CHAPTER 8: DEATH RATTLE
Once an entity reaches the Death Rattle stage, there’s really no escaping its fate. The time for action was while it was in Treadmill, although organizations are sometimes able to pull themselves out of The Big Rut.
In Death Rattle, it’s merely a matter of waiting for the organization’s resources (namely cash), its customers and even its relevancy to run out.
How long it takes for this to happen will depend upon the organization’s financial reserves – it could range anywhere from months to decades.
In the end, the entity will typically be sold via a fire sale or liquidated through bankruptcy.
There aren’t many lessons to be learned from an in-depth examination of this stage. However, we will take a look at a few organizations to see how they arrived here and then faded away.
The links below will enable you to quickly access the resources for this chapter. Then you can move on to ensuring it won’t happen to your business.
Chapter 8 Resources
READING THE SIGNS: BUMP IN THE ROAD VERSUS THE END OF THE ROAD
We’ve all seen big-name corporations take major stumbles – from Starbucks and the Gap to Borders and Kodak. However, these companies experienced vastly different outcomes.
How can you tell the difference between a painful, even humiliating stumble and the final throes of irrelevancy?
In this blog post, we’ll take a look at three key distinctions between stumbles caused by healthy growing pains and those that are signs of arthritic decline:
DEATH RATTLE CASE STUDY: NORTEL
How does a company go from being the 9th most valuable corporation in the world (with a market cap of $283 billion) to being bankrupt and ceasing operations in a span of just ten years?
In this fascinating article, author Max Nisen examines Canadian telecom giant Nortel’s journey, including details revealed through an in-depth academic investigation conducted after the company’s demise.
Here’s a quick overview:
When Nortel was a market leader in the ’70s, it developed an arrogant culture (Fun), which led to poor financial discipline (Whitewater).
Then in the ’90s, it focused so intensely on growth that it broke its ability to innovate and read the market (Treadmill).
And after the tech bubble popped, it turned inward and cut costs to the point where it alienated customers (The Big Rut).
DEATH RATTLE CASE STUDY: KODAK
Did you know that Kodak built one of the original digital cameras in 1975? Both it and its main rival, Fujifilm, saw what the future held for film. Yet Kodak was unable to successfully adapt.
Here’s a closer look at some of the reasons why:
- Kodak’s executives “suffered from a mentality of perfect products, rather than the high-tech mindset of make it, launch it, fix it,” says Rosabeth Moss Kanter of Harvard Business School, who has advised the firm. (Falling into a Treadmill trap)
- In the 2000s Kodak tried to buy ready-made businesses, instead of taking the time and expense to develop technologies in-house. (Trying to buy their way out of Treadmill and avoid slipping into The Big Rut)
- Working in a one-company town did not help, either. Kodak’s bosses in Rochester seldom heard much criticism of the firm. Even when Kodak decided to diversify, it took years to make its first acquisition. (Treadmill)
- Despite its strengths – hefty investment in research, a rigorous approach to manufacturing and good relations with its local community – Kodak had become a complacent monopolist. (The Big Rut)
In this article, you will see the how two massive competitors approached the challenges of rapidly changing technology and the consequences that followed.
DEATH RATTLE CASE STUDY: BORDERS
Just as Kodak and Fujifilm responded quite differently to the impact of technology on their sector, so did rivals Borders and Barnes & Noble.
When faced with competition from online retailers, the emergence of the e-reader and the challenge of enhancing the brick-and-mortar experience, Borders’ was unable to adapt – responding too slowly, if at all.
The company ended up in Death Rattle and filed for bankruptcy. Rival Barnes & Noble continues on, at least for now.
DEATH RATTLE CASE STUDY: RIM BLACKBERRY
In 2008, RIM was valued at $83.4 billion. At the close of 2013, the company (which now simply goes by BlackBerry) was worth $3.4 billion.
In this detailed account, Bloomberg Businessweek examines the rise and fall of this remarkable tech company. Here are just a few of the highlights:
“We were creating all these random products over wireless, [but] none of them had all the dominoes in place to really succeed.” (Early Struggle)
“…one of the orders came in. It was from Michael Dell. We didn’t have a lot of promotion at that point. He had found BlackBerry basically on the Web. I sent him an e-mail: ‘Hey, Michael, I saw that you placed an order. If you need any help don’t hesitate to let me know.’ I got an e-mail back in like 30 seconds, like, “Thank you, I’m super excited about it.” (Fun)
As BlackBerry’s popularity explodes, the company struggles to keep up with demand – and with rapidly changing consumer tastes. (Whitewater)
“There was so much management. You’d have your team lead, then your manager, director, then senior director, then another director. At one point they said it was [only] 5 to 10 percent engineering. That’s pretty hard for a tech organization.” (Treadmill)
“I was in a town hall meeting, and I asked a question about research and development. And they just kind of shot me down: ‘Oh, research is for people who don’t want to actually work anymore.’ It was kind of a real slap in the face. Like, ‘We don’t need raw research here. Let’s just get all the bugs out and make it perfect. Let’s add another menu item that does this or that.’ The menu items were getting so thick.” (The Big Rut)
“I was very worried when an insider was chosen as the new CEO. I was especially worried when suboptimal execution continued: missed delivery dates, buggy products, weak marketing.” (The Big Rut)
In August 2013, Prem Watsa, the head of Fairfax Financial Holdings (FFH:CN), announces that with BlackBerry exploring a possible sale, he would be stepping down from the board. The company continues to go through its money. (Death Rattle)
DEATH RATTLE DUMPSTER DIVING
As this Wall Street Journal article illustrates, it’s still possible to make money even in the Death Rattle stage.
See how entrepreneurs are taking storied brand names and turning them around.