive raping and pillaging that is so common today - especially when those employees don't have access to multi-millon dollar golden parachutes that take effect even if they are fired. Reading Antioco's whining article and Icahn's rebuttal makes me feel like what it must have felt like to watch two Roman families bickering in the stands from the perspective of the poor sap on the floor of the coliseum. If there are still people who wonder why the rich should pay a higher percentage of tax than the poor- and middle-class, THIS is why: They don't PLAY by the same rules so they should not PAY by the same rules. 22 people liked this.

Cobrizocondo 03/21/2011 07:27 PM in reply to Dtravieso

Sounds like you would rather be living in old communist USSR. Capitalism creates more jobs and a better standard of living than the alternative. Workers at corportations who rise to excecutive level will always make alot of money...kind of

like Tiger Woods and Labron James do for being the best at hitting and shooting at a ball. Everyone is captain of their own ship so start navigating. If you dont like your own situation then do something about it yourself and quit complaining because of someone else has become very successful and rich. 12 people liked this.

AaronWahle 03/22/2011 06:30 PM in reply to Cobrizocondo

It's hard to captain your own yacht when you don't even own a boat and are just treading water. 4 people liked this.

Sean 03/26/2011 11:19 PM in reply to AaronWahle

The dude was a 7-11 back room worker and went on to lead the company into recovery, creating the largest convenience store chain in the world. You don't need to "own" anything other than your ambition. Stop whining about what other people have and go get some. 2 people liked this.

Meghan Ennes, HBR.org to Sean

03/27/2011 04:09 PM in reply

Greetings HBR readers, We're very excited around here to have such a strong and passionate debate going on John Antioco's article. However, as a comment moderator, please allow me to step in briefly and remind everyone of our rule against ad hominem attacks in the guidelines below. Please try to keep your criticisms to the ideas being stated, rather than the people stating them. Keep up the great conversation, Meghan

Meghan Ennes, HBR.org

04/20/2011 01:06 PM in reply to Dtravieso

Dear Dtravieso, We're interested in using an excerpt of this comment in the Interaction section of the

upcoming June issue. Can you contact me at mennes [at] hbr [dot] org with your title and company affiliation so we can use it as a one-lined bio? Thanks again! Meghan

Shane Evangelist 03/22/2011 05:50 PM

I worked for John in various roles at Blockbuster and I would consider him to be the greatest leader I have had the privilege to follow. John is not simply a leader but rather a leader of leaders, a skill set that combines great vision with the ability to motivate and get large groups of people to execute. He is truly in the top percentile when it comes to leading. I am fortunate to have learned from him. Unfortunately, what has been lost in all the discussion is the tremendous vision John demonstrated in the years leading up to his departure. John had developed a consumer proposition, Blockbuster Total Access, which allowed people to rent online and in-store under the same subscription. This offer made Blockbuster more relevant than online and physical store competitors and it was capturing share in both markets. Specific to the online market, in the first half of 2007, Blockbuster captured over 100% of the net new subscriber market share and Netflix lost subscribers for the first time. This was truly an unprecedented feat. Never before had an offline retailer actually caught and surpassed the pure play first mover in the online space. It would have been the equivalent of Barnes & Noble catching Amazon. John came under a lot of criticism for his investment in this strategy; however, Johns vision of where the market was heading remained steadfast and Total Access reached over 3.5mm subscribers by the end of the second quarter of 2007. The investment of about $325mm over the previous three years was ultimately validated with Netflixs recent announcement of having over 20mm subscribers and over $11B in market capitalization. At the time of Johns departure, Netflix was valued around $200 - $300 per subscriber, putting a comparable market valuation on Blockbusters over 3.5mm subs between $700mm - $1.1B, which is a decent return on the $325mm investment. John leveraged Blockbusters offline and online assets to combine the convenience of home delivery with the spontaneity of store based renting. No other company in the market had the assets to respond to the offering. Additionally, he was building a relationship with customers online for the eventual transition to digital delivery.

I would have been interesting see this play out. 15 people liked this.

Chuck in Atlanta 03/22/2011 10:44 AM

I was a "junior" executive with TWA when Icahn took control the same way he entered Blockbuster. He very quickly put his own senior executives in charge, none of whom had any airline experience. When the President, Joe Corr, became indoctrinated to become an "airline guy", like the rest of us, Carl got rid of him and we didn't have another President until Carl left in 1993. Before leaving he sold off the crown jewels of the company (lucrative international routes) and we soon entered into our first chapter 11. Employees pensions were tanked and take over by the PBGC. Ultimately, there was no way to salvage what had once been the premier airline in the sky. 37,000 people ultimately lost their jobs, pensions and benefits. Carl married his secretary (who is quite nice in addition to being beautiful) and lives happily ever after with his billions. What a guy! 7 people liked this.

