15 Famous Businesses That Failed Due To Lack Of Innovation
Table of Content
Innovation as they say is the backbone of every business’s growth.
Lack of Innovation can quickly lead to a company being left with products that have no market need or companies that get outcompeted by their competitors.
Now, No Market Need and Get outcompete are 2 of the 3 reasons for the failures of companis and startups (source: CBInsights).
In this blog, we look at 15 major businesses that failed due to lack of innovation.
The blog again is an effort from our side to help all the budding entrepreneurs prepare better for the risks that entrepreneurship involves and learn from the mistakes some major companies have made in the past.
So without further adieu, let’s head to the List of Famous Businesses that Failed Due To Lack of Innovation, which includes names such as Blackberry, MySpace, and Blockbuster.
Blockbuster
Started: October 19, 1985, Dallas, Texas, United States
Closed: 2014
Founder: Wayne Huizenga, David Cook
Industry: Entertainment
Reasons For Failure:
- Poor execution
- Failed Attempts At Innovating
- The Wrong Decisions
- Blockbuster’s pricing and product strategy
- Ignoring what the customers really wanted
- Poor leadership
The BlockBuster Story!
Blockbuster, a company established in the 80s, was a market leader in the home movie and video game rental business.
The company’s primary source of revenue was in-store video rentals. However, they also offered other services like sending DVD-by-mail, video on demand, etc.
Blockbuster was started by David Cook, an entrepreneur who came from the software business where his company offered IT services to Texas-based oil and gas industries.
After the success of his first blockbuster store in 1985, Cook established three more stores in the same year.
By the mid-’90s, Blockbuster hit a significant milestone when it opened its 1,000th store.
In the late 90s, BlockBuster was not just another video rental store in the US – It was a successful video rental business with 9,000 US-based video rental stores. At its peak, the company employed 84,000 people worldwide.
The company also boasted of 65 million registered customers using its service.
However, the company could not sustain its business model.
Within a decade of being a super successful chain, it turned into a debt-laden company with USD 900 Million in debt and filed for bankruptcy. (Source: Business Insider)
What led to the Failure of Blockbuster?
Poor leadership and the inability to innovate and move from the ‘brick and motor’ model to the online streaming model cost Blockbuster dearly.
Despite being bought by Viacom in an $ 8.4 billion deal in 1994, the company had to file for bankruptcy in the 2000s.
“I sold Blockbuster because I saw what was coming: the satellite dish, technology that would make the business obsolete in a few years. Why would people go to a store for a video and then have to return it when they had a dish?” –Wayne Huizenga – (Source: Brainy Quote)
Enron
Started: July 1985, Omaha, Nebraska, United States
Closed: November 2004
Founder: Kenneth Lay
Industry: Energy
Reasons for failure:
- Poor Management Practices
- Poor Businesses Bets
- Poor Leadership
The Enron Story!
In 1985, Enron was established by Kenneth Lay.
The company was formed because of a merger between Lay’s Houston Natural Gas and InterNorth – two small companies.
The energy giant started by trading in energy derivatives markets. Enron, at its peak, was worth about $70 billion, its shares trading for about $90 each.
The collapse of Enron, which held more than $60 billion in assets, involved one of the most prominent bankruptcy filings in the history of the United States.
It generated much debate and legislation designed to improve accounting standards and practices, with long-lasting repercussions in the financial world.
However, the company lost its market value when it accepted that it had hidden trading losses and manipulated its balance sheets. Thereby misstating its income and equity value. (Source: Legacy)
Along with them went Arthur Andersen LLP, one of the biggest bookkeeping companies in the USA.
They were found to have cooked the balance sheets for Enron.
Enron also holds the dubious distinction of being the company that filed one of the largest bankruptcy in the USA.
Their departure led to a long-lasting impact on the world’s financial industry.
What led to the failure of Enron?
Fraudulent practices, a toxic work culture that incentivized profits over company values and bad business bets are some of the reasons that led to the failure of Enron.
