Proof that entrepreneurship doesn’t depend on your company size, but on your mindset: Here are the top five company comebacks – each from the jaws of billion dollar failures.
In 2008, Starbucks’ over expansion into music, movies and too many loss-making stores led to an exodus of customers as quality fell. 977 stores closed and its stock price plummeted 80% from $40 to $7.83. In the midst of the crisis, founder, Howard Schultz returned as the CEO, saying Starbucks had “forgotten what we stand for.”
He refocused 100% on the coffee, closed all stores for a day to retrain the baristas, brought all 10,000 store managers to New Orleans to rediscover their sense of mission and purpose. As he says, “If we hadn’t had New Orleans, we wouldn’t have turned things around.” Since then, Starbucks has doubled in size and profitability, growing to over 23,000 stores, $16 billion in revenue and $3 billion in profit. Howard remains as both Chairman and CEO today.
In 2011, Netflix announced: “We will no longer offer a plan that includes both unlimited streaming and DVDs by mail.” forcing subscribers to join two separate services and pay $16 a month instead of $10. The massive backlash led to more than 800,000 customers quitting Netflix in a single quarter. Netflix’s stock plunging fell 77% in 4 months from $300 a share to around $65.
Founder, Reed Hastings, took personal responsibility for the miss-step and apologized, saying “I messed up. I slid into arrogance based upon past success. Inside Netflix I say ‘Actions speak louder than words,’ and we should just keep improving our service.” He reversed the changes, refocused the company on quality and the customer, launching original content like “House of Cards”, and over the next few years the company has recovered to be the fastest growing video streaming company with over $6 billion in revenue.
In the late 1990’s, Lego lost money for the first time in its history, with its traditional blocks struggling against the rise of video games and other toy makers. Jørgen Vig Knudstorp stepped in as CEO in 2004, and says “When I became CEO, things had gone awfully wrong at Lego.” He began by refocusing the entire staff of 14,000: “We had to ask, ‘Why does Lego Group exist?’ Ultimately, we determined the answer: to offer our core products, whose unique design lets children learn systematic, creative problem solving – a crucial twenty-first-century skill. We also decided we want to compete not by being the biggest but by being the best.”
He began involving Lego fans in product development and rewarding ‘Super users’. The Lego brand was reignited, and Lego has now become the most profitable toy company in the world. As Jørgen says, “We used to be seen as a bit of a basket case. Our competitors were ten years ahead of us. Now we’ve passed them.”
In 1997 Apple had lost its way, was in disarray and just a few months away from bankruptcy when Steve Jobs returned as Interim CEO. His first step shocked the Apple faithful: A $150 million deal with arch-rival Bill Gates to put Microsoft products on all Apple computers. The move sent a message to the market that Apple had to be a serious business that made smart commercial decisions, and rebranded Steve from being a dreamer and visionary to also a serious business leader.
He refocused the team, brought on Tim Cook from Compaq (who now leads Apple), and then began the chain of innovative product launches from the iMac, to iPod, to iPhone. Apple’s market cap grew from $3 billion when Steve Jobs returned to the company, to more than $740 billion today. It’s cash went from deficit to over $200 billion today: The biggest corporate turnaround in history.
TESLA & SpaceX
In 2008, both of Elon Musk’s companies, Tesla and SpaceX, were out of money and he was broke. As he says “I could either pick SpaceX or Tesla or split the money I had left between them. If I split the money, maybe both of them would die. If I gave the money to just one company, the probability of it surviving was greater, but then it would mean certain death for the other company. I debated that over and over.”
That was on top of his personal challenges: “You have these huge doubts that your life is not working, your car is not working, you’re going through a divorce, and all of those things. I felt like a pile of sh_t. I didn’t think we would overcome it. I thought things were probably f*@king doomed.”
He went knocking on all the doors he could, getting Sergey Brin to put up $500,000 and Bill Lee to put up $2 million. Elon managed to pull together all the parts for a $40 million round of funding, but wasn’t able to close. Then, on Christmas Eve, SpaceX announced a $1.6 billion contract to SpaceX, and the Tesla deal closed hours before Tesla would have gone bankrupt.
Elon broke down in tears and said “I hadn’t had an opportunity to buy a Christmas present for Talulah or anything. I went running down the f*@king street in Boulder, and the only place that was open sold these sh%*y trinkets, and they were about to close. The best thing I could find were these plastic monkeys with coconuts—those ‘see no evil, hear no evil’ monkeys.”
He bought the monkeys, turned both companies around, and eight years later – in the last month -has reached new records with the sea landing of his Falcon 9 rocket and the largest product launch in history with the Tesla Model 3.
Each of these five comeback stories show that any company of any size can be turned around when approached with an entrepreneurial mindset. What would Steve Jobs do if he were in your shoes? What would Elon Musk do if he owned your company?
Shift your mindset, and set your mind free.
You’re never too small to start, never too big to fail, and it’s never too late to start again.
“I don’t measure a man’s success by how high he climbs, but how he he bounces when he hits bottom.” ~ George S Patton Jr.