The financial fear factor is back!
- Spacecraft lost in translation
It’s said that Britain and America are separated by a common language and a mathematical mix-up over a Mars lander proves the point.
In 1999, NASA’s Mars Climate Orbiter burned up on entry to the Martian atmosphere because engineers failed to convert English units into American metric. So while the system controlling the thrusters had correctly calculated the force required in pounds, another piece of software assumed that the numbers were in newtons.
The orbiter, which cost $125m, taught them the importance of communication, double checking critical data and never assuming that every check has been made.
- Off to Meerkat
Meerkat was the first live video streaming app to make use of the Twitter and Facebook platforms. Launching in 2015, it was an initial hit as people and celebrities realised they could broadcast on both channels simultaneously and became a hit quickly.
Sadly, Twitter and Facebook developed their own streaming functions (Periscope and Facebook Live) which crippled the fledgling app. It might have been able to successfully pivot to another niche but it had burned through most of the investment and capital it received from backers by giving it to celebrities and influencers for their endorsement rather than investing it in the product.
The lesson is always preparing for a rainy day and never assume that the good times will last forever.
- Say Cheese!
For over 100 years, Kodak was synonymous with photography. Founded in New York in 1880, the company commanded over 85% of the market for cameras and film by the 1970s.
It was also around this time that one of their R&D engineers was playing with a toy called a charge-coupled device (CCD). He worked out that it could translate light into binary code and built a prototype digital camera box that could produce a 100,000 pixel image or 0.01 megapixels in today’s money.
The company started exploring the potential of the device and invested a lot of time and money in development but conservative forces within the company baulked at the idea of abandoning its traditional markets of film and paper where it was still dominant and by the time they shifted to digital in the late 1990s, it was too late. Kodak eventually filed for bankruptcy in 2012 and dropped its digital camera line entirely now focusing on manufacturing printer cartridges and motion picture film.
The lesson is to always keep an eye on the next development and future innovation in your field. What got you here might not get you there. Oh, and if you accidentally invent the digital camera, remember to tell someone about it.
- New Coke
Coca-Cola is the most popular soft drink in the world and had been for close to a hundred years. Invented by John Pemberton in Atlanta, GA in 1886, the original secret formula is still a closely guarded secret.
Spooked at losing market share amongst teenagers to arch-rivals Pepsi, the executives came up with a brilliant idea – ditch the familiar old formula for a sweeter new one closer to the taste of Pepsi.
New Coke premiered in 1985 but within days a huge outcry from fans gained ground with them wanting their old Coke back. The problem was that they ignored their huge base of traditional and loyal customers chasing a smaller demographic that already had a go-to product if they preferred sweetness, just one of the motivators for buying a soft drink.
Less than three months later, New Coke was replaced with Coca-Cola Classic (probably tested better than Old Coke) and an expensive lesson was learned before the whole company was ruined.
Market research and R&D is an important part of any business but as the old Russian proverb goes: “Trust, but verify”.
- Doing a Ratner
Ratners jewellers were a common site on every UK high street in the 1980s. A family-run jewellers business which built up a network of nearly 900 stores at their peak.
However a couple of offhand remarks at a gathering of business people and journalists lost company CEO and Chairman Gerald Ratner over a hundred million pounds in about thirty seconds flat.
He described being able to sell items at such a low price because “they were total crap.” He then doubled down saying that he sold a pair of earrings for under a pound which was cheaper than a shrimp sandwich from Marks and Spencer, but probably wouldn’t last as long.
Neither did his share price. All the journalists in the audience knew they had a front page story and once the remarks got a wider audience, the share price plummeted, over 300 stores closed, Mr Ratner resigned his position and ultimately the company had to jettison the family name and rebrand.
While he now gives talks on overcoming adversity, he would have been better advised to remember the old Yorkshire truism – “if in doubt, say nowt.”
We hope you’ve enjoyed this look at some spectacular business scares – but the most important lesson to heed is that all of them happened by surprise. Nobody in those companies expected that result to happen.
Thinking about your own company – how resilient would it be to a shock to the system that you didn’t see coming?
Contact us to arrange a free initial consultation with one of our expert advisors. It’s far easier to work on contingencies and fix small problems before they become terminal.