Gennaro Cuofano's Blog, page 146

What happened to WeWork?

WeWork is a commercial real estate company providing shared workspaces for tech start-ups and other enterprise services. It was founded by Adam Neumann and Miguel McKelvey in 2010. WeWork’s business model was built on complex arrangements between the company and its landlords. There were also several conflicts of interest between Neumann and WeWork which provided the impetus for the failed IPO and significant devaluation that would follow.

Background

WeWork is a commercial real estate company providing shared workspaces for tech start-ups and other enterprise services. It was founded by Adam Neumann and Miguel McKelvey in 2010.

Few companies have had a more dramatic and convoluted rise and fall than WeWork. For years, the company was at the mercy of Neumann’s unconventional leadership style and questionable behavior. 

In a strange duality, both traits contributed to the success and also the downfall of WeWork. So intriguing is the company’s story it spurned a documentary entitled WeWork: Or the Making and Breaking of a $47 Billion Unicorn.

Some of this story is told below.

Company culture and questionable leadership

WeWork was built on a simple premise: it provided a place where start-up employees and freelancers could find like-minded individuals and discuss ideas.

Employees worked long hours but were well compensated with glamorous parties and extravagant perks. Neumann’s approach blurred the line between work and pleasure, but most stakeholders were fully supportive of an idea he believed represented the future of work.

However, doubts began to emerge over Neumann’s business acumen in 2017 after he told Forbes that WeWork’s valuation was “more based on our energy and spirituality than it is on a multiple of revenue.” He was also accused of purchasing a private jet with company funds and filling it with marijuana smoke to the detriment of others. Together with his wife, he may also have fired employees for giving off bad vibes.  

In the end, many former employees accused him of being a toxic individual akin to a cult leader. They frequently recounted him arriving at meetings intoxicated and making claims that he would become the President, the Israeli Prime Minister, or a trillionaire.

Unsustainable business model

WeWork’s business model provided little scope for attaining profitability. In a nutshell, the company leased office buildings, transformed them into shared workspaces, and provided free beer to tenants. Rent would be paid by a rotating cast of freelancers, venture-funded start-ups, and larger corporations. 

However, it’s important to reiterate that WeWork leases buildings and does not own them. To make a profit, it had to charge workers more than what it was paying to landlords. When the company started leasing office space in 2010, post-GFC rent prices sustained the business for a while. Once the market recovered and hit record highs, WeWork started negotiating with its landlords for concessions including reduced or free rent and infusions of capital to refurbish certain locations.

Essentially, the company was relying on landlords to keep the lights on while it tried to build its revenue streams. This was a risky strategy that to some extent relied on the charisma of Neumann and the novelty of WeWork’s company vision. Furthermore, the strategy made the company vulnerable to any downturn in the tech start-up industry.

In early 2019, a Wall Street Journal article outed Neumann for a potential conflict of interest after it was discovered he purchased commercial properties and then leased them back to WeWork

Failed IPO

In August 2019, the company publicly filed documents for an impending IPO after making a $2 billion loss the previous year. 

The paperwork was criticized for its dramatic, floury epitaph which read “We dedicate this to the energy of we – greater than any one of us but inside each of us”. It also included several damning admissions made by Neumann, including that he sold a trademark for millions back to his own company and gave interviews contravening the IPO quiet period. 

Alarmingly, he did not seem to grasp the magnitude of his actions or that they reflected poorly on him and the company.

WeWork then went into crisis mode as $37 billion was wiped from the company’s valuation. 

Acquisition and restructuring

Fortunately, WeWork was saved by Japanese tech investment fund SoftBank – headed by one of Neumann’s closest allies.

As part of the deal, SoftBank paid Neumann $1.7 billion to step down and took an 80% stake in the company now worth around $8 billion. SoftBank later reneged on a deal to buy $3 billion in WeWork shares after the scale and magnitude of Neumann’s indiscretions took their toll.

In late 2019, WeWork embarked on a cost-cutting mission. It laid off almost 20% of its global workforce in November with more terminations in March and April 2020. It also phased out free beer in its workspaces. While the move to ban beer is arguably less significant than the mass terminations, it does hint at a new WeWork normal post-Neumann.

Key takeaways:WeWork is a commercial real estate company providing shared workspaces for tech start-ups and other enterprise services. Once valued at $47 billion, the company became embroiled in controversy and was acquired for the more modest sum of $8 billion.WeWork company culture promoted excessive spending, long working hours, and partying. CEO Adam Neumann was accused of being a toxic and bizarre leader who made wild, baseless, and sexist claims about himself and his employees. Company IPO documents show he was apparently unaware of the consequences or magnitude of his actions.WeWork’s business model was built on complex arrangements between the company and its landlords. There were also several conflicts of interest between Neumann and WeWork which provided the impetus for the failed IPO and significant devaluation that would follow.

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What happened to Concorde?

