Success and Failure Factors

In thinking of the current BP issue I am reminded of what I wrote in the mid 1980s in my book, Business Plans (Wiley 1988). This was a discussion of success and failure factors. Namely I had spent a few years doing "turn arounds" and what one sees in doing that is the failures of people, the multiple failures that the initial management team was blind to but if they had thought about it up front and if they had prepared for it they could have stayed of a disaster. I said:

At the completion of the development, how do we know if we have a business? We may have reached our goals but we also need success as well as failure factors. One final element in the development plan is the development of the success and failure factors. Once we have established our goal, we must carefully and in a detailed fashion state what success is. In a similar fashion, we must have well defined failure factors. The failure factors are those factors that we use to terminate the effort. They are critical to articulate because that can save a great deal of suffering and expense. All too often businesses do not attain success but they continue to bleed money for a long period. If there had been hard and fast failure factors, this would have been eliminated.

The success factors and the failure factors are those elements of the business that if measured at the end of the development cycle will provide a measure of the future success of lack thereof of the business. These will oftentimes be factors that relate to the financial viability of the business.

Thus in the BP case, there appears to have been an almost total disregard for the downside, assumptions made that one could always get closer and closer to the edge and never have to pay the piper. This was the story of almost all the collapses which have occurred recently. No one ever thought of the down side risks!