Cleantech has seen its share of high profile failures over the past year. The bankruptcy of solar cell company Solyndra has been the most public, but there are many others. This has led many to say that the sector is immature, others to say it is doomed or plagued by fickle or unstable state subsidies. It is also true that quite often, Cleantech firms bank on (somebody) introducing changes in infrastructure that need significant momentum (and time) to take hold. But surely Cleantech CEOs are smart people, so the reason they fail must be slightly more complex, perhaps? And is it even so certain that the problem lies with the industry itself and not with other factors? Is failure, in fact, quite evenly distributed across sectors? You may have noticed that strategies sometimes fail. Some would say strategies mostly fail. I know from my own life that intent does not always translate to result. The question is why.Jim Collins, in his book Why The Mighty Fail (2009), believes failures have a 5 stage lifecycle: hubris of success, pursuit of more, denial of risk, grasping at straws, and capitulation. Does his framework apply equally well across all industries? Is it fully relevant to cleantech?
Strategic management tends to view the world as operating on two axes: the resources a firm possesses or the industry in which a firm finds itself. Both could be the cause of strategy failure. The resource based view would have it that failure stems from things in the firm itself: its founders and employees. their lack of vision, talent, or strategic intent. Failure, then, could result even from making too many sales, from carrying too much debt, or simply from running out of cash. The industry based view would focus more on the forces of competition that affect profitability, including changing market conditions specific to each industry and segment. Some would add a sixth force, naming government regulation, incentives and subsidies as an important factor determining success and failure, unfortunately for some, often unevenly and unpredictably.
However, in reality strategies fail for many and complex reasons: they might have been based on the wrong premises, they might not have been communicated to the right people or the circumstances might have changed faster than the strategy could handle. In short, strategy could fail for internal or external reasons. There are also instances where there were no strategies in place, or where the strategies did not get well executed.
The obvious case of a failing venture is bankruptcy. Those instances are easy to identify (although not always willing to share the reasons why they failed). But how – and this is far trickier – do you identify failing firms before they do?
I am starting a new research project on strategic failure in the cleantech sector. I am looking to identify strategies, companies, people, technologies, structures, and mechanisms that contribute to failed firms. The aim would be to learn from failure and I would welcome your/any input – whether you know about or work with a firm that has failed, might fail, or desperately wants to avoid failure or, if you have the opposite experience: you know of a cleantech firm that has overcome difficulties due to well placed strategic moves and has become a great success. I am trying to obtain a sample of cases from across the spectrum – small to large, US-based to foreign firms. Get in touch and let’s share experiences.
Trond Undheim is Senior Lecturer in Global Economics and Management