Concorde was a supersonic passenger airliner jointly developed and manufactured by Sud Aviation and the British Aircraft Corporation (BAC). After more than three decades in the sky, the entire fleet was retired in 2003.Concorde was not a commercially viable aircraft. The presence of a sonic boom limited its routes to those occurring over the open ocean. It was also heavy on fuel which made Air France and British Airways vulnerable to price hikes.Concorde’s fate was sealed by a fatal crash in 2000 and the September 11 terrorist attacks the following year. A collapse in the first-class market and consumer avoidance of air travel exposed the aircraft’s lack of commercial viability.Background

Concorde was a supersonic passenger airliner jointly developed and manufactured by Sud Aviation and the British Aircraft Corporation (BAC). Twenty aircraft were built, with British Airways and Air France the only two commercial companies to utilize them. 

The Concorde was an extremely fast way to travel. It was one of only two supersonic jets ever produced, carrying 100 passengers and 9 crew at a cruising speed of 1,350 miles per hour. As a result, Concorde’s flagship New York to London route could be made with tailwinds in under three hours.

After its first commercial flight in 1976, all Concorde aircraft were retired in 2003. Many can now be found on public display in museums around the world.

So what happened to Concorde? How did an aircraft promising to be the future of air travel be reduced to a museum piece?

Commercial viability

The Concorde produced a loud sonic boom when it eclipsed the speed of the sound. At ground level, the boom sounded like an explosion and had the potential to shatter glass.

This meant the Concorde could only be flown over water where it wouldn’t disturb people on the ground. Some countries flat out banned the aircraft from flying in their air space. In other countries, residents living near airports frequently complained about the noise.

Where a route could not avoid flying over land, the Concorde had to fly at slower speeds which made it no quicker than conventional aircraft.

BAC and Sud Aviation had difficulty selling the aircraft to airlines, with 12 canceling their orders three years before the first commercial flight. 

In addition to the sonic boom issue, Concorde engines were heavy on fuel and thus had a limited range. With a total capacity of 100, the Concorde consumed the same amount of fuel as a Boeing 747 that could travel twice as far and carry four times more passengers.

In most cases, the cost of fuel exceeded the profit from each flight – making the commercial viability of Concorde extremely vulnerable to high fuel prices. 

Air France Flight 4590

In July 2000, an Air France Concorde crashed shortly after taking off from Paris. 109 people on board were killed plus four on the ground.

Investigators determined that the plane had run over a piece of metal debris from another aircraft, causing a tire to explode and ignite fuel in the wings.

The accident was not a failing of the Concorde itself, but it did provide the impetus for its eventual retirement. Both airlines were instructed to make safety modifications to the Concorde design which cost $150 million.

September 11 attacks

In a twist of fate, the first Concorde flight to test the new modifications landed in New York City moments before the first hijacked plane hit the World Trade Center. 

In the aftermath of the attacks, aircraft around the world were grounded indefinitely.

When aviation did return to some normality, the premium first-class market collapsed and consumer confidence in air travel was low. To compensate for reduced patronage and increased safety restrictions, most airlines had to cut costs to survive.

This did not come naturally to British Airways and Air France. The airlines, who had only recently spent $150 million, would never recoup their costs.

Airbus withdrew maintenance support soon after, signaling the end of commercial operations for both airlines.

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What happened to Xerox?

Xerox is an American corporation selling print and digital document products in 160 countries around the world. The company was founded in 1906 by Joseph C. Wilson and Chester Carlson. Xerox was visited by Steve Jobs in 1979 who gained access to PARC in exchange for Xerox receiving shares in Apple. He then purchased the rights to a Xerox GUI and used it to produce the Apple Macintosh. Xerox myopic focus on its photocopier business, an organization skewed toward sales and marketing, and that might have lost the focus on product slowly lost its market leadership.

Background

Xerox is an American corporation selling print and digital document products in 160 countries around the world. The company was founded in 1906 by Joseph C. Wilson and Chester Carlson.

Carlson invented a process known as xerography in 1938 where photographic copies of documents could be made onto plain paper. As the first company to obtain the commercial rights to xerography in 1947, Xerox photocopiers would become a flagship product for decades 

Xerox also invented the personalized computer based on the idea of mimicking a typical office desk. The Xerox Alto was released in March 1973 and was the first computer to support an operating system based on a graphical user interface. 

History will show that Xerox squandered its first-mover advantage in personal computing. The company practically invented digital communication but failed to realize the full potential of its technology. 

With all of that said, let’s take a look at the Xerox story detailing its missed opportunities.

Collaboration with Steve Jobs

Xerox founded the Palo Alto Research Center (PARC) in 1970. It was here that the Xero Alto was developed alongside innovations such as the laser printer, word-processing machine, and Ethernet networking technology.

In 1979, a young Steve Jobs gained access to the research center with Xero receiving Apple shares in return. Jobs immediately saw the commercial potential of the WIMP (Window, Icon, Menu, and Pointing device) system and later remarked that Xerox had no idea how much commercial potential its products had.

