“We do not learn from experience...we learn from reflecting on experience.” ― John Dewey
For every inspired innovation or change in a sector, there is an opposing force that tries to maintain the status quo. It would be overly simplistic to believe that the path to success lies in one of these options. Often, the right path is somewhere in between - gradual, calculated, well considered change.
Equal and opposite forces create necessary balance and order. For every winner, there is a loser who fails to adapt and move with the times. These losers, with the benefit of hindsight, often evolve into inspired entrepreneurs that go on to create boundary-shifting businesses. Henry Ford failed twice at business before founding the Ford Motor Company, using the lessons he learned from his business failures to ensure his revolutionary motor company’s success.
Entrepreneurs have many places to go in their search for wisdom, but often, it is the unsexy stuff - failed products, failed expansion plans, and failed companies that offer the deepest reservoirs of business intelligence. In today's blog, I explore some real world cases where management, by not detecting and responding to market changes, or not capitalising on game-changing opportunity, have irreparably altered the fortunes of their business. Examples such as these bring entrepreneurial optimism back down to earth, helping us realise that even once great companies can lose their way.
Here are a few examples for you to reflect on:
Decca Records Pass On The Beatles
In 1961, a group of young Liverpudlian musicians earned a trial audition with Decca records in London. On News Year Day of ‘62, the band recorded several songs which were passed on to Decca board executives who quickly decided that the band would flop. Their manager was told that “guitar groups were on the way out” and they were quickly shown the door.
Little over a year later, the Beatles were on course to becoming the most popular band in the world, selling over 2 BILLION records world-wide in a career that spanned 50 years.
Lesson: Market test your audience before making your decision. Had Decca sufficiently studied the public's response to The Beatles, they could have u-turned on what turned out to be a very poor decision.
Google Fail to Excite
In 1999, Google founder Larry Page considered selling his business. The internet generation had birthed many overnight millionaires. He too was eager to make money from “the dot com bubble”, many thought that internet companies were being valued artificially high and that the internet was a passing fad which would eventually fade away.
Page met up with representatives from an internet portal called Excite who discussed and agreed a deal to buy Google for $750,000. The proposal was taken to the Khosla Ventures CEO (who financially backed Excite) who rejected the deal.
If Khosla Ventures had completed the deal, the $750,000 investment would now be worth $170 billion.
Lesson: Recognise a good deal when you see one. We will be guilty of this at some point in our business life, but there are ways to avoid this. At a time when the Information Age was accelerating at a rapid pace, a study of the volume of electronic data being produced year on year (and reasonable predictions of how this would multiply) may have led Khosla to decide that the search engine with the more sophisticated algorithm (Google) would eventually win the race.
Kodak Don’t Go Digital
In 1975, Kodak dominated the photographic-film industry with 89% of the market-share. That same year. an employee of the company named Steven Sasson invented the digital camera and presented it to the Kodak executives. The board was unimpressed by the invention and failed to see the benefit of looking at a photograph on a screen.
In 1996, Kodak was valued as one of the world’s most profitable company reaching annual revenues of $16 billion. Just 12 years later, their refusal to embrace their own invention would lead to their bankruptcy. The digital camera had taken over the world. Kodak was slow to change as all the other company’s prospered in the new digital generation.
Lesson: Back your own people. Every company has corporate types and entrepreneurial types (the intrapreneurs). Our intrapreneurs are on the front lines and often better placed to detect and respond to emerging trends than management or boards. They need to listened to, taken seriously, and invested in.
AOL: the Buying and Selling of Bebo
Bebo first launched in 2005 and soon became one of the most popular pre-cursers to Facebook, only playing second fiddle to MySpace as part of the first generation of social-networking websites. IT giants AOL bought the company for $850 million in 2008, a decision which eventually cost AOL CEO Randy Falco his job. AOL did little to improve the network and users flocked to superior services such as Twitter and Facebook. Just over a year later, Bebo was all but forgotten.
AOL announced they would disband the social network if they failed to find a buyer. Criterion Capital Partners (CCP) then agreed to purchase the platform for an undisclosed sum.
Bebo continued its stagnation under CCP before the original founder Michael Birch bought the site back for $1 million (he had sold for $850 million a few years previously).
He plans to re-launch the website next year.
Lesson: Even good ideas must be evolved. Acquisitions call for celebrations and champagne toasts. But the real hard work comes after the ink has dried. People need to gel, management needs to remain inspired, and the core business needs to keep evolving. Iteration and agility are the key success drivers in today's business world.
Failures always hold valuable lessons. They also bring about necessary economic churn - weeding out the flawed companies while ensuring the survival of the fitter ones. From failed businesses often emerge seasoned entrepreneurs, who statistically have a higher likelihood to strike gold on their second or third attempt. These "seasoned" entrepreneurs also develop a deeper knowledge of the complex business world - what hiring mistakes not to make, how not to respond to technological change, what remuneration structures fail to inspire etc.
In order to achieve balance in my life and develop a well-rounded perspective on business, I make it a point to reflect and meditate on my own failures and those of other entrepreneurs. We grow not through our successes but through genuinely thinking about and internalising our failures. We grow from "reflecting on our experiences" - wise words from a man who is widely credited as one of the founders of functional psychology.