Why do Companles lall?

2014 Survey 8esulLs by Lhe 1urnaround ManagemenL SocleLy

1urnaround ManagemenL SocleLy & ur. ChrlsLoph Lymbersky age 1
!"# %& '&()*+, -. /*, 0 1234 5678-# 9-.60 :.


;<&6: :"- =67+*7&6+% >*+*?-(-+: 5&@, -:#
1he 1urnaround ManagemenL SocleLy ls an lndusLry-speclflc organlzaLlon LhaL alms Lo promoLe besL
pracLlce ln Lurnaround managemenL. lLs members are Lurnaround professlonals, dlsLressed debL
lnvesLors, and academlcs.
lL ls Lhe ob[ecLlve of Lhe 1urnaround ManagemenL SocleLy Lo brlng LogeLher Lhe knowledge of
Lurnaround managemenL academlcs and Lhe experlence of Lurnaround managemenL professlonals.
1he 1MS provldes a llnk beLween academlcs who are engaged ln research and Lhe professlonal
communlLy LhaL seeks research ouLcomes and, ln Lurn, provldes academlcs wlLh professlonal lnslghL,
guldance, and feedback.
As well as supporLlng academlcs around Lhe world and provldlng Lhem wlLh a forum Lo exchange
lnformaLlon wlLh oLher academlcs and pracLlLloners, we are also engaged ln our own research. Cur
Lwo ongolng pro[ecLs are Lhe lnLernaLlonal 1urnaround ManagemenL SLandard and a daLabase of
successful Lurnaround managemenL sLraLegles and cases.

;<&6: :"- 9-.-*7@" A7&B -@:
1he 1urnaround ManagemenL SocleLy (1MS) asked 403 Lurnaround managers and resLrucLurlng
experLs abouL whaL facLors, ln Lhelr experlence, lead Lo corporaLe crlses. 1he lasL survey on Lhls
sub[ecL was carrled ouL ln 1990. 1he 2014 1MS survey hlghllghLs Lhe lnLernal and exLernal causes LhaL
corporaLe resLrucLurlng speclallsLs have wlLnessed ln Lhelr asslgnmenLs over Lhe lasL flve years. 1he
resulLs are Lhen compared Lo prevlous surveys ln order Lo ldenLlfy changes over Lhe lasL 40 years ln
Lhe reasons for company fallure.
MosL corporaLe crlses are only recognlzed once Lhey become obvlous ln reduced sales flgures or Lhe
conLlnuous loss of money. 1here are lnLernal and exLernal reasons for corporaLe crlsls, Lhe lnLernal
causes, however, are ofLen noL sudden, buL bulld up unLll Lhey reach a polnL where Lhey can no
longer be lgnored. 1hls polnL ofLen occurs when a company runs ouL of cash, does noL pay lLs bllls on
Llme, and reduces communlcaLlon wlLh lLs sLakeholders.
Crlses LhaL have exLernal causes are ofLen more sudden and, lf Lhe managemenL dld noL prepare
sufflclenLly, Lhe company may be plunged lnLo a sudden crlsls. lf Lhe managemenL ls noL experlenced
ln deallng wlLh Lhls klnd of crlsls and Lhe company does noL have sufflclenL resources Lhe company
mlghL end up ln lnsolvency before Lhe managemenL has a chance Lo reacL properly. LxLernal reasons
are ofLen clLed as Lhe cause of dlfflculL slLuaLlons, buL mosL of Lhe Llme Lhe reasons are lnLernal.
Why do Companles lall? 2014 Survey 8esulLs by Lhe 1urnaround ManagemenL SocleLy
1urnaround ManagemenL SocleLy & ur. ChrlsLoph Lymbersky age 2
C +:-7+*0 '7, ., . /*@:&7.
>*+*?-(-+:D E, ., &+D *+% 5:7*:-?#
1he 1MS survey reveals LhaL mosL crlses are caused by Lhe mlsLakes of Lop managemenL. 1he mosL
promlnenL causes of a crlsls are LhaL Lhe managemenL conLlnued wlLh a sLraLegy LhaL was no longer
worklng for Lhe company (34.6), and LhaL Lhey losL Louch wlLh Lhe markeL and Lhelr cusLomers and
dld wanL Lo adapL Lo changes occurrlng around Lhem (31.6). Pavlng a clear sLraLegy LhaL ls
communlcaLed well Lo all operaLlonal areas, one LhaL uses and bullds uSs, ls deslrable for every
company buL ls ofLen noL Lhe case. lncorrecL sLraLeglc declslons (39.4) are ofLen made because of
Lhe lack of a clear sLraLegy, and Lhey can have a slgnlflcanL lmpacL on a company's flnanclal poslLlon
ln Lhe markeL.
CulLe ofLen Lhe managemenL underesLlmaLes changes ln Lhe markeL (30.3) and does noL adapL Lo
Lhem approprlaLely.
We can see LhaL crlses may be caused by a comblnaLlon of facLors. lf Lhe managemenL holds on Lo lLs
ldeas for Loo long and ls noL flexlble enough Lo adopL Lo changes, compeLlLors mlghL be qulcker Lo
adapL Lo Lhe demands of Lhe cusLomer or Lo changes ln Lhe markeL. CLher LhreaLs mlghL be new
enLranLs wlLh lower producLlon cosLs LhaL where underesLlmaLed for Lo long, and so on.
AnoLher slgnlflcanL cause ls a managemenL LhaL has losL lLs vlslon (31.4). ln a fasL-changlng
envlronmenL Lhe enLrepreneurlal vlslon Lo drlve a company becomes more and more lmporLanL ln
order Lo malnLaln a compeLlLlve edge and Lo beaL Lhe compeLlLlon ln Lhe race for cusLomers. A
managemenL wlLhouL a vlslon has a Lendency Lo cllng Lo Lhe sLaLus quo, Lhey don'L lnvesL ln ldeas and
have no clear sLraLeglc dlrecLlon. very few companles have Lhe luxury of belng able Lo keep Lhelr
markeL share and proflLablllLy over Lhe long Lerm by noL growlng or lnvesLlng ln a vlslon. 1he only
companles LhaL Lhls applles Lo are usually operaLlng ln nlche markeLs wlLh very hlgh barrlers Lo enLry,
or are monopollsLs wlLh a hlgh level of bureaucracy.

