Why Smart Executives Fail

I just finished Why Smart Executives Fail by Sydney Finkelstein. I think it is as important a read as The E Myth. I loved the section on Webvan. (I remember reading about it as it was gearing up and thinking it was a great idea.) Webvan was to take on the supermarkets and drive those dinosaurs out of business. Customers would order their items on line and have it delivered the same or next day, and instead of a 4 or 6 hour delivery window there would be a 30 minute window. Billions were spent; Bechtel was hired to build distribution centers; competent, experienced directors were hired and yet Webvan was out of business barely 2 years after opening shop.

Finkelstein, in this example, as in many others, showed the difference between "great expectations" and outcome.

"Even today, writing about Webvan, it's easy to get excited by the vision. But the business model was fatally flawed from the start.

The supermarket business is notoriously low-margin to start with, so where was the money goint to come from. ... Throw in free home delivery, and you've got to become the Superman of productivity to make a profit. ... When you add up the costs of building the Webvan infrastructure - easily $1 billion plus -- it's hard to see how the numbers can add up. Now imagine that there are literally tens of thousands of competitors - call them supermarkets - that can easily add home delivery, that do not need to spend millions (let alone billions) to do so, that already have customers and market presence, that offer products of essentailly equal quality to your own, and are - surprise! - not really dinosaurs after all, and you have an idea that is getting less good with each passing minute.