The wise Plato once said, "Good decisions are based on knowledge, not numbers." It's a shame that the leaders of renowned companies like Yahoo didn't follow his advice and become textbook examples of what happens when one bad decision ruins an entire company! Years of effort were wasted due to bad decisions, and company leaders regret not being able to turn back the clock. Here are ten such disastrous decisions that destroyed companies.
1. Sears could have become an internet giant. It had the most extensive network and infrastructure to monopolize the online market, but management believed the internet would not become a significant sales channel and allowed Amazon and eBay to take over.
Sears used to be synonymous with a one-stop-shop where you could buy everything. Then the company decided against entering the e-commerce market and filed for Chapter 11 bankruptcy in October 2018. In a desperate attempt to stay afloat, it was forced to close stores, lay off employees, and sell off valuable land. However, sales continued to decline, and nothing could be done to restore the company to its previous level. In 2006, its sales were $53 billion, but in 2017 they plummeted to $17 billion.
Everything went downhill when Sears, despite being a pioneer in the mail-order industry, decided not to enter the e-commerce market. The retail giant had all the necessary infrastructure to become what Amazon is today. In the 1990s, department store chains like Walmart and Target were rapidly gaining momentum.
Sears made the mistake of imitating them and opening its own chain of stores, which was a disastrous failure. Many experts believe that Sears demonstrated foresight in becoming a pioneer, but when it came to internet technology, they underestimated its potential. This was their biggest mistake. (1, 2)
2. There have been cases where Yahoo! refused to buy Google, failed to buy Facebook, and rejected an offer from Microsoft.
Yahoo!, the email service people used before Google's Gmail, is now dead. The company was much more than just an email service, but numerous mistakes along the way caused it to lose its position. Three of the biggest mistakes involved three giant brands: Google, Facebook, and Microsoft. In 1998, Google's Larry Page and Sergey Brin approached Yahoo! with an offer to sell their PageRank system, which today underpins Google, for just one million dollars.
Yahoo! declined their offer because it wanted to build its own platform. Then, in 2002, Brin and Page approached Yahoo! again. This time, they wanted to raise funds to create Google. If Yahoo! had provided them with the requested $5 billion, it would have received a significant stake in Google. Yahoo! CEO Terry Semel decided against it, and that was another mistake.
After this, Yahoo! made two more mistakes. It failed to acquire Facebook because its $1 billion offer was rejected. Had Yahoo! offered slightly more, Mark Zuckerberg would have been forced to sell the company by the decision of investors and the board of directors. However, Yahoo!'s CEO was adamant in his decision not to increase his offer.
Yahoo! could have acquired Facebook for just 21% of its current market value. In 2008, Microsoft offered to buy Yahoo! for $44.6 billion. Yahoo! again declined. Valued at $100 billion at its peak, Yahoo! was sold to Verizon for just $4.83 billion in 2017. (1, 2)
3. Gerald Ratner, owner of Ratner's Jewelers, built a multi-million dollar empire. Years later, speaking to 6,000 people, he declared his products "total junk," which is why they were selling them at low prices. Within days, the company was destroyed, and its shares lost 500 million euros.
«"We also offer cut-glass sherry decanters, complete with six glasses on a silver-plated tray so your butler can serve you drinks, all for £4.95. People ask, 'How can you sell this for such a low price?' and I say, 'Because it's rubbish.'" So said Gerald Ratner, CEO of the renowned jewelry company Ratners, in a speech on April 23, 1991, at the Institute of Directors conference at the Royal Albert Hall in London. Following this speech, Ratners' shares fell by $500 million, ultimately leading to the company's collapse.
Ratners Jewelers, a small retail store when Gerald Ratner took over, grew into a multi-million dollar empire under his leadership. The company's stores and products enjoyed immense public popularity until Ratner's comments. Ratner brought in the chairman of the board to resolve the situation, but Ratner himself was fired in 1992 amid the scandal. The company then changed its name to "Signet Group" and moved its legal form from the UK to Bermuda. (source)
4. WordStar was a popular word processor for DOS-based PCs back when computers were still fairly new. With the advent of Windows, WordStar delayed releasing a Windows-compatible version for several years. By then, Microsoft Word had already arrived, filling its niche and making WordStar obsolete.
Today, very few people, with the exception of Game of Thrones author George R.R. Martin, use WordStar as a word processor for computers. A hit in the 1980s, WordStar is a text editor written for the CP/M operating system and later also ran on MS-DOS. As the de facto program shipped with the first Osborne computers, WordStar was ported to multiple platforms. All went well until the release of Windows in 1985.
WordStar's publisher, MicroPro International, didn't think Windows would be a hit and delayed the release of a Windows-compatible version of WordStar. The Windows 3.0 version was a commercial success on IBM PCs, and WordStar for Windows was finally released in 1991. This was their biggest mistake, as by then people had already switched to Microsoft Word, which had been released in 1983. WordStar never regained its popularity. (source)
5. In the 1960s, Schlitz beer was extremely popular. To reduce production costs, the company replaced malted barley with corn syrup and made changes to the brewing process. Beer produced this way quickly spoiled and lost its original flavor. People stopped wanting to drink it, which spelled disaster for the company.
Schlitz beer, once the largest beer producer in the United States, was produced by the Joseph Schlitz Brewing Company and enjoyed immense popularity in the early 1900s. It was called "the beer that made Milwaukee famous." Their slogan, "When you're out of Schlitz, you're out of beer," was also very popular. That changed in 1967, when the company's president and chairman, Robert Wiehlein, Jr., decided to cut production costs and meet high demand. Making a huge mistake, Wiehlein completely changed the brewing process for the iconic Schlitz beer.
Wiehlein began experimenting with high-temperature fermentation instead of the traditional method and built a new brewery in Baldwinsville, New York, to accommodate it. He instituted the use of corn syrup in place of some of the malted barley used for brewing beer and replaced traditional ingredients with cheaper extracts. He added silica gel to the process to prevent the beer from becoming cloudy. All of this resulted in the beer losing its popular flavor. The beer also spoiled more quickly. But that wasn't all Wiehlein did.
Among other brewing mistakes, in 1977, Uihlein launched a highly unsuccessful advertising campaign featuring a Schlitz drinker threatening an off-camera person wanting to switch to a competing brand. Viewers found the ad threatening and offensive, and it was pulled after ten weeks. The final blow came when Uihlein workers went on strike in 1981. Shortly thereafter, the company was acquired by Stroh Brewery Company of Michigan. Despite some attempts to revive the Schlitz brand by Pabst Brewing Company, which had acquired Stroh, Schlitz beer never regained its status as the beer of the early 1900s. (source)