DVD Investor 03/23/2011 01:58 AM

Blockbuster faced an existential threat from the one-two punch of DVDs-by-mail rental and then online streaming, and thus faced a transformation that few companies have pulled off (Kodak, the newspaper business, and Borders being other recent examples). That said, neither Antioco nor Icahn covered themselves in glory during their tenures with the company. I followed the DVD rental business closely as an investor during the 2003-2008 time frame so I can offer an interested outsider's perspective. Neflix's original DVD by mail service represented a disruptive technology in the Innovator's Dilemma sense of the phrase. It was an inferior (no instant gratification, no certainty of which title would show up in a given week) low cost (3-5 titles out at a time for the cost of a few in-store rentals) offering that appealed to a portion of the rental market. Blockbuster classically ignored the new entrant for a number of years, giving it time to perfect its model and build scale in a business where minimum efficient scale was deceptively large. By the time Blockbuster got around to responding to Netflix, the new entrant had gradually built out its distribution system, eventually enabling it to achieve a 1-2 day turn around in most of the country which dramatically enhanced the cost of entry for any follower that wanted to provide a competitive level of service. Netflix also used the time to hone its algorithms for predicting which titles its customers would demand. Blockbuster responded primarily with price, by matching the terms of Netflix's by mail offering and throwing in a certain number of free store rentals to boot. Yes it garnered a lot of subs, but it wasn't sustainable, Blockbuster would have bled itself quickly if it sustained that offering going forward. Blockbuster couldn't compete profitably on Netlfix's terms, at least not without much larger scale. Reed Hastings articulated the costs that Blockbuster faced in starting the business on his quarterly conference calls in the 2005 and 2006 time frame. They are worth reviewing to gain an understanding of the

disadvantage that Blockbuster faced as a sub scale second entrant. Antioco's version of history glosses over a number of problems that developed under his watch. The company's operating profit (before write downs of goodwill and other one off items) peaked in 2003, about the time that sales per square foot topped out in the US. The company was fighting a battle on two fronts with the mass merchants and with Netflix (and Redstone's decision to spinoff the business to Viacom shareholders after shopping it for a long time with no takers speaks to its strategic predicament). Admittedly, not an easy operating environment, but they made the classic mistake of being unwilling to cannibalize the base of the existing business by entering the online rental business early. Note the comments about being uncertain of consumer demand for rentals through the mail - they missed the emergence of a new segment of customers. By doing so, they gave Netflix a 5 year head start in the online market and let them establish a leadership position that would have been very hard to dislodge. I also believe the strategy of cutting late fees was a mistake. The right decision at that point would have been to put the store based business into a classic harvest mode (maintain prices and margins while shrinking the footprint of the business) and use the profits from late fees to fund the growth of the online business (while also servicing the almost $1B of debt and preferred stock on the balance sheet) . Sure customers disliked the late fees, but they paid them. I'm sure the franchisees that cut fees saw more traffic, but they were only winning share in a declining store based market - not a path to ultimate prosperity. Blockbuster overlooked the strategic imperative of gaining a leading share of the emerging segment that was the future of the business, until it was too late. Both Antioco and Icahn are wrong about Hollywood Video. Go ask the people at Movie Gallery whether they have any buyer's remorse about doing that deal. Movie Gallery overpaid for the asset and found itself over-levered in a declining market and was bankrupt in two years time. Hollywood would have only added more debt to Blockbuster and provided a bigger anchor to drag around while trying to transition to a new business model. It's not clear that Icahn brought much to the company in terms of strategic advice, though his instincts about late fees seem right and the objection to the golden parachute was entirely appropriate. In addition, Antioco's comments highlight a core problem with the mindset of many of today's CEOs. Somehow they have forgotten that the shareholders own the company and they hold their position at the pleasure of the shareholders. In reading his version of events, one gets the sense that shareholders are a sort of nuisance that just distract management from whatever path it has chosen to follow. The notion of honest disagreements about the direction of the business, and vigorous debates about alternative strategies for deploying the firm's capital are just not kosher in the board room. You get the idea that everyone should be collegial and defer almost everything to management's judgment. Unfortunately, that idea pervades far too many board rooms these days and leads to the many debacles of company performance that we have seen over the past decade. Indeed it is the very job of board to be vigorous advocates for shareholders'

