Editor’s note: This article was first published in August 2013. Its claim that MySpace’s new owners were reviving it and user numbers were growing again reflects that year; MySpace did not regain its position.
Most companies, large and small, get stuck at some point along the way. Perhaps they have lost focus, or never managed to aim their product at a particular group of customers. At other times, customers have simply forgotten about the company for one reason or another. Clearly, something has not been done right.
When this happens, a business can only do one of two things: “change or die”. A high percentage of entrepreneurs choose to change, but if they don’t know how to do it, they will die all the same.
Although we sometimes talk about reinventing or adapting, the truth is that often the best thing is to go back to the beginning, to the roots of our business. At other times, of course, you do have to adapt to the new environment. Here are a few companies and the way they got out of their own particular crisis, in the hope that they will give ideas to business owners going through similar situations.
1. Abercrombie & Fitch
This company was founded in 1892 as a sportswear company. It went through several crises over the years and came out of them stronger. In 1990 it went through a huge renaissance, increasing its number of stores and its revenue and reaching many more people. Or rather, by aiming its products and prices at all kinds of people.
Once it started competing on price, its profits fell, squeezed as well by enormous competition. Its CEO, Michael Jeffries, then had to make a difficult decision: to refocus its products on a more select clientele.
He started an advertising campaign that drew criticism for discriminating against part of the population. In an interview, Jeffries said openly:
“In every school there are the cool and popular kids, and then there are the not-so-cool kids. Candidly, we go after the cool kids. […] Are we exclusionary? Absolutely.”
Sales soon got back on track. It was a very clever strategy, because if you aim a product at the “cool” kid, even those who aren’t “cool” will want it, to keep up appearances. That’s how a brand is built.
(Read: Two of the smartest and most brilliant business strategies in history)
2. Coca-Cola
In 1985, in an attempt to innovate, Coca-Cola made a serious mistake: it changed the Coca-Cola formula, and therefore its taste. According to some experts at the time, Coca-Cola made this decision because it was losing market share to its biggest rival, Pepsi. Of course, “New Coke” only made things worse, drawing criticism from those loyal to the original taste.
After several meetings, the company agreed to go back to the original taste. The problem wasn’t the product but the fading strength of its marketing campaigns, so instead of changing the product, they changed the kind of advertising, hiring new agencies with fresh ideas.
When Coca-Cola announced it was going back to the original taste, every newspaper and TV channel reported it as a major event. The marketing strategy had already begun.
The moral: “Before you make a decision to solve a problem, make sure you know what the problem really is.”
3. Marvel
Selling printed comics stopped being a profitable business for publishers a long time ago, so most of these companies have been forced to sell or close. Marvel was no exception, and it had to declare bankruptcy in 1997. It seemed like the end.
But one executive put his mind to work and came up with the idea of negotiating a merger with Toy Biz, creating Marvel Enterprises in order to move fully into cinemas, where the X-Men and Spider-Man brought in juicy profits. The Avengers alone took in more than 1 billion in a very short time.
This company is an example of adapting to a new medium rather than letting the business die out.
4. MySpace
MySpace led the social networking market. Rupert Murdoch bought it in 2005 for a whopping 580 million dollars, hoping to multiply his investment. Unfortunately for Murdoch, Facebook arrived and took over the market, so Murdoch had no choice but to sell MySpace for 35 million, a loss of 94% of the investment.
The new owners of MySpace are revamping the social network, which has once again seen its number of users grow. Andy Cohn, editor of The FADER magazine, said on Twitter that some talented people are fighting to make MySpace work and that he wouldn’t be so sure betting against it was a good idea, since the battle for control of social networking is not over.
As each of these business cases shows, success is hard to achieve, but once a company is successful, staying at the top becomes even harder, because everyone will come after you and you can’t let your guard down for a single moment. That is the world of big business, and without a doubt it applies to small businesses too.
Further reading
- How much should a business grow each year to be profitable?
- 4 differences between a leader and a manager
Featured image: Wideangle at Japanese Wikipedia, CC BY-SA 3.0, via Wikimedia Commons.
