HBR On Strategy: The 6 Forces of Failure—and How to Protect Your Company from Them
Release Date: April 30, 2025
In the latest episode of HBR On Strategy, hosted by the Harvard Business Review, venture capitalist and founder of the Failure Museum, Shawn Jacobson, delves into the critical factors that lead businesses to failure. Leveraging over a thousand relics from his unique collection, Jacobson identifies and explores the Six Forces of Failure. This comprehensive summary captures the essence of his insights, providing invaluable lessons for business leaders aiming to navigate the complexities of the corporate landscape.
Introduction to the Failure Museum
The episode opens with an intriguing introduction to the Failure Museum, a repository of over 1,000 artifacts from failed business ventures. These items serve as tangible reminders of the pitfalls companies can encounter, offering profound lessons for current and aspiring business leaders.
Jacobson emphasizes the educational value of these failures:
“Failed companies, failed products, failed sports-related items, and failed toys … they hold powerful lessons for business leaders.”
[03:20]
1. Product-Market Fit
Example: Webvan's IPO Bottle
Webvan, launched in the late 1990s, attempted to revolutionize grocery delivery but ultimately failed due to a lack of product-market fit. Jacobson illustrates this with a champagne bottle commemorating Webvan's IPO in 1999.
Key Points:
- Overexpansion: Webvan launched in 10 cities simultaneously without validating a scalable business model.
- Capital Mismanagement: Raised over $880 million but faced insufficient demand to sustain operations.
Jacobson notes:
“Not enough demand for the early version of your product. You shouldn't yet scale go to market.”
[04:15]
2. Team
Example: Theranos' Leadership
Theranos serves as a cautionary tale about the importance of having a competent and experienced team. Despite its high valuation, the company collapsed under poor leadership and lack of domain expertise.
Key Points:
- Lack of Expertise: The team lacked necessary expertise in blood testing technology.
- Overambitious Goals: Aiming to revolutionize blood testing with inadequate resources and knowledge.
Jacobson asserts:
“When they don't have domain expertise, hiring other people without domain expertise … you believe in something that really isn't possible.”
[05:30]
3. Financial Management
Example: ESPN Mobile Phone
ESPN's foray into the mobile phone market is highlighted as a misstep in financial management.
Key Points:
- Excessive Spending: Invested $150 million in development and marketing.
- Insufficient Product Features: The phone only offered basic functionalities, failing to attract consumers.
Jacobson remarks:
“They burned through $150 million, including several Super Bowl ads. They probably should have had more capabilities on the phone.”
[07:10]
4. Timing
Example: WeWork's Thermos and Koozie
WeWork's expansion exemplifies the pitfalls of poor timing in business strategy.
Key Points:
- Market Shifts: The COVID-19 pandemic drastically reduced demand for office space, leading to massive financial losses.
- Rigid Commitments: Long-term leases at peak prices became untenable in a declining market.
Jacobson emphasizes:
“You need to have a pulse on what's happening in the market and be able to anticipate what's going to happen the next 12 to 24 months.”
[06:45]
5. Competition
Example: Blockbuster vs. Netflix
Blockbuster's failure to adapt to the digital revolution serves as a stark lesson in competitive strategy.
Key Points:
- Missed Opportunities: Refused to pivot to online streaming and decline to acquire Netflix for $50 million.
- Underestimating Competitors: Netflix capitalized on the streaming trend, outpacing Blockbuster significantly.
Jacobson observes:
“You need to make sure that you don't have an upstart competitor that offers a cheaper, better way of doing what you do.”
[07:55]
6. Customer Success
Example: Google Glass
Google Glass illustrates the challenges of achieving customer success with innovative but prematurely launched products.
Key Points:
- Misaligned Target Audience: Initially aimed at doctors, the product felt invasive and lacked appeal among broader consumers.
- Lack of Personalization: The device failed to enhance user experience in a meaningful way.
Jacobson explains:
“It's important to pick the right early customers that are representative of your bigger market … people pick the most convenient customers rather than those that are going to help you build a big business.”
[06:20]
Conclusion and Key Takeaways
Throughout the episode, Shawn Jacobson underscores the importance of understanding and mitigating the Six Forces of Failure:
- Product-Market Fit: Ensure there is sufficient demand before scaling.
- Team: Assemble a team with the right expertise and realistic goals.
- Financial Management: Allocate funds wisely and avoid overspending on unproven ventures.
- Timing: Stay attuned to market conditions and adapt strategies accordingly.
- Competition: Continuously monitor competitors and innovate to maintain a competitive edge.
- Customer Success: Focus on selecting the right target audience to drive sustained growth.
Jacobson’s insights, enriched by his extensive collection of failure artifacts, provide a roadmap for businesses to avoid common pitfalls and steer towards success.
Notable Quote:
“I admire companies for taking risks and trying new things … but they spent a lot of money to roll something out that wasn't going to work.”
[08:00]
Final Thoughts
This episode of HBR On Strategy serves as a vital resource for business leaders and entrepreneurs. By dissecting real-world failures through the lens of the Six Forces of Failure, Shawn Jacobson offers actionable strategies to safeguard companies against similar downfalls. Whether you're in the early stages of building a business or navigating complex market dynamics, the lessons from the Failure Museum are indispensable for strategic growth and long-term success.
Further Engagement
Listeners are encouraged to engage with HBR’s extensive resources, including podcasts, articles, case studies, and videos, available at hbr.org. Share your insights and continue the conversation to unlock new ways of doing business.
Produced by Scott Lapierre and Hannah Bates, with editing by Kurt Nickish and special thanks to Ian Fox, Maureen Hob Hoch, Erica Truxler, Ramsey Gabaz, Nicole Smith, Ann Bartholomew, and our listeners.