Businesses aren’t the only ones feeling the pressure from technological innovation — the CEOs are feeling it too. Here are 14 executives who paid the price for their innovation failures.
Approximately 1,452 CEOs left their jobs in 2018, according to a report by outplacement firm Challenger, Gray & Christmas. That’s a 25% increase from the previous year, and the largest wave of departures since the 2007-2008 financial crisis.
While 25% of those departures are labeled retirements, and some can be chalked up to bad personal behavior, there’s another force at work here as well: disruption.
Over the past few decades, technological innovations have swept in and upended legacy businesses in industry after industry. But company leaders aren’t always willing to see that. In fact, we complied a list of 55 big company executives caught with their foot in their mouth, denying the importance of a revolutionary new technology or an insurgent company.
While some of those foot-in-mouth moments were just moments, many have culminated in a change of leadership. The message from boards of directors is loud and clear: help us evolve, or we’ll find someone who will.
The past few decades are filled with stories of CEOs who stepped up to the plate, only to realize that their opponents were playing a different game entirely. In this report, we look at 14 such stories at major US companies, from the Blockbuster exec who passed on acquiring Netflix, to the J. Crew fashion icon who missed out majorly on e-commerce, to the Barnes & Noble CEOs who steered the bookseller’s focus everywhere but on actually selling books.
Below, we break down some of the most memorable CEO oustings in recent years, how they happened, and how companies fared in the aftermath.
Table of contents
- John Akers (1993, IBM)
- Robert Nakasone (1999, Toys R Us)
- Gary DiCamillo (2001, Polaroid)
- John Antioco (2007, Blockbuster)
- Mike Lazaridis & Jim Balsillie (2012, BlackBerry)
- William Lynch (2013, Barnes & Noble)
- Ronald Boire (2016, Barnes & Noble)
- Mark Fields (2017, Ford)
- Jeff Immelt (2017, GE)
- Mickey Drexler (2017, J. Crew)
- Jan Singer (2018, Victoria’s Secret)
- Steve Stagner (2018, Mattress Firm)
- Margo Georgiadis (2018, Mattel)
- Camillo Pane (Coty, 2018)
1. John Akers (1993, IBM)
How a rush to market and a botched reorg led to the biggest annual loss in US history
A 2014 ZDNet article refers to John Akers as the “CEO who lost the PC market.” It’s a harsh, but not inaccurate assessment. Under Akers’s leadership, IBM lost its spot as the unrivaled giant of hardware and software to a new crop of market disruptors — and Akers let the foxes right into the henhouse.
For years, IBM dominated the computer industry on both the hardware and software sides of the business. As the ZDNet retrospective points out, there were some years when IBM alone accounted for 100% of the IT industry’s profits.
Then came the 1980s. As technological advancements paved the way toward smaller, more personal devices, IBM started to falter.
Meanwhile, new contenders were emerging everywhere in the tech industry. In printers, there was HP. In disk drives, there was Oracle. In microprocessors, there was Intel. And in software, there was an upstart company run by a 19-year-old founder by the name of Bill Gates — Microsoft.
Akers felt that IBM needed to get its PC to the market fast, and this focus on speed led him to his most fateful strategic error: licensing Intel microprocessors and Microsoft software, rather than developing those components internally. The partnerships gave the younger companies an early foothold in the industry, which they used to leapfrog past IBM on their path to PC domination.
Akers realized that the future of IBM was in software and services, not hardware, and pushed for a reorganization that would have divided the huge company into smaller independent businesses. The idea was that those smaller orgs would be more nimble and better able to compete with younger rivals like Microsoft. But Akers was reluctant to make the aggressive staffing cuts that the reorg demanded, opting instead for softer measures, such as offering older workers financial incentives to retire.
IBM’s net income per employee dropped precipitously under Akers’s leadership. Source: MBI Concepts
Akers originally planned to steer the company through the turbulence. At the very least, he planned to stay on until 1994, when he would have reached IBM’s customary retirement age of 60. Then in 1992, the company reported a devastating $5B loss — the biggest in U.S. corporate history at the time — and Akers’s fate was sealed. He announced his resignation as CEO of IBM in January 1993.
