"Trojan Horses of Decline": Corporate crises are mostly caused by the wrong strategic decisions

• Business cycles are only partially responsible for corporate developments
• The right strategy is decisive for corporate success
• Strategies and business models must be reviewed regularly – also in good times
• Mistakes sneak into companies like a Trojan Horse and can paralyze them

Corporate success depends on a number of internal and external factors. However, contrary to what many companies think, poor strategic decisions and not business cycles are the main cause of corporate crises. If a company's activities are not in line with what the market demands, then the business model is transformed into a Trojan Horse. These are the main theses of the book entitled "Trojan Horses of Decline" by René Seyger, Partner at Roland Berger Strategy Consultants.

"Far too often, companies look for external factors as the cause of their crises," says René Seyger, author of the book and Partner at Roland Berger in the Netherlands. "This is an unfounded reaction because economic stagnation or a recession are never the real cause of a company's failure." Instead, companies fail because they make the wrong strategic decisions. "Wrong decisions or a lack of decision making sneaks into the company like a Trojan Horse and often paralyzes the company," warns Seyger.

Business model and reality drifting apart

Companies need to regularly reexamine their own strategies to protect themselves against potential crises. "A company is not able to influence general economic developments, but it can control its strategy," says René Seyger. Firms that take a long hard look at their strategic alignment early on can prevent their business model and reality from drifting apart.

"To remain successful on the market, a business model must be in tune with the company's actual environment. A gap that occurs between a firm's strategy and market expectations will turn the business model into a Trojan Horse. The company is then doomed to fail," explains Seyger. When a crisis occurs, businesses often take drastic action. However, this generally alleviates only the symptoms, but doesn't address the actual cause.

Trojan Horses

In his book, René Seyger differentiates between four types of Trojan Horses:

1. Entangled Trojan Horse: This is a company that tackles fundamentally different business activities with the same strategy.
2. Out-of-focus Trojan Horse: This company fails to focus on value creation.
3. Unadapted Trojan Horse: This is a company that does not adapt to market developments.
4. Over-stretched Trojan Horse: In this case, the company is growing faster than it is structurally capable of handling.

However, if a business model develops into a Trojan Horse, that does not necessarily spell the company's demise. "Firms that regularly check and assess their strategic processes are in a position to spot Trojan Horses early on and take the appropriate steps to avoid a crisis," summarizes René Seyger.