Lessons from Business Failures: Insights from the Failure Museum
In the realm of business strategy, understanding failure can provide invaluable lessons. Sean Jacobsohn, founder of the Failure Museum, provides a profound perspective on this topic as he explores various notorious business flops and the insights they offer.
The Failure Museum: A Repository of Lessons
The Failure Museum showcases over a thousand artifacts from failed ventures, including notable products like the Heinz Tomato Ketchup Cookbook and Bic’s pencil designed specifically for women. While these items may prompt laughter, they also underscore critical lessons for entrepreneurs and business leaders.
Six Forces of Business Failure
According to Jacobsohn, a thorough understanding of six primary forces can shape the outcomes of business ventures:
- Product-Market Fit: The importance of aligning products with consumer needs.
- Team Dynamics: The significance of expertise and leadership in a company’s success.
- Financial Management: The necessity for effective budgeting and resource allocation.
- Timing: The critical role of market timing in launching products.
- Competition: Understanding and differentiating from market rivals.
- Customer Success: Ensuring that customer needs drive business strategies.
Examples of Failure
1. Product-Market Fit: Webvan
Webvan, a pioneer in grocery delivery, raised over $880 million but failed due to a miscalculated demand. The company’s business model required immense capital for logistics that exceeded early consumer interest.
2. Team Dynamics: Theranos
Theranos aimed to revolutionize blood testing but lacked skilled leadership and domain expertise. Their ambitious goal proved unfeasible with inadequate technology and oversight.
3. Customer Success: Google Glass
Google Glass faced backlash from initial users, such as doctors, who found the product invasive. Their failure to connect with the right customer segment limited broader adoption.
4. Financial Management: ESPN Mobile Phone
Launched before the iPhone, the ESPN mobile phone failed to resonate with users and incurred significant losses—burning through $150 million with minimal market impact.
5. Timing: WeWork
WeWork’s growth strategy faltered during the pandemic as demand for office space plummeted, resulting in significant financial losses due to long-term leases signed at peak market rates.
6. Competition: Blockbuster
Blockbuster’s refusal to adapt to emerging online rental services like Netflix led to its downfall. Their missed opportunity to buy Netflix ultimately cost them their market dominance.
Conclusion: The Importance of Learning from Failure
Sean Jacobsohn emphasizes that while risk-taking is inherent in business, a solid research foundation can mitigate the likelihood of catastrophic failures. As the Failure Museum continues to grow, it serves as a reminder that the path to success is often paved with lessons learned from past mistakes.
To view the items discussed, visit HBR’s YouTube channel for the video version of Jacobsohn’s insights.