Why do Companles lall? 2014 Survey 8esulLs by Lhe 1urnaround ManagemenL SocleLy
1urnaround ManagemenL SocleLy & ur. ChrlsLoph Lymbersky age 3


C +:-7+*0 '&((6+, @*:, &+
ln almosL a Lhlrd of all slLuaLlons, lnsufflclenL lnLernal communlcaLlon played a blg parL ln fosLerlng
Lhe crlsls. CfLen Lhe managemenL does noL communlcaLe much once a crlsls becomes obvlous, or Lhe
communlcaLlon ls noL clear enough. Accordlng Lo Lhe survey a common mlsLake seems Lo be LhaL Lhe
managemenL plays down Lhe severlLy of Lhe crlsls, or even communlcaLes LhaL everyLhlng ls okay,
whlle worklng on [ob cuLs and salary reducLlons ln Lhe background. lnsufflclenL communlcaLlon ln a
crlsls slLuaLlon ls Lhe besL way Lo lose your mosL LalenLed employees. 1hey have ofLen lnvesLed
counLless hours of Lhelr personal Llme Lo saLlsfy Lhe Lop managemenL. lf Lhey feel abandoned aL a
dlfflculL Llme and don'L geL clear lnformaLlon abouL whaL ls golng on Lhey may Lake lL personally and
leave, some may even cause furLher damage by Lurnlng Lhelr energy and efforLs agalnsL Lhe
company.
6.16
8.89
9.09
9.19
9.23
9.43
9.76
12.12
12.23
13.13
18.18
18.19
21.21
27.27
30.13
30.31
33.33
36.26
31.41
31.32
34.33
0.00 10.00 20.00 30.00 40.00 30.00 60.00
1he buylng deparLmenL dld noL use Lhe full
Wrong lnvesLmenLs lnLo pro[ecLs
lnsumclenL producL quallLy
8ad cusLomer servlce
1he organlzauon was Loo decenLrallzed
lnsumclenL cash ow
lalled expanslon lnLo oLher counLrles
noL enough new cusLomers
lneecuve markeung
no or lnapproprlaLe goals for Lhe workforce
LlquldlLy problems
no or noL enough lnvesLmenL lnLo fuLure
lalled expanslon lnLo oLher producL markeLs
1oo much bureaucracy
1he managemenL was noL well educaLed ln
Changes ln Lhe markeL were underesumaLed
1he lnLernal communlcauon was lnsumclenL
lnsumclenL conLrolllng / accounung especlally
1he managemenL had no vlslon
1he managemenL dld noL wanL Lo adapL Lo
1he managemenL held on Lo sLraLegles LhaL were
!"#$ #&' $"' ()*$ +)((), -,$'&,#. +#/*'* 0)& # +)&1)&#$' +&-*-* $"#$ 2)/ "#3'
'41'&-',+'56
Why do Companles lall? 2014 Survey 8esulLs by Lhe 1urnaround ManagemenL SocleLy
1urnaround ManagemenL SocleLy & ur. ChrlsLoph Lymbersky age 4
Some employees reporL slLuaLlons ln whlch, for example, Lhe managemenL communlcaLe LhaL Lhey
have Lo cuL [obs by 30 percenL and Lhey wlll glve deLalls abouL who ls Lo be affecLed ln Lwo monLhs.
An experlenced resLrucLurlng consulLanL would be very alarmed by Lhls because such a sLaLemenL
can paralyze Lhe whole corporaLlon. uurlng Lhese Lwo monLhs mosL people wlll reslgn or do only
whaL Lhey have Lo do as Lhey belleve Lhey mlghL end up belng flred anyway. 1he lnLenLlon was
probably Lo LhreaLen Lhe employees lnLo worklng harder, buL LhaL ls noL how people work and a
Lurnaround consulLanL knows Lhe psychologlcal effecLs of LhreaLs ln Llmes of uncerLalnLy.
1here ls ofLen no Lransparency (18.2) on whaL's ln lL for Lhe employees and whaL lL wlll cosL Lhem,
and Lhls needs Lo be communlcaLed clearly. 1he Lop managemenL mlghL be surprlsed aL whaL
employees are wllllng Lo rlsk and do lf Lhey feel LhaL Lhey are belng Laken on Lhe resLrucLurlng
