I was recently reminded of a joke that business strategists like to tell.
Common wisdom says that when you discover you’re riding a dead horse, the best strategy is to dismount.
But instead…businesses select more advanced strategies like:
- Buying a stronger whip
- Changing riders
- Threatening the horse with termination
- Appointing a committee to study the horse
- Hiring outside contractors to ride the dead horse
- Harnessing several dead horses together to increase the speed
And on it goes.
It’s a funny joke that illustrates a very common business problem: wasting time, effort, and money on tactics – when the actual problem is a “dead horse” strategy.
Unlike dead horses, wrongheaded business strategies are a lot harder to identify.
Here’s where to start.
There are predictable stages in the life-cycle of any business.
The most dangerous place to be on this life-cycle is at the very top – because there’s a tendency to coast that can very quickly lead to downward momentum.
Here are some danger signals to watch for:
- Believing that because you were successful in the past, you will continue to be successful in the future
- Being more concerned about how your business looks than how it is performing (this focus on “saving face” also prevents some businesses from getting help in time to save them)
- Playing the blame game – more concerned about who is at fault than on identifying and solving the problem
- Sticking with a business model that is out-of-date, often while cutting costs to try to make up for the decline in revenue
In a rapidly changing world, the last point is the downfall of many once great companies.
In this article, we’ll examine the failures of three companies – Nokia, Blockbuster, and Kodak – and pull out some lessons we can learn from their mistakes.
Nokia: Failure to Adapt
Nokia was once the largest and best mobile phone manufacturer in the world.
In the early 2000s, Nokia focused on voice and dominated the mobile phone market.
Then Apple came on the scene and changed the game. The iPhone switched the phone business from voice to data – and Nokia didn’t keep pace with the innovation.
Like many companies, they failed to adapt, clinging to the belief that “no one would want data on a phone!”
What can we learn from Nokia’s failure? Companies need to be willing to adapt and evolve in response to changes in the market.
Nokia failed to anticipate the shift towards smartphones and failed to take the necessary steps to keep up with its competitors. This failure to adapt led to a significant loss of market share and ultimately contributed to the company’s decline.
Blockbuster: Failure to Innovate
Blockbuster was once a household name. With thousands of stores across the United States, they held the position of being the most convenient place to rent movies.
In the early 2000s, Netflix came along and first introduced the idea of renting movies by mail, then started a streaming service.
Blockbuster was in a great position to compete, but instead, they clung to their original model of community video rental outlets.
Despite seeing the rise in streaming popularity, the company continued to rely on its brick-and-mortar stores, while failing to invest in new technologies or innovative solutions.
What can we learn from Blockbuster’s failure? Companies need to be willing to embrace new technologies and innovate in response to changes in the market. Companies that fail to innovate risk becoming irrelevant and losing out to more agile and innovative competitors.
Kodak: Failure to See the Future
Kodak invented digital camera technology!
But believing that “no one would want to buy digital photographs” – they failed to recognize the potential of this technology.
The company continued to focus on its traditional film business. By the time Kodak finally began to embrace digital photography, it was already too late, and the company ultimately filed for bankruptcy in 2012.
What can we learn from Kodak’s failure? Companies need to be willing to anticipate changes in the market and invest in new technologies that have the potential to disrupt their business models. Companies that fail to see the future risk becoming obsolete and losing market share to more forward-thinking competitors.
Maintaining “status quo” can no longer be the goal
In the 1970s and 1980s “maintaining status quo” was a goal that many businesses aimed to achieve. To get to a place where revenue was recurring, systems and processes were optimized and unchanging, and the company could coast.
Since the “latch key generation” started disrupting business with technology in the 1990s, maintaining status quo has become a losing proposition.
Companies today need to be aware of social changes, technology changes, and market changes. They need to adapt, innovate, and see the future in order to survive.
Otherwise, they might just find themselves riding a dead horse.