It’s been proven time and again that when organizations are unable or unwilling to adapt to disruption, technological advancements, and evolving customer demands, they simply cannot survive in the long term.
Successful companies are a result of many things coming together, including smart risks, sustainable growth, financial gain, and corporate innovation. Unfortunately, there is a large mix of reasons why a company can fail, too, much of which comes down to neglected consumer trends and technology and not investing in the right sectors of the business.
9 Companies That Failed to Innovate
Whether it was due to too many stores existing, software solutions crumbling under an existing business model, a failure to adapt to the online advertising market, or a brand that simply failed to innovate, there are plenty of examples out there.
Below, we take a closer look at these nine failed companies that learned this lesson the hard way.
1. Nokia
Nokia, the phone and cellular network company, was once known for being remarkably adaptive and forward-thinking, and so its eventual demise was a surprising one. The company consistently invested in research and development and invented its first smartphone in 1996.
But in the years that followed, this technology company failed to acknowledge the significance of software, including apps, and underestimated the rapid transition from standard mobile phones to smartphones.
Why the company failed
In 2007, for example, Nokia was earning more than 50% of all profits in the mobile industry but most of those profits were not coming from smartphones. In contrast, the company’s biggest competitor Apple was paying equal attention to hardware and software development and was way ahead of the curve when it came to smartphone innovations.
By 2013, Nokia had just 3% of the global smartphone market and in August of the same year, it sold its handset and smartphone manufacturing business to Microsoft for $7.2 billion. It has since rebuilt and branched out into different areas, including becoming a data networking equipment manufacturer.
2. Kodak
At one point in time, Kodak was the most famous and revolutionary name on the photographic film market. The company was largely responsible for developing cameras that were portable, affordable, transportable, and ultimately accessible to the average household.
But Kodak failed to adapt to advances in technology following the invention of the digital camera in 1975.
Why the company failed
Kodak long maintained the belief that its customers would continue to appreciate and value a printed image over digital photography. Unfortunately, that assumption was incorrect and the company failed to innovate—but by the time it halted sales of traditional film cameras in 2004, it was too late to recover its losses.
The company filed for bankruptcy in 2012 and has been working to reinvent itself ever since. In a strange turn of events, the company received a $765 million government loan from the Trump administration in 2020 to produce 25% of the active ingredients for generic medications in the United States.
3. Blockbuster
"Neither RedBox nor Netflix are even on the radar screen in terms of competition.”
This 2008 quote from Blockbuster’s CEO Jim Keyes came back to bite him — and hard.
In the late 90s, Blockbuster owned 9,000 video-rental stores in the United States, employed 84,000 people worldwide, and had 65 million registered customers.
Why the company failed
Despite partnering with Enron around this time to develop a video-on-demand service, Blockbuster was much too focused on the profits it was raking in from its video stores to commit to making the new service a success.
The company seemed unwilling even to contemplate the fast-evolving shift in consumer behavior or how technological advances would impact its business model. Not only was Blockbuster incredibly slow to implement a DVD-by-mail service, but customers were quickly growing frustrated by the company’s late fees.
Not only that, but online business and the digital revolution was beginning to take off, and Blockbuster failed to innovate. The company also had to compete with other brands in the electronic entertainment industry, whether it was a video game or new method of watching films.
It wasn’t long before Netflix started eating into the company’s profits and by 2010, the company decided to file for bankruptcy with over $900 million of debt.
4. Myspace
Myspace was once considered to be the coolest social networking site, and between 2005 and 2008, it was certainly the most popular. At its peak in 2008, the site was attracting 75.9 million unique visitors a month.
Although it was viewed as one of the most innovative companies in the beginning, the business began to break down.
Why the company failed
There are two key reasons for Myspace’s demise. Firstly, Facebook came through with a far superior and more user-friendly service. Not only did it have cool features like the now iconic Facebook newsfeed, but it better facilitated communication and networking for its members.
Secondly, Myspace was poorly managed. The site was acquired by News Corporation for $580 million in 2005 and the company’s culture quickly shifted. Instead of focusing on optimizing the user experience or boosting its research and development team, driving ad revenue became a top priority and the site was quickly saturated.
As a result, Myspace members began migrating to alternative platforms. Between 2009-2011, the site lost over one million users per month.
In 2011, Myspace was purchased by Specific Media for $35 million, over $500 million less than News Corp had paid six years previously.
5. Toys R Us
Toys R Us was a much-loved children’s brand and one of the largest toy store chains, with more than 700 stores across the United States.
Why the toy retailer failed
But in recent years, the company struggled to adapt to the rise of e-commerce and lacked creative vision — ultimately, it failed to innovate and provide a convenient, enjoyable, personalized, or competitively-priced shopping experience for its customers.
It didn’t help matters that the company was suffocating under billions of dollars of debt, precluding much-needed investment in its stores to modernize its service offering.
