5 big brand business failures – and what startup entrepreneurs can learn from them
Newsflash: yet another business heavyweight has fallen into administration.
These all-too-familiar headlines force us to question how such large, established brands continue to get it so unbelievably wrong.
Here are five big businesses that failed, owing to a number of catastrophic yet preventable mistakes:
- Borders – lack of focus and falling into success trap
- Blockbuster – leadership failure and lack of innovation
- Toys “R” Us – slow to change and too dependent on third party
- Woolworths – lack of differentiation
- Kodak – failure to listen to customer needs and innovate
The good news is that startup entrepreneurs can learn invaluable lessons from the frustrating failings of these well-established enterprises.
Once a key player in the retail bookselling market worldwide, Borders built its reputation on offering an unbeatable variety of books across an international network of stores.
But from 2007 until its closing in 2011, Borders recorded net losses totaling USD 680m.
What happened to Borders?
Borders bosses made a series of confusing and ultimately catastrophic decisions that resulted in their closest competitor, Barnes & Noble, overtaking them.
As the book industry began to digitise, Borders chose to invest heavily in CDs and DVDs in-store – an area that Barnes & Noble was de-emphasising, investing instead in online sales and creating its own e-reader. (Barnes and Noble also win the Starbucks contract for its in-store cafés, leaving a lesser-known brand to Borders.)
Meanwhile, Borders chose to expand and refurbish its physical spaces, outsourcing online sales to Amazon.
Borders demonstrated a lack of focus where management decisions were concerned, seemingly ignoring critical market changes and investing in questionable areas that showed no real signs of growth.
Borders bosses could also be accused of falling into the success trap; thinking that they know best regardless of the moves being made by their competition and the changes in their market.
This example proves that responding to industry and market indicators is essential if businesses are to maintain a competitive edge.
In 2004, Blockbuster was employing 84,300 people and had nearly 10,000 stores around the world.
Then it all went wrong. The brand’s dismissal of a key opportunity to embrace the digital world resulted in Blockbuster filing for bankruptcy in 2010.
What happened to Blockbuster?
Netflix was only three years-old when it approached Blockbuster with a proposal to collaborate. Netflix would promote Blockbuster online in return for the promotion of Netflix in-store.
The CEO of Blockbuster was not impressed and any potential collaboration ended before it started.
Of course, we all know what happened next – Blockbuster went out of business and Netflix is now worth over USD 28bn.
Blockbuster suffered due to leadership failure and a degree of arrogance – or perhaps ignorance – when it came to considering an attractive proposal made by a very small but (as it turned out) great competitor.
Never assume that your business model is fool-proof. The failure of Blockbuster proves that conducting regular market research, keeping a close eye on competitors, and taking educated risks on new talent and new opportunities could spell the difference between business success and business failure.
If, like Blockbuster, you fail to innovate or adapt in the face of a changing market, your business will likely suffer as a consequence.
Toys “R” Us
Toys “R” Us was a household name and major player in the toy business for over 65 years until things started to fall apart – filing for bankruptcy in September 2017. The company closed its UK stores, then later its US stores, with just a few in Asia remaining open (having been sold off to other companies).
Last month things started to look up, however, with the company re-emerging under the banner Tru Kids. Time will tell whether it can navigate better this time.
What happened to Toys “R” Us?
The demise of Toys “R” Us can be attributed to a critical error made in 2000, when the company signed a 10-year contract to be the exclusive vendor of toys on Amazon.
Despite later suing Amazon for breaking their agreement and allowing other toy companies to sell on the site, the toy giant never recovered and missed a key opportunity to develop and establish its own online presence.
While the mistreatment by Amazon can’t have been predicted, handing over their entire online presence to a third party was always a risk.
Toys “R” Us has taught us that while it’s important to take risks in business, it’s also important to ensure that you don’t rely on a single, third party revenue stream that is outside of your control – especially with regard to high-growth channels such as online.
The failure of Woolworths, after a 100-year history, still stands as an example of what can happen to the most established enterprise if it fails to adapt and innovate.
What happened to Woolworths?
While the mass market retailer expanded quickly over the years, there were numerous factors contributing to its demise.
- Poor management
- Poor customer offering
- Evolving industry and technology
- Competition from discount stores
But one of the most significant issues flagged by investigators was that Woolworths didn’t really have a unique purpose or target market. It was a shop that tried to be all things to all people.
Business owners, like you, must ensure that the world knows why your business exists. Have a clear USP and purpose, and target a specific group of people in order to uphold market positioning. Differentiation is key to success and longevity.
Once the world’s largest film company and a brand known around the world, Kodak filed for bankruptcy in 2012.
What happened to Kodak?
Put simply, Kodak failed to fully embrace the transition to digital in the fear that it might then undercut its core business centered around film.
The brand missed opportunities to develop products and technologies – not focusing on digital cameras and not fully developing an early Instagram-like site that it had acquired.
The primary lesson we can learn from Kodak is that being fearful of a hero product or service becoming outdated or overtaken doesn’t actually stop the product from being usurped.
If digital development threatens your core business product or service, you need to be the one to innovate and update your offering to suit the changing demands of customers, markets and industries, before your competitors do.