Trond Undheim: Strategy failure in cleantech

MIT Sloan Sr. Lecturer Trond Undheim

MIT Sloan Sr. Lecturer Trond Undheim

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

2 thoughts on “Trond Undheim: Strategy failure in cleantech

  1. I am a small entrepreneur from Bangladesh who had and still have a motivation to pioneer the cleantech revolution as we believed that working towards a greener future is a noble cause, and it is only sustainable when it can be integrated as mainstream business. We have had an exposure of dirty climate politics in the development sector, we have seen how government policy can dilute a promising industry overnight and we have also seen lights of hopes glittering against the odds. Dr. Undheim, I don’t know whether I am enlightened enough to contribute to your research; but certainly I myself take a lot of interest in strategic management and I would be happy if I can play a part by giving him the picture of cleantech business in a developing country.

  2. Perhaps one way to look at this intersting issue is to “re-project’ it. That is, starting from a traditional strategy map, “re-project” the map so that it emanates from the juncture of a failed strategy node. Most-near nodes would be most prone to be failure contributors; distant (distorted) nodes would be unlikely or less weighty contributors.

    Just as we are accustomed to looking at a map of the world from the Mercator Projecton, there are numerous other projections feasible. Actually, the projection possibilites are infinite. Imagine an earth-view with New Zeland’s north south axis as the equator. The earth would look much different.

    Analogous ideas would be to think of network topology or even a family tree as emanating from a node other than the data source or the eldest known antecedant.

    My initial sense is that charting many failures this way would reveal astounding commonalities and could provide predictive (or prevenative) capabilites for strategic initiaves

    Perhaps this approach would be helpful in your inquiries. Thank you

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