Lessons from The Great Fail

Dominique Barker: Welcome to The Sustainability Agenda, a podcast series focusing on the evolving complexities of the sustainability landscape with a view on addressing current issues in a concise format to help you navigate and take action. I’m your host, Dominique Barker. Please join me as we explore today’s most pressing matters with special guests that will give you some new perspective and help you make sense of what really matters.

Debra Chen: There were some survey results where 81% of executives have cited their companies to have experienced negative consequences by failing to meet their ESG goals. I think that’s a stark comparison to what it might have been in the past. What this means is that ESG needs to be part of the brand ethos.

Dominique Barker: Today, we welcome Debra Chen, the producer and host of The Great Fail. It’s one of my favourite podcasts and therefore it’s not a surprise that it’s won a couple of awards. It’s won Adweek’s Producer of the Year and just recently it won the Signal Award. So that’s terrific. I highly recommend that you take a look at The Great Fail. It’s a business show that examines the rise and fall of companies and what leads to the oftentimes avoidable demise of the world’s most prominent and prolific companies. In today’s episode, we’re going to be discussing a few examples of companies failing to adapt to a changing business environment. While listening today, I really encourage you to reflect on how the mistakes of others can provide learnings for today, particularly in this disruptive era. Good morning, Debra. Thank you so much for joining us on today’s episode of The Sustainability Agenda.

Debra Chen: Thanks for having me, Dominique. I’ve been following the show for quite some time and I’m so excited to be speaking with you today.

Dominique Barker: Thank you. Let’s start off, what have you discovered after studying so many case studies of business failures and why it’s important for a company to regularly revisit their business strategy? Maybe you can just describe an example or two that come to mind.

Debra Chen: Yes. Well, first off, I think it’s interesting and I want to preface this, that when I mentioned that I was going to be discussing the research that I’ve done for The Great Fail for an ESG podcast, I got asked how is examining and studying failures of businesses tied into ESG? And I thought that was profound because the common misconception is that for those that are not directly tied into ESG, most people think it’s just environmental and social impacts because that’s much more prevalent in the day to day discussions. But what’s so interesting is that governance plays such a critical role in holding companies accountable and ensuring the longevity of a corporation. So over the past several years, I’ve immersed myself into learning about what went wrong with some of these largest corporate flops in history, like the Toys R Us and Tower Records and Pan Am. And what I have learned in speaking with former CEOs and employees and analysts that were so close to the stories is, number one, many of these failures could have been avoided. Number two, mistakes are not as complicated, meaning you don’t need an MBA grad to understand what went wrong because these are human errors that are not as complex as one imagines. And then the third one is these mistakes generally fall into one of several buckets, and it doesn’t matter what industry or what time period. The same mistakes that have brought down companies in the past continues to bring down companies now. So for these reasons, I think it’s really important for companies to have a system in place where they’re constantly evaluating themselves, conducting their own diagnostic tests. Kind of like when we go to a doctor for an annual check-up, you know, and some of the examples, you know, in terms of studying these iconic companies like a Circuit City who was once a behemoth in the electronics, consumer electronics industry, they fail to understand what their consumers wanted and how they wanted to shop. We’ve seen the same thing with Pier One and Kmart, but we’re still seeing that happening today with what’s happening at Bed Bath and Beyond. You know, they were once the store that everyone wanted to go to. It was one of my favourite stores and unfortunately they never updated who they were. They never adapted to the changing times.

Dominique Barker: Interesting. That’s really profound. And I want the audience to understand the reason. When I listen to The Great Fail podcast, I always look at how companies double down on existing strategy. That seems to be a theme that comes through, and the reason I thought it would be important for this podcast on sustainability is that oftentimes we’re in this disruptive area and consumer behaviour is in the midst of changing and so there is an opportunity, there is this need to rethink. So I appreciate that answer. If you could talk about some of the dangers of being complacent in today’s evolving business environment that would be really helpful and feel free to use some examples.

Debra Chen: Sure, the dangers are just that. You go from being great to a great fail. You get squeezed out of the game and there was a time when companies could last for centuries and we still have some great brands today. But technology has evolved commerce where we’re going through trends a lot quicker. You know, before it was the superstore that offers more, which is what consumers wanted to then offering convenience to now offering experience. I recently did a lecture on how fear and greed, which are the behaviours that drive the financial markets have, I mean, they’re not the only behaviours that drive the financial markets, but how they’ve led to these management mistakes. And again, looking back at the past, because we learn from our history, we have Kodak, who invented the first digital camera, but not putting it into the market for fear that it would cannibalise its existing business.

Dominique Barker: That was a great episode. I highly recommend it. Yeah.