“I take responsibility for what happened at Enron, both good and bad. But I cannot take responsibility for criminal conduct that I was unaware of.” – Kenneth Lay – (Source: Az Quotes)
BlackBerry
Started: March 7, 1984, Waterloo, Canada
Closed: January 4, 2022
Founder: Mike Lazaridis and Douglas Fregin
Industry: Mobile Phone Manufacturing
Reasons for failure:
- Failure to Adapt
- Ignoring Its Competition and Losing Its Core Market
- The BlackBerry Operating System
- Lack Of Innovation
The Blackberry Story!
Established in 1984 as Research In Motion by Mike Lazaridis and Douglas Fregin, BlackBerry, the business mobile phone specialist company, was the market leader in the business mobile space in the early 2000s.
The company was known for delivering phones that had secure communication and helped with productivity.
At its peak, Blackberry was unmatched in the business phone space. They literally had a market share of over 50% in the US and around 20% of the global smartphone market.
Blackberry almost sold 50 million devices in a year, and its stock price was over $230. (Source: Digital)
What led to the downfall?
Despite being one of the leading smartphone companies (sort of a pioneer), the company failed to innovate and keep up with the changing times.
Their failure reminds me of a business that did not transfer their business from spreadsheets to the latest business tools like A Small Business CRM and lost clients in heaps, eventually closing because they could not keep up with the latest technology trends.
They were soon replaced by Android and Apple phones.
“You have to build an industry. You have to be very nimble, and you have to be connected to your customers, and that can’t be done with just one company“ — Mike Lazaridis – (Source: Quote Park)
Kodak
Started: 1888, Rochester, New York, United States
Closed: 2012
Founder: George Eastman
Industry: Technology
Reasons for failure:
- Failed to reinvent itself
- Did not improve based on customer feedback
The Kodak Story!
Kodak, popularly referred to as the innovator of photography, was started in 1888 by George Eastman.
The company famous for its slogan “you press the button, we do the rest” helped uncomplicate the process of photography by delivering cameras that everyone could use.
Before I move to take you through the peak glory days of Kodak – here is an essential piece of Kodak history that you must know
In 1932, George Eastman, the enigmatic founder of Kodasuffers from a painful spinal disorder.
After the incident, George committed suicide and left a note that said, “My work is done. Why wait?”
Moving from sadness to some positive stuff.
At the peak of its day (the year 1996), Kodak nearly had over two-thirds of the global market share with a revenue of $16 billion and a stock price exceeding $90
The company was estimated to be worth over $31 billion.
And that wasn’t all.
The Kodak brand was recognized as the fifth most valuable brand globally. (Source: Photo Secrets)
What led to the failure of Kodak?
the technology advancements and innovations moved the market from films and printing sheets to digital cameras.
While the camera world moved, Kodak refused to budge (innovate) and move with the times. Thereby falling behind in a market where it was the market leader for the longest time.
“The world is moving, and a company that contents itself with present accomplishments soon falls behind.” – George Eastman – (Source: Brainy Quote)
Sears
Started: 1892, Chicago, Illinois, United States
Closed: 2018
Founder: Richard W.
Industry: Retail
Reasons for failure:
- Failed to innovate
- Too many missed opportunities
The Sears Story!
Richard W. Sears started one of the largest and leading retailers of the twentieth century in 1892 in Chicago, USA.
Sears was famous for selling household goods, hardware, and clothing. As an additional service, Sears also offered automobile repairs.
In 1999 Sears entered the internet world with the online website Sears.com.
At its peak (1996), Sears combined company profits were approx. $1.5 billion.
However, things went downhill for this American brand after that.
By 2010, the company went into the red, and between 2011 to 2016, the company lost $10.4 billion. (Source: Investopedia)
What led to the failure of Sears?
A negative investment cycle and the inability to invest online led to the failure of this prominent company.
“I worked at Sears in the Woodfield Mall as a gift wrapper. I’m actually a great gift wrapper, and the customers were so nice to me. I was only 16, and eventually, Sears put me in customer service because I was so friendly” – Sherri Shepherd (Source: Quote master)
Pan-Am
Started: March 14, 1927, Key West, Florida, United States
Closed: December 4, 1991
Founder: Juan Trippe
Industry: Transport
Reasons for failure:
- Failed to innovate
- Could not keep up with the rising fuel cost
The Panam Story!
