In school, we were usually given the lesson first and the test afterward. Not so in business. In business we are often given the test first and the lesson afterward. That’s why business is often described as the school of hard knocks. We are all familiar with stories of missed opportunities among today’s largest corporations, which, in retrospect, would have brought them billions of revenues. Most small businesses, too, will have opportunities that don’t look obvious at the time.
History records some enormous missed opportunities. For example, a British government committee rejected Thomas Edison’s invention of the light bulb stating “… it is OK for our transatlantic friends … but unworthy of the attention of practical or scientific men.”
In 1876, Alexander Graham Bell invented the telephone. He wanted to commercialize it by putting it in every American home. He offered the patent to Western Union for $100,000. Western Union’s response was, “Why would any person want to use this ungainly and impractical device when he can send a messenger to the telegraph office and have a clear written message sent to any large city in the U.S.?”
Kodak was once the largest film company in the U.S. Then came the digital age. Kodak’s own engineer, Steven Sasson, invented the digital camera. He thought his employer would be thrilled. Instead, Kodak thought the new invention would be a threat to its core business. They suppressed the technology and hoped it would never see the light of day. The digital technology would have brought Kodak shareholders billions of dollars. Instead, the company nearly went out of business.
Missed Opportunities are Expensive Mistakes
In the 1970s, Steve Wozniak worked for Hewlett-Packard. He tried to convince his employer to embrace a new home computer that he was building. HP rejected the idea and said, “… people would never use computers at home.” He left HP and joined his friend Steve Jobs to build the first home computer in a garage — Apple I. We all know what happened next.
Remember Ross Perot, founder of Electronic Data Systems? In 1979, Perot met Bill Gates, the founder of his small company, Microsoft. Gates offered Perot a majority interest in his company for $60 million. Perot thought it was too much and passed on the deal, missing one of the greatest financial opportunities in his life.
In 2000, Blockbuster ruled the home entertainment industry. Along came Netflix, a struggling online mail order company in need of cash. Netflix offered to sell its company to Blockbuster for $50 million. Blockbuster’s CEO, John Antioco, thought the offer was ludicrous and laughed Netflix out of the building. Finding the money elsewhere, Netflix changed its business model to online streaming. Blockbuster customers gradually stopped renting DVDs. Today, Netflix’s revenues are over $20 billion. Blockbuster has only one store left in the world — Bend, Ore. — a nostalgic symbol of the age of DVDs.
These are just a few examples of enormous missed opportunities. Lessons can be learned by small-business owners from these big mistakes.
For example, many business owners launch copycat “frontal attacks” at well-established companies. More often than not this strategy torpedoes any chance of success, because small businesses are going after the same customers as the big boys. The odds of success are low because of the lack of “critical mass.”
Best Opportunities for Growth and Expansion
Another mistake is not looking for the next opportunity. The best opportunities for growth and expansion of a businesses are:
- Launching a new product or service instead of trying to compete with well-established competitors.
- Opening new business locations in geographies where competition isn’t located. This strategy offers potential opportunities to gain share over competitors because it is unprofitable for them to try and cover all geographies. This strategy was the Walmart approach to market penetration.
- Changing sources of products or materials to new suppliers and/or building new relationships with new distributors can increase profits. This can often reduce cost of goods sold or shipping costs. In an era where “fee shipping” is almost the “norm” and online purchases are ever increasing, cost savings are paramount to business success.
- Acquiring or merging with a competitor. Cost savings, expanded geographic footprints, increased product/service offerings, expanded customer penetration, marketing/brand power expansion are all benefits of a well-constructed acquisition or merger.
- Looking consistently for new opportunities. so that you are in tune with changing trends, new demographics and products.
- Taking time to focus and thinking through what’s next. Many missed opportunities are a result of not taking enough time to spot them. Reexamine your business goals. Are they the same as they were a year or two to three years ago? Review your strategic business plan and update it or create one if you don’t have one.
Remember, no matter how talented you are, you’re going to make mistakes just as Western Union, Kodak, HP, Ross Perot and Blockbuster did. The key is to avoid just a few of the biggest, most important mistakes.
Gary Miller is CEO of GEM Strategy Management. Read more from GEM Strategy Management here.