[ourney alongslde Lhe managemenL. lL ls of vlLal lmporLance Lo a successful resLrucLurlng and
Lurnaround process LhaL Lhe managemenL ls honesL abouL Lhe slLuaLlon, open Lo crlLlclsm and ldeas,
and communlcaLes regularly.
F%6@*:, &+
A Lhlrd (30.3) of all Lurnaround consulLanLs found LhaL Lhe managemenL of Lhe company was noL
very well educaLed ln buslness maLLers. 1hls ls noL a problem lf consulLanLs are broughL on board aL
Lhe rlghL Llme and lf Lhe managemenL ls open Lo Lhelr advlce. Powever, lf no consulLanL wlLh
speclallzed knowledge of crlsls slLuaLlons ls avallable Lo compensaLe for Lhe lack of speclflc
experlence and knowledge needed Lo masLer Lhe slLuaLlon Lhls can become an lssue. lL ls alarmlng
LhaL Lhls Lhlrd are only a sample of Lhe LoLal number of corporaLe managers who geL lnLo corporaLe
crlses as Lhey represenL a Lhlrd of Lhe senlor managers who hlred resLrucLurlng consulLanLs and were
open Lo advlce. A loL of senlor managers who are runnlng companles are sLlll noL open Lo
resLrucLurlng consulLanLs, Lherefore Lhe real number who are noL educaLed well enough ln leadlng a
company and ln flnance and sLraLegy ls mosL llkely Lo be a loL hlgher, buL Lhese companles almosL
cerLalnly Lend Lo dle quleLly.
A7&%6@:.
roducLs are ofLen a reason for Lhe crlsls. Lxpanslon of an exlsLlng producL llne ls noL always a
success and can lead Lo a corporaLe crlsls (21.2). ln oLher cases, lnvesLmenL lnLo fuLure producLs
and Lechnologles was, over Lhe years, noL enough (18.2), leadlng Lo mlssed Lechnologlcal advances
Lo reduce producLlon cosLs, a lack of feaLures, or new Lechnologles LhaL compeLlLors can provlde, Lhls
can mean LhaL Lhe company doesn'L aLLracL enough new cusLomers (12.1). ln some cases, Lhe
producL lLself ls of lnsufflclenL quallLy (9.1) or Lhere ls a hlgh level of producL reLurns (2.1). alred
wlLh poor cusLomer servlce (9.2) Lhls ls a dangerous mlx.
/, +*+@, *0 G, HH, @60 :, -.
CulLe hlgh up on Lhe llsL of causes of crlses ln Lhe quesLlonnalre were llquldlLy and cash flow
problems (9.43 and 18.18 respecLlvely, 27.63 ln LoLal), whlch are ofLen caused by lnsufflclenL
conLrolllng and accounLlng processes (21.2) and no or lnapproprlaLe flnanclal plannlng (13.2).
lnsufflclenL conLrolllng and accounLlng processes, especlally wlLh regard Lo flnanclal / llquldlLy
plannlng (36.4), are sLlll a very greaL cause of corporaLe fallure, or aL leasL of a slgnlflcanL crlsls.
?oung companles ofLen flnd LhaL when Lhey grow qulckly and cash keeps rolllng ln Lhey don'L keep
Lrack of every dollar spenL, more money comes ln Lhen goes ouL wlLhouL conLrol. MaLure companles
ofLen have Lrouble lmplemenLlng rlgorous flnanclal conLrols because lL means changlng old and long-
sLandlng processes, curLalllng some freedom, and lnvesLlng ln expenslve experLs and changes.
Powever, flnance ls Lhe blood of every corporaLlon, lL ls Lhe cardlo sysLem LhaL keeps Lhe company
Why do Companles lall? 2014 Survey 8esulLs by Lhe 1urnaround ManagemenL SocleLy
1urnaround ManagemenL SocleLy & ur. ChrlsLoph Lymbersky age 3
