When Giants Stumble
Have you ever wondered why even seemingly invincible brands sometimes stumble and fail? This article will examine key reasons, including ten case studies, to crystallise the lessons.
The thread that runs through all of them is not a single villain like “technology” or “the economy,” but a cluster of reinforcing mistakes: strategic inertia, business-model lock-in, heavy debt, warped incentives, a culture that slows honest learning, and late or timid responses to platform shifts.
When those errors compound, even icons fall.
Below is a summary of some common mistakes, followed by more detailed case studies.
1. The Success Trap
Long success makes leaders optimise the current machine and postpone the next one. The costs are invisible in the short run and catastrophic later.
You see this clearly when firms cling to once-brilliant formulae even as the ground shifts under them.
Research on Nokia’s decline highlights how fear and internal dynamics froze timely responses to the iPhone and Android, even though the company had talented engineers and alternatives in development.
2. Misreading Platform Shifts
Many firms see the new technology, but misread the platform change it brings.
Eastman Kodak did not simply “miss digital.”
As Willy Shih explains, the economics moved from a film-consumables model to a general computing platform where the old learning curves and margins vanished.
Kodak’s leaders struggled to replace an annuity-like film model with a digital services model that captured the value of sharing rather than printing.
3. Business-Model Lock-In and Cannibalisation Fear
The more an organisation depends on a legacy profit engine, the harder it becomes to move decisively toward the product that threatens it.
Kodak’s Ofoto strategy tried to make people print their digital photos rather than prioritise online sharing, a sign of lock-in.
4. Debt Handcuffs
Heavy leverage turns a gradual decline into a cliff.
It steals cash that should fund reinvention and customer experience.
When retail icons such as Toys “R” Us faced both e-commerce competition and large interest bills from leveraged buyouts, their room to invest evaporated.
5. Governance That Warps Incentives
The wrong governance and incentive structures can turn strategic problems into existential ones.
Sears mixed related-party real estate deals, spinoffs, and financial engineering with underinvestment in stores and service. That set the stage for a long, public implosion.
6. Culture That Slows Truth-Telling
Middle managers knew of the problem in several collapses, but the fear of delivering bad news blocked honest debate, rapid experiments, and course correction.
Nokia’s internal “fear dynamic” is a textbook case.
7. Late Response to New Customer Journeys
Borders outsourced its online store to Amazon for years, then arrived late to e-commerce and e-readers.
When it brought the business back, customers had already formed new habits elsewhere.
8. Overexpansion on Shaky Unit Economics
Even hypergrowth can hide fundamental flaws.
When a company takes long leases and sells short-term memberships, a downturn exposes fragility. WeWork learned that the hard way.
9. Legal and Ethical Failures
Fraud or weak controls end careers and companies quickly.
The collapse of Wirecard after auditors could not verify cash demonstrated that this was not a “tech story.” It was a governance, controls and auditing story with global ramifications.
10. Narrative over Numbers
When leaders believe their own myth and stop testing assumptions, reality eventually votes.
Versions of that are in Blockbuster’s delay in reframing its business and in several of the cases below.
Ten Case Studies and the Lessons They Teach
1. Eastman Kodak: When the Profit Engine Becomes the Prison
Kodak invented much of digital imaging and even bought an early photo-sharing site. Yet it could not translate that technical lead into a viable digital business fast enough to offset the loss of film profits.
Analysts often say Kodak “missed” digital.
The more profound lesson is that it struggled to replace an annuity business with a platform and services model, and decisions continued to favour printing rather than sharing.
The company filed for Chapter 11 in 2012 and later sold an extensive portfolio of digital patents for a fraction of earlier expectations.
Key Takeaway: If the new model kills your old profits, build the new model anyway, and measure success by lifetime value on the new platform, not legacy margins.
2. Nokia Mobile Phones: Speed, Software Ecosystems, and Fear
Nokia dominated mobile phones until 2007, yet its response to Apple’s iPhone and Google’s Android was slow and conflicted.
Research from INSEAD and later academic work describe how leadership fear, internal politics, and a hardware-first worldview undermined a timely pivot to modern smartphone operating systems and app ecosystems.
Despite efforts around Symbian and MeeGo, Nokia ceded ground rapidly and ultimately sold its handset unit to Microsoft.
Key Takeaway: When the locus of value shifts from hardware to software and ecosystems, your operating model, org design and culture must follow the value, not the past.
3. BlackBerry: Clinging to a Strength While the Category Moves
BlackBerry’s secure messaging and keyboards once made it the executive’s status device.
