Smart strategies for modern business decisions
Business leaders must sift through vast amounts of information to identify relevant insights that can guide their decisions
Published: 04:09 PM,Sep 04,2024 | EDITED : 07:09 PM,Sep 04,2024
Taking a business decision requires a blend of wisdom, knowledge, experience, and skills. The weight of such decisions cannot be understated, as they can significantly impact the future of an organisation.
A single wrong move can lead to unforeseen consequences, affecting not just the bottom line but the very survival of the company.
A recent headline from an electronic newspaper on August 9, 2024, highlighted a major decision by Mukesh Ambani's Reliance Industries: the company cut its workforce by 42,000 in the last financial year amid a revenue slowdown. This is a stark reminder of the difficult choices business leaders must make in response to changing market conditions.
But what are the consequences of such a decision? How was this decision made, and on what basis?
To understand the potential outcomes, one must consider the ripple effects of massive layoffs. In the short term, reducing the workforce may help alleviate financial pressures by cutting costs.
However, in the long run, it can lead to a loss of valuable talent, decreased morale among remaining employees, and a tarnished reputation. Customers and investors might lose confidence in the company’s stability, leading to further declines in revenue and stock value. Therefore, such decisions must be made with careful consideration of both immediate needs and long-term consequences.
Looking back at history, we find numerous examples of wrong business decisions that led to the downfall of once-thriving companies. Kodak is a prime example. Despite being a dominant player in the photography industry and inventing the first digital camera in 1975, Kodak failed to fully embrace digital photography.
The company continued to focus on film photography, believing that digital technology would remain a niche market. This decision allowed competitors to take the lead in the digital space, ultimately leading to Kodak’s bankruptcy in 2012. The failure to adapt to changing technology and consumer preferences was a costly mistake.
Another classic example is Blockbuster. In the early 2000s, Blockbuster was offered the opportunity to purchase Netflix for $50 million. John Antioco, Blockbuster’s CEO at the time, turned down the offer, believing Netflix’s business model was unprofitable. Blockbuster continued to rely on its traditional brick-and-mortar rental model, while Netflix revolutionised the industry with its online streaming service.
By 2010, Blockbuster filed for bankruptcy, while Netflix went on to become a global entertainment giant. What made John Antioco dismiss Netflix’s potential? It’s likely a combination of underestimating the impact of digital disruption and an overconfidence in Blockbuster’s established business model.
Nokia, once the world’s leading mobile phone manufacturer, made a similar mistake. The company decided to stick with its outdated Symbian operating system rather than adopting Android or developing a new platform.
This decision led to a rapid decline in market share as competitors like Apple and Google introduced smartphones with more advanced operating systems.
By 2014, Nokia was acquired by Microsoft, marking the end of its dominance in the mobile phone industry. It’s hard to imagine that Olli-Pekka Kallasvuo, Nokia’s CEO at the time, did not analyze the market before making such a decision. However, the failure to recognise the importance of software in the smartphone revolution proved disastrous.
Yahoo’s story is another cautionary tale. In 2002, Yahoo had the opportunity to purchase Google for $1 billion but turned it down, considering the price too high. Google went on to become one of the most successful companies in history, dominating the search engine market, while Yahoo’s relevance dwindled over the years. Yahoo was eventually acquired by Verizon in 2017. This decision underscores the importance of recognising the potential of emerging technologies and companies, even if they seem expensive or unproven at the time.
These examples highlight the complexities involved in making business decisions, especially in modern organisations. The sheer volume of data available today adds another layer of difficulty. Business leaders must sift through vast amounts of information to identify relevant insights that can guide their decisions. The ability to harness and interpret data has become a critical skill in the business world.
Business intelligence, as described by Chen et al (2012), involves an array of technologies, systems, and practices designed to streamline data collection, integration, analysis, and presentation. This enables organisations to make informed decisions based on timely and relevant information.
However, the exponential growth of data, particularly from sources like the internet and social media, has made it increasingly challenging to manage and utilize effectively.
To address this challenge, many companies have established dedicated analytics departments.
For instance, IBM reorganised its consulting business to focus on analytics, creating a 4,000-person organisation dedicated to this area. The demand for professionals with analytics expertise has skyrocketed, leading many universities to offer specialised programmes in this field.
Strategic decision-making involves assessing and determining the best way to achieve long-term organisational goals (Eisenhardt & Zbaracki, 1992; Glaveli et al, 2023). It is essential that any decision aligns with the long-term strategy of the organisation.
The consequences of poor decision-making can be dire, as demonstrated by the examples of Kodak, Blockbuster, Nokia, and Yahoo.
