Running a business is a constant, intense process that takes loads of resources and people giving it their all every day. Given the number of variables at play, it’s no surprise that people occasionally make errors that seriously hurt or destroy their business. But sometimes those errors are so silly or foolish that we can’t help but scratch our heads and wonder, “What the heck were they thinking?!”
Schlitz was the number one malt beverage in America by far in the late ’60s/early ’70s. Then some genius at the head office decided to change the recipe to save money on ingredients. Management went through 10 (!) successive rounds of cost-cutting, incrementally decreasing product quality with each round. The last cost-cut was the death knell: they stopped filtering out the little yeast flakes from the final product, figuring that consumers wouldn’t mind little flecks of yeast in the head of their drink. Sales fell off a cliff. Almost immediately, they changed back to the old recipe. But it was already too late. The old Schlitz drinkers stayed away in droves, and the company remains up Schlitz creek without a paddle.
Gerald Ratner of British jewelry company Ratner Group (now Signet Group) is known for essentially killing his entire business with a single ill-advised speech. During a 1991 conference of the Institute of Directors at the Royal Albert Hall, he famously said while discussing their products: “We also do cut-glass sherry decanters complete with six glasses on a silver-plated tray that your butler can serve you drinks on, all for £4.95. People say, ‘How can you sell this for such a low price?’ I say, ‘Because it’s total crap.'” After the speech, the value of Ratner Group plummeted around £500 million, and the company was never the same.
Harland Clarke prints a variety of paper products, most notably producing the vast majority of checks in the U.S. Back in 2010, they started a new enterprise called Fidipidi, a $100 million investment that specialized in custom stationary printing. They organized call centers, recruited tons of graphic artists, and setup hundred-line VoIP systems in anticipation of the millions of orders they were going to get.
No one bothered to tell them that the advertising platform they’d already blown $40 million was targeting an audience that had very little interest in old school stationary, or even one-off custom cards. How many orders did they take? 13.
Sprint’s merger with Nextel is widely considering one of the bigger business blunders of the last couple of decades. Sprint phones couldn’t work on the Nextel network, and vice versa. As a result, Sprint ended up losing $30 billion over the course of the next 3-5 years. The stock price has yet to get close to the initial price before the merger. So yeah, they might want to do a little research next time.
POWDR, a group that ran Park City Mountain Resort, one of the top family ski resorts in the country, got absorbed by Vail, its competition, and removed from ownership of its resort. Why, you may ask? Because after twenty years of having an incredible lease ($150,000 a year for a resort that grosses millions and millions), the end of the lease time rolled around…and they forgot to renew it. Someone didn’t take down a note, they turned their paperwork in three days late, got sued, and lost everything. Don’t forget to do your paperwork.
Peanut Corporation of America
Peanut Corporation of America found salmonella in their products, and the owner decided to cover it up and told them to ‘just ship it.’ The peanut butter in question ending up infecting and killing scores of people. The company went bankrupt almost immediately after it was traced back to them, and the owners were charged and prosecuted in one of the more horrific cases of food industry gross negligence.
The CEO of Malden Mills, the original producer of the “polar fleece” material, decided not to patent it, which made it an “open source textile” able to be produced cheaply and widely. This wasn’t the decision that killed the business, however. In 1995, Malden Mills burned down. At a time when manufacturers were relocating their operations overseas to cut costs, CEO Aaron Feuerstein rebuilt the factory at the same location and continued to pay the salaries and benefits of all his employees during the rebuilding. He said, “I have a responsibility to the worker, both blue-collar and white-collar. I have an equal responsibility to the community. It would have been unconscionable to put 3,000 people on the streets and deliver a deathblow to the cities of Lawrence and Methuen. Maybe on paper our company is worthless to Wall Street, but I can tell you it’s worth more.” Sadly, the company never recovered, Feuerstein was eventually ousted, Malden Mills declared bankruptcy, and its assets were sold or spun off to new companies.
Enron Corporation, the former energy company known for its catastrophic collapse, used to pay their executives “idea bonuses” before the ideas even turned a profit. It was a terrible idea. They paid one guy millions for inventing an online movie downloading service about ten years before that was feasible. Hilariously, the documentary uncovering all of Enron’s scandals was available for streaming on Netflix for a period of time.
There was a point in time where content aggregators Digg and Reddit were equally popular. Then Digg switched to “Digg 4.0” and fundamentally changed how users interacted with the site, changing and removing many features that they liked. Users HATED it and demanded the site be reverted to the previous version, but the company refused. Then on August 30, 2010, there was a “quit Digg day” in which most of the user base joined Reddit. Traffic fell significantly, their CEO resigned less than a month later, 37% of its workforce were fired, and the site sold for $500k (a fraction of its previously estimated value).
When Borders Books and Music first started selling their products online, they decided to use Amazon for their website end of things. They ultimately helped build up a major competitor, and they never fully developed their own web presence. They were done for. As everyone knows, Borders has been bankrupt for almost a decade, and Amazon is now one of the biggest companies in the world.