interests and to continually challenge the soundness of management's strategies and the ways they propose to deploy capital. Far too many board members are the CEO's lapdog and really don't hold up their fiduciary duty. I wasn't in the room, so I can't judge the wisdom of Icahn's counsel to the management team. But, Antioco's whine that it was contentious and difficult and required them to defend their strategy is symptomatic of the imperial CEO's desire to have board members that are seen but not really heard. Lastly, anyone that defends a $50MM exit package is seriously out of touch. We are all ultimately replaceable, even the modern, regal CEO. To think that a manager who risks effectively no capital in a business is deserving of a $50MM severance package, in any circumstance, is truly the height of arrogance. A year or two's salary to put gas in the Jag and pay the country club dues, fine. But please don't tell me that you deserve gold plated financial independence because circumstances at the company changed. Sorry, man up, get over it, and move on like the rest of us do in these days of constant change. Moreover, the debate about his 2006 compensation also shows someone who is out of touch with the circumstances of the company. The company that year recorded an operating profit of $79 million and Antioco's total pay package was $16 million. Does it seem reasonable to anyone that the CEO should claim one fifth of the profits of the firm as his own? This unfortunately is all too typical of the sense of entitlement that occupies the executive suite. Somehow there is no sense of shared sacrifice in executive compensation when times are tough and belts have to be tightened. You bemoan activist shareholders, but when you insist on comp plans like this, you get the shareholders you deserve. I applaud HBR for publishing stories like this that review business decisions and provide a chance for the parties involved to share their recollections of how decisions and choices were made. There is far too little introspection of this type among executives today. The creative destruction that took place in the video rental business yields a lot of business lessons. Hopefully HBS is working on a case or two about it if they haven't done them already.

6 people liked this.

Meghan Ennes, HBR.org

04/20/2011 01:06 PM in reply to DVD Investor

Dear DVD Investor, We're interested in using an excerpt of this comment in the Interaction section of the upcoming June issue. Can you contact me at mennes [at] hbr [dot] org with your title and company affiliation so we can use it as a one-lined bio? Thanks again! Meghan

William4mtns 04/13/2011 11:28 AM in reply to DVD Investor

Oh my DVD Investor. Maintaining late fees was the most important reason that people at the store left and never returned. I believe that the founders of Netflix were Blockbuster customers. Taking revenues from consumers for no reason at all is the quickest reason for failure in any business. DVD Investor have you ever run any business on your own?

Crg 03/19/2011 12:19 PM

Interesting article. One only wonders what Blockbuster's outcome would have been if Antioco was still CEO. 6 people liked this.

Dan Kim 03/23/2011 03:06 AM

I am the founder of the first private company in which John Antioco invested after he departed Blockbuster in 2007. Over the past 4 years, I have gotten to know John very well, and one thing that anyone who has worked with John at a professional or personal level is that he is extremely passionate about and dedicated to anything he is involved with, especially his job. John is the hardest working person I have ever known since I started working, so Mr. Icahn's comments about John's work ethic completely baffles me. But enough about that, simply because Mr. Icahn is wrong. What baffles me more, though, is why Blockbuster stopped supporting Total Access. I have had numerous conversations with John about this topic since I first met him, because I never understood why a Board of Directors would pull the plug on such a critical piece of their business. This HBR piece nicely sums up the hundreds of times I would ask John to re-tell me the story as to Total Access was pulled. In my opinion, Blockbuster's recent failure into bankruptcy is the direct result of the company's having stopped supporting Total Access. Having attended both high school and college in the 1990's, I was exposed to a lot of technology and new media. And having grown up in Los Angeles, I loved movies. In the 1980's and early 1990's, I was a diehard Blockbuster member. I was there once a week, usually on Fridays, and loved the fact that I could rent the latest titles and watch them at home. Going to the video store was a cool thing to do, with your friends or family. But when Netflix came onto the scene, the idea of having DVDs sent to me through the mail was compelling enough to cancel my Blockbuster membership. Although, I did miss going to the video store, an experience that for some reason still resonates positive

