What established companies failed by trying something new?

May 4, 2018 6:04 AM

Basically: what companies failed (or were badly wounded) by aggressively pursuing new tech, new markets, new products, etc.? Who bet big on the next big thing and lost? What's the opposite kind of failure from Blockbuster and buggy whips?

It seems like revenue growth, even for mature companies, is a requirement of the marketplace, which causes mature companies to expand in occasionally strange directions, reinvesting talent and resources into these new ventures. I'm wondering what companies made that decision and blew it. Are there companies that lost their core business (not for external reasons, but internal ones) while at the same time failing at the new one? Can you suggest any case studies to read?

posted by lieberschnitzel to Work & Money (34 answers total)

Maybe look into the downfall of Sega and Atari. The Jaguar in particular was a bold new console that failed miserably. (Yes there is a new ‘Atari’ coming out but it’s a completely unrelated company that bought up IP rights).
posted by SaltySalticid at 6:14 AM on May 4, 2018

Apple's Newton. It's arguable at the same time they were losing the core business as well in the faltering Macintosh until Jobs came back.
posted by General Malaise at 6:16 AM on May 4, 2018 [1 favorite]

In 1977 Polaroid invested a whole lot of money in their "instant movie" system, Polavision. It was about as bad as something can possibly be and was a commercial failure. Two years later Edwin Land resigned and the company just had a long spiral downward.

Polavision wasn't the only thing that ended Polaroid, but it felt like the beginning of the end.
posted by bondcliff at 6:19 AM on May 4, 2018 [5 favorites]

The midwestern restaurant chain Bill Knapps destroyed itself by trying to be hip. Their clientele tended to be elderly. If you went and ate there, you saw mostly gray hair in the dining room. They decided to appeal to younger people. The new slogan was, That was then, this is wow. They changed the decor and the menu, played loud rock and roll music, and added TVs and video games. They never attracted the younger people, and they lost the older people who kept them in business. They tried to change back, but it was too late. The new campaign had started in 1998. The last restaurant closed in 2002.
posted by FencingGal at 6:21 AM on May 4, 2018 [7 favorites]

Ford and the Edsel. OK, Ford didn't go out of business, but they lost $250 million ($2.14 billion in today's money), which is quite a bit of change, even for Ford. The linked article has many references.
posted by ubiquity at 6:23 AM on May 4, 2018

New Coke although some believe this was done on purpose to drive up sales of classic Coke when they reintroduced it.
posted by dawkins_7 at 6:32 AM on May 4, 2018 [2 favorites]

Kodak essentially invented the digital camera, but didn't think of it as an industry changer so they didn't push it, expecting film to continue to be the main photography technology for decades to come.

Also, although they're still a pretty successful company, Sony's history of developing and adopting cutting-edge storage technologies -- betamax, minidisk, etc -- which , due to their sprawling media empire which relies on people buying retail copies of music/tv/movies, also included cutting edge technology to dissuade users from using the technology for duplicating commercial recordings, so despite the technology being the superior product in nearly every example, ended up not getting much adoption because people prefer "easy and cheap" to "technologically superior but more difficult". You'd think eventually they'd have learned.
posted by AzraelBrown at 7:00 AM on May 4, 2018 [2 favorites]

Maybe IBM with OS2? They basically lost the Operating System market to DOS and Windows and were never anything more but a premium PC clone supplier in the PC market.
posted by COD at 7:04 AM on May 4, 2018 [4 favorites]

Sega Dreamcast.

A fantastic console with great graphics and lots of innovations. But numerous market force and developer issues doomed it. I bought one for my daughter when it first came out. It was, and remains, impressive. She still plays it regularly.
posted by The Deej at 7:12 AM on May 4, 2018 [2 favorites]

Netflix Qwikster. In 2011, they tried to split off the DVD business into a separate brand, with a separate subscription. That lasted one month.
posted by blob at 7:39 AM on May 4, 2018 [1 favorite]

Osborne computer had the Osborne Effect named after their failure.
posted by dttocs at 7:40 AM on May 4, 2018 [2 favorites]

Infocom, the adventure game company.
posted by johngoren at 7:41 AM on May 4, 2018 [2 favorites]

Sears, under Lampert, has had some infamous missteps with frontline iPads, eCommerce, its reward program, Big Data, others -- though those business failures are seemingly as much due to bad people/asset management as they are from bad tech initiatives themselves.
posted by glibhamdreck at 7:45 AM on May 4, 2018

For loads more examples that will undoubtedly arrive quite soon, keep an eye on companies that are aggressive about spruiking their Blockchain strategy.
posted by flabdablet at 7:58 AM on May 4, 2018

The Palm Foleo. As a company, Palm was a success, but under pressure from new technologies They invented something like a netbook computer which basically gave you a larger screen for your Palm Treo (a reasonably successful product in itself.)

