1 December 2015
Ever since people have traded chickens for cabbages, there have been mistakes in business. But there’s a pretty big consensus that you actually learn more from your failures than your successes. Many successful entrepreneurs had their own disasters along the way to the top, with Henry Ford himself famously saying: “Failure is simply the opportunity to begin again.”
So what lessons can we learn from some of the world’s classic business disasters?
1. Keep an open mind
By all means have an opinion, but don’t assume yours is necessarily the right one. In 1962, Decca Records famously turned down The Beatles with the infamous comment: “Guitar groups are on the way out.” While the name of the unfortunate Decca rep is open to debate, The Fab Four quickly became stratospheric. Decca’s very rapid U-turn on guitar bands saw them sign The Rolling Stones shortly after.
2. Take a chance
In business, it can be tempting to play safe, do what you’ve always done and follow the well-trodden industry path. But sticking your head above the parapet and taking a chance can reap big rewards.
When jobless, single mother Joanne Rowling hit upon the idea of a young boy attending a school for wizards, she was turned down by 12 publishing houses. Bloomsbury took a chance on the aspiring author after the eight-year-old daughter of Bloomsbury’s chairman demanded to know what happened next after reading the manuscript of the first chapter.
The Harry Potter effect transformed Bloomsbury - whose share value of £9m in 1994 increased to £140m by 2001. And not only did the company also get a share of the revenue from eight blockbuster films, new illustrated editions of the boy wizard’s adventures are again driving sales - almost 20 years after their first publication.
3. Listen to your customers
Many businesses can come unstuck by pushing through unwelcome changes - regardless of the effect on their customers. It’s almost as if some companies see customers as an inconvenience rather than the actual life-blood of any business.
In the mid-80s, soft drink giant Coca-Cola reformulated their iconic staple after their market share dropped, believing that customers preferred the sweeter taste of huge rivals Pepsi. The public’s reaction to New Coke was so venomous that the company reintroduced the old formula as Coca-Cola Classic within months.
4. Innovate rather than replicate
It’s said that imitation is the sincerest form of flattery - though anyone who’s seen the 1992 film Single White Female may disagree. While it’s always sound business sense to keep an eye on what your peers are doing, jumping on a successful bandwagon marks you out as a follower rather than a leader.
In an interview with The Wall Street Journal, ex-Nokia Chief Designer, Frank Nuovo revealed that almost a decade before Apple launched the iPhone, Nokia had a prototype smartphone complete with colour screen. A demonstration showed the device finding a restaurant, ordering cosmetics and playing a video game. To add insult to injury, in the late 90s, the company also developed a tablet with a touch screen and wireless connection. The gadgets were never acted upon by the seemingly risk-averse company and the more agile Apple subsequently swept through the market like a petrol-fed forest fire.
5. Don’t be a dinosaur
The trouble with being a dinosaur is the tendency to be extinct - unless you have the wherewithal to evolve. Kodak came up with a version of the digital camera as early as the mid-70s - even filing a patent for their new invention. But the then market-leading company made so much income from the sales of film, it decided against making the technology available to the general public.
Fatally, Kodak stuck to its guns even when the writing was on the wall for film and the average snapper switched to digital. By the time Kodak got with the programme, they were so far behind the new digital specialists, there were unable to recover and the company eventually filed for bankruptcy in 2012.
6. Talk to colleagues
If you’ve ever spent time beavering away on a project or idea, only to find that someone else in the business has been doing exactly the same thing, you’ll understand the frustration that comes with the realisation that you’ve just wasted a whole lot of time and possibly money. Good communication with colleagues and managers, both from the top down and bottom up, are paramount to an aligned strategy and consistent customer service.
So spare a thought for poor NASA, who in 1999 had two teams working on a Mars orbiter. Unfortunately, one was working to the metric system of measurements while the other laboured away in English imperial. The result? The orbiter was lost in space following problems with navigational communications and NASA was out of pocket to the tune of around $125m.
7. Be compliant and understand the regulations
The financial services industry is understandably highly-regulated to protect customers and their money and promote effective competition. Yet, some regulated firms may not consistently meet all of the required standards which can prove to be an expensive mistake.
Take Stratton Oakmont. Jordan Belfort’s company routinely manipulated stocks and were the subject of numerous disciplinary actions brought by the regulators. The company was eventually shut down in 1998, while Belfort and a colleague were prosecuted for securities fraud and money laundering. On the plus side, Belfort was portrayed by none other than Leonardo Di Caprio in The Wolf of Wall Street - Hollywood’s take on the events that meant misery for investors.
While big companies and multi-million pound fines understandably grab the attention of the media, a glance at the FCA’s website shows a whole host of individuals and smaller firms falling foul of the FCA’s Statements of Principle and Code of Practice. Even if the company is able to absorb the loss of what is often a five or six-figure fine, the reputational damage - especially in the ultra-competitive smaller market - may be a bridge too far for customers.