Great companies fail because of 5 Reasons

Fail to innovate (AOL)- Sear, JCPENNEY,
Don’t believe they have competition (Blockbuster vs. Netflix)
Hold on to the past achievements (Kodak, Xerox, etc.)
Next leader up in not ready (Ford vs GE with Jack Welch)
Too Big to Stay Great- IBM


Check out this episode!


Why do big companies fail? They have money, they have a brand, they have high-level leadership, and lines of credit. They seem quite durable, so why is it that they fail? I’ve identified five reasons why big companies fail… 

Failure to Innovate

AOL was IT, and then they weren’t. They were the preeminent online provider and then they started getting into content, losing focus on their core offering.

Another example that would be like Circuit City. They failed to innovate within their core business and ventured into CarMax and things of that nature.

I always say every year you want to look at what can put you out of business. I go through my war game scenario. What can put you out of business? What is happening within your industry that you better be current with or even ahead of? What is your competition? You have to innovate and be ahead of them

Don’t Believe They Have Competition

Blockbuster clearly never viewed Netflix as a competitor. Why? They could have bought them for $50 million.

Netflix did something so smart, they looked at the biggest person, the biggest company in their field, in their industry, and then they created a value proposition that Blockbuster could not fulfill.

What was it? At Blockbuster, you stood in line, you don’t even know if the movie was there, you pay late fees, you had to physically bring the movies back.

What did Netflix do? You had a membership, they mailed you two DVDS and when you return them, you can get two more. They eliminated lines and whether the movie was in-stock and they elminated late fees.

If you don’t believe you have competition, you’re going to fail because you think you’re it and you don’t need to innovate.

Hold on to the past achievements

You remember what you were and not who you need to be today. Look at Kodak. Look at Xerox, Zenith, Nokia, etc.

You got to the top of the mountain but that doesn’t mean you’re going to stay there. The second you get there, there is a Netflix or a Google to knock you off. None of these were the first in their industry. They just carved out the best value proposition. Past achievements are great for a day.

Recently, I was talking about, what separates successful people is our mindset. We’re never content once we achieve something. Within 24 hours, we’re ready to achieve something new again. That’s how you have to be as a company.

The Next Leader Is Not Ready

Who’s the next leader up? What happens?

GE had Jack Welch. Then you can look at the leadership after Jack Welch.
Great companies require great leaders. The leader coming up has to be ready for that position and that’s why you always want to be developing leadership and talent.

Too Big to Stay Great

Sometimes companies get too big to be great. Try to reach customer service at 10 of the 10 largest companies and see if you could ever get anyone on the phone. They get so big that they forget their customers. They forget what their customers want and they take them for granted. It’s an arrogance, and they just become too big to become great and to stay great. IBM is a great example of that.



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