memories with me today. Enter Total Access. I started to receive a bunch of stuff in the mail about this program. The idea of not only getting DVDs in the mail from Blockbuster (which, at that time, I thought had significantly better brand credibility than Netflix did in the movie business), but being able to return those videos via mail OR by going to the video store, was an idea better than Netflix's. Plus, Blockbuster had eliminated late fees! Win! So I, along with a bunch of the same friends I used to go to Blockbuster with, all cancelled our Netflix memberships and re-joined Blockbuster. And we became avid fans again of Blockbuster. We ordered videos through the mail, got the latest titles, but got to return them whenever AND wherever we wanted to. Unfortunately, this continued until we felt Total Access wasn't being supported by Blockbuster as much as when it had first started, and until Netflix successfully convinced us to re-join with clever marketing and persistent advertising. This imbalance of customer marketing made me feel as if Netflix had become the more credible online brand for mail delivery of movies, and that Blockbuster was no longer in this business. It was so disappointing, It was almost as if Total Access disappeared right at the time that it seemed to be helping Blockbuster regain the momentum it had started to lose to Netflix. Since that time, I've only walked into Blockbuster once, maybe twice, only to be baffled again by their transformation from a movie destination into a convenience store. Companies that don't innovate or lead, simply die. Knowing John as well as I do today, I know that if he could have done what he wanted to do at Blockbuster, Blockbuster would have remained a powerful brand in movie rentals and distribution. Blockbuster would have been today's Netflix. But it isn't, because in my opinion, Blockbuster after John left could not and did not innovate or lead.

5 people liked this.

DVD Investor 03/23/2011 04:54 PM in reply to Dan Kim

Total Access was bleeding the company dry, that's why they backed away from it. The company went from making $45MM of operating income the quarter Total Access was launched to losing $91MM a quarter six months later after which they first raised the price to staunch the hemorrhaging. They had less than 6 months worth of cash on the balance sheet at that burn rate. They simply couldn't afford to keep buying customers at that cost, and once they throttled the offer back to something that didn't threaten the solvency of the company, they didn't have anything compelling for the market. As I said earlier, Blockbuster couldn't compete profitably on Netflix's terms due to the scale advantages that Netflix had accumulated at that point. Perhaps if they had not made the decision to remove late fees, they might have had the cash flow to sustain Total Access until they achieve a competitive level of scale

in the online business, but it was financial suicide to try to do both at once. I'm sorry, but I just don't see the vision that everyone keeps talking about. Blockbuster was late to the online party and failed to properly manage the cash flows of its legacy business. 6 people liked this.

Dan Kim 03/27/2011 05:42 PM in reply to DVD Investor

I see your point, but I don't think the right move at that time was to put a bandaid on a business model that was ultimately destined to fail by taking out of play the only option the company had at that time to secure success. Turning Total Access off was cowardly. Businesses need to take risks in order to succeed. Businesses need to innovate, or follow the innovator and fight for market share. If cash was the problem, I would have fought hard to raise more money, and I know John would have done the same. 1 person liked this.

Bob 03/21/2011 12:49 PM

I worked with John Antioco and he was a good amn. He was straightforward and he LISTENED to what cysutomers wanted. Jim Keyes tore apart everything that was right with the company. An article on all of his boneheaded decisions would be interesting.... 1. He stopped the growth of online (genius) 2. He never landed on a "value proposition" for rental terms (Its been 8 years Jim...8 FLIPPIN' years) 3. He steadfastly rfused to offer daily rentals..."We are a premium product - customers want it for FIVE days" The day John left was the beginning of the end...Keyes could not have inflicted more damage if he tried...and many insiders often wondered if he was trying to.. 4 people liked this.

Walter Pressey 03/19/2011 06:04 PM

Icahn never did anything for the "shareholders" he always had in mind only himself. The fact that he was also a shareholder in instances where he took action was always incidental. His time horizon rarely if ever was truly long-term. 4 people liked this.

Victor Allara 03/22/2011 04:02 PM

This is an interesting inside story about Blockbuster. Looking at the company from the shareholder side during Johns 1st 6-years - revenues were growing year over year, but operating income remained flat (and worst even as it was negative most of these years). As a shareholder I would not be happy with these results. As far as John's strategy - I was a customer of Blockbuster and was a big fan of the Total Access. I thought that the Total Access gave Blockbuster a competitive advantage over Netflex and the other video rental retailers get a movie online and return it to the store and get another movie. The elimination of late fees was nice for the customer, but what would have been better for Blockbuster (and the Customer) rent another video and late fee on the past due video would be waived, if you do not rent another video for each past due video then pay the late fees. Jim Keyes came in and changed the Total Access and I quit going to Blockbuster as often, from 1-2 times per week to 1-2 times per month. I am also curious if John Antioco seeked out any advice from Bart Brown (former Chairman @ Circle K when John was there) when the proxy fight came about or in dealing with Carl Icahn. Bart (Attorney by trade) was one of those who can take a complex situation and come up with a simple down to earth solution. 3 people liked this.

