In today’s rapidly transforming business world, it seems the only constant is change. Companies that can’t keep up with the pace of change and adapt to disruptive innovation often find themselves floundering.
There are quite a few examples of companies that were household names until they failed to innovate and were forced to declare bankruptcy.
Eastman Kodak is one name that comes to mind, along with Polaroid Corp., Blockbuster, Inc., and Borders Group. Some of these companies might have had other problems, but not keeping up with market changes was certainly a major factor that led to their bankruptcy.
Eastman Kodak Co.
Eastman Kodak is the company that brought the phrase “Kodak moment” into popular use. The company’s cameras tended to be lower-priced than its competitors but it made more money on the film that the cameras used.
The company failed to keep up with many of the innovations brought by the digital age. As digital cameras became popular, reducing the need for photographic film and cameras, Kodak ran into financial difficulties. The company ultimately filed for bankruptcy in 2012 before reorganizing and emerging from Chapter 11 in 2013.
Ironically enough, the company’s research people came up with a digital camera as early as the 1970s, but the company did not see nor seize its potential. Or maybe management balked at the threat to its lucrative film sales.
Kodak sold off several lines of business during tough times. It has reinvented itself as a provider of hardware, software, and services to commercial printers, publishers, and the entertainment industry.
Polaroid Corp.
Polaroid is another photo industry company that came undone at the start of the digital photography era.
Before the emergence of digital cameras, Polaroid cameras were a popular means to get instant photographs. The company was seen as a representative American company with a listing in the Nifty 50.
However, as digital photography caught on in the 1990s, the company did not respond adequately.
At the same time, its client base, which included many commercial users like insurance adjusters, started going digital.
Ultimately, Polaroid filed for bankruptcy in 2001. The rights to Polaroid went through numerous hands until 2017 when it was sold to a Polish investor. Polaroid instant cameras, film, and printers are sold through the Polaroid.com site.
Blockbuster Inc.
Blockbuster once dominated the video rental business with storefronts in strip malls across the nation. But the company failed to keep up as its market transformed with the availability of digital download technology. People were able to download videos from the internet, and cable companies started offering video-on-demand.
Even before downloading videos went mainstream, Blockbuster’s competitor Netflix, Inc. (NFLX) adopted a savvy strategy, mailing videos to customers and saving them the bother of a trip to a physical store. Video vending machines also competed for business.
Caught off guard, Blockbuster ultimately filed for bankruptcy in 2010. A locally-owned storefront in Bend, Oregon, is now proclaimed to be the Last Blockbuster on Earth.
Borders Group
The online era has also brought about changes in the bookstore business, as online booksellers like Amazon (AMZN), cut into the sales of physical retail stores, and e-reading devices, such as Kindle or mobile devices, cut into sales of physical books.
The Borders Group of bookstores, which also had an entertainment section in its retail outlets, did not get ahead of this trend, while its main competitor Barnes & Noble, Inc. (BKS) was a bit savvier.
Other companies cut down on their music and DVD sections, as physical sales started getting hit by the move to online purchases by more digitally adept younger consumers.
Borders didn’t respond as fast. As a result, Borders ultimately filed for bankruptcy in 2011. All of its stores closed that year.
Why Are Some Companies Oblivious to Innovation?
Why do some companies not heed the warning signs and continue to pursue their defined way of running their business?
Vijay Govindarajan, a professor at Dartmouth’s Tuck School of Business, has studied this subject and provides some insight. For one, he believes companies that have invested heavily in their systems or equipment are hesitant to invest again in newer technologies.
Then there is the psychological aspect in which companies tend to focus on what made them successful and don’t notice when something new comes around.
There also can be strategic missteps, which may occur when companies are too focused on today’s market and don’t prepare for change or technology shifts in the marketplace.
What Are Some Big-Name Retailers that Have Disappeared Lately?
A number of big-name retailers have significantly dwindled in size and impact, or live only in the memories of their customers.
- Pier One Imports stores were once familiar to brick-and-mortar shoppers as a source of imported home goods and decor. The brand now exists only as an online retailer. The last straw for Pier One was the Covid-19 pandemic in 2020.
