Seven Companies That Failed to Innovate and What Happened to Them
Overview: Companies that fail to innovate can go out of business, yet there are even worse fates that can await them. These seven companies lost out on entering major new markets, got acquired by competitors, or accumulated billions on bad bets, all by failing to innovate or grasp the value of their innovations.
Xerox
Xerox was one of the pioneers of Silicon Valley, with its Palo Alto Research Center. Much of what we use today, from the “desktop” metaphor to the mouse to even the concept of a computer sitting on your desk, and using software, was pioneered at Xerox PARC.
So why isn’t Xerox up there with Microsoft and Apple? Because to the company, its main business was making physical documents. Xerox was, and remains, one of the biggest firms in printing and copying. And at the time, it didn’t see personal computing as a money maker. To give you an idea of what Xerox lost for failing to act on its innovations, as of this writing, Apple’s market value is $2 trillion, according to the Fortune 500, and Xerox’s is $4 billion.
National Geographic
Originally published by the National Geographic Society, National Geographic is one of the most widely read magazines of all time. Its photography and writing exposed many people around the world to a variety of different cultures.
And yet, that was also its Achilles heel. Most notably, the company was pitched on launching a documentary channel in the 1980s that it turned down, worried that it would lose its scientific bent to sensationalism. So those behind it instead launched Discovery, which currently enjoys streaming and cable success. It came to television in the 90s, but that was too little, too late; in the space of five years, NatGeo was sold twice and is now owned by Disney.
Circuit City
In the early 90s, Circuit City had the idea of applying its experience in retail, logistics, commercial real estate, and point of sale to used cars to create a national network of used car lots. Jokingly called “Honest Rick’s Used Cars,” after CEO Richard Sharp, the company finally settled on the name CarMax, opening the first lot in 1993 in Richmond, VA.
In 2002, Circuit City looked at the retail landscape, saw success in its future, and decided CarMax needed to be its own company. They spun it off, giving the shares it owned to Circuit City investors as a dividend. Seven years later, it went bust as failure to innovate meant companies like Amazon snapped up its customer base. CarMax, meanwhile, posted nearly $19 billion in revenue for its latest fiscal year.
The Concorde
In theory, getting where we want to go as fast and as luxuriously as possible is a winner. And the Concorde promised both. As the only supersonic jet available for public consumption, it was seemingly just a matter of time before it made even long flights as short as taking a ride to the mall.
Despite being in operation for thirty years flying between London, Paris, and New York, it didn’t happen. Curiously, it wasn’t because of the economics; the Concorde was profitable until close to its retirement. The problem was that it was loud, with the sonic boom startling passengers as it crossed the sound barrier. That meant it couldn’t be used except over open ocean, and the speed wasn’t so important to customers that they’d regularly pay a premium for it. The Concorde turned out to be a solution in search of a problem.
The XFL
Football has been among the top-rated TV programs for decades. So it seemingly made sense, in 2001, to create a second football league to offer people more football, differentiating itself from the NFL with different rules, scantier clad cheerleaders, and edgy names and logos.
The mistake in innovation was to assume that minor cosmetic changes and rougher play were the only things sports fans wanted. While the XFL did pioneer some sports broadcasting techniques, like sky cams, it was built on the idea football fans wanted more football, any time, leading to mistakes like airing a game against March Madness. It also failed to consider that football has a substantial female fanbase, who were put off by the XFL’s excessively macho tone. The lesson? Innovation isn’t change for change’s sake, but instead, change made with real reasons behind it.
Compaq
Compaq started with innovation. Founded by three executives from Texas Instruments worried the company was becoming too stodgy, it was among the first to legally reverse-engineer IBM’s personal computer in the early ’80s. Instead of competing on price, Compaq focused on quality, ease of use, and adding the newest and latest features.
The problem was they focused entirely on desktop computers, leaving the market in industrial computing and servers to others. Yet, the company’s sales structure didn’t let them sell their products directly, unlike their competitors. So they were getting beaten on price right as the personal PC started to become eclipsed by other products in the market. Seeing the writing on the wall, Compaq sold itself to Hewlett Packard in 2002.
Borders
The history of Borders is really the history of being constantly beaten to innovation. From the very beginning, when Borders as we know it was spun off by Kmart, combining their struggling Waldenbooks and Borders operations, the company was stuck in a catch-up mentality.
Take coffee, for example. In 1993, Barnes & Noble teamed up with Starbucks to sell prepared coffee in its outlets, which immediately drew attention and drove up sales. Borders didn’t make a similar arrangement, with Seattle’s Best Coffee, until 2004. Barnes & Noble stopped charging for WiFi access years before Borders followed suit. It was even the last to launch an ebook platform, Kobo, in 2009.
Perhaps most confusingly, Borders and Amazon worked together for a while, with Amazon essentially serving as Borders’ online operation. Right when Amazon was beginning to ascend, in 2008, Borders ended the partnership and announced it was going to launch its own online operation. As a more innovative company, Borders might have simply become part of Amazon’s operation; instead, they made a partner into a rival.
The result was that while Borders and Barnes & Noble had similar vulnerabilities, such as CDs and DVDs giving way to digital downloads and streaming services, and similar competitors, like Amazon, Borders simply didn’t have the institutional will to find new ideas or accept hard decisions. It closed in 2011, outlived, ironically enough, by its own ebook platform, which is still available.
Innovation is the lifeblood of any business, and a failure to innovate, or to see the value in innovation, can be dangerous in the long term. To learn how to drive innovation in your organization, get a free consultation for your team — schedule now.
This story first appeared on IdeaScale.com here.
