Notorious Business Blunders

The good news: There are lessons to be learned from these mistakes.

Notorious Business Blunders

Failure is okay – to a point.

A slew of business executives will tell you the lessons they learned from their biggest goof-ups, and educators are increasingly developing curriculums that help students learn by failing. But often, failure is just that. For businesses, a big failure is often near-fatal, if not fatal.

We looked at some of the biggest business failures and tried to find the key lesson that could be taken away from the debacle. Here’s what we learned.

Motorola Loses the Phone Market

What happened: After releasing its Razr in 2005, Motorola made the No. 1 and No. 2 selling mobile phones in the world. Then, for reasons largely within its control, Motorola lost $4.3 billion between 2007 and 2009, as well as its perch as the world’s leading mobile phone maker.

“The emergence of Android technology was devastating for Motorola and the lackadaisical pace at which they climbed on the 3G bandwagon made them too slow to make the best of the surge,” said career coach and business analyst Michael D. Brown of Fresh Passion Institute. “By the time Motorola was waking up from its innovative slumber trying to catch up with the Q series of smartphones, the bell had rung and they were unforgivably late for the party.”

Lesson: Don’t fall victim to what Bowen calls “predictive short sightedness.” Many businesses “don’t have ‘meteorologists’ on board who appropriately understand the business weather to know when and where the next opportunity is going to rain,” Bowen said. “Therefore, they are embarrassingly ill-equipped and rather than riding the waves of change, they are drowning in the tides.”

LEGO Gets Too Technical

What happened: It’s hard to believe that the successful maker of plastic bricks for generations of kids was once on the verge of bankruptcy. But that’s exactly where the company found itself in the late 1990s and early 2000s after a series of disappointing product launches. Anyone remember “Fiber Optic Technic Kit” or “Primo,” a building set intended for babies? Didn’t think so.

Lowey Bundy Sichol, author of the “From an Idea to…” series of books, said LEGO moved away from its system of play, lost touch with its customers and hired young “innovators” as its engineers rather than AFOLs – adult fans of LEGO. They also lost control of costs. Fiber Optic Technic Kits, for example, contained parts that cost more to produce than what the entire set was sold for.

Lesson: Not all failure has to be fatal.

“What LEGO learned from these failures was to go back to its roots of a play-based building model, one that fit into the LEGO system,” Sichol said. “Business analyst Michael McQueen called LEGO's near-death experience ‘the best thing that ever happened to it.’"

New Coke Angers Classic Coke Lovers

What happened: Arguably one of the biggest business failures of the 20th century, Coca-Cola messed with a good thing and launched a new formula for its namesake beverage on April 23, 1985. Seventy-nine days later, Coca-Cola retreated and returned the original formula to store shelves and fountains. But not before consumer outrage, complete with loyal Coke drinkers pouring out gallons of the new formula in public demonstrations outside Coke’s headquarters in Atlanta.

“We set out to change the dynamics of sugar colas in the United States, and we did exactly that — albeit not in the way we had planned,” then chairman and chief executive officer Roberto Goizueta said in 1995.

Lesson: Always learn from your mistakes.

Today, Coke executives say the New Coke debacle has helped fuel its push to create — and launch — new beverages.

Blockbuster Fails to Buy Netflix

What happened: Blockbuster developed an up-to-the-minute inventory system which allowed it to squeeze out regional chains and mom-and-pop video rental stores to become the dominant player in the video rental market. But it went from innovator to bankruptcy when it failed to see the threat posed by Netflix. Blockbuster reportedly turned down multiple chances to buy Netflix, which was offering to handle its online distribution.

Blockbuster didn’t launch its own DVD-by-mail service until 2005, six full years after Netflix had launched. By that time, it was too late for Blockbuster and Netflix was already looking ahead to the next disruption in the industry and plotting how to dominate then then almost-unheard of streaming video market.

DISH bought Blockbuster out of bankruptcy, and today the company exists as Blockbuster @Home, a package of 15 movie channels and a library with thousands of titles.

Lesson: Don’t delay when it’s time to call an audible on your business plan.

Kodak Loses on Digital

What happened: When photographs relied on film, Kodak was the industry leader and widely seen an innovator. But the company grew complacent and relied on the fat — but quickly diminishing — profits it made from selling film and film processing papers and chemicals.

It’s a familiar story, but Kodak’s version offers a sad twist: many of its own engineers saw the threat that digital photography presented and urged executives to invest more in making the company the leader and innovator in digital. Those warnings and pleas went unheard, and Kodak watched its core business all but disappear while conceding the digital market to other players.

Lesson: Listen to the people who made you successful in the first place.

Borders Partners with Amazon

What happened: Like Blockbuster and movies, Borders developed sophisticated inventory systems to better track sales and predict trends. But as Amazon rose to prominence, Borders stuck to its core business model. Not only was it locked into long-term brick-and-mortar leases, it continued to build new stores.