Jobs then incorporate the WIMP system into the Apple Lisa desktop computer and invited several PARC researchers to join his company. 

Xerox Star vs. Apple Macintosh

In 1981, the Xerox Star was released as a successor to the Alto. It was the first computer to incorporate file servers, Ethernet networking, print servers, and e-mail, among other features.

However, it was priced at $16,000 with a full Xerox Star-based office installation costing as much as $100,000. By comparison, an IBM machine of the time retailed for a tenth of the price while a Commodore VIC-20 cost only $300. The Star did little more than automate secretarial work and it would be years before advances in software and hardware technology-enabled Xero’s original vision to be realized.

Apple then purchased the rights to the Alto GUI and incorporated it into the Apple Macintosh. When the Macintosh was released in 1984, it was the first computer with a GUI and mouse that was commercially successful.

Innovation and the core business model

Despite having the expertise and necessary componentry to revolutionize digital computing, Xerox maintained an almost myopic focus on its photocopier business.

Indeed, Xerox executives were commonly referred to as “toner heads” since they could not see any commercial value in the company’s non-printing or photocopying assets. In 1985, then-CEO David Kearns stated that the future of Xerox was in copy machines. This was an odd statement considering the company was decades ahead of its competitors in developing computers.

To some extent, the attitude of Xerox management was not helped by how much money the company was making from copiers and high-end printers. Sales commissions for selling million-dollar laser printers to enterprise clients were much higher than a personal workstation worth just a few thousand dollars.

A lack of a forward-thinking strategy also ensured the company could not bridge the gap between emerging technologies and commercialization. While Xerox remains a multi-billion dollar company today, it does not have the pedigree of innovators like Apple, Alphabet, Amazon, or Microsoft. 

Key takeaways:Xerox is an American corporation selling print and digital document products and services worldwide. The company failed to capitalize on revolutionary research performed at its PARC R&D center. Xerox was visited by Steve Jobs in 1979 who gained access to PARC in exchange for Xerox receiving shares in Apple. He then purchased the rights to a Xerox GUI and used it to produce the Apple Macintosh.Xerox released the Xerox Star personal computer in 1981 in a rare example of the company selling an innovative product commercially. However, the Star was prohibitively expensive, targeted the wrong market, and was a decade ahead of its time.

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What happened to Commodore?

Commodore was an American manufacturer of home computers and electronics. The company, which was founded by Jack Tramiel and Manfred Kapp, was a major player during the burgeoning PC market of the 70s, 80s, and early 90s. Commodore failed to keep pace with advancements in personal computing, which opened the door for IBM and Apple. This lack of innovation was no doubt caused by the appointment of a CEO who cut research and development funds to almost nothing.

Background

Commodore was an American manufacturer of home computers and electronics. The company, which was founded by Jack Tramiel and Manfred Kapp, was a major player during the burgeoning PC market of the 70s, 80s, and early 90s.

The company is best known for the Commodore 64. With over 17 million units sold, it is regarded as the most popular single computer model of all time. Commodore was also headed by the somewhat enigmatic Tramiel, who recognized the potential of the home computing industry before most others.

Commodore declared bankruptcy on April 29, 1994, with its trademarks sold to Escom and then Tulip Computers – both of which are now defunct.

Below is a look at the interesting story of this once-pioneering company.

Leadership

Jack Tramiel, who was a Holocaust survivor, founded Commodore in 1955. He had an aggressive leadership style and approach to business that frequently landed him in trouble.

After becoming embroiled in a scandal with a Canadian finance company, Tramiel was forced to sell a large portion of Commodore to Irving Gould. The two worked together harmoniously for a time, but Gould quickly tired of Tramiel’s one-man management style which also offended Commodore’s suppliers and resellers. 

After a series of disagreements, Gould forced Tramiel to resign from the company in 1984. Without Tramiel, Commodore became a rudderless ship akin to Apple when Steve Jobs resigned. The company had lost Tramiel’s strategic vision while retaining his aggressive style of leadership.

Gould later embarked on a “hire and fire” campaign as the company struggled to find coherent and stable leadership. This unsettled the company as each incoming CEO had a different vision for Commodore. What’s more, many were unqualified or inexperienced in computing and had no desire to learn. 

Commodore 64 succession

As successful as the Commodore 64 had been, the 8-bit machine was beginning to show its age in the late 1980s.

The problem for Commodore was that its successor, the 16-bit Amiga, was not ready to go on the market. When it was released, it failed to achieve the same access as the 64. The Amiga didn’t offer enough business software to appeal to enterprise customers, but at $1,000 was too expensive to appeal to younger gamers. 

The A500 was eventually released and sold well, but subsequent updates to the Amiga range failed to keep pace with advancements in personal computing. Commodore was also unable to shake its public image as a producer of cheap computers at a time when IBM and Apple were starting to dominate the PC market.