However, when touchscreens, multimedia, and app ecosystems defined the smartphone, the firm’s strengths became constraints.
In 2016, BlackBerry stopped designing and building phones in-house to focus on software and security, outsourcing branded handsets to partners. The pivot came after years of a sliding market share.
Key Takeaway: A crown jewel can become a cognitive trap. Treat strengths as options to reconfigure, not anchors to defend at all costs.
4. Blockbuster: Disruption is Timing, Not Just Imitation
Blockbuster experimented with mail programs and online services, but slowly and defensively.
The Harvard Business Review chronicled how the final shutdown followed a classic “big bang disruption,” where technology and customer behaviour flipped quickly.
Late fees, a significant source of cash, further locked in the old model. Remember those fines you had to pay for returning your video rentals late?
By the time the company reacted, Netflix and streaming had already reshaped consumer habits.
Key Takeaway: When your profit engine depends on a customer pain point that the new model eliminates, assume you must replace the engine before someone else does.
5. Yahoo: Strategy Drift Under Pressure
Yahoo defined the early web portal and was well-positioned to be a dominant, long-term global player, but then it scattered across overlapping products and acquisitions.
Repeated leadership changes, the rise of search and social platforms, and massive data breaches compounded the drift.
Verizon ultimately acquired Yahoo’s core assets in 2017 at a $350 million discount after the breaches. The assets were combined with AOL into a subsidiary called Oath.
Key Takeaway: If your company spans many adjacencies, either knit them into a clear thesis or prune aggressively. Security failures also extract real cash penalties in deals.
6. Toys “R” Us: Debt Needles the Balloon
The company filed for Chapter 11 in 2017 and moved to liquidate U.S. stores in 2018.
Analysts pointed to the double bind of heavy debt service from its leveraged buyout and an e-commerce shift that required sustained investment in online experience and last-mile logistics.
With hundreds of millions a year going to interest, the money that should have funded reinvention was missing.
Key Takeaway: You can fix a strategy, but you cannot easily do it while starved of cash. If leverage is high, your strategy must be sharper and timelines even shorter.
7. Sears: Financial Engineering Without Customer Magic
After Kmart and Sears merged in 2005, the company relied on restructurings, asset sales and a 2015 real estate spinoff into Seritage Growth Properties.
Meanwhile, stores deteriorated, service lagged, and the brand’s equity eroded.
A detailed Wall Street Journal analysis traced how complex related transactions and a reluctance to invest in retail fundamentals left Sears too weak to compete, culminating in a 2018 bankruptcy.
Key Takeaway: You cannot spreadsheet your way to retail relevance. Governance and capital structure matter, but the customer experience pays the bills.
8. Borders Group: Outsourcing Your Future
Borders turned its online store over to Amazon in 2001, effectively training its customers to shop with a rival.
Later, it returned to e-commerce but was far behind and never caught up on devices or digital content.
In 2011, Borders filed for bankruptcy and liquidated after failing to find a restructuring path. Reuters and other chroniclers cite the strategic error of outsourcing digital revenue at the tipping point as pivotal.
Key Takeaway: Never outsource the core channel that will dominate your category’s future. Partnerships can be bridges, not permanent solutions.
9. Wirecard: Growth Without Verified Cash
Germany’s payments champion imploded in 2020 when auditors refused to sign off on accounts after concluding that €1.9 billion of cash did not exist.
The Financial Times and other outlets had raised red flags for years. Within days of the revelation, the company entered insolvency.
The collapse of a firm prized as a national tech hope proved that control failures and weak oversight can instantly erase trust.
Key Takeaway: Fast growth does not substitute for verifiable economics. Independent assurance and sceptical boards are non-negotiable.
10. WeWork: Long Leases, Short Promises
Once valued at roughly $47 billion, WeWork filed for Chapter 11 in 2023 to restructure more than $13 billion of lease obligations.
The model took long-term liabilities and sold month-to-month memberships into a market that shifted to remote and hybrid work.
The company has since slashed leases and debt through the court process, but the fall from grace is a warning about unit economics and governance.
Key Takeaway: The cycle will punish you if your balance sheet and contracts are mismatched to your revenue volatility. Fix the plumbing before you chase the halo.
Patterns Behind the Patterns
Across these cases, you can see a handful of repeatable errors:
1. They optimised for yesterday’s cash cow. Kodak optimised printing and film, Blockbuster protected late-fee revenue, and BlackBerry took too long to abandon the keyboard as the default paradigm. The new platform required a new profit engine, not a defensive retrofit.