Palm announced the Foleo to wide derision, then cancelled it three months later without shipping. It pulled down the company. Palm was eventually purchased by HP.
posted by blob at 8:04 AM on May 4, 2018 [1 favorite]

Maybe Motorola/Iridium?
posted by doctord at 8:17 AM on May 4, 2018

Oh, also the Pippin, Bandai and Apple's joint failure.
posted by General Malaise at 8:26 AM on May 4, 2018

The commoditization of personal computers has killed a number of big businesses, or at least forced them to sell out. IBM more or less failed at PCs and sold the business to their manufacturing partner Lenovo. Compaq's investors saw the writing on the wall and pulled off a merger with HP that killed off the Compaq brand and nearly destroyed HP. While HP was flailing after the Compaq merger they also made a bunch of other bad decisions (e.g. Palm) as they kept guessing wrong about where the market was going. HP eventually split itself into two, HP Enterprise (professional services and heavy duty commercial printers) and HP Inc (PCs and small printers, mostly).

Weirdly, the software that runs my smart TV, LG WebOS, is based on the software HP acquired Palm to get but then failed to capitalize on. LG licensed, and eventually bought, the OS from HP, but HP held onto the patents and later sold them to Qualcomm. Software is confusing.
posted by fedward at 8:30 AM on May 4, 2018 [1 favorite]

The guy who is credited with inventing the modern selfie stick kind of failed before he even really got started due to the one-two punch of inventing the thing before smartphones became de rigeur and also not having the scratch to apply for an international patent on the invention.

Xerox was actually one of the first companies to make a PC with a graphical interface but it never really took off for several reasons and Xerox just never really got into the software and computing market the way Microsoft and Apple did as a result.
posted by helloimjennsco at 8:32 AM on May 4, 2018

Motorola barely exists now compared to what they once were after going all-in on the Iridium satellites (for satellite cell phone service) which turned into one of the most expensive failures ever. There were originally going to be 77 satellites but IIRC only 66 were launched. The radio astronomers looked at the design and said 'hey these are going to interfere with our (internationally protected) bandwidths!' Motorola: 'oh no no absolutely not' [launch] scientists: 'um yeah they totally are' Moto: 'well maybe you can use your telescopes in the wee hours of the morning when we don't need your bandwidth so much' scientists: 'go fuck yourselves.' (They won in court in like 15 minutes and Motorola was forced to radically reduce their bandwidth usage)
Also: the phones were HUGE, also they didn't work indoors, or very well when it was cloudy, they only signed up like 1000 customers (the price was astronomical)(mostly researchers working in remote areas) and in the meantime, the cell network (that they thought would be too expensive) sprouted like mushrooms and ate them alive by being much cheaper and having much better service. They tried to sell off the satellites soon after, with little success and even listed them on eBay for $1000...and they still wouldn't sell. I'm not sure what their business is like now, but at the time they went from top of the food chain (remember beepers/pagers?) to bankruptcy to basically being kodak or atari, just a brand name to stick on things.
posted by sexyrobot at 8:40 AM on May 4, 2018 [7 favorites]

Some of the examples in this thread so far didn't lead the companies to failure. For instance, I think New Coke actually boosted Coke's sales and brand loyalty when they brought the original back, so it was pretty serendipitous.

Target is chugging along just fine (I think), but their expansion into Canada was a disaster. Target lost billions (with a B) trying to aggressively expand into Canada and then eventually closed all 133 stores it had opened in Canada. If you google "Target Canada expansion" you'll get news articles and a Wikipedia entry.
posted by AppleTurnover at 8:42 AM on May 4, 2018 [1 favorite]

Nokia is a big Finnish company that succeeded at mobile phones up to a point. After developing a new phone operating system they abandoned it, and eventually sold the phone business to Microsoft. Microsoft's acquisition of that phone business, however, is also considered a huge failure, losing a pile of money and basically killing off Windows Phone. The company now selling Nokia branded phones bought the rights to the name and some assets from Microsoft, but outsources all the manufacturing.

So, there's still a big company called Nokia that no longer manufactures the thing most people recognize the name for; Microsoft is still around (of course) but lost over eight billion dollars on that endeavor; the company now selling "Nokia" phones, while run by a bunch of former Nokia execs and having offices literally across the street, isn't actually Nokia and doesn't manufacture the phones. I don't know how that figures into what you're asking.
posted by fedward at 8:48 AM on May 4, 2018 [2 favorites]

Oh, Crumbs Bake Shop did actually fail. Part of problem is that they expanded way too quickly, even in the face of declining sales and a declining interest in cupcakes. They tried to expand their offerings from just cupcakes but it didn't work.

FWIW, the Sega Dreamcast was also the first thing that jumped to mind for me.
posted by AppleTurnover at 8:56 AM on May 4, 2018

More computer stuff: Apple's computer business suffered pretty badly for a while because of the switch to PowerPC. The comparatively lower clock speed of the G5 and problems with heat meant that desktop Macs never got to 3 GHz and portable Macs never got G5 processors at all. Apple switched to Intel processors instead, and revitalized the Mac line by doing so. Arguably the switch to PowerPC was the right decision when Apple made it, but by the end it had very much become a constraint.
posted by fedward at 9:11 AM on May 4, 2018 [1 favorite]

JC Penney tried to change themselves into JCP, a hip new form of itself. No one young and hip came, and the older customers hated it. They're still spiraling the drain (though to be fair, they already were in a deep dive when they tried the new approach).
posted by Mchelly at 10:22 AM on May 4, 2018

Nortel. In the mid-1990s, it "set out to dominate the burgeoning global market for public and private networks":

At its height, Nortel accounted for more than a third of the total valuation of all the companies listed on the Toronto Stock Exchange (TSX), employing 94,500 people worldwide.