The company filed for bankruptcy in 2017, listing $7.9 billion in debt against $6.6 billion in assets.
Toys R Us made a low-scale comeback in 2019 to compete with other toy vendors. It opened two mall stores for the holiday season with a focus on open play areas, interactive displays, and spaces for private events like birthday parties. Both stores have since closed.
6. Yahoo
Yahoo first launched in 1994 and quickly became the go-to portal for email, news, and web searches.
Despite its creation during the digital revolution, the company’s failure came about as the result of several bad business decisions and its lack of corporate innovation.
Why the company failed
In 2002, Yahoo missed an opportunity to buy Google for $1 billion and then Facebook for an alleged $1.1 billion in 2006.
Yahoo has also been criticized for mismanaging Flickr and Tumblr, failing to prioritize the recruitment of high-caliber programming staff, and a lack of vision among its leadership team.
This string of failures culminated in Yahoo’s sale to Verizon in 2016 for just $4.8 billion. For comparison, the company was valued at $125 billion at its peak in 2000.
7. Xerox
In 1970, printer company Xerox launched the Xerox Palo Alto Research Center (known as Xerox PARC) to develop the technologies of the future. Technologies such as laser printers, the Ethernet, and a prototype of the modern PC were all invented at the Xerox PARC.
Why the company failed
While the company invested heavily in research and development and achieved some revolutionary innovations, it struggled to capitalize on market potential and achieve commercial success, eventually losing out to an organization with a better-established brand and a much bigger vision.
Despite having developed the graphical user interface (GUI) and a commercial version of the mouse, it was Steve Jobs and Apple who reaped the success for these inventions when the Macintosh Computer was launched in 1984.
Ultimately, Xerox was unable to seize the right opportunities to leverage its ideas and innovations and run a profitable, commercial business.
8. Pan American World Airways
Pan American World Airways (Pan Am) at the time was the largest international air carrier in the U.S. The company began in 1927 and was one of the first American airline companies to fly internationally.
The company founded a mail carrier service before it even began carrying passengers to and from destinations. Once it added these flight routes and new destinations, it was viewed as an incredibly innovative company. Unfortunately, its large fleet size, fancy features, and trained personnel weren’t enough.
Why the company failed
Competition in the airline industry is ultimately what struck down Pan Am. Although it helped usher in and embrace many new innovations in the aviation industry, it wasn’t enough to keep the company afloat. Alongside this, the price of fuel and a waning interest in travel due to the recession.
The company called it quits in 1991 and had to sell all of its assets. A railway corporation later purchased the logo and bore the name Pan Am Railways. This was later bought out by another rail company.
9. Segway
Most will remember the personal motorized scooter invented by Segway, one that is still seen in many tourist destinations today. Segway came to the market in 2001, founded by Dean Kamen.
Company leaders at the brand overestimated how successful the two-wheeled invention would be. Even with commercial partnerships, physical stores, and its own e-commerce presence, it faltered.
Why the company failed
Although it may have seemed to be a good idea, the Segway PT wasn’t actually solving a true gap in the market. Regardless of whether or not it was a great invention, the company didn’t continue corporate innovation.
The Segway PT was difficult to ride and maneuver and led to many accidents and injuries. This self-balancing motorized gadget wasn’t nearly as easy to use as a standard scooter and the company failed to innovate despite all the technical flaws and as electrical scooters gained popularity.
Later, it was acquired by Ninebot Inc., and although it still sells some versions of the upright scooter, it has since expanded into electric scooters, go karts, and eMopeds.
Other Failed Companies
The list doesn’t end here when it comes to companies that failed to innovate. Aside from these examples, there are major company fallouts in other categories, too.
JCPenney was one of America’s largest department store brands. Although it was quick to adapt and become one of the first online retailers to get a website and have both an online and catalog business, it couldn’t quite keep up.
After too many shifts of its model and intended audience, it hasn’t managed to make a successful comeback.
In the technology company sector, International Business Machines (IBM) had initially found success after the personal computer revolution and really investing in consumer electronics. After creating the IBM personal computer, it quickly became an enormous hit.
The American multinational technology company managed to climb into the spot of the most valuable company in the world in the 1980s and later branched into enterprise software. The company lost its touch when it came to innovation though, crashing and burning later.
The retail music store Tower Records also experienced a major loss. Although it wasn’t slow to innovate, this came at an expensive cost. It also had to compete against illegally downloadable music online and the retail music chain shut down in 2006. It came back from the grave in 2020 as an online retailer.
While many of these brands failed to innovate, it’s not the end of the story for all of them, like Tower Records, IBM, and Nokia. Outstanding technological innovation mixed with new leadership and direction changes means many of these companies have come back from the dead or rebooted.
Some haven’t been so lucky, making for cautionary tales across many industries.