Picking the right business model is paramount, as these catastrophic failures illustrate. We take a look at what they did wrong (which, in some cases, was everything).
All great businesses start with an idea. For successful businesses, those ideas end up being imitated and studied, but for those which don’t perform so well, it’s hard not to ask “What were they thinking?” We’re going to take a look at the latter category, partly for the entertainment value, partly to see what common pitfalls should be avoided.
Don’t Kill The Golden Goose
Since companies invest fortunes and decades into creating the kind of brand recognition enjoyed by McDonald’s and Coors, it’s interesting that both of them made a similar blunder.
McDonald’s had pretty much cornered the fast food market with their mass-appeal back in 1996, so execs decided the time was ripe to give their range a touch of sophistication: cue the Arch Deluxe, described as “The Burger with the Grown-up Taste.”
Ads featured children turning their noses up at the new, sophisticated offering:
Depicting your product as being nauseating to your main target demographic is a risky strategy, and for McDonald’s, it didn’t pay off. Diners looking for a Michelin star experience were untempted by the Arch Deluxe, and existing McDonald’s customers chose not to gamble $2.49 (at the time, 32 cents more than a Big Mac) on a new, weird looking dish — after all, McDonalds themselves had assured them they wouldn’t like it.
Coors’ attempt at brand expansion was even more bizarre. Undaunted by the Arch Deluxe’s high-profile failure, the market-leading brewers released a rather stripped back version of their flagship product: Coors Rocky Mountain Sparkling Water.
Expanding into the booming mineral water market might not have been such a bad idea if the bottle hadn’t been emblazoned with Coors branding: consumers looking to grab a bottle of water in a hurry probably passed it over assuming it would get them buzzed, not hydrated.
Both McDonald’s and Coors’ overconfidence shows that a brand’s success is conditional on staying true to the product offerings and not confusing customers by changing things up too radically.
That said, it’s more than possible to overdo reliability. The failure of Polaroid is proof that taking the relevancy of a brand for granted is a great way to guarantee becoming obsolete: a brand might be static, but the world isn’t.
Pride Goes Before A Fall
Former Enron CFO Andrew Fastow now teaches seminars on avoiding corporate fraud. Fastow brings both his CFO of the Year award and his prison ID to these events, emphasizing that the same actions led to his business success as well as his incarceration: the business was built upon a foundation of looking the other way.
He says, “When you’re in the business world, it’s a lot harder to recognize unethical situations than you think . . . our financial statements were intentionally misleading. But did I think that was wrong? No. I was just following the rules.”
While the fall of Enron has been the focus of a great deal of academic research, it boils down to a few factors. Enron’s culture celebrated both greed and hubris: the fact that profit was rewarded above all else silently reinforced a complex system of fraudulent behaviour, while their pride made them feel invincible– right until they were blatantly caught with their hands in the cookie jar.
Enron shows how rewarding honesty and constructive criticism isn’t just the morally right thing to do, it’s a matter of survival.
It’s easy to say that the orchestrators of these flops should have seen it coming, but then it’s always easy to pick holes in retrospect. However, it’s safe to say that if these brands had taken more time to fully evaluate their situation and not allowed themselves to be blinded to basic principles of branding and business practice, some of these products and organizations might still be with us (Probably not Coors Water, though. That idea was bizarre).
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