Akers was replaced by Louis V. Gerstner, Jr. It was the first time since 1914 that IBM had recruited an executive from outside its ranks. In his almost decade-long tenure as CEO, Gerstner revamped IBM’s business model, abandoning commoditized technologies (hard drives, personal printers) and focusing instead on high-margin opportunities.
Gerstner later told a group of business students:
“Transformation of an enterprise begins with a sense of crisis or urgency. No institution will go through fundamental change unless it believes it is in deep trouble and needs to do something different to survive.”
Today IBM has by no means reclaimed the top spot of the tech pyramid, but it’s still very much a player in the tech space. The company’s IBM Watson division, in particular, is regularly mentioned alongside the likes of Google, Apple, and Amazon as one of the companies leading the charge into the next wave of disruptive technology: artificial intelligence.
2. Robert Nakasone (1999, Toys ‘R’ Us)
How the advent of e-commerce toppled a toy giant — and took down its CEO
Toys “R” Us was already under threat from discount retailers like Walmart when Robert Nakasone donned the CEO cap in 1998. The company’s market share had declined from 25.4% in 1990 to just 16.8%. Little did anyone know then that the biggest disruption in the toy business was still to come: e-commerce.
Described by one analyst as “more of an operations guy,” Nakasone implemented a number of different measures to turn the ship around, including closing underperforming stores, cutting inventory, and downsizing. None proved effective in reversing the company’s fortunes, and Toys “R” Us stock declined an additional 45% during Nakasone’s 18-month tenure.
In retrospect, Nakasone was likely focusing his energies in the wrong places. The late 1990s were a turning point in children’s entertainment. Kids were moving away from traditional toys and spending more time with computer and video games.
But Nakasone’s biggest obstacle was adjusting the company to the new way toys were being bought and sold. While he promised during investor calls that Toys “R” Us would be a leader in the online toy market, the company was caught off guard by the success of eToys, an internet startup founded in 1997.
eToys went public 2 years after its founding at a market valuation 35% higher than Toys “R” Us. Meanwhile, Toys “R” Us’ efforts to establish an online presence floundered: in the critical 1998 Christmas season, for example, the company lost business to online competitors due to inventory issues, and struggled to fulfill the online orders it did receive.
All of this spelled the end for Robert Nakasone, who was replaced as CEO in 1999. But the company’s fortunes didn’t improve much. In 2000, feeling the pressure to compete on the e-commerce front, Toys “R” Us signed a fateful partnership deal with Amazon, giving the soon-to-be giant exclusive rights to sell its products. Toys “R” Us paid Amazon a reported $50M a year — essentially paying the younger company to put it out of business.
The end did not come quickly for Toys “R” Us: the company continued to struggle to fight off attacks from Amazon on the one hand and Walmart and Target on the other. In 2018, the company filed for bankruptcy and closed its stores for good.
However, reports have since surfaced that the company is planning a modest brick-and-mortar comeback by Christmas 2019.
3. Gary DiCamillo (2001, Polaroid)
How loyalty to a dying legacy business led a camera exec to let opportunity slip through his fingers
Once considered to be one of the most innovative and tech-forward companies in the United States, Polaroid had fallen on tougher times by the time Gary DiCamillo took on the CEO job in 1995. This was in large part due to a customer base that was “closer to the grave than the crib,” as a 2001 Wall Street Journal article put it.
DiCamillo made some efforts to change that with new products aimed at teens and kids. But with the invention of the digital camera, efforts to bring people back to instant film were doomed to fail.
DiCamillo and other top executives were dismissive of the threat that digital technology posed at the time:
“People were betting on hard copy and media that was going to be pick-up-able, visible, seeable, touchable, as a photograph would be,” DiCamillo said in a 2008 interview. “That was a major hypothesis that I believed in my marrow that was wrong.”