Started by Juan Terry Trippe, an American commercial aviation pioneer in 1927, Pan American World Airways, aka Pan Am, was the leading international air carrier in the USA.
Famous for its slogan, the “World’s Most Experienced Airline,” when the company was at its peak (1966) – It carried 6.7 million passengers.
By 1968, PanAm comprised 150 jets that flew to 86 countries on every continent, and the company was highly profitable, with cash reserves of almost $1 billion. (Source: Wikipedia)
What led to the failure of Pan-Am?
Going back to the 197s, the rising fuel cost and low supply led to the fuel barrel price going up from $3/barrel to $12/barrel.
The sudden spike in the fuel prices followed by the economic stagnation impacted Pan-Am adversely.
In January 1991, Pan-Am filed for bankruptcy.
“Mass travel by air – made possible in the jet age – may prove to be more significant to world destiny than the atom bomb. For there can be no atom bomb potentially more powerful than the air tourist, charged with curiosity, enthusiasm, and goodwill, who can roam the four corner of the world, meeting in friendship and understanding the people of other nations and races” — President Pan Am Airways – (Source: Pinterest)
MySpace
Started: August 1, 2003
Closed: March 18, 2019
Founder: Chris DeWolfe, Tom Anderson, Jon Hart
Industry: Social networking service
Reasons for failure:
- Lack of loyalty to its users
- Lack of innovation
- Too many advertisements on the portal
Myspace Story!
In 2003, Thomas Anderson, along with Chris DeWolfe, started the social networking website Myspace.
In 2005, the website had 25 million registered users and was ranked the fifth popular site in the United States.
The same year, NewsCorp acquired Myspace and tried merging it with Yahoo!.
At the peak, MySpace’s registered users were over 75 million users a month, and Myspace was valued at $12 billion. (Source: Screen Rant))
What led to the failure of Myspace?
Legal troubles – the website was found to have thousands of sex offenders and was sued by eight public offenders (source: productmint) mismanagement of funds and some good competition from websites like Facebook led to the closure of MySpace.
“Remember all of the ‘me too’ social networks built just to have a social feature Facebook and MySpace didn’t have? I built one for political discussion called Essembly. It enabled unique and potentially transformative social interactions, but only 20,000 people ever used it” – Joe Green — (Source: Quote State)
Polaroid
Started: 1937, Cambridge, Massachusetts, United States
Closed: October 2001
Founder: Edwin H. Land
Industry: Film and cameras
Reasons for failure:
- Misguided business model
- Fear of being innovators in their field
The Polaroid Story!
In 1937, Polaroid was started by Edwin H. Land, who was famous for inventing instant photography (instant films and cameras).
In 1960, the company launched the first automatics exposure camera (900) and expanded to Japan.
At the peak of its journey(1991), Polaroid employed 21,000 employees and had approx. $3 billion revenue. (Source: Wikipedia)
What Led to Polaroid’s Failure?
Complacency and inability to innovate cost Polaroid dearly. It was a pure strategic mistake when they ignored digital technologies capturing their core business.
“Polaroid, you know, goes against everything that photography is now. You can`t make multiples. Only one exists. I love that. By the way, while we`ve been talking I`ve now seen a total of three people I know walking on 8th street.” – Laurel Nakadate — (Source: Wise Sayings)
Xerox
Started: April 18, 1906, Rochester, New York, United States
Closed: 2009
Founder: Joseph C. Wilson
Industry: Information technology
Reasons for failure:
- Lack of Innovation
The Xerox Story!
Joseph C. Wilson, the enigmatic founder of Xerox, established the company in 1906. The company was famous for its innovation methods (in initial years), where it launched the plain-paper copiers.
In the year 1970, Xerox established Palo Alto Research Center in Palo Alto, California, to create “The Office of the Future.”
Why did Xerox Fail?
The biggest reason for the downfall of Xerox was overestimating its products.
The decline started in 1981 when they launched Xerox Star for a whopping $16,000. The competition (IBM PC) was selling for $1600 at that time.
Xerox was also a late starter in adopting technologies like mount technology to its circuit board. Also, they did not focus on some of the innovations of that time, like fax machines, etc.