Then, in an effort to catch up, it made a deal with the devil and allowed Amazon to act as its online distributor. The thinking was it could continue to focus on its brick-and-mortar business. The end result is Borders ceased to exist.

Lesson: Don’t bury your head in the sand when your core business model is threatened.

Apple Maps Bugs Out

What happened: Maybe Apple is too big to fail, but in 2012 its launch of Apple Maps was a major setback to the behemoth. Apple kicked Google Maps off its iOS platform and replaced it with its own version. The product was notoriously buggy, which gave the tech press fodder as it went after a company that had portrayed itself as the perfectionist in developing tech products.

It could have been an even bigger failure for Apple if it hadn’t decided to admit its mistake. Within a few months, it had brought Google Maps back into its App Store.

Lesson: It’s okay to admit someone else does something better than you if you can find a way to partner with them.

Schlitz Gets Gooey

What happened: Schlitz had made beer the same way for 100 years and was in the upper echelon of the most recognizable American brewers. Then in 1976 CEO Robert Uihlein decided to mess with that recipe for success.

Uihlein proposed massive shifts in how Schlitz made its beer. He cut the brewing time from 40 to 15 days and replaced barley malt with corn syrup. Fearing proposed regulations that would require brewers to put a more detailed list of ingredients on packages, he also switched stabilizers. The end result was a beer that tasted awful and had a thick sediment that many drinkers compared to mucous. Schlitz was forced to secretly recall 10 million bottles of the beer, but the damage to its brand had already been done.

Lesson: If it ain’t broke, don’t fix it.

Excite.com Spurns the Google Guys

What happened: In 1999, Excite was the world’s second most popular search engine and Google was a small start-up. That was the year that Google’s co-founders Larry Page and Sergey Brin offered to sell Google to Excite for $750,000, with the condition that Excite replace its own search technology with Google’s.

“The thing that Larry insisted on that we all do recall, is that Larry said, ‘If we come to work for Excite, you need to rip out all the Excite technology and replace it with Google’s search.’ And, ultimately, that’s, in my recollection, where the deal fell apart,” George Bell, who was the CEO of Excite at the time, recalled in 2014.

Today, Google is now known as Alphabet and has $197.30 billion in assets – or more than 263,000 times the price Page offered in 1999.

Lesson: Make sure you kick the tires – and kick them again, and again and again – before saying no to a deal.

MySpace Gets Swallowed

What happened: It’s too simple to say “Facebook killed MySpace,” because dozens of social media platforms have managed to co-exist with Facebook. But business analysts point to NewsCorp’s $850 million acquisition of MySpace in 2005 as the beginning of the end.

Initially, it seemed like a great deal for both sides, as MySpace continued to grow, and by 2008 its value peaked at an estimated $12 billion. Then the rapid decline began.

The internal innovation that had driven MySpace’s initial growth was stifled by NewsCorp and it couldn’t keep up with Facebook. NewsCorp ended up selling MySpace in 2011 for an estimated $35 million.

Lesson: Bigger isn’t always better.

Quaker Buys Snapple

What happened: Before energy drinks, Snapple was a beverage of choice for high school and college students. Quaker noticed its success for small retailers and made a massive, $1.7 billion purchase of the drink maker.

But other drink makers had already noticed Snapple’s success, and if they hadn’t, the price Quaker was willing to pay for Snapple certainly opened their eyes. Beverage behemoth Coca-Cola launched Fruitopia in 2004 and SoBe in 2006. Quaker cut its losses one year later, selling Snapple for $250 million in 1997.

Lesson: Get in on the next big thing before it’s the next big thing.

Compaq Gets Ahead of Itself

What happened: By the 1990s, Compaq was the world's biggest maker of PCs, thanks in large part to its emphasis on better graphics and performance, not to mention a better price. That decade followed phenomenal fast growth after its 1982 founding. In 1986 it became the youngest company to make the Fortune 500.

But by 2002, its stock price had dropped by 75 percent and it was eventually bought for pennies on the dollar by Hewlett-Packard. HP finally discontinued use of the Compaq brand name 11 years later. Initially, observers assumed Compaq was a victim of the dot-com bubble bust. But why Compaq and not, say, Dell? The culprit, according to more detailed analysis, is that Compaq grew too fast. Boston Consulting Group research shows accelerated revenue group correlates with shorter lifespans for companies. In Compaq's case, acquisitions of Tandem Computers in 1997 and the Digital Equipment Company in 1998 made the company too complex. In other words, they mucked up the simple formula that had fueled their success.

Lesson: Slow down. The 1990s were a time of rapidly changing marketplaces and companies like Compaq felt pressure to make moves to keep up. But branching into new businesses took attention away from its core effort – the thing Compaq did well and built its success on.