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Product Flops and Collapsed Corporations: Business Lessons from the Failure Museum
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SEAN JACOBSOHN: I have a lot of favorites.
The pets.com sock puppet from 1998--
they could have been successful if they didn't
build a money-losing business.
Harley Davidson cologne from 1996--
it reeked the scent of tobacco.
Here's an unopened bottle.
No, they weren't joking.
They were serious about it.
There's a lot of product extensions,
of course-- sparkling water, Cheetos, lip balm.
Another one of my favorites is Allan from 1964.
He was Ken's best friend.
You may remember him from the Barbie movie.
ALAN: Hi, Barbie.
BARBIE: Oh.
Hi, Allan.
SEAN JACOBSOHN: Here he is in the original box.
Allan wore the same clothing.
He was his best friend.
The problem is everyone just wanted to own Ken, not Allan.
Yes, I have two cans of New Coke.
Do you want me to bring them out or--
it was really hard to switch people en masse to something
completely different.
I have not tasted one.
No.
I certainly have been tempted.
But some of these things are 15, 20, 30 years old.
So they probably don't taste good anymore.
Sean Jacobsohn, a partner at Norwest Venture Partners.
I'm on 14 boards.
I'm also the founder and curator of The Failure Museum.
The Failure Museum has over 1,000 items and continues
to grow--
failed companies, failed products,
failed sports-related items, and failed toys.
I've tagged all 1,000 items of mine to one or two forces
of failure--
product market fit, team, financial management, timing,
competition, and customer success.
I'm going to go through all six forces of failure
and share one example of each.
I have a champagne bottle from Webvan's IPO date in 1999.
For product market fit, Webvan is a good example.
They were the world's first grocery delivery company.
NARRATOR: You have the right to come home from work
and find something good waiting for you in the fridge.
SEAN JACOBSOHN: They raised over 880 million
to launch in 10 cities before having proven one.
Business model required so much capital.
They had distribution centers.
They hired their own drivers, which
is why they had to raise $880 million.
Not enough demand for the early version of your product,
you shouldn't get scale, go to market.
So I have a Theranos mug, and I also
have Elizabeth Holmes' business card.
Their goal was to revolutionize the blood-testing industry
and at the peak were worth $10 billion.
Theranos didn't have a strong team or board.
None of them had domain expertise.
They tried to use a pinprick of blood to do testing,
and that's just not enough data.
Yeah.
When you don't have domain expertise,
hiring other people without domain expertise,
you believe something can be possible when it really isn't.
Here is a copy of the Google Glass.
And I can put it on here too.
A good example of customer success is Google Glass.
They did not pick the right early customers well.
They started with doctors.
And doctors could see patient records on the Glass
while they were talking to the patient,
so they didn't have to use their computer.
It felt invasive.
It didn't seem very personal.
You're not used to having someone
with a strange device on your face trying
to communicate with you.
Because it lacked the cool factor,
they couldn't find any other segments
of the population that wanted to wear something like this.
It's important to pick the right early customers that
are representative of your bigger market.
A lot of times, people pick the most convenient customers
rather than those that are going to help
you build a big business.
I love this one so much that I actually bought two of them
on eBay-- for financial management, the ESPN
mobile phone.
They launched a year before the iPhone.
All the phone did was calling, sharing
ESPN mobile content and scores.
They burned through $150 million,
including several Super Bowl ads.
It only hit 6% of its sales target.
They probably should have had more capabilities on the phone.
There just wasn't enough to do on the phone.
ANNOUNCER: Introducing Mobile ESPN--
sports fans, your phone has arrived.
SEAN JACOBSOHN: I have a couple items here,
a WeWork thermos and a koozie from WeWork's summer camp.
For timing, a good example is WeWork.
WeWork's in the co-working space business.
And when the pandemic hit, the demand for office space
fell off a cliff, and they ended up burning through $16 billion.
The goal was to give people flexible space that
allowed you to do month-to-month leases and scale up and down
and space depending on your demand.
They also signed 10- to 15-year leases at peak market prices,
and then they ended up renting them out at a loss.
There's some level of unluckiness,
but I think that they had the wrong business model.
You need to have a pulse on what's happening in the market
and be able to anticipate what's going to happen
in the next 12 to 24 months.
And so I've had several friends donate their Blockbuster
membership card to me.
And then in every store, there was a sign that said, "Be kind,
rewind."
For competition, Blockbuster is a good example.
They're in the movie rental business.
At the peak, they had 9,000 stores.
They missed the opportunity to move online,
and Netflix ate their lunch.
They also, after they went public,
had the opportunity to buy Netflix for $50 million
and turned it down.
And instead, Netflix ended up beating them.
When I talk about competition, you
need to make sure that you don't have an upstart competitor that
offers a cheaper, better way of doing what you do.
You need to be aware of all the competitors in your market
segment and how you stay differentiated and better
than them.
SPEAKER: (SINGING) Blockbuster Video.
Wow, what a difference.
SEAN JACOBSOHN: I do admire companies
for taking risks and trying new things.
Some of these big risks turn into humongous outcomes,
and some fail spectacularly.
I am a lot of times surprised at the lack of research
that they did before they spent a lot of money
to roll something out that wasn't going to work.
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