Time would show how wrong he was: By 2001, 1 in 4 US households had a digital camera — and Polaroid had filed for bankruptcy.
The irony of the Polaroid story is that the company could have been one of the leaders in the digital photography revolution. It had been doing research into digital imaging as far back as the 1960s. By 1989, 42% of the company’s research and development funding was going to digital imaging.
Why were DiCamillo and his team so reluctant to put more of Polaroid’s chips on digital innovation? One reason was the company’s business model at the time. The vast majority of Polaroid’s profits came from instant film, which had gross margins well over 65%. If DiCamillo was going to throw that business over for something else, he felt it needed to be something that could match or top those margins.
But no such profit machine presented itself. Meanwhile, the company was buckling under a $1B debt load it had been racking up since the 1980s. DiCamillo eventually attempted to steer Polaroid in a more digital-friendly direction with the development of the Opal and Onyx digital photographic printers, but not in time to save the business. It filed for bankruptcy in October 2001, and DiCamillo announced his resignation the following year.
Polaroid continued to struggle in the years after DiCamillo’s departure, filing for bankruptcy a second time in 2008 and going through 6 CEOs between 2005 and 2009.
However, the company’s fortunes have improved in more recent years, thanks to strategic licensing partnerships and expansion into tablets, television, and digital media.
The nostalgia cycle has been kind to Polaroid as well. One of the company’s most successful products, Polaroid Pic-300, is a throwback to the brand’s instant film days. Seen as fun, retro, and refreshingly analog in an overwhelmingly digital world, the camera is now particularly popular with the demographic DiCamillo struggled to win back in the late 1990s: teens and young adults.
4. John Antioco (2007, Blockbuster)
How a movie rental exec missed out on a $150B opportunity and made changes that were too little, too late
The story of Blockbuster’s disruption is practically business legend: in 2000, a tech founder named Reed Hastings approached Blockbuster CEO John Antioco about the possibility of acquiring his startup, a movie rental company called Netflix, for $50M. Antioco turned down the offer.
Netflix went on to become a $150B company, Antioco was out as CEO by 2007, and Blockbuster was bankrupt by 2010.
However, there’s more to the story than meets the eye. Antioco did turn down an acquisition and a partnership deal with Netflix in the early days, but by the mid-2000s he realized the threat that it posed, and started to make changes he hoped would help Blockbuster compete. These included discontinuing late fees and investing in an online platform, Blockbuster Total Access.
Some of the measures started to pay off: The company’s stock price gained in 2006, but still fell far short of the $30 per share it had commanded at its height in 2002.
Blockbuster’s profits were on the decline for 4 years leading up to Antioco’s departure. Source: Harvard Business Review
Antioco had less success winning buy-in for his strategy from Blockbuster’s Board of Directors, however. Noted activist investor Carl Icahn, in particular, proved a stumbling block: Icahn questioned Antioco’s strategy, especially the decision to end late fees, which was a significant source of profits for the chain. He began advocating for Antioco’s ouster as early as 2005.
As it was, things didn’t improve for Blockbuster once Antioco was gone. His replacement, James Keyes, unwound much of Antioco’s work in advancing Blockbuster’s digital presence in favor of doubling down on the brick-and-mortar business. At one point, Keyes eyed acquiring ailing electronics chain Circuit City, which was feeling the “disruption drain” itself as Amazon expanded into the electronics space. The deal never went through, and Blockbuster’s fortunes never improved either.
Icahn softened in his assessment of Antioco in the years following his departure, saying in 2011 that while he still considered Blockbuster “the worst investment I ever made,” Antioco “did a good job in executing on Blockbuster’s Total Access program” and could potentially have fended off Netflix over time.
When the company filed for Chapter 11 bankruptcy in 2010, it was valued at around $24M. Netflix was already valued at around $13B. In 2011, Blockbuster was acquired by Dish Network for $320M.
