6 heart-wrenching lessons from companies that failed to handle disruption

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Falling off the perch is not a nice feeling as an individual or a company. However, falling is a trait of warriors and rising after a fall is a hobby for champions. For this to happen, an individual or a company needs to be sitting right up to the pile of all other competitors for a number of years to lose track and fall so viciously, that the fall usually ends up in a bankruptcy file. For a new business, there can be a number of reasons causing disruptions, however, a seasoned business is not easily brought to the ground.

Let’s take a look at 6 broad reasons learned from business fallout. Each explained by a recognized business history. Try to guess all six!

Not Having The Larger Perspective

In 2004, a video rental company ‘A’ owned about 9000 stores and employed approximately 84000 people. No one matched the size and magnitude of their video collection. Once the world went from VHS to the round shiny discs, they survived. ‘A’ was approached by company ‘B’, which was renting movies with a home delivery USP, with a price tag of USD 50 Million.

However, ‘A’ thought that the new strategy was below them and they were far too big to be taken down because of the number of stores/employees they had under their belt. The same number of stores and employees became a liability when people found it easier to just rent a movie with a phone call. ‘A’ neglected to see a market shift in consumer behavior right in front of their eyes and eventually filed for Bankruptcy in 2010.

Company ‘A’ was Blockbuster which was unable to switch their strategy whereas company ‘B’ (Netflix) went from home delivery to online streaming and annual revenue of USD 16 Billion and 139 Million paid users in 2018.

Not Switching To An Alternate Product

A company that manufactured photographic film (this is n easy guess) blew the opportunity of stepping into the digital era before everyone since they thought that it will reduce their business of selling physical films. Their own development team developed the prototype of what was to be the first digital camera.

However, the idea was soon shot down by top management that thought that if they started producing an alternative to their own product, their original best selling product will fail eventually. The management was so focused on selling the original product that they missed out on several opportunities to be the pioneers of the digital industry. Digital photography eventually came in as a force and forced this champion company to file for bankruptcy in 2012 as they failed to launch a better alternative to their own product.

This company was none other than Kodak.

History Will Not Save You!

A leading Toy company in the ’90s which boasted to be the world’s largest toy store chain got stuck with the internet boom in the 2000s. They contracted with Amazon so that Amazon will sell their toys online for the next ten years. However, Amazon contract ended just after 4 years once Amazon started exploring the world over toy-making companies. This was the ideal time for the toy company to go digital and jump into an e-commerce venture. However, past glory (just like Blockbuster) made them stagnant and persistent in their old ways of doing business.

They initiated an online program in May 2017 but finally had to make a u-turn in September of the same year by filing for bankruptcy under the pressure of USD 1 Billion debt and a strong online presence of other toy-making companies.

This company was none other than Toys “R” Us.

Ignoring User Experience Evolution

Many companies became fatalities of the internet boom as they did not see the user being comfortable with the new technology in their own homes. People became more and more laid back while reading and ordering books.

This hit company ‘A’ did not expect readers to read and order most of their books online in the near future. While company ‘B’ and others like Amazon& Apple started selling paperback and e-versions online with a virtual swipe of a card. They jumped the game with their own reading gadgets which gave the user a book-like experience with owing a number of books in one device. In the meanwhile, company ‘A’ grew in liabilities in the form of about 400 stores and 10000+ employees. For which, they eventually filed for bankruptcy in 2011 after opening its first store in 1971.

This drama was for no other bookstore than ‘Borders’ whereas company ‘B’ was Barnes & Noble who bought the reader database from Borders for a whopping USD 13.9 Million.

Overestimating Your Brand Value

This is the most discussed fall in the history of consumer products which is also taught as a test case in many business schools and probably the easiest to guess. This technology giant was the pioneer of cellular devices and no other company came even in its vicinity in technological advancement and sales volume. However, they overestimated their brand value and did not see the paradigm shift. This was a time when users were experimenting with a new kind of user interface ‘the touch screen’ cellular device.

This company did not foresee a change in customer experience and stuck its strategy with the same old school model. The thought process behind this move was to save the customer from the current design and the level of difficulty if they changed too much. What happened later was what happen in the past and will keep happening in the future. Companies like Apple and others came out with a better user experience revolutionizing the whole industry. Once they decided to jump on the bandwagon, they were late and came up with software that was not liked by the users at all.

The end result was that ‘Nokia’ became an outdated cellular symbol which was once the sign of prosperity and success. Overestimating your brand value can not only kill your present but the future as well.

Ignoring that Social Impact & Purpose Matters

Now all companies are worried about their image because it can be tarnished worldwide with a single hashtag. This was not the case in the early 2000s but the social impact still existed, however it was slow. This clothing tycoon learned this lesson the hard way. This company hit the gold mine when they rode pop culture and sold their articles of clothing to teens and young adults and became the talk of the town. However, a controversial statement by their CEO “we would rather burn clothes than sell them to the poor” became their downfall syndrome and pushed the brand popularity to an all-time low.

Adding salt to the wound, a number of hip brands boasting the fast pace culture like H&M, Forever21, and various others. As a result, the company in question has become one of the most hated brands in the USA.

This clothing brand is Abercrombie & Fitch which is now surviving just on the brink of collapse.

Conclusion

Business Disruption implies moving and testing new grounds and questioning a comfortable perch. As an entrepreneur or intrapreneur, one needs to learn from these misinterpretations if you are starting out or on top of the world, like:

  • Not having a larger perspective
  • Not switching to an alternate product
  • Believe that history will save you
  • Ignoring user experience evolution
  • Overestimating your brand value
  • Shut one’s eyes to social impact and purpose 

Therefore, not committing the same errors old tycoons made can be a good start to your disruption road. However, shying away from risks and not adhering to new trends according to changing user experiences can also be catastrophic.

Strike the right balance to disrupt yourself and your company and you will thrive innovation and business success!

References

https://www.forbes.com/sites/jonathansalembaskin/2013/11/08/the-internet-didnt-kill-blockbuster-the-company-did-it-to-itself/#497de3176488

https://www.youtube.com/watch?v=WdYtoj4KSeU

https://www.npr.org/2011/07/19/138514209/why-borders-failed-while-barnes-and-noble-survived?t=1566156169991

https://www.theguardian.com/business/2015/feb/25/clothing-retailers-teens-abercrombie-fitch-wet-seal-aeropostale-hollister

http://www.businessinsider.fr/us/why-abercrombie-and-fitch-is-failing-2015-5

https://knowledge.insead.edu/strategy/the-strategic-decisions-that-caused-nokias-failure-7766

Photo by Sebastian Voortman and Harvey Reed from Pexels

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  1. […] business that has pivoted based on customer preferences, wants, and needs than Netflix. While Blockbuster failed to handled disruption, Netflix pivoted by using design thinking to become on-demand […]

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