Strategy Errors: 4 Big Brands That Got It Wrong And The Business Lessons

While making mistakes is part of the entrepreneurial journey, there’s a lot of value in studying the mistakes of other businesses, too. After all, prevention is better than cure, right?

Here we explore some notable strategic misfires from big brands, and the lessons they can offer small business owners.

1. New Coke

Strategy error: Thinking too much about the competition

Why it failed: In 1985, blind taste tests suggested consumers preferred the sweeter taste of Coca-Cola’s competitor, Pepsi.

In response, Coca-Cola reformulated its recipe, marking the first formula change in 99 years coining it ‘New Coke’. Coca-Cola’s aim was to revitalise the brand, show they were in touch with their consumers and continue to remain market leader in the cola market. What the taste tests didn’t show though was the strong connection consumers had with the existing brand.

The result? A negative reaction from many, particularly the southern US states, some of whom considered Coca-Cola part of their regional identity. The company received over 40,000 calls and letters expressing anger or disappointment. Protest groups started popping up and die-hard fans began stock piling original recipe Coke in their basements.

PepsiCo jumped on the marketing opportunity, running ads where a first-time Pepsi drinker says, “Now I know why Coke did it!”.

In 1985 the original recipe Coca-Cola returned to shelves, making the news and front page of many major publications. While this is seen as one of the biggest marketing blunders in history, the brand remains strong as has since seen great success in the industry.

Lessons:

• Don’t tamper with an established, successful brand
• Take time to work out what it is your customers value about your brand
• Refrain from making knee-jerk reactions
• Don’t overthink your product compared to competitors
• Don’t underestimate consumers’ emotional attachments to original products

2. Apple (without Steve Jobs)

Strategy error: Too many product lines

Why it failed: When Steve Jobs returned to Apple in 1997, he found the tech giant in a bit of a mess. Profits had plummeted, with the company in crisis. Jobs’ response? Slash the product line down to a few core items (it was making 350 different products at the time!), with the goal of making those items “insanely great.” The product menu was cut down to 10, shifting Apple’s focus back to the iMac, the PowerBook and then the iPod, iPhone and the iPad. This focus directly contributed to Apple’s comeback.

While the Apple we know today is nowhere near the state it was in 25 years ago, it’s argued that the technology giant seems to be losing some of its product focus.

Take Apple’s iPad line-up for example - iPad Pro, iPad Air, iPad 10th generation, iPad 9th generation, iPad mini… While choice is good for consumers, you also run the risk of creating confusion in trying to appeal to everyone. As one of the most profitable companies in the world, Apple faces pressure to deliver financial success each year and in its pursuit, might be chasing markets that might not be best suited. By adding more product categories to appeal to more consumers, it risks allowing overall product quality to suffer. While this isn’t the case currently, it’s a genuine concern amongst Apple fans.

Steve Jobs: Apple Matrix Strategy in 1997

Lesson: Less can be more

3. WeWork

Strategy error: Over-expansion

Why it failed: A misfire spanning a number of years by coworking pioneer, WeWork. Unfortunately, the business expanded itself at an unsustainable rate, after attracting significant investor capital. Established in 2008, the first WeWork labs officially opened in 2011, which functioned as an incubator for start-ups.

With investors like JPMorgan Chase & Co., Goldman Sachs Group, and Wellington Management, by 2015 WeWork had doubled the number of working spaces – with 51 locations across the US, Europe, and Israel. They even had plans to expand to every continent by 2017 (excluding Antarctica!).

However, the company expanded too quickly, lost sight of its original offering and spent money on frivolous items, such as a $60 million ultra-luxurious private jet, used extensively by CEO Adam Neumann (who later on had to sell it due to it becoming a divisive symbol between employees and management).

Further mistakes made by the company over the years permanently harmed its brand image, creating a negative feeling amongst its target audience.

The beginning of WeWork’s downfall was in 2019, when it filed for an initial public offering (IPO). Hoping to make upwards of $3.5 billion from the IPO to continue funding its growth. Neumann liquidated $700 million in stock before the IPO was supposed to go live. (A move questioned by many.) When it filed mandatory S-1 paperwork to go public, the company’s heavy losses were revealed, causing analysts to struggle to see how WeWork’s future could be a profitable one. The IPO was postponed in September 2019, with the company’s governance, business model and financial sustainability coming under fire.

Following these issues, WeWork had a big change in management. Due to backlash from the failed IPO and an alleged loss in confidence by SoftBank, Neumann was asked to step down as CEO.

After further changes in management, heavy losses due to Covid-19, and a merger with BowX Acquisition Corp later, WeWork posted another $2.1 billion loss.

While the business remains a coworking giant, with half a million users across the world, it has a new strategy: to take it slow and focus more on the product. WeWork is doing its best to grow again. The company says it has recently seen a resurgence in popularity thanks to workers’ increasing desire for flexible workspaces as the economy attempts to rebound from the pandemic. WeWork, which was once valued at $47 billion, was worth an estimated $9 billion when it finally went public in October 2021 under current CEO Sandeep Mathrani.

Lessons:

• Be a good leader that your employees trust and respect
• Don’t try and be everything to everyone
• Keep a firm grasp on your finances
• Check in with your target audience while you make changes. Are they on board? Is your brand strategy resonating with your important customers?
• Gather funding responsibly and sustainably. Don’t spend everything at once!
• Don’t over promise and underdeliver.

For the finer chronology of the demise of WeWork, Latana’s Cory Shroder has written an insightful piece: From Unicorn to Fiasco: How WeWork Crashed & Burned.

 Also, there’s the Apple+ series WeCrashed (launched in March 2022), starring Jared Leto and Anne Hathaway, which follows the true story of Adam Neumann and WeWork.

4. Tie Rack

Strategy error: Failing to understand men’s shopping behaviour, unable to beat its competition and a lack of innovation.

Why it failed: The company was unable to understand men’s shopping behaviour. Men tended to buy ties wherever they bought their shirts from. Tie Rack didn’t offer anything unique to encourage its customers away from this ease of shopping.

Tie Rack had a lot of competition. Not only were other businesses selling shirts alongside ties, but many were pairing them together, taking the styling job away from the customer. There was no need for a separate tie shop.

Tie Rack also failed to adapt its product offering when many industries became more accepting of open-neck shirts in the modern workplace. Its customers were dressing more casually at work, but a lack of innovation meant the company wasn’t agile enough to respond to a change in men’s fashion trends.

Its customer base started to shrink, sales dwindled, and Tie Rack began experiencing major losses. In 2013, it decided to stop operating in Britain to prevent future financial damage. Forty-four stores would close. Within one year before the decision was made to pull out of Britain, Tie Rack lost as much as £6.9 million. What was once a booming British-based business that began in the ’80s and flourished in the ’90s while ties were still a staple, its inability to adapt and innovate sadly led to its demise.

Lessons:

• Understand your target audience
• Continue to monitor your target audience – have their shopping habits changed? Their tastes? Their priorities?
• Consider additional target audiences. Is there a new target audience on the scene that you’re not currently catering for?
• Always have a plan. Many businesses fail due to lack of short-term and long-term planning. Where will your business be heading in one month? A year? Five years?
• Be agile. It can cost your business a lot if you’re unable to adapt to changes
• Get creative. Is there a better way you could market your products / services to adapt to any changes in customer behaviour?
• Have a Business Growth Strategy
• Be prepared to pivot. Consider how a change of customer behaviour might impact your offering. Do you have a plan B?
• Keep a close eye on your competition
• Ensure your marketing is on-the-mark
• Remain relevant by keeping an eye on trends and behaviours
• Get advice before it’s too late