Successes that Hide Failures

Sometimes business can be counter-intuitive. Some of my other much written about subjects include spending more on advertising when money is tight and holding on to employees during lean times. For this post, I want to take a look at your most profitable product or service, and see if it is masking major failures in your business model.

I won’t link it here, but I once read a blog about a woman that owned a once-successful candle company. At the time of the post, she was about to close the doors because of the “skyrocketing” cost of wax. She felt there was no way that anyone would pay a higher price for her product, and her margins were slowly shrinking into negative territory.

The high cost of wax for this woman revealed a major failure in her business model- it was based on only one particular price of a raw material. There was no flexibility. For years, this failure was hidden because she was selling so many of her candles. There was no need to push forward, innovate, extend boundaries, etc., because of her success.

This is not limited to small businesses. Everyone knows what used to be the best-selling phone- Motorola’s RAZR! What happened? The iPhone happened. As a result, it became apparent that Motorola’s top end phones had none of the capabilities of their competitors. Their business model had major flaws that they are now rushing to correct- now that it may be too late. This story is highlighted in a Street.com article here.

If you are still not convinced, look at Blockbuster, my favorite company to pick on. They were so successful in renting movies, it hid the major failure of their business plan to address the changing ways in which people watch movies. They made it through VHS to DVD (all be it very slowly), but that was still basicly the same thing. They did not have a plan for if people no longer went to stores to rent movies. First came Netflix, then downloadable movies. In both instances, Blockbuster found itslef making after-the-fact type moves, hardly remaining the leader it once was.

What about you and your business. What is your best product or service. Is it hiding the fact that changes in your industry could doom you to failure?

For the master of successes that hide failures, view the Wile E. Coyote video below:

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