Nortel's 2009 bankruptcy case—the largest in Canadian history—left pensioners, shareholders and former employees with enormous losses while Nortel executives continued to draw "retention bonuses" totaling US$190 million during the eight-year post-bankruptcy period.

Maybe they failed because they went on an acquisition spree, or maybe they failed because of a culture of arrogance and hubris:

And more to the point, they never listened to their customers.

"They didn’t ask a lot of the right questions. They weren’t prepared to hear what came back and they lacked the ability to implement much of what they were saying," Calof said.

"They lacked the resiliency to deal with what they were hearing in the environment."

posted by clawsoon at 10:55 AM on May 4, 2018

Ambitious IT and ERP projects are a common way for companies to think that they're striding boldly into the technological future while destroying their businesses: Fox-Meyer Drugs, Avon Canada, Denver Airport Baggage System.
posted by clawsoon at 11:54 AM on May 4, 2018

Maybe IBM with OS2? They basically lost the Operating System market to DOS and Windows and were never anything more but a premium PC clone supplier in the PC market.

I feel compelled to point out that "PC" here refers to the IBM Personal Computer. They failed to capitalize on the opportunity it represented but IBM supplied the PCs themselves, not the clones of the PCs.

On the general topic of failing by trying something new, I'd think a significant category of examples would be companies that edge themselves into illegal practices, then can't kick the habit. Enron comes to mind.
posted by XMLicious at 6:48 PM on May 4, 2018

Kodak was mentioned earlier, but look particularly at the Sterling Drug acquisition. It's often cited as the classic example of what not to do.
posted by frumiousb at 8:28 PM on May 4, 2018

Lytro light field cameras allowed you to focus anywhere in a picture after it was taken, but the cameras cost a fortune and the picture quality wasn't great.

Dxo, primarily a photo editing company had recently filed for bankruptcy, speculation is that its because they spent a fortune on an ill fated phone accessory camera, which was too expensive and didn't move enough units. It was a first and only of its kind, but phone cameras caught up too quick.
posted by smoke at 8:49 PM on May 4, 2018

I was also going to bring up Nortel. My father joined them (via acquisition) in 95ish. 2-3 years later they wanted to get on that Silicon Valley train so they bought Bay Networks, licensed the Beatles song “Come Together” for useless commercials (their typical customer was the postal service of Spain, not likely to swayed by commercials), and then laid off like 20k people.

A 100 year old company fatally wounded itself over a 3-4 year span, just because they saw networking companies like Cisco getting that SV cash. The corpse was still shuffling along until 2009, but they went from “boring but ok” to “sexy and super fucked” from about 96-99.
posted by sideshow at 9:48 PM on May 5, 2018 [1 favorite]

sideshow, is there any chance that Nortel's executives had stock options? Perhaps those advertisements were aimed at Canadian retail investors who could make the executives a whole lot of money by driving up the stock price?
posted by clawsoon at 5:20 AM on May 6, 2018

Oh hey, here's a current one: guitar maker Gibson just filed for bankruptcy.

Fortunately, there looks to be a viable path to survival for the Nashville-based company. That path involves liquidating the consumer electronics business, which is the work of a soon-to-be-defunct division called Gibson Innovation. The division's products have included headphones, speakers, and other audio equipment. If the company's plan is successful, Les Pauls and other guitars—along with the company's other professional studio audio equipment products and instruments, like Epiphone guitars and Baldwin pianos—could continue to be sold to future generations of musicians.

The NYT article linked in the Ars piece talks about the decision to diversify and has some further links:

Gibson’s problems are not hard to diagnose. The company’s longtime chief executive, Henry Juszkiewicz, wanted to diversify by turning Gibson into what he has called a “music lifestyle company” — basically a consumer electronics business that sells headphones and hi-fis as well as guitars. He made a splashy purchase of the audio and home entertainment division of Netherlands-based Royal Philips in 2014, and then ran headlong into the collapse of the euro.

It was a disaster. Mr. Juszkiewicz, in an interview, didn’t sugarcoat it.

“No, it wasn’t a great decision,” he said. “It didn’t work out very well. I think it was a rational decision, but it turned out to be a very poor decision, and it’s a decision I made. It is what it is.”

I can honestly say I didn't even realize they sold headphones and speakers, but there seems to be a pretty straight line from that business decision to the current bankruptcy.
posted by fedward at 8:05 AM on May 6, 2018 [1 favorite]

Before Qwikster, Netflix actually had an existing failure when they launched Red Envelope Entertainment in 2006. It was intended to be an independent production/distribution wing of the company that would finance indie films and get exclusive (or at least first run) distribution through their own disc-by-mail service. But the existing studios got so upset about it that they threatened to withhold all rental copies of their discs and so the affair was folded in 2008.
posted by The Pluto Gangsta at 11:49 AM on August 30, 2018