“When I became CEO of Xerox 10 years ago, the company’s situation was dire. Debt was mounting, the stock sinking and bankers were calling. People urged me to declare bankruptcy, but I felt personally responsible for tens of thousands of employees” – Anne M. Mulcahy — (Source: Brainy Quote)
Toys R us
Started: June 1957, Washington, D.C., United States
Closed: June 29, 2018
Founder: Charles Lazarus
Industry: Retail
Reasons for failure:
- Failure to adapt and innovate
- Competing on price alone
- The infamous Amazon Deal
The Toys R us story!
Toys R Us, A US-based brand, was established in 1948 by Charles Lazarus – world war 2 veterans.
The company became famous for using famous personalities like the NBA Hall of Famer Magic Johnson for its promotional events.
In the 1990s, when the company was at the top of its game – Toys R Us had 1,400 stores and controlled 25 percent of the global toy market.
By 2017, Toys R us was listed as the 22nd largest private company with $11.5 billion in sales, (Source: nypost)
Why did Toys R Us Fail?
The inability The growth of eCommerce and amazon squeezed the toy market leader out of the market. They failed to keep up with the online shopping growth and paid the price for that.
One time my mom tried to send me to my room for a time-out when I was 5 or 6, and I was like, “Fine! I like my room! All my imagination and toys are in my room!” I will never forget that. And she will never forget that”. – Elizabeth Olsen (Source: Quote Stats)
Borders
Started: December 10, 1971, Ann Arbor, Michigan, United States
Closed: 1971
Founder: Louis Borders, Tom Borders
Industry: Retails
Reasons for failure:
- Too late to catch up on the internet bus (website, e-books)
- Bad Business decisions
- Too much debt
The Borders Story!
In 1971 Borders was started by Louis and Tom Borders. It was a used bookstore in Ann Arbor, Michigan.
By 1991, Borders forayed into new service lines like integrating music and movies in a few of its stores.
The company’s at its peak (1994) reached a turnover of the sales number of $ 1.5 billion.
The success was also attributed to the company’s company’s advanced inventory and sales management solution and the highest sales-per-foot ratio the company had amongst its competitors. (Source: Reference for business)
What led to Border’s Failure?
The overhead cost and long-term leases (15 to 20 years) and aggressive expansion strategy, led to the company filing for bankruptcy in February 2011.
“A bookstore is a place densely populated with tens of thousands of authors, dead or living, residing side by side. But books are quiet. They remain dead silent until somebody flips open a page. Only then so they spill out their stories, calmly and thoroughly, just enough at a time for me to handle.”
― Won-pyung Sohn, Almond – (Source: Good Reads)
Pets[dot]com
![Pets[dot]com - Failed businesses due to lack of innovation - Lessonsatstartup](https://eqi57ieuhyf.exactdn.com/wp-content/uploads/2022/02/Petsdotcom.jpg?strip=all&lossy=1&resize=768%2C512&ssl=1 "15 Famous Businesses that Failed Due To Lack of Innovation 12")
Started: November 1998
Closed: November 9, 2000
Founder: Greg McLemore, Eva Woodsmall
Industry: Online Retail
Reasons for failure:
- Flawed business model
- Pets.com was probably too early to the market
- Unsuitable business plan and excessive spending
- Poor understanding of target audience
- A lack of technology
The Pets.com story!
Greg McLemore and Eva Woodsmall started pets.com, an e-commerce store for pet supplies, in August 1998.
The company gained popularity through its mascot, a sock puppet dog created by TBWA Worldwide and voiced by comedian Michael Ian Black.
Before the company shut down, it had around 570,000 registered paying users. It employed 320 employees across the United States. (Source: Wikipedia)
What led to the downfall?
A typical e-commerce failure model where the company sold the products at a loss to outcompete or kill the competition.
The company eventually ran out of money to fuel the ‘loss-making’ model and filed for liquidation in Feb 2000.
At the time of the liquidation announcement, the company’s stock dropped from $11 to $0.19.
CEO Julie Wainright said in a statement,”It is well known that this is a very, very difficult environment for business-to-consumer Internet companies. With no better offers and avenues effectively exhausted, we felt that the best option was an orderly wind-down with the objective to try to return something to the shareholders.”
