Leadership Mistakes

Even Those with Enormous Stakes at Risk Can Mistake Future Trends

Donald Mitchell asked:

Spreadsheet software programs often cause more harm than good. Why do I say that? They give people the false sense that they can project a profitable future just by putting a few numbers in place.

You can look at beautiful patterns of growth that rise smoothly into the future. Who wouldn’t feel more confident after seeing such projected success?

But what do those few numbers reflect? Naturally, they imply what future conditions and performance will be. Yet most of us cannot successfully forecast whether or not it will be windy next week (unless we happen to live in an area where it is always windy).

But surely you can be more accurate if you simply have enough at stake? I’m not so sure. Let’s consider the forecasting accuracy associated with one of the biggest corporate break-ups in history.

Ask Not for Whom the Bell Tolls

When the Bell telephone monopoly was broken up by the courts in the 1980s, investors were absolutely convinced that AT&T’s stock would be the best one to own. Why? This part of the company was in the fastest growing part of the industry (long distance services and computer products), had the best technology, and would now be free to do more in computers.

Investors were told by many security analysts to shun the local Bell operating companies. Yet by the late 1990s, the results turned out to be just the opposite. Since the traditional way of managing the local Bell operating company offered such limited potential, the Bell operating companies (Baby Bells) were quick to find ways to expand faster into new, more attractive business areas like providing cellular telephone service, software-based services like call forwarding, acquiring foreign telephone operations in high growth markets, and facilitating the growth of the customers using the Internet.

The deregulation allowed the Baby Bells to move forward in many more ways, more quickly. Since their managements felt that competing solely in the ways they had in the past would not work, the former Bell operating companies overcame the defensiveness stall that could have left them vulnerable.

In addition, those who were slower to make the needed changes were soon acquired by other former Bell operating companies or long distance competitors of AT&T. The threat of becoming losers turned the best enterprises into winners.

The final irony of this example came when one of the former Baby Bells bought what remained of AT&T, while retaining the name.

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