Gajendra Prasad 03/22/2011 09:41 AM

I am not a movie or a video person but just reading about what happened to BBI saddens me just to think that it takes only a few people in power to bring a large flourishing business to its knees. 3 people liked this.

Hoppster 22 03/22/2011 08:22 AM

The greed of many CEO's and the failure of many directors to say no to CEO's results in opportunities for people like Carl Icahn to put the Company in play. 3 people liked this.

Tim 03/22/2011 07:55 AM

Having read both sides, I can agree with both men. Antioco seemed to have a very good grasp on the market and where his vision for the company was headed. He saw opportunities and took them. Side note: if you think he should have jumped on streaming video sooner, you're most likely wrong. Netflix tried it earlier and failed miserably... the delivery technology wasn't ready yet. Blockbuster enter the game at the right time. Icahn is correct, in that $50M is a large sum of cash to compensate anyone, no matter how good their performance. In the wake of the economic meltdown (sorry for the overused word, but it's the commonly known term now), executive payouts has become a real issue. Icahn had the vision to see the problems as they were happening, rather than waiting for the whole house of cards to fall. At the time, it would have been difficult to replace him for a significantly lower compensation package, but it was either that or stick with the status quo. He was stuck between Scylla and Charibdis. In business, it's usually unwise to hope to safely sail between both. So why did two smart, capable men fail? I believe it was the conflict in a time of crisis that did it. Both of them are strong leaders, and both seemed to have strong views that were very different. Once they fell into a habit of conflict with little compromise, they could not work as a team. 3 people liked this.

Info 03/19/2011 05:47 PM

Better yet: One only wonders what BBI's outcome would have been if Antioco was still CEO and Icahn never put his claws on the company? 3 people liked this.

Nomo Blockbuster 03/28/2011 06:21 PM

As a Blockbuster employee from late 2004 to early 2006 under Mr. Antioco's leadership, I knew that the company was going in the wrong direction when it said it was getting rid of late fees. These fees were a very large portion of the company's revenue and, if customers could keep DVDs much longer than originally intended, it would impact availability of titles to other customers. In addition, customers would get confused by the new policies when they saw a charge on their account for the sales price of movies/games less a $1.25 'restocking fee' (how deceptive) for items they'd checked out for a long time.

Sure enough, just as I predicted, Blockbuster lost significant revenue, customers kept items longer and were not only confused, but angered, when they saw charges on their accounts. Blockbuster felt that it could rely on the fine print and that the customers should be reading it. Many lawsuits resulted and Blockbuster's reputation was tarnished as being a lying, deceptive conglomerate with no regard for the customer. Blockbuster was now more concerned about the bottom line than ever and, in doing so, sacrificed valuable customer service and chased the customers away to competitors like Netflix. Netflix got and has kept my loyalty after I quit Blockbuster in early 2006 and the rest is history. 2 people liked this.

Born in the USA 03/27/2011 05:57 AM

It is so easy for Carl Icahn to gather his team together and start complaining about how companies are managed. Virtually every company in which our family has invested since the early 20th century and forward has served us very well. But, whenever Carl Icahn appears on the scene, he reminds me of Gordon Gekko. His ideas are to start stripping, shredding, dumping and otherwise decimating a going concern and manages to walk away with a ton of money. After hitting on a particular dislike that the raider knows will get people agitated is to pick on CEO salaries and the one so favored decades ago--the need for a company plane. The first to go, of course, are the employees and a couple of board members and executives. The wonder of it all, however, is that raiders think they will live forever and haven't got a clue as to the wreckage they leave behind. This is not capitalism. Instead of building, the raiders destroy and remind me of the barbarians coming down from the north into villages and towns trying to establish themselves for the future. What I find completely galling is when the barbarians then say, "We really liked these people" as they ride off contemplating the next target. Communism did not get a foothold because of fair play, it came into being when the ultra-rich totally ignored the wants and needs of the very people who made life luxurious for them and pushed their noses into the dirt for good measure. 2 people liked this.

