Dumbest Business Decision of All Time – OnlineBusinessDegree.org
Right now Americans are living in the midst of the worst financial period since the Great Depression. If you can find 10 Wall Street pundits, you’ll likely find 10 different opinions as to where we are headed and more importantly, how we got here. But no matter the talking head’s opinion one thing is for certain, the lion’s share of the blame for our current national financial predicament is based on one single problem… shitty business decisions.
This brings me to my favorite subject, something I often like to discuss at cocktail parties or with random MBA’s. What I like to call… The Single Worst Business Decision of all time.
In the early 1980’s the world’s leading soft-drink manufacturer, The Coca-Cola Company, was dealing with true corporate adversity for the first time in 100 years. Having enjoyed a 52% market share since WWII, in 1982 market share had dropped to a mere 24% . In fact, Pepsi-Cola was outselling Coca-Cola in supermarkets, leaving Coke to hold its edge only in Fountain Sales.
New CEO Roberto Goizuetahad made the determination that nothing was sacred and the corporation could take any steps necessary to reestablish market dominance, and boy did he! . On April 23rd, 1985 The Coca-Cola Company devised a drastic marketing ploy; they would reinvent the formula and taste of their flagship soda. The maneuver was aimed at curtailing a loss of market share to rival Pepsi-Co. And boy did he! He reinvented Coke. 25 years later it’s still fun to say… he changed the formula so that the taste of a 100 YEAR OLD SOFT DRINK WOULD BE COMPLETELY DIFFERENT!!! I mean, I could see tinkering with the formula and introducing a new product, but they threw the baby out with the bathwater. It was as if they had plumbing problems in the bathroom and decided to level the entire house as a solution.
Certainly they had their reasons, among them: problems with bottlers rejecting the idea of an additional product (Diet Coke had recently been introduced) and the possibility that an additional drink like would only further dilute the market share issue at the heart of the matter.
Nonetheless, they proceeded with the roll out. Hindsight tells us that consumers rejected the taste of the New Coke product, when in reality this isn’t entirely true. What is more relevant to the failure is the fact that the company dispensed with the old product entirely, leaving those who had become loyal consumers with no viable alternative but to accept the new product or reject the company entirely. After a tumultuous period of 3 months, the Coca-Cola Company ultimately reincorporated the old product as “Coca-Cola Classic.” The new Coke product retained the name “Coke” until 1992 when it was re-branded “Coke II.”
Ultimately, what is considered to be one of the Worst Business decisions in American Corporate History ended up being a fortuitous event for the company. While the original plan to regain market share by making a sweeter Coke to compete with Pepsi had backfired, the end effect was still the same. It was dumb luck that saved Coke, not shrewd and well planned business maneuvers. This decision could make for it’s own course in Business School. “The Best Demonstration of what NOT to do in Corporate Strategery.”ALL PHOTOS USED UNDER CREATIVE COMMONS LICENSE: NEW COKE – http://upload.wikimedia.org/wikipedia/commons/0/0f/Newcokebottle2.jpg
Robert Goizueta – http://farm2.static.flickr.com/1356/1058185468_6cb66065a6_o.jpg
Facepalm – http://upload.wikimedia.org/wikipedia/commons/thumb/0/0a/Cain_Henri_Vidal_Tuileries.jpg/394px-Cain_Henri_Vidal_Tuileries.jpg