There are many established companies in different sectors that have built a successful brand name for themselves – think Johnson and Johnson, Apple, Tim Hortons, Microsoft, Procter & Gamble and Walmart. Their products are recognized by the masses and there is a lot of media attention devoted to the technology-oriented corporations (ie. the buzz surrounding Apple’s iPhone 5 launch). However, despite their strong balance sheet and access to best resources that money can buy, some companies come out with products that turn out to be damp squibs.
If only the timing was better…
A (nearly) good product could still fail if it was released without being ready for prime time action. Apple has been a pioneer in the technology industry but it has had its share of failures. Apple released the Newton MessagePad, a personal digital assistant (PDA), in the 1990s for a price of ~$700 (at that time). The PDA was marketed as a tool with excellent handwriting recognition capabilities but the performance did not meet the claims and hype. Consequently, consumers voted with their wallet and Apple pulled the plug on the project.
Improving a product that was already perfect (to consumers)
Almost every corporation is big on continuous improvement, operations excellence, Lean manufacturing, and product development. However, when thriving companies look for avenues to grow, they sometimes end up with a flop story. The Coca Cola and Pepsi rivalry is well-known and the 1980s were no different. Coca Cola released New Coke to combat Pepsi’s popularity but realized a little too late that consumers preferred the tried and tested Coke. The reformulated drink did nothing to alter consumer taste and New Coke was shelved.
Drifting away from their core business
As the saying goes, sometimes, it is better to “leave it to the experts”. Xerox Corporation is an established name in the document management field selling all-in-one/multi-function units/machines that take care of printing, copying, scanning, and faxing. They also offer consulting services to businesses. In 1981, Xerox launched Star, which was an information system similar to the modern-day personal computer to compete with IBM. Nevertheless, despite some pioneering work and laying the foundation for technologies that are part of today’s personal computer, the Star never shone bright enough.
Confusing consumers with poor brand extension
An example of wasting a good brand name on unwanted products can be found in Colgate’s Kitchen Entrées. Colgate has been associated with toothpaste for a long time and the company is successful in that line. Nonetheless, the company decided to take advantage of its strong brand name and get into foods. Buyers were not thrilled with the idea of Colgate taking care of their meals and dental hygiene and the product, rather unsurprisingly, died soon.
Getting associated with the wrong partner
In personal finance, a partner who has different goals and not on board with budgeting and saving can drag a relationship downhill soon. Corporations are no different and merging with a company with different philosophies can become disastrous. In 1998, Daimler Benz, the German manufacturer of Mercedes-Benz and Maybach, merged with Chrysler, a US company, to form Daimler Chrysler. The deal was aimed to create a trans-Atlantic auto behemoth but within 10 years, Daimler sold Chrysler to cut losses. The corporate culture of a high-end manufacturer like Daimler did not work well with Chrysler’s and the end was a logical conclusion.
Can you think of other diversification/branching out examples that failed? Have you worked for a company at a time when it launched a product that failed? If so, do you think it was due to one or more of the reasons mentioned above or was it something not discussed?
About the Author: Clark works in Saskatchewan and has been working to build his (DIY) investment portfolio, structured for an early retirement. He loves reading (and using the lessons learned) about personal finance, technology and minimalism. You can read his other articles here.-> If you would like to read more articles like this, you can sign up for my free newsletter service below (we will not spam you).