An interesting post in HBR Blog Network by Robert Sher talks about the risks midsize firms take, and how they can hurt (or kill) the company.  He points out that they don’t have large amounts of capital and usually run far too close to the edge.

Here is part of that article:

“That was the case at a toy importer that was pressing the growth pedal to the metal. The company was hell-bent on entering a new market but knew it had to automate its warehouse to do so. Warehouse automation systems are big and complicated; if they don’t work, you’re worse off than before since it becomes almost impossible to ship product. Unlike a Fortune 500 company that can spend tens of millions of dollars on external consultants to help implement such a system, this company was stingy with its IT dollars. It put one of its executives in charge of the project and told him to team up with the head of IT, even though neither had ever run a project this large or complex.

The project budget paid for the software and not a lot more. The timeline was unrealistic, so the installation took a month longer than planned. And when the company did the cutover – right before its customers’ biggest selling season – the system just . . . didn’t . . . work. The malfunction caused major delays shipping toys to retailers. Not surprisingly, many of those retailers refused to pay when the toys finally did arrive, too late for the holiday season. The importer lost millions of dollars and began running out of money. Its growth had been derailed.”

 

For the full article, click here.