However, sometimes you have to look at the failures before you truly learn something. So sit back and read some stories about blunders and flops.
This has become one of the top textbook references for failed mergers. In the early 2000s Time
Warner was one of the powerhouses in global ‘traditional media’. AOL had grown to become the largest internet portal in the US with 35 million users.
Then, both got the idea that merging the old with the new would mean big success for both. That new success had its price tag and in 2002 the largest merger in American corporate history was estimated at $350bn (€320bn).
The merger was based on the premise that AOL’s growth would largely be underpinned by advertising revenue. Soon after the merger the dotcom bubble burst and AOL went into freefall.
The merger soon became cancerous to both companies, $100bn was wiped from the stocks. So what happened to AOL? It got spun off as a Time Warner company towards the end of the decade. In researching this article I went to AOL for the first time in about 17 years. You can still use it to search for content on the internet, but the symbol to the right of search denotes that it is ‘powered by Google’.
By the time the 1970s came along Kodak was the ultimate name in film. In the early 70s one of their engineers, Steve Sasson, developed a new technology called charged-couple devices. They would eventually turn into what we now know as digital cameras. What he discovered was that a sensor could turn light into binary code which could then produce a digital image
Kodak invested billions into the new technology. However, it delayed the release of it onto the market, not wanting to give up on the lucrative film market it had built. Kodak would turn to digital by the late 90s, but by then it was too late.
In 2012 it laid off 50,000 employees and filed for chapter 11 bankruptcy in the US. Now it makes print cartridges and maintains a presence in the movie industry by supplying moviemakers with film.
Letting go of something can be hard. However,as many great innovators have shown, you don’t reinvent the wheel, just make it better.
This is true in the case of Henry Ford and the Ford Motor Company. Ford had been creating and selling cars since the early 1900s and each model it released took the order of the letter of the alphabet.
However, it was the Model T which would change the fortunes of the company. Contrary to popular belief Ford did not invent the assembly line (meat packers in Chicago get that accolade), but he was the first to streamline it for the car industry. By 1920 the company was churning out over one million cars a year. In the end it was its own downfall.
For 15 years it was the only car it produced and other car manufacturers were catching up. Henry Ford refused to release new models, going so far as to take a suggested new model apart piece by piece on the factory floor.
The damage was done and Ford’s popularity dropped. Carmakers like Chevrolet and the Detroit Motor Company had produced more powerful and quicker cars to suit America’s growing network of paved roads. Ford would never dominate the market again.
In the 1980s Ratners was the name in British main street jewellery retailing. It had over 1,500 stores in the UK and 1,000 in the US. At helm was Gerald Ratner who had brought the company from losses of over £300,000 (€400,000m) to profits of over £125m. In 1991 he was caught confessing that his stores sold ‘total crap’.
The comment instantly caught the headlines and media went to town. The share price of the company plummeted and Ratner was forced from board. The situation became so bad Ratners had to rebrand and change its name. In 2014 the company was in the red for well over £100m and announced plans to shut over 330 shops across in network. The company now intends to pursue a more ‘up market’ jewellery strategy.
After being rejected by some of the top publishing houses in the UK, JK Rowling must have thought that it just wasn’t going to happen. However, those rejections were soon to turn into big losses for the publishing houses that said no. When the daughter of a Bloomsbury Press executive asked to read more of few pages she had read of a book called Harry Potter it seems there may have been more to this book. There was and Harry Potter has made Rowling a billionaire as well huge book sales, merchandising, movie blockbusters and has been translated into nearly 70 languages.
The one that brought down the whole house of cards. In the early hours of September 8, 2008, Lehmann Brothers Bank filed for bankruptcy in New York. The bank cited debts of over $600bn in what was one of the biggest bankruptcies in history.
Lehmanns Bank was an investment bank and as such did not operate inside the same rules as ordinary high street banks. Exposure to the mortgage market was heavy and eventually when the system collapsed, so did Lehmanns. Just before the collapse, executives at Neuberger Berman sent email memos suggesting the company forego bonuses to “send a strong message to both employees and investors that management is not shirking accountability for recent performances”.
Investment management director, George Herbert Walker, dismissed the proposal. He even went so far as to apologise for to other members of the executive. He wrote to them saying: “Sorry team. I am not sure what’s in the water at Neuberger Berman. I’m embarrassed and I apologise.”
In business you may never get it right, but sometimes it’s important to consider all possibilities before you reject an idea.