flexlble and allve. CfLen people have a Lendency Lo spend money more easlly lf lL ls noL Lhelr own,
Lhese expenses need Lo be conLrolled oLherwlse a corporaLlon wlll end up wlLhouL enough blood Lo
funcLlon properly.
lL ls surprlslng LhaL only 18.1 percenL of companles had llquldlLy problems. 1haL means LhaL ln Lhe
cases where resLrucLurlng consulLanLs were on board Lhe decllne was noL so sLrong LhaL flnanclal
resources were compleLely used up yeL. 1he research shows LhaL companles LhaL are open Lo
resLrucLurlng advlce seek lL aL an early sLage durlng Lhe corporaLe decllne, Lhls also means LhaL Lhey
recognlze Lhey are ln a dlfflculL slLuaLlon early enough and geL speclallzed advlce aL Lhe rlghL Llme.
1hese are very promlslng numbers bearlng ln mlnd LhaL 1MS-cerLlfled Lurnaround consulLanLs have a
success raLe, on average, of 91 percenL. 1hls means LhaL companles LhaL hlre a Lurnaround consulLanL
early enough have an exLremely hlgh chance of survlvlng Lhelr crlsls slLuaLlon.
I6(*+ 9-.&67@-.
no goals or wrong goals for Lhe workforce (13.1) ofLen conLrlbuLe Lo poor performance by
employees and acceleraLe a crlsls slLuaLlon. SeLLlng no goals ls as lneffecLlve as Loo many goals. An
employee can only spend so much Llme on someLhlng Lhey are supposed Lo focus on. lf Loo many
goals are seL some of Lhem wlll suffer, or Lhe quallLy of Lhe work wlll decrease. l have seen goals
sysLems LhaL are dlvlded lnLo four or even flve areas, wlLh up Lo four sub-goals for each caLegory.
Such a sysLem leads Lo employees elLher glvlng up before even Lrylng Lo reach Lhe goals or Lrylng Lo
manlpulaLe Lhe sysLem. 8oLh Loo few and Loo many goals are lnadequaLe sysLems for allgnlng
employees' efforLs, especlally ln a Lurnaround slLuaLlon. ln crlsls slLuaLlons each employee should
have one, or aL mosL Lwo, goals LhaL are achlevable and shorL Lerm. usually goals are evaluaLed
annually. ln a crlsls slLuaLlon Lhls should lncrease Lo every slx monLhs or, beLLer sLlll, every Lhree
monLhs. AL LhaL polnL Lhe nexL goal should be seL.
J:"-7 *::7, <6:-.
CLher aLLrlbuLes of falllng companles are:
1he managemenL ls noL well educaLed ln buslness maLLers (30.3)
Plgh level of bureaucracy (27.3)
lalled expanslon lnLo oLher producL markeLs (21.2)
no Lransparency (18.2)
LlquldlLy problems (18.1)
noL enough lnvesLmenL ln fuLure producLs or Lechnologles (18.0)
lneffecLlve markeLlng (12.1)
noL enough new cusLomers (12.1)
uecenLrallzed organlzaLlon (9.2)
Wrong lnvesLmenLs (9.1)
oor cusLomer servlce (9.0)
lnsufflclenL producL quallLy (9.0)
lalled expanslon lnLo oLher counLrles (9.0)
1he buylng deparLmenL dld noL reach lLs full poLenLlal (6.1)
K6., +-.. ;7-*. '*6., +? '&7)&7*:- '7, ., .
AlmosL 88 percenL of respondenLs held Lop managemenL responslble for a crlsls slLuaLlon, and 30.3
blamed mlddle managemenL. 1he mosL commonly clLed reason was corporaLe sLraLegy (43.3)
Why do Companles lall? 2014 Survey 8esulLs by Lhe 1urnaround ManagemenL SocleLy
1urnaround ManagemenL SocleLy & ur. ChrlsLoph Lymbersky age 6
followed by lnLernal communlcaLlons (30.2), markeLlng (24.3), sales (24.2), and cusLomer
servlce (13.2).