5. Mike Lazaridis & Jim Balsillie (2012, BlackBerry)
How Blackberry’s executives got comfortable at the top, then lost their lunch to Apple
The BlackBerry was a game-changer when it hit the market in 1999. At its peak, the device accounted for over half of the global smartphone market. But that didn’t protect parent company Research in Motion — or its co-CEOs Mike Lazaridis and Jim Balsillie — when Apple’s iPhone and Google’s Android started eating into the device’s market share.
When the iPhone was introduced in 2007, BlackBerry had over 12M subscribers and was worth $42B. By the end of 2011, RIM’s stock had plummeted by nearly 75%. Investors blamed Lazaridis and Balsillie, questioning the pair’s ability to produce products that could compete with Apple’s and Google’s offerings.
Lazaridis and Balsillie attempted to reclaim BlackBerry’s relevance with new products that incorporated their new competitors’ stand-out features — Apple’s, in particular. In 2008 they introduced the BlackBerry Storm, the company’s first touchscreen device, and were met with bad reviews. Three years later, they released the PlayBook tablet in a bid to compete against Apple’s newly introduced iPad — but the device was both a critical and commercial failure.
BlackBerry’s share of the smartphone market reached its peak in 2009 and never recovered after that. Source: Statista
The pressure came to a head in 2012: Lazaridis and Balsillie both stepped down as CEOs and were replaced by COO Thorsten Heins. Lazaridis and Balsillie also relinquished their positions as co-chairmen of RIM’s board, with Lazaridis transitioning to vice chairman and Balsillie assuming a board seat with no operational role.
Things did not improve much for BlackBerry’s smartphone business in the years following Lazaridis’ and Balsillie’s departures. The struggling company attempted to find an acquirer in 2013. Even Lazaridis considered buying it, but the deal fell through.
In September 2016, BlackBerry announced that it would stop manufacturing phones altogether, and instead focus on software. The next year, the company’s market share officially dropped to 0%.
The main charge levied against Lazaridis and Balsillie in the years since BlackBerry’s precipitous fall has been their lack of urgency in responding to the existential threat posed by Apple and Google. In an investor call at the time, Balsillie was quoted as saying that the iPhone was actually good for their business:
“I’ve said before [Apple] did us a great favor because they drove attention to the converged appliance space. The attention to it has quite frankly been overwhelmingly positive for our business.”
Balsillie and Lazaridis believed it was far too soon to seriously entertain the idea of putting a computer on a phone, and Apple and Google were able to outmaneuver them through simple technological superiority.
BlackBerry’s slump becomes even more pronounced when stacked against iOS and Android. Source: Recode
6 & 7. William Lynch (2013, Barnes & Noble) & Ronald Boire (2016, Barnes & Noble)
How a bookseller lost its focus on selling books
Barnes & Noble survived the e-commerce apocalypse that is Amazon better than some brick-and-mortar retailers. Borders Books, for example, closed its doors for good in 2011. But B&N has been far from immune to the e-commerce giant’s disruptive presence.
Two people who have felt that disruption firsthand are former B&N CEOs William Lynch and Ronald Boire. Both were ousted after failing to help the bookseller navigate the Amazon onslaught: Lynch in 2013, after a three-year stint in the top spot, and Boire in 2016, following a tenure that lasted less than a year.
In Lynch’s case, his fate was intertwined with that of Barnes & Noble’s most prominent bid to beat Amazon back: the Nook e-reader. The Nook was initially seen by many as a strong product for Barnes & Noble when it was introduced in 2009. Lynch made Nook — and Barnes & Noble’s digital business more broadly — his core focus, even taking frequent trips to Palo Alto to establish a presence in the tech hub.
But by 2013, the untenable economics of Nook’s hardware operation began to make themselves clear. In the quarter preceding Lynch’s departure, the Nook unit posted a 34% decline in sales and a $177M loss — twice that from the same period the year prior.
Lynch didn’t last long at Barnes & Noble after that, with his departure being announced in July 2013.
The share of book sales happening online climbed steadily throughout Lynch and Boire’s tenures at B&N. Source: Seeking Alpha
When Ronald Boire assumed the CEO mantle in July 2015, he took a different tack than Lynch. Having previously worked in top posts at Sears, Brookstone, and Toys “R” Us, he tried to broaden the bookseller’s range of offerings in a number of areas, including art equipment, music, games, and in-store workshops.
