Brand Failures_ The Truth About the 100 Biggest Branding Mistakes of All Time - Matt Haig [74]
Lessons from Guiltless Gourmet
Be aware that success breeds competition. Guiltless Gourmet’s success within a niche product category was inevitably going to catch the attention of larger rivals.
Have a Plan B. Brands need to prepare for such an eventuality and have a back-up plan.
Chapter Eight
Business cycle failures
Okay, business cycles are nothing new. The ancient Aztecs had booms and busts. But we are at one of those points in history – a decade or so into the new millennium – when we’re feeling what it’s really like to feel the business tide come in and out. Oh, and now in our wired-up interconnected world when one business sneezes the whole world gets a cold. Here we look at those business brands that forgot to take their antibiotics.
The famous Austrian economist Joseph Schumpeter in 1939, the one year in history when the devastating effects of bad economics could be most keenly felt, described the cycle itself as ‘the economic ebb and flow that defines capitalism.’
‘Cycles,’ he said, ‘are not, like tonsils, separable things that might be treated by themselves, but are, like the beat of the heart, of the essence of the organism that displays them.’
This creative destruction is the by-product of the continuous stream of innovation; the more radical the innovation – steam, electricity, the internet – the more violent the cycle.
And so, while economic meltdown seems quite new, it’s worth remembering that since 1900 we have had an eye-popping 27 ‘bull’ markets, roughly corresponding to the upswing of an economic cycle, when brands can rise sharply with the incoming economic tide. For every bull is a corresponding ‘bear’ market, when overoptimistic firms get mauled as the trapdoor opens and the bottom drops out of stock markets. The table below shows the stock market effect of the most significant of these troughs.
Figure 8.1 Drop in share price index 1929–2009
Now businesses and their brands don’t have to die just because the market is bad. Indeed as we have already seen, a successful brand can ride out some pretty rough weather. But these occasional ‘perfect storms’, test some of the longest serving brands to destruction, as the following two failures testify.
71 Lehman Brothers (1844–2008)
Lehman Brothers, like most banking ventures, didn’t start out in that field and went through many twists and turns on the way. The firm was started in 1844 when Henry Lehman left Germany to start a new life in Alabama. Lehman set up a small shop selling groceries, dry goods and utensils to the local cotton farmers. Soon his two brothers joined him in the business and the name Lehman Brothers was adopted.
Lehman Brothers evolved from general merchandising business to trading in commodities and by 1870 they were deeply involved in the financial world as founding members of the New York Cotton Exchange. They had offices all over the city, making them the Donald Trumps of their day. Over the coming years Lehman Brothers’ business grew to include a Coffee Exchange and a Petroleum Exchange. In 1887 the firm became a member of the New York Stock Exchange, so completing its evolution from the commodities business to merchant-banking. The firm went on to play an important role in raising finance for fast-growing industries such as radio and films adding a speck of movie glamour to the name.
The Great Depression that started in 1929 made it difficult even for well-established firms to raise capital. Lehman Brothers pioneered a new method of financing known as the private placement. These loans between blue-chip borrowers and private lenders included some extra safeguards to protect investors and so getting much needed capital flowing again. Adventurous at the time, the private placement is a commonplace financing technique today. Paradoxically it was this willingness to innovate at the frontiers of financial knowledge that was eventually to