lL ls surprlslng Lo see LhaL Lhe lnLernal communlcaLlons deparLmenL conLrlbuLed slgnlflcanLly Lo Lhe
crlsls ln over 30 percenL of all corporaLe resLrucLurlngs. Slnce sLaLlsLlcally a quarLer of all companles
hlL a serlous corporaLe crlsls every Len years, maklng sure LhaL Lhe lnLernal communlcaLlon
deparLmenL ls Lralned ln crlsls communlcaLlon can play a key role ln a company's survlval. Weak
communlcaLlon conLrlbuLes Lo a lack of allgnmenL beLween sLraLegy and operaLlons, Lhls allgnmenL ls
even more cruclal when changlng a sLraLegy LhaL ls Lhe mosL llkely cause of Lhe Lurnaround slLuaLlon.



87.88
30.3
8.13
1
0
20
40
60
80
100
1op ManagemenL Mlddle ManagemenL Lower ManagemenL Llne Lmployees
!"#$ (#,#7'(',$ .'3'. +#/*'5 $"' -,$'&,#. +&-*-*6
6.06
12.11
13.12
13.17
24.13
24.22
30.32
43.41
0.00 3.00 10.00 13.00 20.00 23.00 30.00 33.00 40.00 43.00 30.00
llnance
ConLrolllng
roducLs
CusLomer Servlce
Sales
Markeung
lnLernal Communlcauons
CorporaLe SLraLegy
!"#$ #&' $"' ()*$ +)((), 8/*-,'** #&'#5* $"#$ +#/*' # +)&1)&#$'
+&-*-* )& +),$&-8/$' *-7,-9+#,$.2 $) -$6
Why do Companles lall? 2014 Survey 8esulLs by Lhe 1urnaround ManagemenL SocleLy
1urnaround ManagemenL SocleLy & ur. ChrlsLoph Lymbersky age 7
FL:-7+*0 '7, ., . /*@:&7.
LxLernal crlsls facLors creaLe pressure Lo acL sLraLeglcally Lo reacL Lo a sudden evenL LhaL was noL
foreseen by Lhe managemenL.
CfLen exLernal evenLs make lnLernal crlsls facLors more obvlous, hence Lhey are noL Lhe only reason a
company geLs lnLo a crlsls.



