April 24, 2007
News & Opinion: Your Chances Are Not Good (Failure - Part 3 in a Series)
Chris Zook is the head of Bain's Strategy Practice and the author of three books on growth.
Michael Porter created the framework for how most think about strategy. Zook's work provide clues on how to improve your chance of success.
What I have always liked most about his books is his quantification of the stark reality of business. Your chance of success are not good. This from his second book Beyond The Core:
In looking at adjacency expansion moves, my research team and I combed the literature, and we conducted out own independent analysis to understand as completely as possible the odds that major growth initiatives would truly drive a new source of sustained, profitable growth. We found, in our own data as well as in the secondary data, the success to only about one in four. Just 25% of investments in growth initiatives, most of them true adjacency expansions, created value and added growth
Of 160 reports worldwide we were able to find on the topic of growth, only twenty-four contain sufficient sample size and make clear assumptions regarding the criteria for success. The average success rate for new products is about 30 percent; for start-ups, below 10 percent; for joint ventures, about 30 percent. These studies span a wide range of methods and quality of data, but all show how hard it is to find and execute on new sources of growth in a company.
Zook's books give you methods that can doubled your chance of success, but you still only end up at a 50/50 chance of something working.
Failure is a part of doing business.