Being part of the business world means competing neck and neck with other companies. Designing and implementing strategies to run ahead in that competition is something every company must do as part of its survival and success. In that process, the heads of the companies have to make several decisions that affect their future. Some of these decisions, though at that time may seem to be sound, could be mistakes and have unpredictable consequences. So, here are some of the biggest mistakes that companies have made that eventually proved to lead to their downfall.
1. In 2008, United Airlines mishandled and broke musician Dave Carroll’s $3,500 guitar. After nine months of fruitless negotiations with the airlines, he wrote a song about his experience which went viral, causing a 10% drop in UAL’s stock price and a loss of $180 million within four weeks.
In 2008, Dave Carroll took a flight from Halifax Stanfield International Airport to Omaha, Nebraska’s Eppley Airfield. During a layover at Chicago O’Hare International Airport, he allegedly heard one of the co-passengers talk about the baggage handlers throwing the guitars on the tarmac. He discovered that his $3,500 Taylor guitar was indeed severely damaged. Though Carroll filed a claim with the airlines, they informed that he was ineligible for compensation as he didn’t make the claim within 24 hours.
Following nine months of indifference from the airlines, Carroll wrote a song titled United Breaks Guitars with the refrain “I should have flown with someone else, or gone by car, ’cause United breaks guitars.” Its video was posted on YouTube on July 6, 2009, and immediately went viral getting half a million views in just three days, 5 million by mid-August, 10 million by February 2011, and 15 million by August 2015. It prompted an apology from United’s managing director and a compensation of $3,000 donated to the Thelonious Monk Institute of Jazz, but it was too little, too late. The airlines suffered severe losses financially and to its reputation. (source)
2. In 1982, Mars, Inc. refused the offer to include M&M’s in the movie E.T.: The Extra-Terrestrial. Its competitor Hershey was approached to include Reese’s Pieces, resulting in a 65% increase in its sales.
In the film, 10-year-old Elliott leaves Reese’s Pieces candy to lure the reluctant alien into his house despite his family’s disbelief that it was hiding in their shed. Mars, Incorporated refused to let M&M’s be used in the film because they thought E.T. would frighten children. Hershey did not have to pay for the inclusion of its candy in the movie. But, it agreed to a tie-in to promote the movie with $1 million of advertising and in return was allowed to use E.T. to advertise its own product. (1, 2)
3. Despite introducing the first desktop computer with a GUI and a mouse called the Alto in 1973, Xerox chose to produce a text-based machine. Meanwhile, Apple’s Macintosh revolutionized the PC market with its bitmap display and mouse, both copied from the Alto.
The Xerox Alto was introduced on March 1, 1973, a decade before computers with a graphical user interface (GUI) were introduced to the mass market. The Alto used a custom, multi-chip CPU that could fill a small cabinet. In the beginning, only a handful of the machines were produced, but by the late 1970s over a thousand were used at Xerox labs and a 500 more in various universities, totaling up to 2,000 machines.
Its popularity in Silicon Valley for its GUI interface attracted Steve Jobs who arranged a visit for Apple engineers to Xerox PARC (Palo Alto Research Center Incorporated) and a demonstration of the technology. Two visits later, they introduced Apple Lisa and Macintosh systems. However, Xerox itself showed no interest in the research and instead opted for a conventional model with no mouse and the standard 80 by 24 character-only monitor. By the time Xerox realized their mistake in the 1980s, Apple’s machines were already in the market. Though they did introduce a new GUI-based system called Xerox Star, it was expensive and could not compete with other, cheaper options. (source)
4. In 2003 when eBay was launched in China, it spent $100 million to fend off competition from Alibaba. However, eBay charged the sellers for listing their product while on Alibaba it was free. This resulted in a 43% drop in market share and eventually the closure of eBay’s China operations in 2006.
5. In 2001, a Tokyo-based stock trader accidentally sold 610,000 shares at six yen when he was supposed to sell six shares for 610,000 yen. This cost his company US$100 million.
The Tokyo-based trader was working for UBS Warburg, a Swiss global financial company. The shares belonged to a Japanese advertising agency known as Dentsu which had newly debuted on the Tokyo Stock Exchange. Even though the trader’s fat-fingered error was spotted immediately, the transaction was not canceled by the stock exchange, forcing UBS to buy back the shares at market-value and incur a loss of US$100 million. The trader is believed to have resigned after he realized the mistake. (1,2)