New CEO appointment

With deteriorating company finances, Gould paid millions to a management consulting firm to find a new CEO. Yale graduate and former GM and Pepsi executive Mehdi Ali was appointed in 1989 – a hiring many consider to be the beginning of the end for Commodore.

Ali’s reign was characterized by costly strategic errors. He cut funds for essential research and development while increasing his own compensation. In fact, in 1990, Ali received a $2 million salary not including bonuses, while IBM CEO John Akers received $713,000.

Ali twice sabotaged a lucrative deal with Sun Microsystems which wanted to license Commodore hardware. He was also responsible for one of the worst Amiga products ever released – the Amiga 600. He doubled down on its manufacture instead of creating more of the A500s and A1200s people wanted.

Perhaps his greatest indiscretion as leader was the continual cutting of R&D funding to almost zero. Early Amigas were years ahead of their time, with a color GUI, pre-emptive multitasking, and advanced sound acceleration and hardware graphics. When the research team created an updated version of Amiga’s chipset, Commodore chose to shelve it. Instead, they opted for a much less powerful upgrade to the Amiga 500 and 2000.

Commodore did begin work on a major revamp in 1988 named the Advanced Amiga Architecture (AAA). Due to a lack of funding, however, only one engineer was working on it by the time the company went bankrupt six years later. A stopgap solution was rushed into production, but it was not ready for market and only highlighted how far the company had fallen.

Key takeaways:Commodore was an American manufacturer of home computers and electronics. The company was a significant part of the burgeoning personal computer market but filed for bankruptcy in 1994.Commodore founder Jack Tramiel employed an autocratic leadership style which ended in his forced resignation from the company. Commodore then lost its strategic direction and hired a series of underqualified and inexperienced CEOs.Commodore failed to keep pace with advancements in personal computing, which opened the door for IBM and Apple. This lack of innovation was no doubt caused by the appointment of a CEO who cut research and development funds to almost nothing.

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What happened to Circuit City?

Circuit City is an American consumer electronics retailer originally founded by Samuel S. Wurtzel in 1949. The company filed for bankruptcy in 2009 after being an industry leader for decades. Circuit City suffered from complacent management who also made poor decisions. Many Circuit City stores were outdated and in poor locations. Stores were also staffed with salespeople pushing high-margin products at a time when consumers were moving toward cheap, low-margin products.

Background

Circuit City is an American consumer electronics retailer originally founded by Samuel S. Wurtzel in 1949. 

Circuit City – then known as the Wards Company – was established after Wurtzel witnessed the start of the television revolution in the United States. Imagining its future potential, he opened the first Wards store in Richmond, Virginia. Hundreds of stores followed as the company pioneered the electronic superstore format in the 1970s. 

By 2000, the company employed more than 60,000 people across 616 locations in North America. Just eight years later, it was forced to file for bankruptcy with the final Circuit City store closing in March 2009. A new company was then founded in 2016 by Ronny Shmoel, who acquired the brand name and trademark rights in a deal with Systemax.

The demise of Circuit City is a cautionary tale in complacency, poor strategy, and bad management. Let’s tell this tale below.

Complacency 

Circuit City became blinded by its success as a market leader in the 1980s and 1990s. In the highly competitive and dynamic electronics industry, this proved to be a fatal mistake. 

At the start of the new millennium, Circuit City remained focused on a strategy it had developed in the 1980s that focused on products consumers didn’t want or need.

Management was not frightened by the emergence of competitors such as Best Buy, Costco, and Kmart. Former CEO Alan Wurtzel, son of Samuel, would later note that “We thought we were smarter than anybody. But the time you get into trouble is when you think you know the answers.”

Outdated store model

Best Buy was the most significant threat to Circuit City, largely because it offered a better store experience. Best Buy stores stocked a wide variety of low-margin products to get customers in the door, such as CDs, video games, and peripherals. 

The company also understood that as electronics became cheaper and more widespread, consumers no longer needed a salesperson to help them with their purchases. Despite this clear trend, Circuit City stuck with a commission-based model. Its stores were populated with aggressive, jacket-clad salespeople who pushed high-margin items with extended service plans. 

Many of the stories themselves were also out of date and in less visible areas than the newer Best Buy stores.

Poor inventory management

Circuit City operated more than 1,500 stores across the United States and Canada at its peak.

With such a vast network of stores, poor inventory management meant the company had trouble moving its stock. This hindered its ability to purchase new stock and pay off the millions it owed to vendors. 

At one point, the company owed $118 million to Hewlett Packard, $116 million to Samsung, and $60 million to Sony.

Corporate mismanagement

Circuit City management made several inexplicably poor decisions in the years leading up to its bankruptcy.

When new CEO Alan McCollough was appointed, he decided the company would stop selling appliances to focus on consumer electronics. The decision meant a 15% decline in revenue and resulted in Circuit City missing out on the real estate boom where appliance sales skyrocketed. The move was confusing to the company’s core user base and only weakened Circuit City relative to its competitors.