Compaq
Started: February 16, 1982
Closed: 2002
Founder: Rod Canion, Jim Harris, Bill Murto
Industry: Technology
Reasons for failure:
The DEC merger
Demotivated staff
Poor-quality products
The Compaq Story!
It all started in 1981 when, Rod Canion, Jim Harris & Bill Murto decided to start a tech company that could build portable PCs and challenges IBM’s dominance in the portable PC market.
By the late 1980s and 90s, Compaq had grown to be the world’s best-selling personal computer brand.
In 1983, Compaq went public on the NYSE and raised $67 million.
The money raised was further utilized to fuel the company’s growth – helping the company record sales of $329 million from 150,000 PCs In 1986.
Compaq’s success made it the youngest-ever firm to make the Fortune 500.
Growing from strength to strength, by 1987, Compaq hit the $1 billion revenue mark and again – took the least time amongst its peers and competitors to reach this landmark (Source: Wikipedia)
CbY 1994, the company was one of the leading players in its market and gained attention from bigger rivals. Xerox, in 1994, acquired the company’s printer division for 50 million dollars.
What led to Compaq’s failure?
The wrong acquisition, overconfidence, and finally, the merger with DEC whose chips were not compatible with Compaq were some of the reasons for compaq’s failure.
The final nail in the coffin was ‘unrealistic sales targets’ which led to the sales teams over-selling the product without any support for after-service.
Lastly, intel made the whole pc manufacturing space a level playing field—Thereby, leading to the demise of premium PC manufacturers like Compaq.
Carli Fiorina says companies are consolidating because it’s the only way to compete with a big, corrupt government. “This is how socialism starts.” Is that also why she bought Compaq when she was CEO of Hewlett-Packard? – Kevin Drum (Source: Quote Stats)
Segway
Started: July 1999
Closed: 2020
Founder: Dean Kamen
Industry: Personal transporters and robotics
Reasons for failure:
- No clear target market
- It was expensive
- It was a product rather than a solution
- Technological limitations
The Segway Story!
Founded by Dean Kamen, Segway is a two-wheeled, self-balancing personal transporter. The company caught everyone’s attention when ex-US President George W. Bush took the vehicle for a ride and fell 🙂 at his family property.
In 2020, Segway touched $22.5M in revenue. (Source: Zippia)
What led to Segway’s failure?
Despite all the hype and hoopla around its innovation, Segway was a ‘Dangerous’ Vehicle.
It also failed because it never improved the product and refused to listen to the market feedback/
The inventor of the Segway, Dean Kamen, said:
“I believe the Segway HT will do for walking, what the calculator did for pad and pencil. Get there quicker. You’ll go further.” – (Source: Better Marketing)
Netscape
Started: April 4, 1994
Closed: 2003
Founder: Marc Andreessen, James H. Clark
Industry: Internet, software, & telecommunication
Reasons for failure:
Netscape Navigator was not free
Product Strategy Mistake
Poor Product Planning
Microsoft’s IE
The Netspace Story!
In the 1990s, Netscape was famous for its web browsers Navigator. The company was established under the name of Mosaic Communications Corporation on April 4, 1994, by Jim Clark.
Marc Andreessen joined Clark as co-founder and Kleiner Perkins as an investor.
AOL acquired Netscape Communications for $4.2 billion in 1998.
Eventually, the company went public, with the Netscape going as high as $74.75 per share before closing at $58.25. The closing price put the company’s evaluation of the web browser at around $3 billion. (Source: Benzinga)
By the end of 1995, Netscape‘s share was trading at $174.
What led to Netspac’s failure?
Blame it on Microsoft.
Cough-2 – I mean Internet Explorer, which I am sure is blaming google chrome at present for losing its market dominance 😉
By the way, another reason for the failure of Netscape was its journey from 3.0 to 6.0, which took three years of development.
The competitors had enough time to capture the market by then, and the share price had hit rock bottom.
“The professors argued that Netscape courted disaster from the start, by taunting Microsoft. Mooning the Giant” — Michael Lewis – (Source: Wise famous quotes)
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this perhaps one of the well documented educative piece I have seen and read.
Thanks, Mercy. I am glad you find it useful.
thanks for this very educative piece.