BBV ATL 03/23/2011 09:11 PM

Hi. I currently work in a successful Blockbuster Store in Georgia for over 5 years. Before Blockbuster I worked a couple specialty retail stores, and before that... I worked at a Blockbuster store back when we were renting VHS and Beta. Blockbuster Video serves many, many happy customers and hopefully will continue this path for a long time! Blockbuster Video has the Total Access program which is SO much better than anything Netflix has or offers! I am not saying that for any biased reasons other than IT'S TRUE! When I first worked for Blockbuster we began the "mini-Walmart' model where we were

trying to "be everything to everyone" instead of focusing on the service and rental side of things (back to basics). There is no CEO for Blockbuster now....... do we need one? YES..... We need a leader who can take this company out of the ruins of an unfocused past leadership. We NEED a "Lee" Iacocca-type who can come in and get us back on path. We don't need a public 'pissing" match to blame this or blame that. If you are an investor or an executive you had every opportunity to make right. You win in today's business by "taking chances". Just imagine if there was a CEO who would step up and take control of this company for little or no money THEN turn it around with just pure leadership TALENT. That CEO would be GOLDEN! Worth BILLIONS! What do we need to do? We need to stop playing defensive and start playing offense! We gotta go after the competition. Stop waiting for them taking market share. Drop the prices of the movie rentals to 99 cents PER DAY for older favorites movies and drop new releases to $1.50 PER DAY. That would drive more traffic into the stores and we would get the product back more frequently for others to rent. Customers for the most part would LOVE a cheaper DAILY rental rate than the 3 or 5 day rental charge. Charge per day. If they keep it longer.... you charge them like Red Box does for each day over the ONE day rental. This company is too great..... and with 20,000 jobs on the line who wants or needs another company to go under? Not me! BBV ATL

2 people liked this.

Meghan Ennes, HBR.org

04/20/2011 01:06 PM in reply to BBV ATL

Dear BBV ATL, We're interested in using an excerpt of this comment in the Interaction section of the upcoming June issue. Can you contact me at mennes [at] hbr [dot] org with your title and company affiliation so we can use it as a one-lined bio? Thanks again! Meghan

instore movie-pass lover 04/12/2011 03:27 PM in reply to BBV ATL

Just to reply to this real quick. About your aggressive pricing strategy of "Drop the prices of the movie rentals to 99 cents PER DAY for older favorites movies and drop new releases to $1.50 PER DAY", Blockbuster had previously had a late fee plan in place similar to what you are proposing. I understand that there would be no flat rental fee instead it would be charged per hour but one of the most common complaints was that they had returned the movie before midnight/noon and the employees just hadn't checked it in. A policy such as the one that you are describing would bring back those old customer issues and now that blockbuster has successfully torpedoed it's stores and shot itself in the foot multiple times a plan like this, i feel, would not be successful.

Nomo Blockbuster 03/28/2011 06:36 PM in reply to BBV ATL

You best update your resume or brush up on your knowledge of South Korean telecommunications because, if things continue as they are, that's the crapper that Blockbuster will be in.

Etrw 03/23/2011 02:31 PM

John Antioco made avery clear case iof his responsible and innovative leadership when he first came on as CEO, and the ensuing review of the last 18 years at BBI. And, as we all know , Hind sight is always 20-20. John said as much as he reflected on learning's and things he would have done differently if he and Cher could truly " Turn Back Time"! That said, whether or not late fee removal could have been delayed, or online launched quicker...there were great years under John's leadership, and what seems an accelerated decline under Jim's. Icahn was never about growing the business. I think he simply was after how to quickly squeeze how much back after a bad arbitrage bet. John, you can count on me any time. Next time you are in LA, let me buy you a margarita! ET 2 people liked this.

Rayjunk 03/22/2011 12:29 PM

You can place all kinds of business strategies in place, but if you don't know your customer, and listen to them, your customer will eventually leave. This is what happened to Blockbuster, plain and simple. I'm a single parent in my home town, and my three kids and I would rent movies and games on a weekly basis. We used to do this from the local businesss, but then moved to Blockbuster for it's wider selection. The local business was forgiving in their late fees. Blockbuster wasn't. The amount of material I rented from

Blockbuster ended up being considerably lower than I would have rented from the local business because my budget for rentals was lost to exorbitant late fees. Okay, I could have been better at returning rented items on time, but hey I'm human. I pointed this out to the Blockbuster staff and they indicated that if they didn't charge these exorbitant late fees, they would go out of business, and that the local business will likely go out of business because they don't. Two years later, blockbuster has closed in our Town, and the local business remains strong, and has a large loyal customer base. Moral of the story: don't build a wall called "Revenue" that is so tall that it hides your customer. Remember, your customer is only human. Your customer is the foundation holding up the wall called "Revenue". Watch out cable companies!, You're next. 2 people liked this.