Meanwhile, Barnes & Noble’s e-commerce division languished, as a series of botched website overhaul attempts further hobbled the company’s ability to compete with Amazon in online sales.
Boire’s strategy did not improve the company’s numbers. In early 2016, the year after Boire assumed the top role, the company reported a quarterly loss of about $30M — 57% higher than in the same period the previous year.
To make matters worse for Boire, the company’s lackluster performance came at a time when physical book retail as a whole was in the midst of an upstream. Sales of books in physical stores grew 1.8% in 2015, according to the Association of American Publishers, but most of that growth was attributed to an upswell of support for small, independent booksellers. Caught in the middle — not an e-commerce behemoth, but not an endearing shop-around-the-corner either — Barnes & Noble was at risk of getting squeezed out.
Against this backdrop, Boire’s departure as CEO was announced in August 2016. In a statement that was unusually candid for this type of high-level departure, the company said: “The board of directors determined that Mr. Boire is not a good fit for the organization and that it was in the best interest of all parties for him to leave the company.”
Parting ways with Boire didn’t bring an end to Barnes & Noble’s challenges. The bookseller’s stock continued to fall in the years after Boire’s departure. In June 2019, it was announced that the company had reached an agreement to be acquired by Elliott Management in a deal worth roughly $683M.
8. Mark Fields (2017, Ford)
How a desire to innovate caused a car exec to take his eye off the ball — and strike out
The automotive incumbents have been feeling the pressure from a triple threat of technological innovation in transportation: electric vehicles (Tesla), self-driving cars (Waymo), and ride-hailing (Uber/Lyft). Ford is no exception — but CEO Mark Fields had a plan for how Ford could get in on these new technologies.
Under Fields’s leadership, Ford shifted toward becoming more of a “mobility” company, more focused on apps, rides-hailing, and autonomous vehicles — the very spaces where the disruptive new entries were staking their claim.
But as Fields focused on the future of mobility, Ford’s business started to falter. Sales flagged, and Ford’s share price dropped by 40% from the time Fields took over the CEO spot in 2014 to his departure in 2017.
Ford’s stock fell by about 40% during Fields’s tenure as CEO. Source: Business Insider
Meanwhile, funding Ford Smart Mobility — the division focused on future technologies — proved to be expensive, eating into the company’s profits.
Fields himself warned that investing in EV and self-driving technology would cost the company in the short-term. But many investors weren’t convinced that enough was being done to boost the profitability of Ford’s core businesses — and its stock continued to prove a tough sell as a result.
In May 2017, Ford announced that Fields was out as CEO, with Forbes reporting that the departure was the result of the Ford board losing confidence in Fields’ leadership. At the time of Fields’ ouster, Ford’s market capitalization was at just below $44B — about $7B lower than that of Tesla at the time.
Replacing Fields at the helm didn’t mean Ford had given up on innovation. In fact, Fields’s replacement, Jim Hackett, previously headed up Ford’s driverless technology division. Whether Hackett has more success in his task of steering Ford into the future, however, remains to be seen. As of June 2019, Ford’s stock had fallen farther still below where it was at the time of Fields’s departure.
9. Jeff Immelt (2017, GE)
How innovation without results can turn into accusations of empty “success theater”
No one can accuse ousted GE CEO Jeff Immelt of not caring about innovation. In fact, he made innovation the core of his brand at the 127-year-old giant.
Citing an influence from books about disruption such as Eric Ries’s The Lean Startup and Marc Andreessen’s 2011 Wall Street Journal article “Why Software Is Eating the World,” Immelt pushed GE to adopt the startup mentality, including the lean startup methodology for product and business development. Taking Andreessen’s cue on the rising importance of software, GE also took a bet on IIoT (industrial internet of things) technology with a software product called Predix Cloud.
