In today’s piece by the KeepSolid Goals team, we’ll see that even the biggest, most famous companies are prone to failure. Unless you want your business to follow their suit, it’s best to learn from their mistakes. Check out these 3 failed strategy examples and see how you can avoid repeating the history!
1. Too Greedy - Electronic Arts
Electronic Arts (EA) is an American computer gaming company. You may have heard about it even if you’re not into that industry. Some know EA as one of the world’s biggest game publishers, owning titles like FIFA and Battlefield. However, it’s also infamous for being named the worst company in America by consumers - twice in a row!
According to a Consumerist poll, Electronic Arts failed at 3 core requirements of a consumer-friendly business strategy:
- They don’t provide products that people want and like
- They sell their products at an unreasonable price
- They don’t support the products they sell
What can you learn from EA’s failure and poor strategy?
Generally speaking, you don’t want your customer base to see you as a “greedy money-grabbing machine”. While focusing on driving margins is a natural and understandable behavior for a business. But profit itself should rarely be a focus. Otherwise, the more focused you become on it, the more likely it is that your sales and public image will suffer.
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What should you focus on with your strategic plan then, instead of profits, to prevent business failure? Why, on the things that drive it! Such as:
- High-quality products
- Great customer experience
- Adopting and driving innovations
Seems obvious? It’s because it is! However, instead of these simple, time-tested targets, the core of the strategic plan of Electronic Arts looked like this:
- Increase the lifetime value of games by N%
- Engage additional streams of revenue from digital media
- Capitalize on mobile gaming
If you create a profit-first business culture, you establish an unhealthy attitude toward your products and customers. Naturally, you as a business leader should drive ever-increasing financial returns for your organization. But never forget to translate this goal into focus areas that employees can get behind.
2. Identity Crisis - Kmart
What are the US’ biggest discount high street retailers? Target, Walmart, and Kmart (now owned by Sears). However, whereas the first two are feeling pretty well now, Kmart has been on a steady decline in terms of footfall and sales. Even worse, shoppers have been moving from Kmart to Target and Walmart.
What aspect of Kmart’s business strategy was so poor as to lead to its failure? An utter lack of identity. Let’s compare the vision statements of the three businesses and see if you can spot the issue:
- Target: “Offer cheap-chic clothing styles”
- Walmart: “Always set the lowest prices”
- Kmart: “To thrive as a mass merchandising company that offers customers quality products through a portfolio of exclusive brands and labels.”
Do you see the problem? Exactly - Kmart’s vision statement is as broad and uninspiring as possible. This creates a problem for both employees (they don’t know clearly what results are expected of them) and customers (they don’t understand why they should come to Kmart as opposed to any other business).
What can you learn from Kmart’s failure and poor strategy?
If nothing else, identity is the single biggest reason to create a strategic plan for a business. It forces you and your whole organization to focus your limited resources on a cohesive common objective. That’s why Kmart’s generic vision statement was such a poor strategy, and that’s why this business failed. Without a clear identity, they had no chance to compete with juggernauts such as Target and Walmart.
How to avoid repeating this mistake? A mix of two business goal setting approaches can help, one called Value Disciplines and the other - Objectives and Key Results (OKR).
- The Value Disciplines model suggests that you pick one of the following key disciplines for your business to focus on: Operational Excellence, Customer Intimacy, or Product Leadership.
Kmart’s case is great for illustrating this approach. Target clearly has outstanding Customer Intimacy with their fashion lines, and Walmart’s is Operational Excellence. This means that Kmart probably should have tried to pursue the niche of Product Leadership, or focus on beating its counterparts in their own game. - The OKR model is great for keeping your business focused on the chosen Value Discipline. According to it, you determine an Objective - the major goal that your entire organization should pursue. Then, you figure out Key Result - specific sub-goals that are tied to your Objective and must be achieved to reach it. Finally, you assign Tasks - concrete business activities, each tied to a specific Key Result.
Avoiding business failure with OKR tools
One of the biggest challenges with OKR is keeping track of your Objectives, Key Results, and Tasks, channeling everyone’s efforts towards them. To make it easier and streamline the process, we recommend utilizing dedicated OKR tools, such as KeepSolid Goals. It helps streamline the whole process and prevent your company from failing due to poor strategy.
3. Lack of Focus - McDonald’s
Wait, what? McDonald's is a particularly successful corporation, how is that a failed strategy example? Glad you asked! Despite being a massive success by all means, McDonald’s is still prone to making mistakes and coming up with strategies that in hindsight were quite poor. One such business failure was its attempt at healthy salads.
In 2005, facing increasing pressure about their high-fat meals, McDonald’s decided to launch a range of healthy salads. This seemed like a smart idea that could capitalize on the rising trend for healthy living.
However, the salads didn't sell well. Consumer focus groups suggested that customers didn't enjoy the salads as much as they did fries and burgers. McDonald's responded by tweaking the flavors of the salads - adding sauces, dressings, fried chicken meat, etc. This did increase sales by around 1%, but eventually, the company had to admit their failure - that salads are unlikely to be a major source of revenue for McDonald’s.
Not only that, but the range of salads turned out to be actually worse for your health. After all the added dressings and sauces, some of the salads would contain even more calories and fat than Double Big Mac! So it’s not that this strategy was poor and failed - it’s that the people implementing it skewed half-way through.
What can you learn from McDonald’s failure and poor strategy?
So, why was the idea of healthy salads one of McDonald’s worst business strategies? First of all, it’s like the company forgot what its core competencies (Value Disciplines) are and ventured too far from them. But that was already covered in the Kmart example above.
The second aspect of why strategy ended up a grand business failure is the lack of focus. Whenever you launch a new strategy, you should clearly articulate what problem you're trying to solve and why you're doing it. This vision needs to be shared with all stakeholders and embedded in the strategy.
McDonald's failed with this poor strategy because it started off as mitigating reputational risk but then shifted to trying to increase revenue, completely forgetting about the original reason. And so they came full circle. McDonald’s once again had to face criticism about their unhealthy menu, but this time it’s the products that were originally introduced to solve this very problem!
How do you avoid this? Once again, by implementing OKRs! The idea of this approach is to keep you focused on what matters for your business. With OKRs, the McDonald’s salads situation would have been impossible. If they’d set “mitigating reputational damage” as their Objective, it would have been clear that “growing revenue” and “adding more dressings” are not fitting Key Results for it.
