The 6 Forces of Failure—and How to Protect Your Company from Them

Summary

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:

1. Product-Market Fit: Ensure there is sufficient demand before scaling.
2. Team: Assemble a team with the right expertise and realistic goals.
3. Financial Management: Allocate funds wisely and avoid overspending on unproven ventures.
4. Timing: Stay attuned to market conditions and adapt strategies accordingly.
5. Competition: Continuously monitor competitors and innovate to maintain a competitive edge.
6. 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.

Transcript

[Hannah Bates]

Strategic growth isn't just about where you're going, it's about where you build. Global business leaders are choosing Ohio for its Pro Business Climate, rapid Innovation and tailored incentive packages. With Jobs Ohio, you'll find a partner that moves on your timeline, helping you scale with confidence. Make your smartest move yet. Get [e-mail] before we begin, we have a couple of questions. What do you love about HBR OnStrategy? What do you want less of? What would make HBR OnStrategy even better? Tell us. Head over to hbr.org podcastsurvey to share your thoughts. We want to make the show even better, but we need your help to do that. So head to hbr.org podcastsurvey thank you. Welcome to HBR on Strategy, case studies and conversations with the world's top business and management experts, hand selected to help you unlock new ways of doing business. Ever heard of the Failure Museum? It's home to more than 1000 relics of failed business ventures like the Heinz Tomato Ketchup cookbook, Bic's Pencil just for Women, and a stock certificate from Lehman Brothers. While these flops and washouts might be fun to laugh at, they hold powerful lessons for business leaders. In this episode, museum founder and venture capitalist Shawn Jacobson identifies six forces of failure, from bad timing to poor financial management with the help of artifacts from his cautionary collection. Along the way, you'll learn how your company can avoid making the same costly mistakes. By the way, if you want to see the items Jacobson talks about, go to HBR's YouTube channel where you'll find the video version of this episode. Here's Jacobson.

[Shawn Jacobson]

I have a lot of favorites. The pets.com sock puppet from 1998. They could have been successful if they didn't build a money losing business. Harley Davidson clone from 1996. It wreaked the scent of tobacco. Here's an unopened bottle. No, they weren't joking. They were serious about it. There's a lot of product extensions. Coors sparkling water, Cheetos lip balm. Another one of my favorites is Alan from 1964. He was Ken's best friend. You may remember him from the Barbie movie. Hi Barbie. Oh hi Alan. Here he is in the original box. Alan wore the same clothing. He was his best friend. The problem is everyone just wanted to own Ken, not Ellen. Yes, I have two cans of New Coke. You want me to bring them out or it was really hard to switch people in Mass to something completely different. I have not tasted one. I I certainly have been tempted, but I'm, you know, some of These things are 15, 20, 30 years old, so they probably don't taste good anymore. Shawn Jacobson, partner at Norwest Venture partners I'm on 14 boards. I'm also the founder and curator of the museum. The Failure Museum has over a thousand items and continues to grow. Failed companies, failed products, failed sports related items and failed toys. I've tagged all 1,000 items of mine to one or two forces of failure. Product, market, Fit team, financial management, Timing, competition and customer success. I'm going to go through all six forces of failure and share one example of each. I have a champagne Bottle from Webvan's IPO date in 1999. For product market Fit Webvan is a good example. They were the world's first grocery delivery company. You have the right to come home from work and find something good waiting for you in the fridge. They raised over 880 million to launch in 10 cities before having proven one business model required so much capital. They had distribution centers, they hired their own drivers, which is why they had to raise $880 million. Not enough demand for the early version of your product. You shouldn't yet scale go to market. So I have a Theranos mug and I also have Elizabeth Holmes business card. Their goal was to revolutionize the blood testing industry and at the peak were worth $10 billion. Theranos didn't have a strong team or board. None of them had domain expertise. They tried to use a pinprick of blood to do testing and that's just not enough data. Yeah, when they don't have domain expertise. Hiring other people without domain expertise. You believe in something can be possible when it really isn't. Here is a copy of the Google Glass and I can put it on here too. A good example of customer success is Google Glass. They did not pick the right early customers. Well, they started with doctors and doctors could see patient records on the glass while they were talking to the patient. So they didn't have to use their computer. It felt invasive. It didn't seem very personal. You're not used to having someone with a strange device on your face trying to communicate with you. Because it lacked the cool factor. They couldn't find any other segments of the population that wanted to to wear something like this. It's important to pick the right early customers that are representative of your bigger market. A lot of times people pick the most convenient customers rather than those that are going to help you build a big business. I love this one so much. That I actually bought two of them on eBay for financial management. The ESPN mobile phone they launched a year before the iPhone. All the phone did was calling, sharing ESPN mobile content and scores. They burned through $150 million, including several Super bowl ads. It only hit 6% of its sales target. They probably should have had more capabilities on the phone. There just wasn't enough to do on the phone. Introducing mobile ESPN sports fans, your phone has arrived. I have a couple Items here, a WeWork thermos and a koozie from WeWork's summer camp for timing. A good example is WeWork. WeWork's in the co working space business and when the pandemic hit, the demand for office space fell off a cliff and they ended up burning through $16 billion. The goal was to give people flexible space that allowed you to do month to month leases and scale up and down in space depending on your demand. They also signed 10 to 15 year leases at peak market prices and then they ended up renting them out at a loss. There's some level of unluckiness, but I think that they had the wrong business model. 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. And so I've had several friends donate their Blockbuster membership card to me and then in every store there was a sign that said Beat be kind. Rewind for competition. Blockbuster is a good example. They're in the movie rental business. At the peak they had 9,000 stores. They missed the opportunity to move online and Netflix ate their lunch. They also, after they went public, had the opportunity to buy Netflix for $50 million and turn it down. And instead Netflix ended up beating them. When I talk about competition, you need to make sure that you don't have an upstart competitor that offers a cheaper, better way of doing what you do. You need to be aware of all the competitors in your market segment and how you stay differentiated and better than them. I do admire companies for taking risks and trying new things. Some of these big risks turn into humongous outcomes and some fail spectacularly. I am a lot of times surprised at the lack of research that they did before. They spent a lot of money to roll something out that wasn't going to work.

[Hannah Bates]

That was Sean Jacobson, partner at Norwest Venture Partners and founder of the Failure Museum. We'll be back next Wednesday with another handpicked conversation about business strategy from Harvard Business Review. If you found this episode helpful. Share it with your friends and colleagues and follow our show on Apple Podcasts, Spotify or wherever you get your podcasts. While you're there, be sure to leave us a review. And when you're ready for more podcasts, articles, case studies, books and videos with the world's top business and management experts, you'll find it [e-mail] this episode was produced by Scott Lapierre and me, Hannah Bates. Kurt Nickish is our editor and special thanks to Ian Fox, Maureen Hob Hoch, Erica Truxler, Ramsey Gabaz, Nicole Smith, Ann Bartholomew and you our listener. See you next week. Strategic growth isn't just about where you're going, it's about where you build. Global business leaders are choosing Ohio for its pro business climate, rapid innovation and tailored incentive packages. With Jobs Ohio, you'll find a partner that moves on your timeline, helping you scale with confidence. Make your smartest move yet. Get [e-mail].