What small businesses can learn from four notable Big Business ‘mistakes’.
by Reed Richardson.
For many entrepreneurs, the notion of making even a small mistake often sends a chill down their spines. That fear of failure can be a powerful motivator, but if in the pursuit of avoiding such a mistake it breeds hidebound thinking and paralysis, it can create even bigger problems.
“Success in a business career—any career, really—doesn’t happen because everything falls into place,” notes author Bob Sellers in his book “Forbes Best Business Mistakes.” “There’s virtually no activity, athletic or otherwise, in which trial and error doesn’t play a role. Why would a business career be any different?”
In the world of Big Business, this inherent messiness sometimes translates into Big Mistakes. But even some of the most notable corporate screw-ups have a surprising upside and can provide an important lesson to small business owners.
Mistake: The Apple – Steve Jobs breakup
Pull-Quote—Tall.pngLess that a year after high-flying Apple debuted its Macintosh personal computer in a now infamous 1984 Super Bowl ad, the company found itself locked in an ongoing internal battle. Its co-founder, Steve Jobs, had effectively created a splinter group within the company—to the point of flying a pirate flag atop a separate building—and his personality was clashing with newly hired CEO John Sculley. Amidst pressure from lagging Mac sales, Apple’s board chose to bet the company’s future on the experienced manager Sculley rather than its chief visionary, effectively firing Jobs in 1985.
That fateful decision would soon send an idea-starved company on a 10-year downward spiral, one where it continually lost market share until it reached the brink of bankruptcy. Only after Apple acquired Jobs’ follow-on computer venture, NeXT, and tapped him to retake the helm as CEO did the company’s fortunes rebound.
“I didn’t see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me,” Jobs said in a 2005 Stanford commencement speech. “The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter into one of the most creative periods of my life.”
For Apple, the break-up turned out to have an upside as well. Having been pushed to the edge of failure, the company welcomed the return of its prodigal son Jobs, whose embrace of the entrepreneurial spirit turned the once moribund company into what is now a top global brand.
Small Business Lessons: First, don’t let any member of your venture, even a founder, continually sow dissension amongst the ranks—it creates a corrosive atmosphere that will eventually undermine any chance for success. Second, remember that good executives are far easier to replace than brilliant designers and engineers.. And third, be willing to put ego and pride aside for the long-term sake of your company, even if that means bringing back someone you thought you no longer needed but now realize you do.
Mistake: Coke’s messing with a century of success
In the pantheon of boneheaded business moves, Coca-Cola’s decision to abandon its best-selling, 99-year-old soda formula often ranks among the top. Bowing to focus groups that preferred the sweeter-tasting Pepsi in sip tests, Coke rolled out a sweeter “New Coke” in the spring of 1985 to near universal antagonism from customers. Within weeks, the company saw its market share plunge and its chief rival, Pepsi, take a public relations victory lap. As summer approached, a desperate Coca-Cola caved to customer appeals and re-issued the old formula as “Coke Classic.”
That’s usually the end of the story one hears, but there’s more to it. What was undeniably a strategic miss of epic proportions actually paid numerous dividends within a few months. With two products now bearing the Coke name in the market, Coca-Cola rebounded quickly, so much so that sales and profits from all operations actually rose 10 and 9 percent, respectively, for the entire year. What’s more, by listening to the consumer’s overwhelming response and reacting rather nimbly for a worldwide corporation (“old Coke” was only off the shelves for 11 weeks), the company rewarded its customer’s loyalty.
“Yes, [New Coke] infuriated the public, cost a ton of money,” acknowledged former Coca-Cola marketing executive Sergio Zyman in the late 1990s. “Still, New Coke was a success because it revitalized the brand and reattached the public to Coke.” In fact, after it returned original formula Coke to the market, the company experienced a near decade-long run of ever-increasing market share. And because Coca-Cola made a point not to fire or demote anyone associated the New Coke decision, former Pepsi CEO Roger Enrico later admitted that the way the company stood by its employees through the crisis paved the way for future brand broadening efforts, like the top-selling Diet Coke.
Small Business Lessons: Number one, don’t overlook the many different ways your customers may relate to your product. Coke’s reformulation decision was framed entirely around one of taste, so it missed the powerful emotional relationship its customers had with the brand. Next, be open to “third way” solutions. Rather than just drop New Coke and go back to the old formula, Coca-Cola chose to sell both, which rejuvenated sales even quicker. Finally, don’t sacrifice tomorrow’s next great idea by harshly punishing those responsible for today’s lousy one. Though it easily could have tossed numerous executives overboard, Coke sent a message to its employees that risk-taking was acceptable and it has since reaped the benefits.
Mistake: Amazon’s ominous repossession of its customers’ content
In the summer of 2009, Amazon realized that it had been selling certain novels to its Kindle e-reader customers illegally, because the publisher had failed to properly acquire the rights. Faced with the prospect of having sold intellectually purloined material, Amazon decided to refund its customers and remotely delete the content. Unnerved by the company’s unilateral action, a public relations uproar ensued with customers claiming their privacy and trust had been violated. (In addition, Amazon appeared to have violated its own Kindle license agreement, which grants customers the right to a “permanent copy” when they buy and download digital content.) And there was also the too-good-to-be-true ironic twist: one of the books in question was 1984, George Orwell’s dystopian novel about life in totalitarian society ruled by an all-powerful Big Brother.
Making matters worse, Amazon responded to the initial outcry with a vague press release sprinkled with legalese. So, six days after the incident, Amazon CEO Jeff Bezos finally addressed the situation on a post at a company-hosted bulletin board.
“This is an apology for the way we previously handled illegally sold copies of 1984 and other novels on Kindle,” wrote Bezos. “Our ‘solution’ to the problem was stupid, thoughtless, and painfully out of line with our principles. It is wholly self-inflicted, and we deserve the criticism we’ve received. We will use the scar tissue from this painful mistake to help make better decisions going forward, ones that match our mission.”
As far as corporate apologies go, Bezos’ was bracingly honest and forthright in its ownership of the mistake. By speaking plainly and avoiding the passive tone, he sent a clear message that the company had erred and, more importantly, that it had realized and accepted that it had erred. For Kindle customers concerned about further encroachments by Amazon into their personal devices, his straightforward (albeit somewhat tardy) mea culpa was welcome news and went a long way toward repairing any damage the brand had sustained.
Small Business Lessons: While it goes without saying a company should never violate the letter of the law when it come to its own user agreements with its customers, it’s also worth pointing out the potential damage from violating the spirit of those contracts. Amazon learned this hard way and re-affirmed the old-fashioned notion that two wrongs don’t make a right. But Bezos once again proved that customers are forgiving if they feel that a company has genuinely accepted responsibility for a mistake and is taking legitimate steps to preventing it in the future.