Invasion As A Case Study

At USC, students learn parallels between Iraq and a merger gone wrong

When Deputy Defense Secretary Paul D. Wolfowitz asked Congress in early May for $25 billion more for the wars in Iraq and Afghanistan, Michael Keane, a lecturer at the University of Southern California's Marshall School of Business, reached for his pen. Like many other B-school teachers, Keane uses case studies -- analyses of real transactions and outcomes -- to teach MBA students in his financial strategy class. But his cases offer a sobering twist -- each corporate example is taught alongside a corresponding military campaign. And Wolfowitz had just given him his next lesson plan.

Keane's premise is simple. Business and military strategy are based on similar principles -- but with war, the outcomes resonate on a massive scale. Want a model for a successful hostile takeover? That's easy: the Civil War battle of Vicksburg, Miss., that turned the war in favor of the Union Army. Repeated failure to market a product properly? Consider the flawed campaigns in Vietnam that still haunt U.S. policy decisions. And now, Keane is teaching a messy mergers-and-acquisitions case: the war and reconstruction of Iraq.

Sure, it's easy to suggest military strategy from the ivory tower. But the B-school lecturer, who is also a military strategist and former Defense Dept. fellow, saw action firsthand earlier this year when he embedded with the U.S. Army's 101st Airborne Division in Mosul, Iraq. He was there to advise the division on integrating business and economic development into military efforts. Iraq, he says, is a spectacular version of a troubled transaction, rife with serious threats to success: an undetermined desired outcome, culture clashes, conflicting interests, and an endangered profit-and-loss sheet.

Add to those problems some angry shareholders, in this case senators who scolded Wolfowitz for asking, essentially, for a blank check. That raises another lesson: Always integrate expenditures with strategy -- and conduct meticulous research before plowing ahead with a business or war plan. "I've seen better due diligence around a QuikStop purchase," he says of the Iraq war.

EXPLOSIVE DISCONTENT. As with leaders of scandal-plagued companies, Keane draws a parallel with those in charge of the Iraq war, who overpromised, underachieved, then tried to hide failure. The lesson? Make clear how each action will help accomplish the overall goal, and be honest about how much money and human capital are needed. In Iraq, the fall of Baghdad came quickly enough for the President to declare a mission accomplished. But, as it turns out, that takedown was a prelude to a costly guerrilla war that the shareholders -- U.S. citizens, Congress, and soldiers -- weren't expecting. Now disappointment has given way to explosive discontent. It mirrors common merger problems like, say, those between J.P. Morgan & Co. and Chase Manhattan Bank in 2001, a combination that started with optimistic talk of synergies but devolved into turf battles and a steep share-price decline.

Keane's class, one of the most popular at the B-school, is likely to see high enrollment again in the fall. By that time he'll have new material on exit strategies -- or the lack thereof. The haphazard strategy for extrication has left the U.S. looking "like entrenched management facing a group of activist shareholders," says Keane. And the Iraqis looking like a group simmering over the merger terms.

By Kate Hazelwood in New York

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