Immelt reflected on his approach in an article for the Harvard Business Review:
“All the major initiatives we implemented during my tenure as CEO were aimed at making GE one of the 21st century’s most valuable technology-driven industrial companies — one that can grow, one that can generate greater productivity for ourselves and our customers.”
However, Immelt’s innovating wasn’t translating into immediate tangible success for GE, and the company’s stock market value fell by about a third during his tenure.
GE’s investors eventually decided to show Immelt the door. A Wall Street Journal article about his replacement begins by saying, “John Flannery, the leader of General Electric for just 2½ months, has already begun dismantling the legacy of his predecessor.”
Some analysts have accused Immelt of engaging in “success theater” by fostering an overly optimistic culture that discouraged criticism or questioning.
“Mr. Immelt and his top deputies projected an optimism about GE’s business and its future that didn’t always match the reality of its operations or its markets,” said one Wall Street Journal article on the subject. According to the same article, even the company’s board wasn’t aware of just how bad things had gotten with GE’s core business, GE Power, until after Immelt was gone.
Immelt’s defenders largely chalk up his failure to a case of “square peg, round hole.” Immelt wanted to invest in long-term innovations, they argue, while its activist investors were more focused on short-term returns.
Immelt’s successor didn’t last long either, leaving the post in 2018 after little more than a year.
10. Mickey Drexler (2017, J. Crew)
How an iconic fashion executive rejected e-commerce — and got rejected right back
Mickey Drexler became a fashion retail legend in the 1990s after spearheading The Gap’s return to relevancy and turning J. Crew into a household name.
But by 2017, Drexler appeared to had lost some of his golden touch: sales at J. Crew Group stores had fallen for ten consecutive quarters, and the brand was struggling to stay competitive in a retail landscape that had been transformed by a trifecta of disruptive forces: e-commerce, fast fashion, and social media.
In some ways, the very strengths that helped Drexler build his reputation in the industry were what hobbled his ability to effectively steer the brand into a digital future. Executives who worked with Drexler at J. Crew and The Gap highlighted his focus on details — such as fabric texture and button weight. These qualities were what built J. Crew into a globally recognized premium brand, but they were also qualities that the digitized fashion ecosystem was not designed to reward.
Details like fabric weight and texture don’t make as much of an impact in images on an e-commerce website or an Instagram ad. Consumers get accustomed to the savings that come with shopping online, making J. Crew’s relatively high-end prices a bigger barrier. And while J. Crew maintained its emphasis on craftsmanship, its competitors took advantage of high-tech supply chains and manufacturing processes to churn out fast fashion looks at a pace better suited to the accelerated cadence of a social media-driven world.
Drexler himself once admitted to harboring regrets about how he underestimated the impact that tech would have on the fashion industry. “I’ve never seen the speed of change as it is today,” he said in an interview. “If I could go back ten years, I might have done some things earlier.”
Drexler stepped down as CEO in 2017 after 14 years in the top job. He retained his position as chairman of the board, however, and oversaw the transition to the new CEO, Jim Brett.
Brett set an ambitious new agenda for J. Crew’s turnaround, including expanding the brand’s entry-price and plus-size offerings and even partnering directly with Amazon. This last point in particular put Brett on a collision course with Drexler. While he may have had regrets about how he navigated the arrival of e-commerce, Drexler once vowed that J. Crew would never do business with Amazon, out of fear it would cheapen the J. Crew brand.
Brett left the company in 2018 after less than eighteen months in the CEO spot. Drexler’s stint as chairman didn’t last much longer — he announced his departure from J. Crew in early 2019.
The company continues to face challenges. In May 2019, it announced the closing of about twenty of its retail stores. While revenues at the company are improving, the gains are coming from the company’s budget brand Madewell — a Drexler acquisition.
11. Jan Singer (2018, Victoria’s Secret)
How Victoria’s Secret “listened” to customers — and missed what they were actually saying
J. Crew is far from the only fashion brand that has struggled to find its footing in an era defined by disruption. Victoria’s Secret has found it more difficult to connect with consumers in the face of shifting shopping behavior and sensibilities.