In 2003, the company also eliminated its commission-based sales staff with little warning. Almost 4,000 high-paid employees were fired with plans to replace them with half as many staff paid by the hour. Ostensibly made to reduce operating costs, the decision caused employee morale and productivity to deteriorate and had the reverse effect. The remaining employees avoided becoming too successful for fear of being fired, which cost the company sales.

Stock buybacks

Sales continued to decline, but Circuit City had a considerable amount of cash on hand after spinning out its automotive chain CarMax and selling a private label credit facility. 

Between 2003 and 2007, it spent almost $1 billion buying back its own stock. The company failed to mask its flagging sales, with the share price plunging from $20 in 2003 to just $4.20 by the end of 2007. 

Ultimately, the cash splash meant Circuit City could not survive the GFC which was less than twelve months away.

Key takeaways:Circuit City is an American electronics and appliance retailer originally founded in 1949 by Samuel Wurtzel. The company filed for bankruptcy in 2009 after being an industry leader for decades.Circuit City suffered from complacent management who also made poor decisions. Many Circuit City stores were outdated and in poor locations. Stores were also staffed with salespeople pushing high-margin products at a time when consumers were moving toward cheap, low-margin products.Circuit City sold several of its most valuable assets to fund a four-year stock buyback. The move failed to arrest a steady decline in its share price and meant the company was unable to survive the coming GFC.

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What happened to Pebble?

Pebble was a smartwatch developed by Pebble Technology Corporation and was the brainchild of Eric Migicovsky. After initial success, the company ran out of funds and had to declare bankruptcy after almost four years in operation. The watch was funded by a $10.3 million Kickstarter campaign – the largest such campaign at the time – with the first watches shipped to backers by January 2013. Approximately 400,000 units were sold in the following year, increasing to nearly two million by 2016. Pebble suffered from cash flow issues with many purchase orders still outstanding after the Fitbit acquisition. It also failed to secure enough funding to develop a health-based smartwatch, allowing Apple to move in with its superior pedigree.

Background

Pebble was a smartwatch developed by Pebble Technology Corporation.

The watch was funded by a $10.3 million Kickstarter campaign – the largest such campaign at the time – with the first watches shipped to backers by January 2013. Approximately 400,000 units were sold in the following year, increasing to nearly two million by 2016.

However, Pebble was acquired by Fitbit for $40 million in December 2016 after the company announced it would no longer manufacture, support, or honor the warranties on its products. The company’s intellectual property and software engineering team was absorbed into Fitbit, with the remainder left out of work.

Pebble developed a reputation for going against the grain in the smartwatch industry. Designers favored simple watches with e-ink screens and long battery life over high-resolution displays with sophisticated features.

Unfortunately, this point of difference did not help the company remain viable long-term. To find out why do read on!

Usability

With prices starting at $99, the Pebble watch was attractive to consumers. It was waterproof and the relatively primitive screen worked well under a variety of light conditions.

However, there were some usability issues. The watch was cumbersome because it needed multiple apps to connect with a smartphone. Connectivity itself was also unreliable, reducing the long battery life marketed as a unique feature of Pebble watches. What’s more, the first versions did not have scratch-resistant glass.

Most crucially, the Pebble worked better on Android than it did iOS, which alienated Pebble’s mostly iPhone-based target audience.

Poor product positioning

Pebble misjudged the smartwatch market by focusing on productivity and third-party innovation and not health and fitness. As a company still reliant on crowdfunding, this error would prove costly.

In response, the company began Kickstarter campaigns for new products aimed at the fitness crowd including the Pebble Core and Pebble Time 2. Both products were due to launch in early 2017 with thousands of backers, but the company could not reach its funding goal. It also failed to secure any interest from private equity funds and other investment groups.

Former CEO Eric Migicovsky highlighted the misstep in an interview, noting that “We did not get this in 2014 – if we had come out then as the smartwatch fitness wearable, maybe it would have been different.”

Supply chain difficulties

A lack of funding also made it difficult for Pebble to pay its Taiwanese suppliers during 2015. 

In some instances, suppliers would contact Pebble regarding outstanding purchase orders and receive no response. Some of these orders remained unpaid even as Fitbit took over the company in late 2016. 

Competition

Apple also entered the smartwatch market shortly after Pebble. Initially, it also failed to recognize the potential of a health and fitness wearable – instead of marketing its smartwatch as an iPhone that could be worn on the wrist.

In the end, the market was not as big as Apple and Pebble had envisioned. With its superior brand and product-building experience, Apple quickly secured what little market share existed.

