5 Companies That Almost Failed
A little over 500,000 companies fail every year. But there is always something we can learn from failure! In this article, we will talk about 5 companies that are immensely successful today but almost failed at a point in time and what we can learn from them:
In 1971, Frederick Smith invested his own fortune of $4 million and an additional $90 million in capital to start a delivery service- FedEx. Rising fuel costs put the company on the brink of bankruptcy and was losing $1 million a month.
In desperation, Smith jetted off to Las Vegas with the remaining funds and tried his luck in the blackjack tables. The gambling gods must have needed their prime deliveries because, on Monday morning, FedEx had $32000 in their account. This was just enough to fuel their planes and keep the operation afloat a few days longer. In just 2 years, the company showed its first profit of $3.6 million.
Founded in 1911, IBM or the “Big Blue,” got its start in hardware and thrived in that field for decades, becoming the top supplier of mainframe computers.
In the 1980s, IBM’s profit margins suffered a steep decline and the decline of profit margins as a result of failing customer interest in mainframe computers. IBM was losing $8.1 billion every year simply because they could not compete with nimbler personal computers.
New leadership in the form of Lou Gerstner as CEO was brought in. His first action as CEO was firing about 100,000 people. He also did something most leaders don’t-he listened to the customer and understood that customers wanted integrated solutions. IBM worked to build a robust technology stack and included a couple of products made by its competitors to provide the best solutions to its customers.
Gerstner’s plan worked and quickly improved the margins of the services business which were much higher than the hardware sales. By 2002, IBM had $7.7B in profit, While it had ups and downs over the years, IBM today has over 400,000 employees all over the world and has set for the most number of patents, 20 years in a row. Valued at $32 billion, IBM is one of the world’s most valuable brands today.
#8 Go Daddy
In 1997, GoDaddy was founded by Bob Parsons to offer a simple e-commerce solution for small businesses. Four years after spending his own fortune into the business with not much success, he found himself on the verge of shutting down the company. He took a vacation in 2001 to clear his mind and there he observed a valet driver. He realized that if he lost all his money, he would survive by working as a valet drive but would still survive. This showed him that failure was not as scary as it seemed and this understanding revitalized Parsons to not give up on GoDaddy.
At that moment, the economy crashed with most of his competitors losing money. Since GoDaddy was priced affordable, it looked attractive to the customers and the company has not looked back since. By offering good customer service and affordable pricing, Godaddy was able to upsell and cross-sell extra features like privacy, hosting, website builder and more! In 2014, Godaddy became the world’s biggest domain name registrar with more than 50 million domain names under its repository.
In 2003, two silicon valley engineers Martin Eberhard and Mark Tarpon started Tesla to build a greener car and Elon Musk joined as an early investor, leading the series A financing. Their plan was to focus on lithium-ion batteries which they expected to get cheaper and more powerful for many years. They wanted to avoid complex manufacturing by plugging Tesla develop battery and powertrain into the existing chassis of the Lotus Elise.
However, the company began customizing many parts which made costs spiral out of control. Tesla was on the verge of bankruptcy with several CEO quitting as soon as they had come. Eventually, Elon Musk took the job and made drastic changes to save the company such as – cutting 25% of the workforce, recalling 75% of roadsters, forming a partnership with Daimler, raising $40 million in debt financing and $465 million dollars from the US government.
Musk went to immense struggle by sleeping on the factory floor, working 120 hour-weeks to design a production line of battery packs in three weeks. All the work paid off as Tesla debuted on the NASDAQ in 2010, raised $226 million and became the first American company to go public since Ford in 1956. By the end of 2017. Tesla passed Ford in market value, just seven years after its IPO.
In 1983, Howard Schultz traveled to Italy and came back with an idea of turning coffee bean stores into cafes. Starbucks served its very first latte that year and this experiment was a success! He pursued a strategy of rapid expansion and it had about 165 stores in 1992 across the USA.
Starbucks however hit a wall in 2007 with the financial crash. It’s growth screeched and its stock price plummeted by 50% as cash-strapped consumers backed away from pricey habits. He shut over 1000 cafes in 2009 and laid off about 6700 employees. In a drastic decision, he ordered all starbucks locations in the USA to be closed for one afternoon so that he could retrain 135000 baristas about how to make its signature espresso. He also mandated a removal of automatic espresso machines which made service faster but took away the romance of making coffee.
This makeover seemingly worked as the stock prices rose 143% and same-store sales rebounded. We can all agree that Starbucks is to coffee what Apple is to laptops and is a global brand today!
If you missed out on reading the prequel to this blog post (about some more cool companies!) go have a look at it here.