- Bed Bath & Beyond, a ubiquitous chain of housewares stores, shut down all of its stores in April 2023. Its name lives on since its purchase by Overstock.com, which changed its website and corporate names to reflect the takeover.
- Toys ‘R Us once controlled a quarter of the world’s toy market, with some 1,500 stores. It is now getting a second life as a mini-shop in Macy’s department stores.
What Are the Biggest Bankruptcies in U.S. History?
The distinction for the biggest bankruptcy in U.S. history belongs to Lehman Brother Holdings, which kicked off the 2008-2009 financial crisis by collapsing despite nearly $800 billion in assets. Most of the trouble was caused by Lehman’s investments in subprime mortgage debt, which was very popular on Wall Street until it wasn’t.
- Second on the list is Washington Mutual, which came up short after a run on the bank during the start of the 2008-2009 crisis despite about $328 billion in assets. That makes it the biggest bank failure and the second most costly bankruptcy in U.S. history.
- Third is Silicon Valley Bank, once the darling of West Coast tech startups. which helped kick off the crisis in March 2007 after a run on the bank. About $42 billion was withdrawn in one day, leaving the bank with -$1 billion in assets,
What Happens to a Company When It Declares Bankruptcy?
A declaration of bankruptcy is an admission that a business or an individual is incapable of meeting its financial responsibilities. Chapter 11 bankruptcy, the most common filing for businesses, is designed to allow for court approval of a plan by the company to get out of the mess, cut its expenses drastically, and pay off at least some of its creditors.
In many cases, the company hopes to emerge from bankruptcy with a second chance. In other cases, the company is shut down and its assets are liquidated to pay off as many of its debts as possible.
The Bottom Line
Companies that don’t respond to market changes brought about by innovation, either because of a fixed mindset or because they didn’t read the market right, tend to miss out on opportunities. Companies that don’t evolve ultimately go under.
If the changes are big enough that an industry’s fundamental business model changes, these old- school companies are at risk of losing their market share and ultimately going bankrupt.
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Companies that Failed to Innovate and Went Bankrupt[/gpt3]
In today’s rapidly transforming business world, it seems the only constant is change. Companies that can’t keep up with the pace of change and adapt to disruptive innovation often find themselves floundering.
There are quite a few examples of companies that were household names until they failed to innovate and were forced to declare bankruptcy.
Eastman Kodak is one name that comes to mind, along with Polaroid Corp., Blockbuster, Inc., and Borders Group. Some of these companies might have had other problems, but not keeping up with market changes was certainly a major factor that led to their bankruptcy.
Eastman Kodak Co.
Eastman Kodak is the company that brought the phrase “Kodak moment” into popular use. The company’s cameras tended to be lower-priced than its competitors but it made more money on the film that the cameras used.
The company failed to keep up with many of the innovations brought by the digital age. As digital cameras became popular, reducing the need for photographic film and cameras, Kodak ran into financial difficulties. The company ultimately filed for bankruptcy in 2012 before reorganizing and emerging from Chapter 11 in 2013.
Ironically enough, the company’s research people came up with a digital camera as early as the 1970s, but the company did not see nor seize its potential. Or maybe management balked at the threat to its lucrative film sales.
Kodak sold off several lines of business during tough times. It has reinvented itself as a provider of hardware, software, and services to commercial printers, publishers, and the entertainment industry.
Polaroid Corp.
Polaroid is another photo industry company that came undone at the start of the digital photography era.
Before the emergence of digital cameras, Polaroid cameras were a popular means to get instant photographs. The company was seen as a representative American company with a listing in the Nifty 50.
However, as digital photography caught on in the 1990s, the company did not respond adequately.
At the same time, its client base, which included many commercial users like insurance adjusters, started going digital.
Ultimately, Polaroid filed for bankruptcy in 2001. The rights to Polaroid went through numerous hands until 2017 when it was sold to a Polish investor. Polaroid instant cameras, film, and printers are sold through the Polaroid.com site.
Blockbuster Inc.
Blockbuster once dominated the video rental business with storefronts in strip malls across the nation. But the company failed to keep up as its market transformed with the availability of digital download technology. People were able to download videos from the internet, and cable companies started offering video-on-demand.