In a recurring theme in this list, Victoria’s Secret’s problems predated the tenure of its recently ousted CEO, Jan Singer. While parent company L Brands’ stock hit an all-time high of close to $100 per share at the end of 2015, it had lost a quarter of that value by the time Singer came aboard in September 2016.
Singer, a Spanx veteran, was brought on with a mandate to stem the tide by “aggressively” seeking out new customers and to better understand what it was that customers were looking for.
L Brands’ share price dropped by 39% in the year leading up to Singer’s departure from Victoria’s Secret. Source: Bloomberg
However, Singer’s mission to better understand Victoria’s Secret’s customers missed a crucial shift in attitudes. While consumer sentiment was trending away from the ultra-sexy aesthetic, Victoria’s Secret was steering into it. In one conference call in 2017, Singer said that Victoria’s Secret was “in the business of fashion and sexy.”
Meanwhile, a new crop of intimates brands was emerging with a different set of priorities. Intimates startups, such as ThirdLove and Adore Me, have gained ground in recent years by making comfort, body-positivity, and inclusivity the core of their brands.
The cost of all this disruption is in the numbers. In 2016, when Singer began her tenure as CEO, Victoria’s Secret claimed close to a third of the women’s underwear market. A year later, its share was down to under 29%. Meanwhile, ThirdLove saw a sharp sales increase in 2018 to reach $160M in revenue.
It’s not just the e-commerce upstarts, either: American Eagle-owned rival Aerie posted strong growth numbers during the same quarters that Victoria’s Secret was losing sales.
Singer’s departure as CEO of Victoria’s Secret was announced in November 2018, but things haven’t improved much for Victoria’s Secret or L Brands since. L Brands’ stock is down by a further 60% since Singer left and in March 2019, the company announced plans to close 53 Victoria’s Secret locations.
12. Steve Stagner (2018, Mattress Firm)
How a mattress exec doubled down on physical retail at exactly the wrong time
Between 2013 and 2018, Mattress Firm embarked on a campaign of aggressive growth, expanding its footprint from 700 to 3,500 locations.
But that hypergrowth could not continue forever. In October 2018, Mattress Firm filed for Chapter 11 bankruptcy — attributed to unaffordable leases — six months later, in April 2019, CEO Steve Stagner was out the door.
Stagner wasn’t the sole author of Mattress Firm’s aggressive expansion, but he oversaw much of it. Stagner first assumed the chief executive mantle in 2010, but moved aside in 2016 for another executive, Ken Murphy. After Murphy left in 2018, Stagner returned to the top spot.
If Mattress Firm’s rapid expansion reflected confidence that the mattress industry would prove immune to e-commerce’s disruptive forces, that confidence was misplaced. A crop of online mattress retailers, led by unicorn Casper, have emerged in recent years. These startups promise to deliver savings and convenience by “cutting out the middlemen” — such as brick-and-mortar retailers like Mattress Firm. Amazon, too, released a memory foam mattress under its AmazonBasics line.
Consumers are quickly warming to the idea of buying mattresses over the internet. Online sellers’ share of the $15B US mattress market, according to IBISWorld, is quickly rising.
It’s possible that Mattress Firm could have fought the disruptors back by better boosting its own online presence. In 2017, for instance, the company introduced a bed-in-a-box product, Tulo, in a bid to compete directly with Casper’s core business. But with so much cash tied up in the brick-and-mortar expansion project, Mattress Firm didn’t have enough spare resources to invest in digital tools and shipping infrastructure to shore up its defenses against the younger, more agile brands.
And now, the digital disruptors are coming for Mattress Firm on its home turf — physical retail. In August 2018, Casper announced it was to open 200 stores over the course of three years.
The statement from the board of directors following Stagner’s resignation showed little bad blood between the board and the outgoing CEO: “We are celebrating Steve Stagner’s incredible 23-year contribution to building Mattress Firm into the No. 1 specialty mattress retailer. Steve’s leadership has been critical through this period where we needed to return the business to positive momentum.”
