We aren’t really sure how business pundits come up with the prophecies they espouse on prime time cable news shows. Perhaps it has something to do with tracking the stars, seeking out the fortune teller at the local Roma encampment, and gazing misty-eyed into a magical crystal ball. Or maybe it has more to do with tracking current trends and hoping that they are applicable to a wider array of companies than currently being affected.
Of course, there is always the old “throw a dart at a piece of paper and read out the results” trick. While this method may not be quite as accurate, it seems to the go-to plan for some corporate prophets.
How else would we have gotten the following four failed business predictions over the years?
Groupon was a nice idea that got way, way, way too much publicity. Normally, marketability is something that should be striven for. The more people hear about your product or service, the more people send a nice chunk of money your way, and everyone involved is happy.
Not with Groupon. Many small retailers have quickly discovered that signing up with Groupon can cost them money. And customers. It turns out that businesses are getting absolutely swamped by these daily deals. Even GAP, a national brand, had trouble keeping up with demand. It seems that Groupon has also grown too big for its britches, rejecting seven out of eight offers that came its way back in 2010.
Analysts were calling Groupon the next big thing, and they made a strong showing when they opened themselves to public trading. Sadly for Groupon, their stock price fell below the IPO at the end of last year, and as of this post the price is hovering .89 above the twenty-dollar mark, its original offering.
Now the likes of BusinessWeek are discussing what Groupon can do to grow the industry to the level so many believed it would be. Merchants don’t seem too happy with their service, so unless something is done Groupon could be headed for an early grave.
The dot-com Bubble
While it is easy to pick on the ’90s as a failed decade, we cannot forget the disastrous effect the internet boom had on the American economy. The internet was shiny and brand new – no one knew what the dang thing was going to be used for, but they all knew it was going to be big.
And investors wanted a piece of it.
Had early Venture Capitalists realized that internet users wanted videos of cats doing funny things, the economy may not have been so badly damaged. But the early sites of the internet operated of on a maxim of Go Big or Go Home. They spent huge amounts of money trying to increase user base, and no one had any idea how to begin valuing these new entities. A lot of money was sunk into a lot of companies that had no plan beyond the initial growth stage.
As it turned out, many of these companies folded. Lavish spending, unchecked investment and a desperate attempt by American cities to secure the fledgling technology industry all spelled disaster. Amazon and Google weathered the storm fairly well, while around half of the major dot-coms were liquidated. Investing firms were given a slap on the wrist for misleading their clients, and they never stupidly invested in an over-inflated market again.
Pepsi and the Cola Wars
Letters of Note just ran a very nostalgic little piece about the huge marketing gaff Coca-Cola pulled with its release of New Coke. In it then Pepsi CEO Roger Enrico declares a holiday on Friday in celebration of Coke’s newest attempt to be like Pepsi.
And he was right – New Coke was reviled. Pepsi was able to stir skepticism among journalists, and any attempt to market the soft-drink was met with ridicule and failure. It seemed that Pepsi had won.
Unfortunately for them, that was not the case. Coca-Cola, apparently hearing the anguished calls of its loving community, made the decision to re-introduce Coca-Cola Classic; it’s normal, slightly less sweet, formula. The entire scene was farcical, but Coca-Cola somehow made it seem like they were doing their customers a favor by bringing back the formula they had used for nearly a century. Plus it worked – people were buying twice as much Coca-Cola Classic as they were Pepsi Cola.
It seems that Roger Enrico spoke just a tad too soon.
BusinessWeek and the Automotive Industry
We’d like to round this post off with a blast from the past. In 1968 BusinessWeek, an otherwise excellent publication, made the not-so-excellent prediction that Japanese cars wouldn’t make a dent (figuratively) in the American car market, saying “with over 50 foreign cars already on sale here, the Japanese auto industry isn’t likely to carve out a big slice of the U.S. market.”
Sadly for Detroit Motor City, this didn’t quite work out the way BusinessWeek predicted. The oil crisis, increase in gasoline prices, and perceived shoddiness of American cars seriously hurt the American automotive industry. Japan’s small, sporty designs rocketed past the lumbering beasts of General Motors and Toyota, the country’s top vehicle manufacturer, now holds the number one spot in the world.
Hindsight is always 20/20, so it is easy to poke fun at the failed predictions of decades past. However, we would hope that something could be learned from the business failures of yesteryear, mainly in regard to over-valuation. Business analysts love speaking in absolutes, as though the world worked in such a way; the reality is that things are never that black and white.
After all, what goes up must always come down.