Even before downloading videos went mainstream, Blockbuster’s competitor Netflix, Inc. (NFLX) adopted a savvy strategy, mailing videos to customers and saving them the bother of a trip to a physical store. Video vending machines also competed for business.
Caught off guard, Blockbuster ultimately filed for bankruptcy in 2010. A locally-owned storefront in Bend, Oregon, is now proclaimed to be the Last Blockbuster on Earth.
Borders Group
The online era has also brought about changes in the bookstore business, as online booksellers like Amazon (AMZN), cut into the sales of physical retail stores, and e-reading devices, such as Kindle or mobile devices, cut into sales of physical books.
The Borders Group of bookstores, which also had an entertainment section in its retail outlets, did not get ahead of this trend, while its main competitor Barnes & Noble, Inc. (BKS) was a bit savvier.
Other companies cut down on their music and DVD sections, as physical sales started getting hit by the move to online purchases by more digitally adept younger consumers.
Borders didn’t respond as fast. As a result, Borders ultimately filed for bankruptcy in 2011. All of its stores closed that year.
Why Are Some Companies Oblivious to Innovation?
Why do some companies not heed the warning signs and continue to pursue their defined way of running their business?
Vijay Govindarajan, a professor at Dartmouth’s Tuck School of Business, has studied this subject and provides some insight. For one, he believes companies that have invested heavily in their systems or equipment are hesitant to invest again in newer technologies.
Then there is the psychological aspect in which companies tend to focus on what made them successful and don’t notice when something new comes around.
There also can be strategic missteps, which may occur when companies are too focused on today’s market and don’t prepare for change or technology shifts in the marketplace.
What Are Some Big-Name Retailers that Have Disappeared Lately?
A number of big-name retailers have significantly dwindled in size and impact, or live only in the memories of their customers.
- Pier One Imports stores were once familiar to brick-and-mortar shoppers as a source of imported home goods and decor. The brand now exists only as an online retailer. The last straw for Pier One was the Covid-19 pandemic in 2020.
- Bed Bath & Beyond, a ubiquitous chain of housewares stores, shut down all of its stores in April 2023. Its name lives on since its purchase by Overstock.com, which changed its website and corporate names to reflect the takeover.
- Toys ‘R Us once controlled a quarter of the world’s toy market, with some 1,500 stores. It is now getting a second life as a mini-shop in Macy’s department stores.
What Are the Biggest Bankruptcies in U.S. History?
The distinction for the biggest bankruptcy in U.S. history belongs to Lehman Brother Holdings, which kicked off the 2008-2009 financial crisis by collapsing despite nearly $800 billion in assets. Most of the trouble was caused by Lehman’s investments in subprime mortgage debt, which was very popular on Wall Street until it wasn’t.
- Second on the list is Washington Mutual, which came up short after a run on the bank during the start of the 2008-2009 crisis despite about $328 billion in assets. That makes it the biggest bank failure and the second most costly bankruptcy in U.S. history.
- Third is Silicon Valley Bank, once the darling of West Coast tech startups. which helped kick off the crisis in March 2007 after a run on the bank. About $42 billion was withdrawn in one day, leaving the bank with -$1 billion in assets,
What Happens to a Company When It Declares Bankruptcy?
A declaration of bankruptcy is an admission that a business or an individual is incapable of meeting its financial responsibilities. Chapter 11 bankruptcy, the most common filing for businesses, is designed to allow for court approval of a plan by the company to get out of the mess, cut its expenses drastically, and pay off at least some of its creditors.
In many cases, the company hopes to emerge from bankruptcy with a second chance. In other cases, the company is shut down and its assets are liquidated to pay off as many of its debts as possible.
The Bottom Line
Companies that don’t respond to market changes brought about by innovation, either because of a fixed mindset or because they didn’t read the market right, tend to miss out on opportunities. Companies that don’t evolve ultimately go under.
If the changes are big enough that an industry’s fundamental business model changes, these old- school companies are at risk of losing their market share and ultimately going bankrupt.
[/gpt3]
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