Culture is driven by values and behaviours. Employee fulfilment is driven by culture. When employees feel fulfilled at their workplace, customer satisfaction increases and contributes to higher shareholder value.
Ideally, yes. In reality, corporate values often fail to generate business value.
This article explores a few reasons for this, examples of major corporate failure, and possible solutions and ways to prevent corporate values from backfiring.
As many as 70% of poor performers on S&P 500 in Q1/2019 shared values like teamwork, accountability and innovation with successful companies. What makes the difference? Essentially, the failure to implement them. In addition, value didn’t translate to behaviour on one or more corporate levels.
Kraft Foods and Coca-Cola were among the worst performers mentioned. Interestingly, the titan Berkshire Hathaway holds a significant stake in both.
The majority of corporate values involve similar ideas and words. Booz Allen Hamilton and the Aspen Institute conducted a survey of corporations in 30 countries and found 90% used the words “integrity” or “ethical behaviour”, 88% cited commitment to clients, and 76% mentioned trust and teamwork.
Universally appealing values are cliched
The universal appeal of values like “integrity,” “respect,” “trust,” “teamwork,” etc. renders them completely meaningless. Evolution has programmed people to build tightly-knit communities because they increase the chance of survival. These communities need a sense of belonging, connection, and uniqueness. Having a visible and clear identity is a way to make sure we survive as a species. We are always looking for ways to stand out.
If a company is lacking unique values, it sheds its ability to create a sense of belonging among clients and staff.
Misalignment between real and theoretical values
Real values are the ones people demonstrate in their everyday activities. Theoretical or espoused ones are those companies pronounce as important. When there is a mismatch between the two, the company is not seen as authentic by customers, employees, the general public, or other stakeholders.
Not considering real customers
Like beauty, value is in the eye of the beholder. Ask your average manager what’s important for customers or what values they think customers want the company to have and they’ll probably tell you they have no idea.
Regrettably, many companies only have a very general idea of what their customers really want and often no idea what their ideal customer is like.
The ones that stand out possess deep insight into their customers’ worldview and what they value, want, and need. They want to cater to the perfect customer and offer an excellent experience. You can only get so far if you deliver an average experience and settle for run-of-the-mill customers.
7 epic cases of corporate value failure
With this, we come to the essence – seven startling examples of Fortune 500 companies that went bankrupt. Of course, they’re far from the only ones: almost 90% of the Fortune 500 firms that existed 70 years ago no longer do. They have merged, gone bankrupt, or still exist under another name, outside the Fortune 500.
If you take a look at the names of the companies on the list in 1955, you probably won’t recognize a single one. What’s more, companies’ life cycles continue to shrink. If they want to ensure their survival, they may need to be flexible and innovative.
Here are our seven epic failures and why they occurred.
1. Polaroid’s failure to keep innovating
Polaroid is remembered for its instant cameras and film. Founded back in 1937, the company enjoyed some success on the market because its offering was almost unique. However, they underestimated the impact of digital cameras. They failed to improve long-term feasibility and explore new areas of activity, instead relying on their historically successful business.
The original Polaroid Corporation declared bankruptcy in 2001 and sold its assets and brand, which still exists. The Impossible Project, founded in 2008, acquired the brand and intellectual property in 2017. It is now a Dutch company under the name Polaroid B.V. and produces instant film for its original cameras and certain instant cameras.
2. Blockbuster’s lack of foresight
Blockbuster Video, the giant of movie and game rental services, was the best-known brand in its niche. It was founded in 1985 and had almost 85,000 employees and more than 9,000 stores worldwide in its heyday around two decades ago.
Like most of the companies on this list, Blockbuster’s failed to adopt a digital model, ultimately declaring bankruptcy in 2010.
That wasn’t the worst of it. In 2000, a small niche company approached Blockbuster with an interesting proposition. The company, which was losing money at the time, offered to sell its business to Blockbuster for $50 million. Blockbuster declined. In hindsight, you might call it a poor decision. Netflix’s annual revenue was $31.6 billion in 2022.
3. Toys “R” Us’ inflexibility led to its undoing
In 2000, the toy retailer signed a 10-year contract to be Amazon’s exclusive vendor. Despite the agreement, Amazon started letting other toy retailers sell on its platform. In 2004, Toys “R” Us sued Amazon to terminate the contract.
This made sense at the time, but the toy vendor missed a great chance to develop an e-commerce presence. It wasn’t until 2017 that the company redesigned its site as part of a long-term investment in e-commerce.
The $100 million investment seems not to have paid off. The former toy giant filed for bankruptcy in September that same year, facing cutthroat competition and excessive pressure from hefty debt of $1 billion. Its land-based venues continue to operate.
4. Tower Records ceased to disrupt
Tower Records was a pioneer in the 60s, becoming the first company to come up with the concept of a retail megastore for music. Founded back in 1960, it sold cassettes, CDs, DVDs, video games, electronics, toys, and accessories.
The company continued to be a trendsetter well into its third decade of operation. It set up Tower.com in 1995, becoming one of the few retailers to take their business online at the time.
