At What Cost? Using the internet, conduct research regarding costly corporate mi

Question

At What Cost?
Using the internet, conduct research regarding costly corporate mistakes that resulted from unclear instructions or poor research. Give specifics about a costly mistake that you discovered. Explain the situation in your post.

Here is an example:
Netflix
Blockbuster Video used to rule the home video rental world. Apparently not doing adequate research or sensing a dramatic shift in the upcoming years, when it was given the option to purchase the fledgling Netflix company in the early 2000's for a small amount of money, Blockbuster opted not to. Ironically, it ultimately led to the company's destruction. Netflix, on the other hand, has grown exponentially while the home video market has been more or less eliminated. If Blockbuster would have been looking at the future of the home video market, they would have realized a chance was on the horizon.

Explanation / Answer

1. Excite could have bought Google for less than $1 million.

Back in 1999, Excite was the No. 2 search engine and Google was the new kid on the block. Larry Page offered to sell Google to Excite for $750,000 (though with the stipulation that Excite would replace their technology with Google Search tech). There are several possible explanations for why Excite made this choice, but the end result is clear. Excite was eventually bought by Ask.com, which has a less than 2 percent share of the search market. Google has more than 60 percent of the U.S. search market share and much larger share worldwide. And Google has more than $130 billion in assets, so it's worth more than 173,333 times what Excite would have paid for it.

Khosla, who was also a partner at Kleiner Perkins (which ended up backing Google) at the time, said he had “a lot of interesting discussions” with Google founders Larry Page and Sergey Brin at the time (early 1999). The story goes that after Excite CEO George Bell rejected Page and Brin’s $1 million price for Google, Khosla talked the duo down to $750,000. But Bell still rejected that.

Google’s market cap stands at $167 billion.

Excite, meanwhile, was acquired by Ask Jeeves in 2004. That company became Ask.com, and now it’s owned by Barry Diller’s IAC. As Diller stated at Disrupt today, Ask would probably be better off outside of IAC at this point.

After the rejection, Google went through multiple rounds of funding, within months raising about $25 million (including a substantial amount coming from Kleiner Perkins who had previously funded Excite as noted above). They continued to grow and refine their search engine and eventually went public in 2004 at an opening price of $85 per share. Today’s share price for Google is at about $812 with the company bringing in about $50+ billion in revenue a year these days.

Some have stated that this is one of the worst tech industry decisions of all time. After all, had Excite forked out $750K for Google back then, the company would have got their hands on one of the early iterations of the Google algorithm that makes their search results so good, and many felt better than what Excite was offering at the time.

2. Daimler-Benz loses $20 billion on Chrysler.

Though Chrysler has always been one of the big three automakers in the U.S., it has had trouble establishing an international presence. Daimler-Benz (i.e. Mercedes) saw an opportunity here and merged with Chrysler at a cost of $30.7 billion in 1998. This didn't work out as planned. Though it was a theoretical 50/50 split, Chrysler sales made up less than a third of revenue for the merged company in 2006. In the end, Daimler-Benz decided it was better off without Chrysler and sold 80 percent of its stake in 2007 for $7.4 billion. This unhappy trip down merger lane cost Daimler-Benz over $20 billion.

3. Kodak has the first digital camera back in 1977.

Whenever technology changes the landscape of an industry, there are some businesses that adapt and thrive and others that continue doing the old thing until it's too late. For Kodak, who fell from grace due to the advent of digital camera, the situation is a little different. Kodak filed a patent for one of the first digital cameras (one that used a magnetic cassette to store images of about 100kb) back in 1977. However, Kodak made so much money on film, it didn't introduce the technology at the time to the public. Kodak continued its focus on traditional film cameras even when it was clear the market was moving to digital. When it finally got into the digital market, Kodak was selling cameras at a loss and still couldn't make strong gains against other manufacturers who had been producing digitals for years.

4. News Corp has a Myspace meltdown.

In a world dominated by social media, it's strange that Myspace, one of the grandaddies of all social media sites, is hardly on the radar. To just say that it got beat by Facebook is oversimplifying the issue, since many platforms currently co-exist with Facebook. While MySpace was still on the rise, in 2005, News Corp bought it, paying $580 million for the social media site. But News Corp managed it badly. The first few years were good and the value of Myspace was estimated at $12 billion in 2008. Three years later, Myspace declined dramatically. It failed to adapt and change with the times and people passed it by for other social networking experiences. In 2011, News Corp sold MySpace for just $35 million, according to some estimates.

5. