Devil's Advocate
In 1983, William Smithburg, the CEO of Quaker, made a bold decision to acquire the parent company of Gatorade for $220 million. According to various reports, William made this purchase impulsively after he tried the product and he liked it. However, this purchase proved to be profitable as the company grew to an estimated value of $3 billion.
After a decade in 1994, William proposed to buy another beverage company named Snapple for $1.8 billion. A lot of analysts thought this was a billion more than the deserved price but even the Board of Directors at Quaker didn’t protest due to the success of Gatorade. William, however, was just picturing a replay of Gatorade’s success — a bold, impulsive and flashy purchase of a beverage brand. So, with the board’s support William moved quickly and the purchase was completed in 1994.
It turned out to be a fiasco and is now known as one of the worst decisions in the business history. In just 3 years, Quaker hurriedly sold Snapple for $300 million and with this humiliation William stepped down as the CEO. Reflecting on this purchase, William admitted that there was no one within Quaker who was arguing against the acquisition and Quaker was making ‘yes or yes’ choice — A decision where we’ve already made the choice without considering other options and try to justify it.
To illustrate the weakness of this process, consider the parallel in legal system —Inside a courtroom, a prosecutor presents powerpoint slides explaining why the defendant is guilty. The judge challenges some of the facts of the presentation, but the prosecutor has a good answer to every objection. So the judge decides, and the accused man is sentenced. This process is flawed, not only in the legal system but also in most of the decisions we make in our life.
Next time we make a big decision, let’s remember to ask someone to be devil’s advocate.
source — Decisive by Chip Heath and Dan Heath
Kaushik Rangadurai
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