Which high-profile business mistakes from 2014 should you avoid making this year?
History is littered with bad business decisions: everything from Excite passing up the opportunity to buy Google (valued today at $170 billion) for a paltry $750,000 in 1999; to Blockbuster’s refusal in the early 2000s to partner with Netflix (the company that caused its downfall). And let’s not forget 20th Century Fox deciding to sign over all merchandising rights from Star Wars to George Lucas ($4 billion and counting) – just so it could save $20,000 on his director’s fee.
According to business psychologists, bad business decisions continue to be made because cognitive bias tends to distort ethical thinking in leadership roles (what’s called ‘ethical fading’). Most bad decisions can be attributed to laziness, stubbornness and a lack of technical or communication acumen. 2014 was no exception, with plenty of business blunders.
1) Starbucks smells the coffee
After constant scrutiny over Starbucks failing to pay its corporation tax, a decision by executives to pay a one-off contribution to the HMRC backfired badly. Rather than appease an angry public, it was seen as buying the government off cheaply. Customers voted with their feet by inflicting on the company its first ever fall in UK annual sales – representing a drop of 3.4 per cent when its accounts were announced in May 2014.
2) Ryanair’s Twitter Q&A nosedives
Any CEO deciding it’s a good idea to become more popular by hosting a Twitter Q&A had better be prepared for the backlash. Michael O’Leary, the acerbic boss of no-frills European airline Ryanair, attracted some none too PR-friendly Tweets during his ‘AskRyanair’ session last January, including, “How do you chose where to fly? Dartboard?”
3) Viagra maker’s shares droop
Pfizer’s attempt to buy UK pharmaceuticals giant AstraZeneca was the biggest takeover attempt of the year, but it collapsed spectacularly after the board went against shareholder sentiment by resolutely sticking to a ‘take it or leave it’ 5885p share price.
Pfizer initially offered 5000p a share, then 5350p then 5500p. After rejecting all three offers, AstraZeneca shares lost 13 per cent, or around £8 billion. Several major shareholders had urged the AstraZeneca board to engage in constructive talks with Pfizer, but the AstraZeneca CEO insisted the bid still undervalued the company.
Human nature – and business – being what it is, we confidently predict that 2015 will provide its own choice selection of wince-worthy blunders.