Meghan Ennes, HBR.org

04/21/2011 03:13 PM in reply to Rayjunk

Dear Rayjunk, We're planning to use an excerpt of this comment in the Interaction section of the upcoming June issue. Can you contact me at mennes [at] hbr [dot] org with your real name, title, and company affiliation so we can use it as a one-lined bio? We're working on a tight deadline, so I would appreciate your prompt reply. Thanks! Meghan

Argentinas Ocean Eleven 03/21/2011 10:21 AM

Take a look what Mr. Icahn did with the Blockbuster subsidiary in Argentina: they theorically spent several millions dollar in a non profit for years market, to end in a runaway against the local law leaving employees, customers, stores owners, etc. instead of a right closure. Where went the U$S millions sent to Argentina, a market that closed 50 stores before 9/23 bankruptcy???. Maybe Mr. Icahn, Mr. Kurrikopf will explain, if Burton Lifland seeks for real justice... 1 person liked this.

Hendra Raharjaputra 03/20/2011 06:32 PM

The revenue of Blockbuster's was going down in 2003 -2007 , while Antioco still involved. In my opinion not because Antioco departed from Blockbuster's. Even Antioco was doing late to improve their business strategy : innovation !!! 1 person liked this.

Greg Wroblewski 22 minutes ago

If you read both sides carefully, you'll see there's no real dispute about the business strategies involved. Icahn admits that Antioco had the right idea with Total Access, and Antioco admits that he should have held off the abolition of late fees to some later date in order to have enough cash flow to make the online business and Total Access work. The basic source of friction between them seems to be Antioco's compensation package which, justly or unjustly, was a matter of contractual obligation. As for Icahn's statement about John Antioco's work ethic, that doesn't ring true. It would require no effort to find hundreds of people who worked with John Antioco at several different companies, including me. I would be very surprised if even a single one of them would question his dedication.

Sadiq S. Fecto 10/20/2011 03:52 PM

I used to work as District Manager for Circle K Stores during Antioco's tenure as CEO. This guy is a magician he can turnaround any sinking company, he is my hero ! Sadiq Fecto

Whitebeach23 04/12/2011 11:43 PM

Great behind the scene details. 50M golden parachute?! What was the board thinking!? It's unfortunate that shareholders don't sell their shares when companies/boards pull ethically dubius acts such as these. When one sees this occur, they should sell their share immediately and find a better run company to be partners in. Any board that agrees to an exit package like this, while barely braking even for over a decade, is clearly unfit for their duty to the shareholders. Shame on them.

Just my two cents.

Meghan Ennes, HBR.org

04/21/2011 03:13 PM in reply to Whitebeach23

Dear Whitebeach23, We're planning to use an excerpt of this comment in the Interaction section of the upcoming June issue. Can you contact me at mennes [at] hbr [dot] org with your real name, title, and company affiliation so we can use it as a one-lined bio? We're working on a tight deadline, so I would appreciate your prompt reply. Thanks! Meghan

instore movie-pass lover 04/12/2011 04:26 PM

Honestly, all I am hearing about is Blockbuster's total access program and that if it had been given a chance it would have worked out. I was employed at Blockbuster as a CSR for about 2 years when Total Access rolled out officially. I was probably around 20 years old, I will refer back to this later in my comment. At first, I thought this was an excellent idea and a great way to battle Netflix even though Netflix had already acquired a decent market presence. A few weeks later, I went to my store manager and told him that I refused to market the Total Access program. He was shocked since I was the top seller in our store, as well as our district, and had always been gung-ho about Blockbuster even though they treat their employees like garbage. I gave him my reasons which are as follows: 1. Total Access gave customers to pay a subscription fee ranging from 7.99 to 14.99 depending on how many movies were rented per week. For this fee the customer would receive a movie via the mail and could return them in the store for a free movie. A movie rental cost 4.76 when I worked there and an online subscription was 7.99. Which would a customer driven by price go for? 2. When the Total Access customer would return the mailer in the store it was removed from their online que and they would receive another movie from blockbuster online. Great deal for the customer using Total Access! However, the movie that was initially rented from the store using the online mailer is no longer available to rent by other PAYING customers and due to the no late fees they can keep the film out for up to 51 days (7 day rental period+14 day grace period+30 day period where movie can be returned for 1.25 restocking fee), if I remember correctly. So let's do some math here and don't get scared because this is all stuff that you are taught in middle school. In 51 days, a rental period for 1 movie under the end of late fees policy, someone who pays 7.99 can rent out 17 movies in-store (51 / 3 = 17), considering a 3 day turnaround from blockbuster online to their home. So that is 17 movies, checked out by one individual, which could have been rented by a PAYING customer. 3. This relates to #2. Now that would not be such an issue if Blockbuster was still allocating significant funds to the stocking of their brick and mortar stores, however since Blockbuster was focusing on the Total Access program, it was receiving a huge chunk of