In May 2019, Mattress Firm appointed John Eck as Stagner’s replacement. With the new CEO indicating that he was planning to leverage the company’s “strong network of stores and distribution centers.”
13. Margo Georgiadis (2018, Mattel)
How a disruption domino effect upended a tech CEO’s plans for a legacy toy brand
Margo Georgiadis wasn’t technically axed from her position as CEO of Mattel — she left of her own accord to take up the top job at Ancestry.com instead. But given the 50% hit that Mattel’s stock took during Georgiadis’s tenure, the toymaker’s board may have shown her the door eventually had she not walked through it first herself.
Mattel’s shares dropped 50% during Georgiadis’s 14-month tenure as CEO. Source: Bloomberg
Mattel’s struggles preceded Georgiadis’ tenure, which lasted only 14 months. There’s something of a disruption domino effect at work here: the toy company, known for toy brands like Barbie and Hot Wheels, had been getting pinched by the struggles of Toys “R” Us, its primary distribution partner. Like the beleaguered toy seller, Mattel has also struggled to adapt to shifts in how children play, spending more time with smartphones and streaming services and less time with tangible entertainment like dolls and cars.
Georgiadis was brought in for her tech credentials. Prior to joining Mattel, she was a President at Google, heading up commercial operations and advertising for the search giant. Leaning on that background, Georgiadis’s vision for Mattel included plans to increase the brand’s focus on scripted content and digital gaming.
One roadblock to implementing her ambitious plans was Mattel’s $2.9B debt load, which made it more difficult for the company to invest effectively in e-commerce. Prior to her departure, Georgiadis had made moves to ease the pressure of that debt, including overhauling the company’s management team, suspending dividends, and planning cost-cutting measures totaling as much as $650M.
Today, efforts to turn Mattel’s fortunes around continue. Georgiadis’s successor, Ynon Kreiz, came to the toymaker from the entertainment world. Mattel’s latest gambit is a heavy investment in film franchise partnerships, and the company announced an extension in its licensing partnership with Warner Brothers in May 2019.
14. Camillo Pane (Coty, 2018)
How the advent of influencer culture diverted beauty customers from department stores
A year before his ouster as CEO of Coty, Camillo Pane sounded more like the disruptor than the disrupted. Speaking at the CEW Newsmaker Forum in November 2017, Pane talked about how Coty was “acting like a startup” and adopting “a challenger mentality.”
A year later, Pane was out as CEO — and technological disruption had a starring role to play.
There are few industries where the disruptive influence of social media (in this case primarily from Instagram and YouTube) has been more pronounced than the beauty industry. Consumers are now taking cues from beauty influencers, and those influencers aren’t typically sending them rushing out to buy up mass-market brands from the local drugstore or big box retailers.
That was bad news for Coty, and for Pane as CEO. When Pane took the CEO job, Coty had just agreed a deal with Procter & Gamble to acquire more than 40 of the personal product giant’s beauty brands, including drugstore staples such as CoverGirl and Clairol. One of Pane’s priorities as CEO was to integrate the new brands into Coty’s stable.
His efforts proved unsuccessful — in the quarter leading up to his ouster, Coty’s share price dropped 21%. From the time that the P&G acquisition was closed in 2016 to Pane’s departure in 2018, Coty stock lost more than half its value. Meanwhile, its rival Estee Lauder Cos — which owns high-end names like MAC, Bobbi Brown, and Clinique — saw its stock approximately double in that time.
Attempting to explain the company’s struggles a few months before his departure, Pane pointed to another major disruptive force in the beauty industry: e-commerce.
“E-commerce is slowing traffic and consumers are looking for more of an experience. You see a trade-up to prestige and specialty,” Pane said in an interview. “This is something I’m not sure people were expecting, but it is the reality.”
Efforts to revive Coty continue. Since Pane’s departure last year, the company is in the process of trying to boost the branding of some of its products and ramping up its own investment in e-commerce — a bid to get on the right side of the disruptions that are transforming its industry.
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