The best thing to do in business is to learn from the mistakes of others. Here are three major lessons learned from some of the biggest business blunders to ever occur:
Mistake #1: Ignoring their own innovations
We all know Xerox, they’re world famous for their document solutions and services. Your company is probably using several of their machines. What you might not know is that they could’ve owned the entire computer industry if they had the foresight to.
Back in the day, in 1970 to be exact, Xerox set up the Palo Alto Research Center (PARC) to invent the technology of the future. They pumped it with funding and made sure the genius scientists working there had everything they needed to make magic.
And magic they made.
PARC invented what is widely argued to be the world’s first Personal Computer in 1973.
The Xerox Alto was awesome — it had an operating system, the world’s first Graphical User Interface (GUI — which enabled the then primitive computer screens to display information beyond just numbers and letters), and even a mouse to point towards stuff on the screen. To top it all off, this computer was linked to other PCs by a system they created called the ethernet.
No other machine had this magical combo at the time.
Remember, this was before Apple, Microsoft and the likes even came up with anything close to what Xerox had invented.
And what did Xerox do with this amazing breakthrough technology?
The higher ups didn’t quite get the revolutionary technology they had in their hands. They were more focused on their photocopiers that were the existing cash cow of the company.
According to former PARC researcher Larry Tessler,
“the company management at the East Coast of the USA did not (care a straw for) the PARC’s research results unless they were directly involved with photocopiers.”
Someone else was there to capitalize from this technology though.
Steve Jobs was invited to take a tour of the PARC facility in 1979. And during this tour they were introduced to the Xerox Alto and all its (at the time) jaw-dropping tech.
As Larry Tesler demonstrated how their “mouse” moves the cursor on the screen and clicked on icons, opened and closed “windows”, wrote emails to other people in PARC, Steve Jobs gradually got more and more excited.
In Steve Jobs’ own words:
“Why aren’t you doing anything with this? This is the greatest thing. This is revolutionary!”
He took this inspiration back to Apple and the rest, as you know, was history.
Mistake #2: Not looking beyond their existing business models
In the early 2000s, Blockbuster was the kingpin of the video rental industry in the United States. At its prime in 2004, it had about 60,000 employees and over 2,000 stores in 25 countries.
Just a short 6 years later, Blockbuster filed for bankruptcy.
Here’s a fun little story about Blockbuster and Netflix you may have heard.
Back in 2000, Reed Hastings, founder of the then tiny, but thriving company called Netflix, met up with Blockbuster CEO John Antioco and his team.
Hastings suggested they join forces and work together. The deal was that Netflix would help run Blockbuster’s online service while Blockbuster helps run Netflix’s offline component (DVD rental through their large network of stores).
Netflix was laughed out of the room.
We don’t know what would’ve happened if they ended up partnering with Netflix. Would Netflix have grown into what they are today — a 61 billion dollar company? Not too sure.
What we do know is that Blockbuster had the funds, the expertise and the resources to launch their own subscription-based streaming service, but they didn’t.
They even got an offer to purchase Netflix for $50 million, but they didn’t.
Instead, they continued focusing on their existing business model — physical stores that rent out videos.
Because they ran such a large network of stores and employed so many people — they needed DVD rental prices that could sustain this. A significant chunk of their profit also came from late fees, something which doesn’t even exist on mail-order video rental services like Netflix.
It was OK when they were the main player, but when given a better alternative and better customer experience?
Netflix knew what the customer wanted — variety and convenience at a low price. They also accurately predicted the customer’s shifting priorities when online streaming became more accessible.
Because they saw that, they pivoted quickly from their mail-order business into an intuitive online platform for movie-watching.
At a time when similar sites were struggling to even display their content in a clean, functional manner, Netflix was sleek, sexy and even had a first-of-its-kind system which accurately recommended movies based on what your personal preferences and movie-consumption history.
Blockbuster’s CEO Antioco realized Netflix (and other services like it) was becoming a threat. And in 2004, he started taking action — he discontinued the late fees and pumped money into a digital platform which he hoped would pave the way to Blockbuster’s bright future.
The board of directors were not happy about the $400 million these moves would cost the company. They did not believe that growing an online business and finding new ways to satisfy customers were the right strategy to take.
In 2007, they fired Antioco and reinstated the late fees. They raised prices on Blockbuster’s digital platform and cut marketing on it despite its fast growth rate. Instead of innovating their business model, they chose to focus on their brick-and-mortar business.
Today, the Blockbuster brand has mostly vanished from society, with a few straggling stores scattered in certain markets. Netflix, on the other hand, has become a household name.
In his reflections on this, Antioco wrote in the Harvard Business Review that he “firmly believed that if our online strategy had not been essentially abandoned, Blockbuster Online would have 10 million subscribers today, and we’d be rivaling Netflix for the leadership position in the internet downloading business.”
Quite possible, indeed.
Mistake #3: Not changing fast enough
Just over a decade ago, Nokia defined the mobile phone industry. With a history that began in 1979, it innovated its way into making the most sought-after mobile phones in the market. It was the world’s no. 1 phone company and sold its billionth phone in 2005.
Shortly after, iPhones and Android came into the market. Suddenly, consumers weren’t looking at Nokia anymore for the latest and greatest in mobile tech.
When Android 1.0 was launched in 2008, Nokia’s Q3 profits plummeted by 30%. It went downhill from there.
Nokia realized a bit too late in the game that they needed something that could compete with the smartphones being produced by Apple, Blackberry and Samsung and the likes.
While Nokia continued releasing solid phones with top-notch build quality, the Symbian software that they used in their touch-enabled phones were sub-par compared to Apple and Android phones. Nokia was making great quality phones with amazing cameras, but lagged behind in user experience.
People found other mobile phone operating systems easier to use and so sales continued to dip.
In a last-ditch attempt to win the smartphone battle, Nokia partnered with Microsoft to produce phone that will run on a Windows OS.
The move sold quite a few phones, but it came too slow, and the end product was not good enough to compete with the likes of Apple and Android phones which still delivered a far superior user experience.
Nokia’s market share continued to decline and in 2014, Microsoft acquired Nokia’s mobile business for $7.2 billion.
Just for a bit of perspective, at the height of its times in 2000, Nokia’s market cap was hovering around $245 billion.
However, this is fortunately not the end of the story.
There’s talk of a comeback for Nokia in the first half of 2017, and this time finally, the phones will run on Android. Knowing Nokia’s hardware capabilities, I’m definitely looking forward to see what they come up with.
What are the biggest mistakes you’ve made in business and what has that cost you? Share your lessons in the comments section below.