Therefore, business leaders must be diligent, data-driven, and forward-thinking in their approach to decision-making.
Mohammed Anwar Al Balushi
The writer is an academic lecturer and advisor at Oman College of Management and Technology
A single wrong move can lead to unforeseen consequences, affecting not just the bottom line but the very survival of the company.
A recent headline from an electronic newspaper on August 9, 2024, highlighted a major decision by Mukesh Ambani's Reliance Industries: the company cut its workforce by 42,000 in the last financial year amid a revenue slowdown. This is a stark reminder of the difficult choices business leaders must make in response to changing market conditions.
But what are the consequences of such a decision? How was this decision made, and on what basis?
To understand the potential outcomes, one must consider the ripple effects of massive layoffs. In the short term, reducing the workforce may help alleviate financial pressures by cutting costs.
However, in the long run, it can lead to a loss of valuable talent, decreased morale among remaining employees, and a tarnished reputation. Customers and investors might lose confidence in the company’s stability, leading to further declines in revenue and stock value. Therefore, such decisions must be made with careful consideration of both immediate needs and long-term consequences.
Looking back at history, we find numerous examples of wrong business decisions that led to the downfall of once-thriving companies. Kodak is a prime example. Despite being a dominant player in the photography industry and inventing the first digital camera in 1975, Kodak failed to fully embrace digital photography.
The company continued to focus on film photography, believing that digital technology would remain a niche market. This decision allowed competitors to take the lead in the digital space, ultimately leading to Kodak’s bankruptcy in 2012. The failure to adapt to changing technology and consumer preferences was a costly mistake.
Another classic example is Blockbuster. In the early 2000s, Blockbuster was offered the opportunity to purchase Netflix for $50 million. John Antioco, Blockbuster’s CEO at the time, turned down the offer, believing Netflix’s business model was unprofitable. Blockbuster continued to rely on its traditional brick-and-mortar rental model, while Netflix revolutionised the industry with its online streaming service.
By 2010, Blockbuster filed for bankruptcy, while Netflix went on to become a global entertainment giant. What made John Antioco dismiss Netflix’s potential? It’s likely a combination of underestimating the impact of digital disruption and an overconfidence in Blockbuster’s established business model.
Nokia, once the world’s leading mobile phone manufacturer, made a similar mistake. The company decided to stick with its outdated Symbian operating system rather than adopting Android or developing a new platform.
This decision led to a rapid decline in market share as competitors like Apple and Google introduced smartphones with more advanced operating systems.
By 2014, Nokia was acquired by Microsoft, marking the end of its dominance in the mobile phone industry. It’s hard to imagine that Olli-Pekka Kallasvuo, Nokia’s CEO at the time, did not analyze the market before making such a decision. However, the failure to recognise the importance of software in the smartphone revolution proved disastrous.
Yahoo’s story is another cautionary tale. In 2002, Yahoo had the opportunity to purchase Google for $1 billion but turned it down, considering the price too high. Google went on to become one of the most successful companies in history, dominating the search engine market, while Yahoo’s relevance dwindled over the years. Yahoo was eventually acquired by Verizon in 2017. This decision underscores the importance of recognising the potential of emerging technologies and companies, even if they seem expensive or unproven at the time.
These examples highlight the complexities involved in making business decisions, especially in modern organisations. The sheer volume of data available today adds another layer of difficulty. Business leaders must sift through vast amounts of information to identify relevant insights that can guide their decisions. The ability to harness and interpret data has become a critical skill in the business world.
Business intelligence, as described by Chen et al (2012), involves an array of technologies, systems, and practices designed to streamline data collection, integration, analysis, and presentation. This enables organisations to make informed decisions based on timely and relevant information.
However, the exponential growth of data, particularly from sources like the internet and social media, has made it increasingly challenging to manage and utilize effectively.
To address this challenge, many companies have established dedicated analytics departments.
For instance, IBM reorganised its consulting business to focus on analytics, creating a 4,000-person organisation dedicated to this area. The demand for professionals with analytics expertise has skyrocketed, leading many universities to offer specialised programmes in this field.
Strategic decision-making involves assessing and determining the best way to achieve long-term organisational goals (Eisenhardt & Zbaracki, 1992; Glaveli et al, 2023). It is essential that any decision aligns with the long-term strategy of the organisation.
The consequences of poor decision-making can be dire, as demonstrated by the examples of Kodak, Blockbuster, Nokia, and Yahoo.
Therefore, business leaders must be diligent, data-driven, and forward-thinking in their approach to decision-making.
Mohammed Anwar Al Balushi
The writer is an academic lecturer and advisor at Oman College of Management and Technology