Blockbuster's funds that would have normally gone to stocking the stores. Let's not forget about the millions of dollars spent on advertising the online program that almost bankrupted the company way back when. I remember being appalled at only receiving 50-100 copies of a hit new release when only months before we had received 300+ copies of Troy or some other big Hollywood release. Now since the majority of our inventory was not available since it was taken out by Total Access members who were reaping the benefits of free in-store movie rentals and the end of late fees, those customers who had previously been loyal began not renting from our store since there were, quite literally, no movies to rent. 4. I was told by my store manager and district manager to market the Total Access program to movie pass customers who have developed customer loyalty to our store and our employees because they enjoyed the experience of coming in and speaking to us and interacting with other customers. These customers would not go to Netflix because they loved the Blockbuster experience. By having employees, who the customers had come to regard as friends and not just employees, tell these customers to check out our Total Access program, Blockbuster successfully drove away all loyalty from the brick and mortar store. Previously store-loyal customers began using and became used to the online way of renting movies. When these customers became disgruntled due to either the disconnect between Blockbuster stores and Blockbuster Online, since they acted as two separate companies, or due to the price increase of Blockbuster Online, customers who never would have tried Netflix in the first place flocked to it. There are a few other reasons but I feel that my point has been made. I was 20 years old and a lowly CSR being paid minimum wage. Why did no one else see this? Blockbuster's Total Access program was the primary force behind Blockbuster's demise. I understand that it was necessary to combat Netflix but not at the expense of cannibalizing your brick and mortar stores on which the company is based. The movie pass was the best and most brilliant plan this company, or any other, has ever developed. If the focus had not been on beating out Netflix and instead focusing on Blockbuster's core competencies than I do not think Blockbuster would be in the situation which it now finds itself. Thanks Antioco!

bluemd 04/12/2011 03:25 AM

Personally I feel Blockbuster came too late to the party. They should have had an online rental service much more quickly then they did. They had also had many angry customers who they had soaked with late fees who were more than willing to seek out a new service. Blockbuster Total Access may have won them back, as they still had brand credibility, but it needed a full investment. However, it seems they would have burned through all their cash to regain share, and I don't know if they could have raised enough

money at decent enough rates to do it. They should have gotten into the business sooner. That was their deathknell. Icahn merely accelerated the decline.

Reasonable Person 03/22/2011 12:02 PM

Chapter 11 bankruptcy is brought on by a spiral of distress in which operational and financial issues cross-fertilize each other until the hole is too deep to safely dig out of. Blockbuster's route was no different than many, many others. Blaming Icahn stems from feelings beyond the scope of this case.

Meghan Ennes, HBR.org Person

04/20/2011 01:08 PM in reply to Reasonable

Dear Reasonable Person, We're interested in using an excerpt of this comment in the Interaction section of the upcoming June issue. Can you contact me at mennes [at] hbr [dot] org with your title and company affiliation so we can use it as a one-lined bio? Thanks again! Meghan 1 person liked this.

Rob 03/22/2011 12:24 AM

Eliminating late fees was the beginning of the end for Blockbuster. Probably the biggest mistake Antioco ever made in business. It not only ruined Blockbuster, but the entire movie rental industry.

Carlo 03/21/2011 04:57 PM

I'd like to support John here, but I agree with Hendra.....innovation wasn't at the forefront for Blockbuster when they needed it to be. They were years late. They should've seen the area of opportunity (digital streaming) when Pay-Per-View was the only player or at the very least when Netflix was only mailing movies.

EL 03/21/2011 12:23 PM

editors- please remove my comment immediately above. Thank you.

Meghan Ennes, HBR.org

03/21/2011 12:50 PM in reply to EL

Thanks, EL. It's been removed. Cheers, Meghan

Triplesbrunk 03/21/2011 10:45 AM

I think BBI could do a full turn around if they would bring back John A. yet today and allow him to work his magic as he did in the past.

Ezdisc 03/20/2011 09:55 PM

wise man keep touching with any potential high level people

Lost in Translation
by Fons Trompenaars and Peter Woolliams