Over the years we have seen numerous companies and products rise and fall by taking risks. However, for every I-phone there is a Zune, and today we will focus on the unfortunate event of failed expansion.
The market always shifts and corporations tend to gravitate towards where the money is. However sometimes companies try to expand in areas that, though have a very lucrative market, prove to be fruitful for them, and their expansion fails. This can happen for any number of things and today we will take a look at them all.
Lets take a dive into why expansion and incentive have more things in common than not.
Expanding Is Demanding
If you are following news on the gaming world, it would come to the surprise of literally no one, that Google's Stadia project has failed spectacularly. Taking that that means for the gaming scene aside, lets focus on why this failure was easy to predict, and see what people more educated than I have to say about this.
Business Insider reports in their article that according to developers, it was the lack of incentive and the fear of Google's fickle nature. The very -FACT- that there is a site that documents and lists all the things Google has started and has subsequently killed, makes many potential investors in Google Stadia feel very uncertain about things. And this brings us to the second thing mentioned, lack of incentive. Google wished to expand in a market that already has similar products already present in the field Google wanted to expand. There is a school of thought in marketing that claims you have to be "first, best or different". Google was not the first, but to be one of the other two, it needed to commit funds and provide a platform that offered to people what they needed to make sure they stay with Google, and help make it the best.
Google however is not the first major corporation that has done a similar error. Microsoft had a failed attempt getting into the smartphone market. CNBC in their article reporting on the incident mentions that part of that failure was underestimating the importance of Google in the market.
So it is clear that in both those scenarios, mistakes were made.
Incentive and Preparation
Incentive is a term that is often used in business to talk about increasing productivity or as a means to attract and retain customers. However incentive should also be considered in talks about expanding your business. You have to make sure you give enough incentive to those with funds you are after,customers and even other companies, to make sure they stick with you and help you expand.
Sujan Patel in his blog gives a very insightful article about how growth and subsequently expansion and branching out, is not necessarily a good thing. In the article it presents examples of failed companies and potential lessons to be learned by those failures. In the end it summarizes them neatly but one of the lessons stuck out to me.
"Always be aware of your vulnerabilities. Overconfidence can cause us to make rash decisions that seem wise at the time, yet ultimately, are the cause of our downfall. Rapid growth is not symptomatic of invincibility – if anything, accelerated growth puts your company at considerable risk."
I wish more companies understood this. What Stadia's failure hints at, from my perspective, is that Google did not understand its limits. It overestimated the brand name, and assumed that just because practically everyone uses her products (gmail, youtube etc) they would without a doubt, use Stadia for their gaming needs. They failed to understand how the Gaming market works, they released a sub-par product that only had the backing of major AAA publishers, and did not see, or ignored, the value of Indie developers when it comes to those projects surviving. Losing the support of the Indie developers due to reputation and lack of monetary incentive for them to invest in putting their games there, resulted in having an underwhelming array of video games.
Having an underwhelming array of video games meant that customers had no incentive to buy into Google Stadia, as the already established platforms that did more or less the same, offered them more, and they had no reason to risk investing there. Another key error I have seen crop up lately is the fact that many corporations fail to view customers as investors. If your product is always online and is made as an "online service" then you do -NOT- have consumers, or even customers. You have investors.
Without knowing for sure if you will continue maintaining that service in the foreseeable future will dissuade your audience from getting on board your product, thus resulting in not enough people to sustain your online service, thus forcing you to shut it down.
But it is not all dread and horror. There are plenty of articles and ways to properly expand, like this one from Forbes which gives amazing advice on the steps required to be ready for an expansion, and off course, articles for those with small companies that want to know what and how to identify if they are over extending, like this one from Entepreneur Europe.
Today, market is aggressive, customers and businesses have a short attention span and the rapid growth of the internet makes things more chaotic. Though it might be a perfect time to take risks, it is still important to understand the value of preparation and humility. It is a shame that we see major companies ignoring the lessons taught to them by similar failures of the past.
Expanding or branching your company always has its risk, but with humility in your approach, careful planing and giving your target and your company proper incentives I feel that the risk can be mitigated.