Published On: Mon, Aug 20th, 2018

The Top 3 Reasons Industry-Leading Enterprises Go Out of Business

You’ve likely heard that roughly 80% of new startups will fail. But what about large, established businesses? It may seem like industry-leading enterprises have become large enough as to avoid bankruptcy, but this is far from the truth. Any business—even a major enterprise, or a globally recognized brand—can end up closing its doors. All it takes are a few simple mistakes, and they can find themselves on a slippery slope that leads to closing their doors forever.

Here are 3 of the biggest reasons that industry leaders have gone out of business in the past. Use this information to improve your own company, and keep it growing and thriving from year to year.

photo/ Rudy and Peter Skitterians

Spreading Themselves Too Thin

Since the Industrial Age, specialization has been a key to business efficiency and improving the bottom line. Yet, as enterprises grow, they naturally begin to branch out into other areas, looking to expand their reach, broaden their client base, and increase their profits. While some expansion can be great for an enterprise, if it gets out of hand, it’s usually not long before the company loses its way and begins to stumble.

Just take a look at Sears. This company was once a household name, and sold household products to virtually every person in America. Now, most of their stores across the country have closed down. Where did they go wrong? While competitors like Wal-Mart and Amazon moved in on their turf, Sears was busy trying to get their hands into every pot they could. They dabbled in insurance, real estate, financial services, and even internet services. And, with their attention divided, their customers turned to other vendors. Now, Sears is all but extinct, because they couldn’t seem to decide exactly what their niche should be.

Undervaluing Their Employees

Employees are the backbone of any business, large or small. But while a close-knit atmosphere can help smaller companies hang onto great employees, booming enterprises sometimes struggle to make their employees feel like a valuable team member, rather than just a cog in the machine. As your company grows, be sure to keep the importance of your employees at the forefront of your mind. Failing to do so could have your enterprise ending up like Circuit City.

The electronics store was once the go-to place for all forms of new technology. However, their sales began to decline in the early 2000s for a variety of reasons that included inventory management and website issues. But arguably their biggest blunder was in failing to value their employees. In an effort to cut costs, Circuit City fired 3,400 of its highest-paid workers in March of 2007. In April, their sales dropped significantly—a byproduct of having less-experienced employees on the floor. By early 2009, every Circuit City store in the country was closed.

Failing to Innovate

While there are many blunders that can bring down a major enterprise, there is one that seems to have claimed more businesses than any other—failing to innovate. Refusing to adapt to changes in the industry, and failing to continue creating innovative products and improvements, has brought about the downfall of globally recognized brands like Kodak, Blockbuster, and Motorola. Each of these companies (and many others) ignored major changes in their industries, and as a result, lost customers, saw falling profits, and ultimately filed bankruptcy.

Innovation is an important cornerstone for any business. No matter how much your enterprise grows, you should never be complacent with your products and services. Adapt to changes in the market, look for ways to improve and consider using innovation management tools to gather and track ideas to improve your business.

No business is immune to failure. But if you make efforts to avoid these 3 major blunders, you’ll have that much more of a chance at long-term success.

Author: Jeff Broth

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  1. […] International Executive Coach Barry Tay says corporate training is important and gives a big competitive advantage for any business. With the help of an LMS, employees can be trained easily, with the resources available anytime they would need it. This also falls under valuing your employees that play a key role in making them happy, resulting in a stable business organization. […]

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