Debra Chen: Yes and Steven Sasson, who was the guest, was amazing. He was the young engineer that was tasked with seeing if the digital camera had anything to do with the market and when he discovered it, the executives told him, you need to shelve this. You know, this is cute, but don’t show anybody. Don’t tell anybody about it or Blockbuster. You know, people have always cited Blockbuster as being a dinosaur when in fact, the CEO had a plan, a digital plan in place, but the board, their stakeholders, they were afraid that this would disrupt the video rental business. And again, out of fear and greed, fear of losing out on its late fee revenues and greed for not being able to hit the Wall Street target estimates. They didn’t make the pivot and as a result, they’re no longer around today. And we still see this type of short sightedness that continues to impact leaders and managers as they’re making their decisions.

Dominique Barker: That’s interesting. Fear is indeed really important in disruption, and that short term ness, I’ll say, especially for publicly traded companies, just making sure that you’re hitting your targets is something that is hard to ignore. But I think in this moment of disruption, we really need to think about it. Debra, I’d love for you to talk about some of the learnings from some of these past failures that you’ve spoken about on The Great Fail.

Debra Chen: Sure. Well, what I have seen is that all industries and companies are not immune to failure. You’re never too big to fail. You know, take Amazon, for instance. That behemoth alone has already eradicated so many businesses. They’ll continue to disrupt many others. And there are other technologies that are coming into play, and with the changing times and with the changing trends, companies will always be under threat and nothing is ever stagnant. But what seems to be a risk is the reactions that leaders and managements have when these changes arise, and going back to what I cited earlier, which is that studying the past failures, the same mistakes that have brought down companies in the past continue to bring down companies now.

Dominique Barker: So you talked in the opening question, you spoke about how you’d been once in preparing for this podcast, you started to look at ESG and started to think about things a little bit differently. Could a company’s lack of engagement in sustainability be the next great fail?

Debra Chen: Well, the bright side is that we’re seeing the significance in the adoption of ESG all around, and disclosures and current guidelines are still broad and in some ways it’s very helpful because it provides some freedom for architecting that framework. There were some survey results where 81% of executives have cited their companies to have experienced negative consequences by failing to meet their ESG goals. I think that’s a stark comparison to what it might have been in the past. What this means is that ESG needs to be part of the brand ethos. I got asked by an executive of a large company recently. He said to me, we’re having a hard time attracting talent because of the industry that we’re in, and they were in the oil and gas business. He’s saying prospective employees think that we’re this big, bad wolf. And so I asked him, well, what are your ESG policies? And he wasn’t able to tell me because he actually asked me, well, what is ESG? Right. He’s been with the company for over a decade and he’s a high level executive. If your high level executives do not know what ESG stands for, chances are it’s not embedded authentically into your corporate brand ethos. And I thought that was really telling, I thought that was profound, and I think that as a society within the financial ecosystem, we can do a better job of reconciling ESG investments, you know, investments made in sustainability, because that will ultimately ensure the longevity of a company and a brand.

Dominique Barker: Well said. Debra, some of your episodes, you do speak about the issue of compensation, and there’s been a couple of episodes where you’ve spoken about the poor consequence to employees and shareholders. When CEOs receive big pay packages on the company’s failure, can you just explain what those consequences are?

Debra Chen: Sure. You know, these are examples when the system is broken, why do we see companies who are on the brink of failure? That struggle with paying their creditors and suppliers find ways to compensate millions of dollars to the management team, you know, especially when they’re not up to par with performance. I think those are the questions that we should be asking, Why are boards not held accountable? But more importantly, how do we fix this issue? And I think the consequence is obviously within the ecosystem. You know, investors don’t get paid back. Suppliers don’t receive what they’re owed in inventory, bills don’t get paid, and this hurts the ecosystem while executives, they walk away scot free with fat pockets. But the bigger consequence is within the moral and ethics of a system that’s rewarding someone, that’s not deserving. I think the silver lining here is that more light is being shed on cases like this. I’m seeing law firms write white papers on this very topic, and what is hopeful to me is that education is the first step to change.

Dominique Barker: Yeah, and I think we’re seeing more shareholder proposals on the topic of compensation coming to the forefront may not be related to companies failures, but just putting a spotlight on it, and I think transparency is always helpful. Debra, thank you so much for joining us today and for our audience, I really recommend that you check out The Great Fail podcast that’s available on all platforms. It’s very entertaining and enlightening and it’s covered some Canadian stories as well, but mostly US company failures. Thank you so much for joining us today, Debra.

Debra Chen: Great chatting with you, Dominique. Thanks for having me.

Dominique Barker: Please join us next time as we tackle some of sustainability’s biggest questions, providing different perspectives to help you move forward. I’m your host, Dominique Barker, and this is The Sustainability Agenda.

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