Key takeaways:Pebble was a smartwatch developed by Pebble Technology Corporation and was the brainchild of Eric Migicovsky. After initial success, the company ran out of funds and had to declare bankruptcy after almost four years in operation.Pebble watches had usability issues with alienated its target audience of iOS users. The company was also overly optimistic about the size and potential of the smartwatch market.Pebble suffered from cash flow issues with many purchase orders still outstanding after the Fitbit acquisition. It also failed to secure enough funding to develop a health-based smartwatch, allowing Apple to move in with its superior pedigree.

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What happened to JCPenney?

JCPenney is an American department store chain founded by James Cash Penney and William Henry McManus in 1902. The company filed for bankruptcy in 2020 and after an acquisition, continues to operate in a limited capacity. JCPenney was ultimately crippled by the coronavirus pandemic, becoming one of many retail companies to meet a similar end in the face of sluggish consumer spending and reduced foot traffic.

Background

JCPenney is an American department store chain founded by James Cash Penney and William Henry McManus in 1902.

From a single store in Wyoming, JCPenney became a household name in the 70s and 80s as it took advantage of the surge in popularity of mall shopping. Indeed, most malls would be anchored by a JCPenney store selling everything from homewares to fashion.

In May 2020, the 118-year-old department store filed for bankruptcy with net losses of $4.5 billion. The demise of JCPenney is, in some respects, emblematic of the pandemic era for physical department stores. 

In truth, however, the decline of the company was gradual and started long before the onset of the virus.

Poor strategy and mismanagement

With revenue declining by $2.4 billion since the Global Financial Crisis, JCPenney appointed new CEO Ron Johnson in June 2011.

Johnson had a transformative plan for the company and quickly set it in motion. He hired a team of outsiders to fill critical senior positions, fired 19,000 employees, and removed JCPenney’s discount pricing strategy. Then, he instituted a massive store revamp without verifying that it would resonate with consumers.

Employee morale suffered as a result of the mass terminations. Revamped stores featured an Apple-esque genius bar, with Johnson drawing inspiration from his time at Apple. Ultimately, the genius bar did not inspire shoppers. 

When the company banned the word ‘sale’ from its promotions and replaced it with ‘month-long savings’, consumers became confused over the new pricing system. The near-constant discounting cycle damaged the JCPenney Brand. When the company shifted its focus to affluent shoppers, it alienated its traditional, value-seeking customer base.

Johnson was fired just 16 months after being appointed. Sales fell by 25% under his tenure, equating to a further $4.3 billion loss in revenue.

Bankruptcy

The coronavirus pandemic and subsequent shift to purchasing online became the straw that broke the company’s back. 

JCPenney filed for bankruptcy on May 15, 2020, and announced the immediate closure of 242 stores.  

In fact, the company became one of 20 retail businesses that would go bankrupt because of the pandemic in North America.

Acquisition

In September 2020, JCPenney was acquired by Simon Property Group and Brookfield Asset Management in a cash and debt deal worth around $800 million.

Post-acquisition, the new owners plan to close nearly a third of all remaining JCPenney stores in the next two years. The company headquarters in Plano, Texas, was also vacated with no new location as yet announced.

The future remains uncertain for the company as consumer spending and bricks-and-mortar shopping continue to be impacted. This was highlighted by findings released by Mastercard in late 2020 showing that department store sales – once the bread and butter of JCPenney – had declined by 10.2% over the October-December holiday period.

Key takeaways:JCPenney is an American department store chain founded by James Cash Penney and William Henry McManus in 1902. The company filed for bankruptcy in 2020 and after an acquisition, continues to operate in a limited capacity. JCPenney posted billion-dollar losses after the GFC and in response, appointed new CEO Ron Johnson. Unfortunately, Johnson alienated the company’s target audience by focusing on the affluent market and revamping JCPenney stores without validating his ideas.JCPenney was ultimately crippled by the coronavirus pandemic, becoming one of twenty such companies to meet a similar end in the face of sluggish consumer spending and reduced foot traffic.

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What happened to Juicero?

Juicero was a manufacturer of juicing machines founded by Doug Evans in 2013. The Juicero Press was overpriced at launch and only squeezed juice from branded, pre-packaged food and vegetable sachets. Juicero’s flagship product was rendered obsolete after Bloomberg News reported that juice of similar quality and quantity could be obtained by hand-squeezing. Juicero machines were also needlessly complex, with Evans taking design and engineering cues from Apple. This is a great example of a good idea, killed by bad execution.

Background

Juicero was a manufacturer of fruit and vegetable juicing machines. The company was founded by Doug Evans in 2013.

The flagship Juicero Press used single-serve packets of diced fruits and vegetables sold to consumers on a subscription basis. Each Juicero Press also offered Wi-Fi connectivity.

Juicero claimed its machines and smart packaging helped consumers eat more healthily, but the company was embroiled in controversy seemingly from day one.

So what happened to Juicero? Following is a look at the intriguing story of yet another tech start-up collapsing after receiving substantial investor funding.

The Juicero Press

When the Juicero Press was first released in 2016, it was priced at $699. The price was then reduced to $399 early in 2017 after abysmal sales. 

