Business Mistakes | The 10 Worst Business Decisions Ever
Article by, Staff Writer at Find the Capital
It's always fun to look back at someone else's business mistakes... We ran across an interesting article put out by the website Business Insurance Quotes that we thought you would enjoy.
There's no doubt that the creation of Netflix was one of the best business decisions of the last 15 years. The concept has earned the subscription-based movie and television show rental service more than 23 million subscribers, making it one of the most successful dot-com ventures since the emergence of the Internet. Of course, that doesn't mean it's above the occasional blunder. Netflix's decision to separate its DVD shipping business from its streaming business, forming the new delivery service Qwikster, has upset many of its customers. The move has resulted in tens of thousands of complaints, a major decline in subscriptions and a stock plunge — obvious causes for concern for CEO Reed Hastings. As he attempts to clean up the public relations mess, he can take solace in the fact that it won't register as the worst business decision ever made. The following rank as the most costly and regrettable of all time, and will continue to be mocked for years to come.
1. Ross Perot Passes on Microsoft for Cheap
Cheap is a relative term. At the time, Ross Perot didn't view then-23-year-old Bill Gates' $40-to-$60 million asking price as reasonable, and thus opted not to make a move. It was 1979, and Perot's Electronic Data Systems was worth about $1 billion. The company was looking to invest in a small computer company, and saw Microsoft as an attractive option because it could potentially supply valuable software. Gates was hoping to enter the corporate marketplace, but refused to undersell his hard work. Perot later told theSeattle Timesthat it was "one of the biggest business mistakes I've ever made."
2. IBM Allows Microsoft to Retain Copyright for DOS Platform
In 1980, IBM was the king of the computer industry. When it approached Gates to develop an operating system, he took the opportunity, providing PC-DOS in exchange for $80,000 with the stipulation that Microsoft could retain the copyright for the platform. Microsoft in turn created the MS-DOS system, bringing forth a software revolution and ensuring the company would rule over the industry for the next three decades.
3. Excite Passes on Google for $750,000
Today, Google is valued at $180 billion, a bit more than the $750,000 it could've commanded from Internet portal Excite in 1999. At the time, Excite was a highly-trafficked search engine that was at the forefront of the dot-com boom. Google founders Larry Page and Sergey Brin, recognizing Excite's stature, attempted to sale their search engine for $1 million, eventually reducing their asking price by $250,000. Excite CEO George Bell refused. A few years later, his company was purchased by AskJeeves following a major decline in the value of its stock.
4. Edwin Drake Fails to Patent His Oil Drill
Extracting large quantities of oil from reserves was a seemingly impossible task in 1858, but Drake wasn't afraid to work to make it a happen. Stationed in Titusville, Pennsylvania, he spent a year looking for a solution without results. After employing a local blacksmith, he built a derrick of pine wood, surrounded the drill with a pipe to keep water out, and drilled for weeks until he finally procured the black gold. Unfortunately, Drake was later fired by his company and he lost all of his money on Wall Street, just as many Americans took advantage of the opportunity to get rich quick. His failure to patent his invention resulted in the loss of millions, though the state of Pennsylvania and oil barons eventually paid him to express their gratitude.
5. Western Union Passes on the Telephone for $100,000
Already a communications giant with its telegraph monopoly, Western Union felt little need to take risks they deemed as unnecessary in 1876. Sticking to his guns, company president William Orton turned down Gardiner Greene Hubbard's offer to sell the patent to the telephone for a mere $100,000. According to Orton, the invention lacked "commercial possibilities" and resembled an "electrical toy." In the end, he missed out, and AT&T became America's telecommunications giant.
6. M&Ms Passes on the Opportunity to Appear in E.T.
Reese's Pieces have been among the most popular candies of the past three decades due, in large part, to their appearance inE.T., in which they were used by Elliot to lure the little alien out of hiding. The Hershey Company can thank competitor Mars, Inc. for the success, as it turned down Amblin Productions when it approached it for permission to use the popular bite-sized chocolate candy. It's unclear why the decision was made, but many possible explanations have been offered through the years, including a rather mundane one claiming Mars had reached its advertising budget limit.
7. Ever-Popular Coke Introduces a New Formula
Almost 100 years old in 1985, Coke was the world's leading soft drink and a marketing force. Drastic change certainly wasn't necessary, which is why so many Coke drinkers were perplexed when the company unveiled New Coke. A major aspect of the drink's appeal, in addition to the distinct taste, was the emotional connection it had formed with customers. That connection was compromised, causing a flurry of complaints to the company and eventually forcing it to acknowledge the mistake, despite the fact that New Coke had received favorable ratings in taste tests. Coca-Cola Classic was then released to placate the masses and reinvigorate sales.
8. Decca Records Passes on the Beatles
The Beatles' audition for Decca Records on New Year's Day 1961 was less than perfect, as the group was nervous and eager to earn a record deal. Even still, they felt good about their chances, and hoped to proceed with the next step of their careers. Ultimately, the decision was made by A&R representative Mike Smith to instead sign a local act from London, Brian Poole and the Tremeloes, the safer choice. Decca's reasoning was that "guitar groups are on the way out." The Beatles went on to become the best-selling band in the history of the world, starting a cultural revolution in the process.
9. NBC and CBS Pass on Monday Night Football
Baseball was still America's pastime in the late '60s, but football was emerging as the country's passion. The impending AFL-NFL merger would cause the newly-minted league to explode in popularity and become an extremely valuable television property. Commissioner Pete Rozelle foresaw the success of a weekly primetime game, initially approaching CBS and NBC to negotiate a contract. Both networks were reluctant to reach a deal, however, as they didn't want sacrifice successful programs such as theDoris Day ShowandLaugh-In. Rozelle then went to last-placed ABC, which was more open to the idea, andMonday Night Footballbecame one of the longest-running and consistently highest-rated televisions series of all time.
10. ABC Passes on The Cosby Show
You win some, you lose some. Such was the case when ABC passed onThe Cosby Showseveral years after it opted to broadcastMonday Night Football. In the mid-'80s, the network was still stuck in third place, withMNFessentially being its most-popular program. Entertainment Division President Lewis Erlicht received Cosby's first pitch, but turned it down because, according to Erlicht, Cosby asked for a commitment without providing substance such as a script or pilot episode. The program became an instant hit, ranking No. 3 in the Nielson ratings during its first season and No. 1 during the next five seasons, catapulting NBC to the No. 1 spot among the networks.