I, .:&7, @*0 '&()*7, .&+
Some flndlngs ln Lhls research are compleLely new, however, oLher facLors LhaL led Lo corporaLe
crlses came up ln pasL research as well. We have Lherefore compared our 2014 survey resulLs wlLh
research done almosL 40 years ago. lnLeresLlngly, leadershlp was Lhe maln buslness area causlng
corporaLe crlses ln boLh. 1herefore educaLlng managers ln how Lo deal wlLh a crlsls ls Lhe besL way Lo
reduce Lhe number of lnsolvencles. 1urnaround managers know how Lo deal wlLh Lhese dlfflculLles,
and lL ls noL lmposslble for Lhe Lop managemenL Leam Lo learn Lhe slgns of a crlsls and how Lo
respond properly. 1he 1MS, as a noL-for-proflL organlzaLlon, has lmplemenLed numerous pro[ecLs Lo
LargeL Lhls problem. 1he 1MS cerLlflcaLlon program, CerLlfled lnLernaLlonal 1urnaround Manager", ls
dlvlded lnLo four levels from Level A, Lhe foundaLlon level ln Lurnaround managemenL, Lo Level u,
whlch ls for very experlenced Lurnaround managers wlLh more Lhan 13 years' work experlence ln
corporaLe resLrucLurlng and Lurnaround managemenL. A cerLlflcaLe ls only valld for Lwo years, and ln
Lhose Lwo years Lhe parLlclpanL needs Lo prove LhaL Lhey have sLayed up Lo daLe wlLh Lhe lndusLry.
Cnly Lhen are Lhey lssued wlLh a cerLlflcaLe valld for anoLher Lwo years. 1he 1MS also advlses
unlverslLles on how Lo seL up Lurnaround managemenL courses and lnLegraLe relevanL Lheory lnLo
Lhelr exlsLlng classes ln order Lo educaLe Lhe leaders of Lomorrow as early as posslble.


0.00 10.00 20.00 30.00 40.00 30.00 60.00 70.00 80.00
Lxchange raLe changes
lorce of naLure / hlgher force
lnsolvency of a cllenL / suppller
CovernmenL regulauons
Lconomlc / nanclal crlsls
Mlssed Lechnologlcal developmenL
Changes ln markeL demand
!"#$ #&' $"' (#-, '4$'&,#. &'#*),* 0)& &'*$&/+$/&-,7 : $/&,#&)/,5
1&);'+$*6
Why do Companles lall? 2014 Survey 8esulLs by Lhe 1urnaround ManagemenL SocleLy
1urnaround ManagemenL SocleLy & ur. ChrlsLoph Lymbersky age 8
</*-,'** #&'#* $"#$ +#/*' # +)&1)&#$' +&-*-* =&#,>'5? @2(8'&*>2
=ABCD?
E'*>' '$ #.F
=CGHI?
Leadershlp 1 1
lnLernal communlcaLlons 2 -
MarkeLlng 3 -
Sales 4 3
CusLomer servlce 3 -
Cwn producLs 6 -
ConLrolllng 7 8
llnance 8 2
8uylng 9 11

A second area LhaL has sLayed ln almosL Lhe same poslLlon ln Lhe ranklngs ls Lhe sales deparLmenL,
belng ln Lhlrd or fourLh place ls sLlll falrly hlgh. Cne posslble reason could be LhaL lL ls ofLen blamed
for low sales, however, Lhls could be Lhe resulL of facLors oLher Lhan Lhe sales force lLself. AnoLher
area LhaL sLands ouL ls Lhe flnance deparLmenL, whlch dropped from second place ln 1978 Lo elghLh
ln our currenL survey. 1he many posslble reasons for Lhls are open Lo speculaLlon, one belng LhaL
flnance Loday ls hlghly compuLerlzed and flnanclal sofLware glves us a permanenL, llve overvlew of
Lhe sLaLe of Lhe company, forclng flnanclal managers Lo uphold cerLaln regulaLory and reporLlng
sLandards LhaL could have been lgnored more easlly 40 years ago.

lnLernal causes for corporaLe decllne @2(8'&*>2
=ABCD?
J+"',5'. '$
#.F =CGHK?
J.#$'&
=CGID?
L&-,2'& '$
#.F =CGGB?
oor managemenL 32* - 73 43
lnadequaLe flnanclal conLrol 36 - 73 43
Plgh cosL sLrucLure - 67 33 63
oor markeLlng 12 4 22 30
lalled pro[ecLs 9 - 17 40
AcqulslLlons <1 - 13 30
Changes ln Lhe markeL were underesLlmaLed 30 - 20 -
oor producL quallLy 9 - - 10
*average of Lop Lhree facLors regardlng managemenL ln Lhls sLudy
1he comparlson of lnLernal causes over a Llmellne of 38 years also shows LhaL Lhe lack of flnanclal
conLrol ls becomlng less and less relevanL as a crlsls facLor. ln 1984 lnadequaLe flnanclal conLrol sLlll
conLrlbuLed Lo 73 percenL of all corporaLe crlses. 1oday, ln our 2014 survey, only 36 percenL reporLed
Lhls Lo be a cause of decllne. We can see a reducLlon ln Lhe conLrlbuLlon of poor managemenL, poor
markeLlng, falllng pro[ecLs, and falllng acqulslLlons Lo corporaLe crlses.
1he followlng graphlc shows a comparlson of crlsls facLors over a Llmespan of 38 years. 1he
comparlson can only be done Lo a very llmlLed exLenL as Lhe research varles ln sample slze, quallLy,
Llme, and respondenLs. 1he graphlc slmply alms Lo lllusLraLe general Lendencles.