2. They confused experiments with commitment. Several firms tried pilots that looked like innovation theatre. They arrived late to the new curve with too little conviction. Borders' return to e-commerce after years of outsourcing is a prime example.
3. They underinvested in the experience while doing financial manoeuvres. Sears had levers to pull, but customers did not feel progress. A great brand is a promise kept in the store and on the site, not a spreadsheet outcome.
4. They underestimated culture as a strategic asset. Nokia’s internal fear dynamic was not an HR footnote. It was the mechanism that blocked fast, coordinated moves when timing mattered.
5. They did not stress-test governance. For Yahoo, weak security governance carried a direct price in a sale. For Wirecard, failures in controls and assurance destroyed the company. For WeWork, founder-era governance and incentives outpaced unit economics.
How Leaders Can Avoid Becoming a Case Study
1. Pre-commit to cannibalise your cash cow. Tie management incentives to the success of new businesses even when they lower near-term margins. Have a written plan for how you will replace legacy revenue before a disruptor does it for you. Kodak and Blockbuster show the cost of waiting.
2. Put platform shifts on your board agenda. Treat changes in the locus of value as existential. When value moves to software and ecosystems, rewire processes, talent, partnerships and metrics accordingly. Nokia’s story makes this tangible.
3. Keep optionality in your balance sheet. If your category is changing, heavy leverage is a strategic error. Toys “R” Us needed cash to reinvent stores and supply chains, but debt service crowded out investment.
4. Audit the customer experience as intensely as the financials. If the store or app is stale, you are declining, regardless of how ingenious the financial structure looks. Sears is the cautionary tale.
5. Institutionalise truth-seeking. Create mechanisms that reward early bad news, not late disasters. Use independent red teams, internal venture studios, and rapid test-and-learn loops. Nokia's internal fear dynamic warns about what happens without this.
6. Make security and controls strategic. Breaches and control failures now directly impact valuation. Yahoo’s price cut and Wirecard’s collapse should be permanently taped to the boardroom wall.
7. Align contracts to revenue volatility. Mismatched liabilities accelerate collapse when the cycle turns. WeWork’s long-lease, short-term membership mismatch is an example.
Conclusion
It should be noted that big brands do not disappear overnight. Rather, they are gradually eroded by rationalisations that once made sense.
Until next time, may you have the discipline to change the story while you still have the power to do so. Learn from these ten examples. The key message is not that disruption is inevitable. It is that denial is optional.
Dion Le Roux
References
Financial Times. “WeWork files for bankruptcy amid office market downturn.” 6 Nov 2023.
Financial Times. “Wirecard collapses into insolvency after revealing €1.9bn cash is missing.” 25 Jun 2020.
Harvard Business Review. Anthony, S. “Kodak’s Downfall Wasn’t About Technology.” 15 Jul 2016.
Harvard Business Review. Downes, L. and Nunes, P. “Blockbuster Becomes a Casualty of Big Bang Disruption.” 7 Nov 2013.
Harvard Business Review. Sull, D. “The Real Cause of Nokia’s Crisis.” 15 Feb 2011.
INSEAD Knowledge. Vuori, T. and Huy, Q. “Who Killed Nokia? Nokia Did.” 22 Sep 2015.
MIT Sloan Management Review. Shih, W. “The Real Lessons From Kodak’s Decline.” 20 May 2016.
PBS NewsHour. “Borders outsourced online sales to Amazon in 2001” (company history segment). 2011.
Reuters. “Borders files for bankruptcy, to close 200 stores.” 17 Feb 2011.
Reuters. “Toys ‘R’ Us plans to close all U.S. stores; 33,000 jobs at risk.” 14 Mar 2018.
Reuters. “Verizon, Yahoo agree to lowered $4.48 billion deal following cyber attacks.” 21 Feb 2017.
Reuters. “WeWork cleared to exit bankruptcy and slash $4 billion in debt, court says.” 30 May 2024.
The Wall Street Journal. “Dismantling Sears to Save It: Edward Lampert’s Web.” 7 Dec 2017.
The Wall Street Journal. “Why Verizon Decided to Stick With Yahoo Deal After Big Data Breaches.” 21 Feb 2017.
The Wall Street Journal. “WeWork, Once Valued at $47 Billion, Files for Bankruptcy.” 7 Nov 2023.
Wired. “BlackBerry shuts down its hardware division, will stop making handsets in-house.” 28 Sep 2016.
Wired. “Wirecard: how it went under” coverage and timeline references via BBC and FT; for context see BBC below.
BBC News. “Wirecard scandal: How it unfolded.” 22 Jun 2020.