Each pre-packaged serving of fruit and vegetable had a QR code that needed to be scanned and verified by the juicer while connected to the internet. Former CEO Jeff Dunn argued that this prevented produce from being used past its expiration date, but consumers saw the measure as prohibiting them from juicing their own fruit and vegetables.

The Juicero Press was thus expensive to purchase and also to use, with fruit and vegetable packs typically costing between $5-$7.

Bloomberg controversy

The Juicero Press suffered further criticism in 2017 after Bloomberg News published a story implying the proprietary produce packs could be squeezed by hand.

Not only could they be squeezed by hand, but the resultant juice was comparable in quality and quantity to juice produced from the $399 machine. The company jumped to the defense of the Juicero Press, claiming that squeezing by hand created a mess and detracted from the user experience. 

Nevertheless, it offered a refund to disgruntled customers and no doubt suffered further reputational damage.

Over-engineering

Venture capitalist Ben Einstein disassembled his juicer and noted it was “an incredibly complicated piece of engineering” for a fundamentally simple process. The internal elements of the juicer were assembled with great attention to detail and a polymer used for white components underwent 8 separate revisions before acceptance. 

Raising nearly $120 million before shipping a single product, the Juicero product design team was unconstrained by money or time. They were also under the guidance of Evans, who had worked with Jobs in a previous life and considered him to be a major design inspiration.

Ceasing operations

By June of 2017, Juicero had terminated 25% of its workforce and was making a 4 million dollar loss each month.

On September 1, 2017, Juicero announced it would be ceasing operations and suspending sales of the Juicero Press after only 16 months on sale.

Aside from its flagship product being too expensive and not solving a genuine problem, distribution was also underdeveloped. Announcing the shutdown, the company noted that it “became clear that creating an effective manufacturing and distribution system for a nationwide customer base requires infrastructure that we cannot achieve on our own as a standalone business.”

Key takeaways:Juicero was a manufacturer of juicing machines founded by Doug Evans in 2013. The Juicero Press was overpriced at launch and only squeezed juice from branded, pre-packaged food and vegetable sachets.Juicero’s flagship product was rendered obsolete after Bloomberg News reported that juice of similar quality and quantity could be obtained by hand-squeezing.Juicero machines were also needlessly complex, with Evans taking design and engineering cues from Apple. Ultimately, the Juicero Press was too expensive and did not address a significant consumer problem. If it had sold in any great quantity, it would also have been hampered by a weak distribution network.

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What happened to MySpace?

MySpace is an American social networking and lifestyle news site with a focus on music. The platform was founded in 2003 by Chris DeWolfe, Tom Anderson, and Jon Hart and by 2006, it received more traffic than Yahoo and Google. Over time its cluttered, non-intuitive interface, riddled with ads and compromised user experience helped its decline (and other social media companies like Facebook and Twitter took over). Parent company News Corporation contributed to this problem since its management had no experience in running a social media site.

Background

MySpace is an American social networking service that was the largest such site in the world from 2005 to 2008.

The platform was founded in 2003 by Chris DeWolfe, Tom Anderson, and Jon Hart. Users could create a personalized page using basic HTML or CSS and could add their favorite songs, posts, videos, and photos. 

In the early days, MySpace tended to focus on promoting musicians and up-and-coming talent. Indeed, acts such as Adele, Calvin Harris, and Panic! At the Disco all got their start on the platform.

MySpace grew rapidly after its launch in 2004 with 20 million users added by 2005. The following year, MySpace overtook Yahoo Email as the single most visited website in the United States.

From a peak of 115 million users in 2008, the MySpace user base started diminishing despite the best efforts of the company to remain relevant.

Let’s now chart the downfall of MySpace from social media giant to yesterday’s news.

Poor user experience and management

MySpace was acquired by News Corporation in July 2005 for $580 million, which immediately set about monetizing the platform to recoup the large acquisition cost.

Unfortunately, News Corporation was a media company that had no experience in building or maintaining an internet company. MySpace quickly became cluttered with ads, degrading the user experience in the process.

When the user base started to decline, this problem became worse as the MySpace investors tried in vain to bolster revenue.

MySpace was also poorly laid out and suffered from frequent technical issues that no doubt exacerbated the migration of users to other services.

Negative publicity

MySpace had a somewhat blasé attitude toward censorship at a time where millions of young users were flocking to its platform. While it did censor illegal content, content containing hate speech or nudity could be found relatively easily.

This point was highlighted in 2007 when it was discovered that thousands of known sex offenders were using the platform. In one example, MySpace was sued after a 49-year-old woman registered as a 16-year-old boy and caused the suicide of a 13-year-old girl. 

Similar protracted lawsuits ensued, costing the company money and severely damaging its brand.

Failed innovation and competition

MySpace also failed to develop a culture of innovation that would allow the company to remain competitive. 

