7 companies that failed to adapt

These businesses were once household names, but failed to innovate. We mitigate these risks through our research into companies and the industries they operate in, helping us build resilient, diversified portfolios that protect investors against ruinous mismanagement.

The collapse of Woolworths, the UK’s iconic high-street store that sold everything from CDs and children’s clothes to paint and pick’n’mix, shocked both business and consumers when all 800 shops closed in 2008. Though the tipping point was the global economic crash, the 100-year-old brand’s demise had been on the cards for some time, due to a combination of poor management, a highly unionised workforce, failure to adapt to changing consumer demand, rising high-street rents, and an awkward market position that was neither high-end department store nor pound shop. The Finnish company was the giant of the mobile phone market until 2007, and was once known for being one of the most innovative and adaptive around: it invented a smartphone in 1996 and even a prototype touchscreen, and made mobile phones into fashion accessories. So, what went wrong? It was perhaps a victim of its own success in creating brilliant hardware, but failing to understand the importance of software, and apps in particular. Crushed by Apple and Android, by 2013 Nokia’s market share had shrunk to just 3%, and it eventually sold off its remaining assets to Microsoft for $7.2bn.

Kodak once dominated the photographic industry with a market share of around 50% worldwide, but the company failed to progress with the digital camera revolution, instead pouring its investment into photographic film, as it had done for decades. Despite one of its own engineers creating the first digital camera in 1975 as well as holding over 7,000 patents, the company failed to innovate and steadfastly stuck to the tried and tested film roll business model until it was too late. Kodak filed for bankruptcy in 2012, with the loss of 7,000 jobs.

Photos: Alamy

In its late-90s heyday, Blockbuster had more than 65 million registered customers and 84,000 employees worldwide. Too focused on the profits from its video rental stores, the company seemed unwilling to react to changing customer behaviour, such as the demand for a postal DVD rental service, let alone keeping up with the streaming revolution. “Neither RedBox nor Netflix are even on the radar screen in terms of competition” CEO Jim Keyes said, unwisely, in 2008. Two years later Blockbuster filed for bankruptcy with over $900 million debt.

The children’s toy store giant Toys R Us was a victim of poor management and bad investment. In 2000, it launched a 10-year partnership with Amazon, to be its exclusive seller of toys and baby products. When Amazon began to allow other toy vendors on the site, Toys R Us sued. Though it won, it had missed the opportunity to develop its own e-commerce presence. Meanwhile mounting debt meant the company failed to invest in its stores and staff. When children turned away from traditional toys to more tech-related entertainment, Toys R Us couldn’t keep up with competitors; it filed for bankruptcy in 2017. The British music retailer HMV was ‘top dog for music’ during the CD and DVD boom of the 1980s and 90s. With its strong brand heritage it was a destination for leisurely Saturday afternoon browsing; it had more than 400 UK stores and a stock market listing. However, it failed to keep pace with the disruptive technology of downloads and streaming and continued to focus its core business on bricks and mortar retail when almost 75% of music and film was now downloaded or bought online. Despite being bailed out in 2013 and streamlining its offering, it hit the buffers again in 2018 – a case of too little, too late.

Forever associated with the humble photocopier, Xerox could have been another Apple. It opened its ground-breaking Xerox Palo Alto Research Center (Xerox PARC) in 1970. The prototype of the modern PC, Ethernet and the mouse were all invented there. However, the company failed to realise the potential of these ideas, instead focusing on what it saw was its core business: the ‘office of the future’. This culminated in the unsuccessful Xerox Star, a workstation that cost an eye-watering $16,500 in 1981. Meanwhile Xerox had invested in a young entrepreneur called Steve Jobs and given him access to the technology at Xerox PARC. The rest is history.