Ultimately, the company fell into excessive debt and had to file for bankruptcy nine years later. The pioneer proved unable to keep up with iTunes, streaming services like Spotify, music piracy, and other digital disruptions.
5. Pan Am’s unfortunate propensity to overinvest
Pan American World Airways (Pan Am) was the biggest US airline over much of its existence. Founded in 1927, the industry innovator was the first air carrier to launch jumbo jets and computerized reservation systems.
Pan Am ultimately went under due to a combination of inadequate regulations, corporate mismanagement, PR disasters, and the government’s indifference to its plights. Indeed, the US government could have done more to protect its main international air carrier.
Instead of looking forward and investing in new technology, Pan Am over-invested in its current business model. It started to operate at a loss due to increasing fuel prices. In addition, it suffered because it could not operate domestic routes.
1988 was the year of the final nail in the coffin. A Pan Am Boeing 747 crashed in Lockerbie, blown up over the Scottish town by a terrorist bomb planted in a suitcase on board. A court awarded damages of $300 million to the victims’ families, having found the air carrier’s security procedures inadequate.
Pan Am declared bankruptcy in 1991.
6. Kodak: Playing it safe – to the death
Kodak was the biggest film company in the world for much of the 20th century. It was founded in 1892 by George Eastman, who had brought the first commercial transparent roll film to market three years earlier. This product paved the way for Thomas Edison’s invention of the motion picture camera.
When the digital revolution started, Kodak was hesitant to jump the bandwagon. The company was afraid of losing its strongest product lines and clung to security. An undisputed pioneer in the production, design, and marketing of photographic equipment, Kodak had multiple chances to move in the right direction, but didn’t take them.
They invested billions into technology to take photos using cell phones and other mobile devices. However, they failed to bring digital cameras to the mass market because they were afraid their business with film would dissipate. Canon jumped at the chance and outlived Kodak as a result.
In 2001, Kodak bought Ofoto, a photo sharing site, but failed to pioneer the forerunner of Instagram. Instead, they tried to use the site to get customers to print more digital images.
The former film giant closed the majority of its product streams and filed for bankruptcy in 2012. It re-emerged as a consolidated, but much smaller firm with a focus on commercial clients the following year.
7. GM’s aversion to competitiveness
GM was a leading automobile manufacturer and one of the biggest companies worldwide for over a century. It also holds the dubious honour of going through one of history’s largest bankruptcies. The giant carmaker could not accept the fact that they had competition and stubbornly failed to innovate, relying on being a household name. Ultimately, this approach led to its demise.
GM’s main focus was on profiting from financial operations. It began to neglect its main product’s quality. It didn’t invest in innovative technologies or try to adapt to customers’ changing needs.
Ultimately, GM was compelled to file for bankruptcy in 2009. That same year, the new GM (General Motors Company) was formed following a substantial bailout from the US government. The government announced intentions to invest up to $50 billion, making it the largest shareholder in the new company with a stake of 60%.
The new GM bought most of its predecessor’s assets, including the “General Motors” brand itself.
Stop your values from failing your company!
These historic examples of companies that failed in part due to misaligned values serve to show that one must make consistent efforts to not only uphold, but adjust and tailor them according to changing circumstances.
A company’s values might be failing it without anyone realizing. Here are some ways to stop that from happening.
Look for a gap between stated and implemented values
Take care to ensure your values are different from those of your competitors. If one competing firm shares your values, it’s one too many.
Ask yourself what values make you identifiable. Look at what gets people promoted or fired at the company, if there is something more important to you than profit, and what most of your meetings focus on – and why.
Identify clients’ wants and needs
You need to find out who your perfect customer is and what they care about.
Making efforts to eliminate toxic workplace culture is critical. Even a business in a dynamically growing sector with a great product cannot achieve lasting success if its managers contribute to a toxic culture – a culture that encourages hypocrisy and blame instead of respect, accountability, and cooperation.
An alternative to core values: core behaviours
You can observe behaviour across an organization and focus on actions rather than ideas. Ask yourself how you want your people to act. Consider how the best team members behave. If a manager is prone to ranting, identify what they rant about the most.
Ideally, you’ll come up with a list of core behaviours based on this. When you do, discuss it with other key leaders at the company and get their opinions.
The CEO’s role and tone are critical
The CEO’s opinion and attitude are most crucial. According to the Hamilton/Aspen survey, 85% of the respondents depended on concrete support from the CEO to reinforce values. More than three-quarters said this was among the “most effective” practices to reinforce values and the ability to act on them. This opinion was voiced across industries and regions with no relation to company size.
Write positive descriptions of behaviours. They should be action-oriented and not written as an advertisement for the company. You want your staff to behave a certain way, not your customers.
Most companies are not measuring their return on values
Finally, fewer than 50% of senior executives said they could measure the link between values and revenue. On the other hand, the best-performing companies consciously linked business operations to values. Businesses that report good financial results focus on adaptability, ambition, and commitment to employees to a far greater extent than ones with average or poor results. Executives at well-performing companies can elaborate on the connection between financial results and being socially and environmentally responsible.