Why do Companles lall? 2014 Survey 8esulLs by Lhe 1urnaround ManagemenL SocleLy
1urnaround ManagemenL SocleLy & ur. ChrlsLoph Lymbersky age 9


1he only facLor LhaL grew over Lhe lasL 20 years ls managemenL underesLlmaLlon of changes ln Lhe
markeL. 1hls could be because markeLs are changlng more rapldly, producL llfecycles are geLLlng
shorLer, and new Lechnologles evolve qulckly and wlLh more lmpacL on exlsLlng processes wlLhln Lhe
company and sLrucLures ln Lhe markeL.
ln Lhe comlng decades corporaLlons wlll need Lo develop new producLs and servlces fasLer and ln
shorLer cycles. 1he Llme beLween ma[or lnnovaLlons decreases every year, llfecycles are shorLenlng,
and Lhe posslblllLy of creaLlng new companles and conquerlng markeLs ls becomlng easler and less
expenslve. 1oday, a small Lhree-person sLarLup such as WhaLsapp can cosL blg LelecommunlcaLlons
companles around Lhe world mllllons wlLhln a few monLhs. noL even global corporaLlons are safe
from companles born ln someone's garage. 1he managemenL Lherefore needs Lo be more aware of
changes ln Lhe markeL and more open Lo change wlLhln Lhe corporaLlon ln order Lo adapL and remaln
compeLlLlve ln Lhe fuLure.
lormer enLry barrlers Lo markeLs don'L exlsL anymore. Anyone wlLh a greaL ldea can Lake on Coogle,
e8ay, A1&1, or ueuLsche 1elekom, so a consLanL eye Lo compeLlLlveness ls essenLlal. 1he basls for
compeLlLlveness ls creaLlvlLy, lf Apple wanLs Lo remaln Lhe mosL valuable company ln Lhe world,
Lomorrow's mosL lnnovaLlve and popular phone wlll need Lo come from Apple. 1omorrow's
compeLlLlon may be slLLlng behlnd a dusLy workbench ln hls grandma's garage, so everyone ls a
poLenLlal compeLlLor. 1he only way Lo keep up ls Lo provlde employees wlLh Lhe besL posslble
envlronmenL ln whlch Lo be boLh producLlve and creaLlve.
Companles need Lhls dual focus on producLlvlLy and creaLlvlLy ln order Lo survlve ln Lhe long Lerm.
1helr level of producLlvlLy, creaLlvlLy, and lnnovaLlon musL be conLlnuously hlgher Lhan Lhe
compeLlLlon's level of producLlvlLy, creaLlvlLy, and lnnovaLlon. lf a company falls Lo lnnovaLe, lLs
producLs become old and reach Lhe end of Lhelr llfecycles. Cnly conLlnuous lnnovaLlon can ensure
LhaL Lhe company wlll sLay ahead of lLs compeLlLlon. lor more lnformaLlon please see Lhe arLlcle 1he
1MS lnnovaLlon maLrlx" by ur. ChrlsLoph Lymbersky.
0
10
20
30
40
30
60
70
80
1970 1986 1990 2014
oor managemenL
llnanclal conLrol
Plgh cosL sLrucLure
oor markeung
lalled pro[ecLs
Aqulsluons
Changes ln Lhe markeL were
underesumaLed
oor producL quallLy
Why do Companles lall? 2014 Survey 8esulLs by Lhe 1urnaround ManagemenL SocleLy
1urnaround ManagemenL SocleLy & ur. ChrlsLoph Lymbersky age 10
5-0 -@:-% A*7:, @, )*+:.