Everyone makes mistakes, but not everyone is the CEO of a massive international corporation. When we make a bad call, we kick ourselves and move on. When the heroes of capital mess up, the earth shakes. Investors lose their shirts. Workers lose their jobs. The chattering class piles on and high-flying careers implode—either that or leaders learn from the mistake and steer their companies in a different direction.
Business is just like a person. It lives, it breathes, it buys crap, it sells crap. It’s no different than a person.
“Every CEO makes mistakes,” Stephen Troy, CEO of AeroPay Express and author of Business Biographies: Shaken Not Stirred tells FashionBeans. “It’s how your recover from those mistakes that will guide what happens to your company.”
So we’re not here to judge the business leaders who made these calls. Hindsight is 20/20. Still, these make excellent cautionary tales for the CEOs of tomorrow. Success may hinge on how you deal with failure, but wouldn’t it be nice to avoid those failures in the first place? (If that is at all possible, which we suspect it is not.)
These stories all fall short of criminal—we’ve heard enough about Enron, thanks—but they’re enough to scare you right out of your MBA program.
Google’s business plan, technically, was dead.
“Google came up with the idea of indexing the whole web, and they went out to sell search,” Troy explains. “But by the time they got into search, everybody was doing search. Search was free. It was not hard to write a program, to do your own bots and do your search … and there were a number of companies … in the marketplace that had search.”
One of those companies was called Excite. You may not remember them, and here’s one reason why: Given the chance to buy Google for $1 million, and later for a desperation price of $750,000, Excite CEO George Bell said no.
This wasn’t as goofy a decision as it looks with the benefit of hindsight. In fact, at the time, Google founders Sergey Brin and Larry Page were the business novices.
“They wanted to create the best search engine and they wanted to sell it to people,” Troy says. “But … by the time they got it to market, nobody wanted it. Google’s business plan, technically, was dead.”
How the tables turned. As of May 2017, Google was valued at $101.8 billion. Excite is nowhere to be seen—Ask Jeeves bought the company in 2004, then rebranded as Ask.com. How are they doing? Just google it.
2. Fumbling the NFL’s Big TV Offer
In 1970, the National Football League merged with the rival American Football League, and NFL commissioner Pete Rozelle was ready to make some TV deals. The NFL had previously dangled the idea for a televised, prime-time football game in front of two of the three major networks: CBS and NBC. He would call the weekly contest “Monday Night Football.”
The TV execs were nervous. After all, prime time on a Monday night? CBS would have to bump the Doris Day Show. Even worse, NBC would have to move Laugh-In! It was unthinkable.
That just left ABC. Roone Arledge, then-president of ABC’s sports division, was all for Monday Night Football. He campaigned among his colleagues to make it happen.
Fast-forward to 2017, when more than 10 million viewers tuned in to watch the Saints take on the Vikings and the Chargers battle the Broncos on the first Monday Night Football broadcast of the season. That’s down by 9 percent compared to the previous year, but it’s still a lot of ad revenue.
Monday Night Football has since moved to ESPN and its online streaming app. Television is a completely different market today than it was in 1970. But we can’t help imagining some CBS and NBC executives in the 1970s, grimacing as they look at the ratings Monday Night Football began to wrack up. ABC, on the other hand, scored a touchdown.
3. Barnes & Noble Puts Off a Survival Strategy for Nearly 20 Years
The big-box bookseller outlasted Borders. They survived the dismal failure of their e-reader, the Nook. They’re even withstanding the competitive onslaught that is Amazon.com. But back in 2000, then-chief executive Leonard Riggio saw the writing on the wall, if not the eink on the page.
“The No. 1 consideration of where someone will shop is how close it is to where they are,” Riggio told David Sax of The New Yorker. “It has nothing to do with pedigree or branding. If there’s no bookstore close to them, they’re more likely to buy online. If there’s one close, they’re more likely to buy if it’s a block away.”
The trouble is, most of Barnes & Nobles’ locations were
enormous big box stores in far-flung suburbs, accessible only by car, stuck in
business districts where no one lives. Riggio said that in 2000, he realized
that a shift toward smaller, more community-focused stores in densely populated
urban centers could save the company from becoming another Borders —call it the
Starbucks strategy. But the money from the megastores was still too good. He
declined to shift the company’s priorities.
“You blow some and you get some right,” Riggio told Sax, and it’s hard to imagine him saying those words without shaking his head sorrowfully. “Timing is everything.”
“You never know,” he says. “Sometimes it’s luck and timing.”
The question now—at a time when activist investors are urging Barnes & Noble’s board to sell the company to the highest bidder—is whether there’s enough time left for the shift.
4. J.C. Penney Tries to Rise Again … As Apple?
By 2011, the e-commerce revolution was in full swing, and brick-and-mortar retailers were feeling the burn. The older and more entrenched the brand, the more difficulty they seemed to have, and no one was older or more entrenched than J.C. Penney (except maybe Sears, but that’s another story).
Worried by declining sales, investors brought in an outsider CEO to overhaul the business. Ron Johnson made his name shepherding the Apple stores to astounding success, and it seems that he brought his bag of tricks with him to J.C. Penney. One problem: He didn’t seem to notice that J.C. Penney is not Apple.
“[Apple customers] are not price-sensitive. They want the latest and greatest and they want the status of it. Apple is a status brand,” Troy says. “J.C. Penney is not. It’s a discount brand, a coupon brand. And [Johnson] just didn’t understand that.”
J.C. Penney customers were used to deep discounts, sales, and coupons. Johnson took all that away, calling them “fake prices.” Instead, under Johnson’s leadership, the retail chain set prices to be profitable without inflating and discounting them to create the illusion of a deal. It was a move worthy of the Apple Store. But J.C. Penney’s customer base hated the change. They liked feeling as if they were saving money.
“It was a classic [case] of ‘know your customer,’” Troy says. “The J.C. Penney customer was a middle class … family that was fighting their budget and looking for deals. They were brought up on old-school couponing for discounts and always feeling good about walking out of a store with a deal.”
Johnson’s “boutique” approach, which was designed to reign in young customers, misfired spectacularly.
“[Johnson] missed the market,” Troy explains. “The younger clientele was going online, they were going to Amazon. They weren’t going to J.C. Penney.”
The changes drove out loyal customers without bringing in anyone new. Sales plummeted by $6 billion during Johnson’s tenure. After just 17 months at the helm, the board sent him packing. Discounts and coupons returned. Johnson is still convinced that’s a mistake.
“I still think if we had continued on, the company would have been a lot better than this painful U-turn where they’re trying to find growth from a new baseline,” Johnson told Fortune in 2016.
That seems doubtful. J.C. Penney’s stock prices have fallen by 85 percent since 2012. Apple this is not.
Why CEOs Will Continue to Make Devastating Mistakes
The moral of these stories isn’t that the leaders of huge corporations weren’t smart enough to make the right call. The moral is that everyone makes mistakes. That’s true whether you’re the CEO of Apple or the humblest new hire in their most distant store.
“Business is just like a person,” Troy says. “It lives, it breathes, it buys crap, it sells crap. It’s no different than a person.”
By that logic, businesses are fallible. The executives of a company might try to do the right thing. But ask yourself, in your own life, do you always know what’s right? The next great business mistake is right around the corner, because businesses are run by people, and people are in the business of making mistakes.
It’s always been like that. As long as humans are in charge, it always will be.