10 June 2010

The differing problems facing BP and BA set me thinking about how some household names were destroyed by a combination of lack of planning, staff unrest, poor strategy or marketing that went wrong. It is surprising how many examples there are when you start thinking about it. My list would include:

Ratners This must be the classic example of the wrong thing said at the wrong time to the wrong audience. Who could have guessed that a poor joke contained in a speech to the Institute of Directors in 1991 would bring down a high street giant? Cracks about a decanter being “total crap” and earrings lasting less time than an M&S prawn sandwich wiped £500m from the worth of Ratners. Where Ratners had previously cornered an important segment of the market at a stroke no-one wanted to be seen wearing their products and the company never recovered. Gerald Ratner has the dubious honour of being remembered as a man who destroyed a company rather than a great entrepreneur who built one. A lesson for everyone running a business not to dismiss your own product.

Enron A major player originally in the energy sector brought down by perhaps the worst case of corporate mismanagement ever seen. Diversification is generally a good thing but Enron moved into a huge range of sectors which it knew little about and then rather than managing it even with a modicum of ability it hid problems with a labyrinth of insider deals, associated companies etc and went from a $60billion company to bankruptcy in a heartbeat. This is a classic case of fraud, bad practice and incompetency which will hopefully never be repeated on this scale again.

DeLorean A favourite of mine because it exposed the soft underbelly of government support for big industry. Four years only 6000 cars sold and it went bust in spectacular fashion having consumed vast amounts of taxpayers money. Fraud was of course a major part of this but it should be a case study for any government looking to “bribe” companies to set up in a particular location.

Most dotcoms Our very own South Sea Bubble when the combined intelligence of the market was lost in a rush to enter a new unknown market. The number of massive failures is long but includes notable scalps such as Boo and Flooz. Technology advance is wonderful but normal investment rules should apply!

Hoover flights What idiot thought up the idea to give away a free gift worth more than the product being purchased – and worse what idiots agreed to run with it?! Spend a £100 on a Hoover and get a free flight anywhere in the world – it is thought to have cost the company £50m, its royal warrant and its independence. A juicy case of marketing gone mad.

Betamax I cannot decide if this is a technology or marketing failure. This was a product which was superior to its VHS competitor but lost out big time. Some say because VHS could record up to 4 hours on a tape whilst Betamax could only record 1 hour (a major flaw) whilst others accuse Sony of losing out to a worldwide marketing campaign. Either way Betamax is a footnote in technology advance but a good lesson that engineering on its own does not a good product make.

Swissair Perhaps the best case study there is about pursuing an overambitious expansion programme without due diligence. For 60 years one of the worlds best run airlines producing annual profits it embarked on an expansion programme (allegedly after advice from consultants) without targetting its takeovers and putting market share over profitability. It got the share but was saddled with huge losses and a lack of cash flow and within 10 years it folded.

There are many more examples but these should act as valuable lessons for businesses. I would like to think that we would see less failures as we go forward but I can spy the warning signs in several household names and expect to see a few more “staples” such as Woolworths disappearing from view over the coming years. Strategy and effective delivery is key and some companies suffer from a lack of both and will be found out.

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