A young Facebook, with its clean and organized interface, started to emerge as the social network of choice. It offered a far superior suite of ad targeting features for advertisers who were simply following the crowd. It also allowed users to connect and interact with real people using their real names – a requirement MySpace never enforced. With a similarly clean design and culture of innovation, Twitter was another service that added to the competitive pressure on MySpace.

In 2008, MySpace was overtaken by Facebook as the world’s most popular social media network. It then released its long-awaited Music product where users could listen to music and legally download it from the MySpace website. However, Music was full of bugs and for whatever reason, was not easy to find on the homepage. It was an expensive mistake, costing the company $120 million to develop.

The inability to adapt and innovate was also made worse by the speed with which MySpace fell out of favor. In the twelve months to March 2011, it lost a staggering 32 million users to other platforms.

Rebranding

After terminating over one thousand employees, News Corporation sold MySpace to Specific Media for a paltry $35 million.

With the battle against Twitter and Facebook lost, the new owners decided to focus solely on discovering new music artists and supporting them. The company continued to receive negative press, including a cyber-attack where 427 million passwords were stolen and the accidental deletion of 50 million songs during a server migration.

Today, MySpace continues to operate as a lifestyle news site with elements of music artist promotion.

Key takeaways:MySpace is an American social networking and lifestyle news site with a focus on music. At its peak in 2006, it received more traffic than Yahoo and Google.MySpace suffered from a cluttered, non-intuitive interface that was riddled with ads and compromised user experience. Parent company News Corporation contributed to this problem since its management had no experience in running a social media site.MySpace was also subject to public and protracted lawsuits, with sex offenders known to frequent the site. It also failed to innovate successfully as competitors such as Facebook and Twitter started to emerge.

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What happened to Google Plus?

Google Plus was a Google-owned social network that operated from 2011 to 2019. Its low usage and engagement due to convoluted sign-up processes and bundling with Gmail accounts. Google Plus also suffered two major breaches of privacy after bugs were found in its API. The first breach was kept a secret for six months, while the second affected over 52 million user accounts. Google Plus for consumers was rebranded as Shoelace, a community-based meet-up service for like-minded individuals that was itself shut down because of COVID-19 protocols. Google Plus for business still exists in some form as Google Currents.

Background

Google Plus was a Google-owned social network launched on June 28, 2011, by Bradley Horowitz and Vic Gundotra.

The service formed part of a suite of Google products including Google Drive, Blogger, and YouTube to compete with Facebook, among other platforms.

Google Plus was shut down in 2019, becoming the company’s third failed attempt at creating a social network after Orkut in 2004 and Google Buzz in 2010.

What happened to Google Plus? How did it fail with the power and influence of parent company Google behind it? Read on to find out.

Low usage and engagement

Google software engineer Ben Smith noted that the platform had failed to meet expectations around growth and adoption. “While our engineering teams have put a lot of effort and dedication into building Google+ over the years, it has not achieved broad consumer or developer adoption, and has seen limited user interaction with apps.”

Perhaps more damning for the platform was that according to Smith, 90% of all Google Plus user sessions lasted less than five seconds. It is generally accepted that low usage and engagement were caused by Google forcing new users to jump through too many hoops. At one point, it required them to create an account to comment on ancillary services such as YouTube. It also tied Google Plus to the process of signing up for a Gmail account – whether the user wanted a new social account or not.

Data leaks

In early 2018, it was revealed Google had discovered a bug in the Google Plus API. This bug allowed third-party app developers to access the data of users and also their friends. Google knew about the vulnerability for around six months, only choosing to come clean once a Wall Street Journal publicly outed the company.

Google released a blog post in October 2018 noting that up to 500,000 accounts were affected by the bug with up to 438 different apps potentially having access to private information. With low usage a continuing problem, Google then decided to gradually phase out the consumer version of Google Plus over the next ten months.

A second data leak occurred soon after, causing the company to bring forward the shutdown by four months. Significantly, the second leak impacted some 52.5 million users with names, email addresses, occupations, and ages exposed.

Consumer shutdown and business rebranding

The consumer version of Google Plus was shut down in April 2019. Google Shoelace was then launched three months, serving as a quasi-replacement for its predecessor. Shoelace aimed to bring together individuals in a community with similar interests, but it too was shut down after becoming another victim of COVID-19 social distancing.

The business version, on the other hand, was rebranded as Google Currents for G Suite users to facilitate better collaboration within organizations.

Key takeaways:Google Plus was a Google-owned social network that operated from 2011 to 2019. The platform suffered from low usage and engagement due to convoluted sign-up processes and bundling with Gmail accounts.Google Plus suffered two major breaches of privacy after bugs were found in its API. The first breach was kept a secret for six months, while the second affected over 52 million user accounts.Google Plus for consumers was rebranded as Shoelace, a community-based meet-up service for like-minded individuals that was itself shut down because of COVID-19 protocols. Google Plus for business still exists in some form as Google Currents.

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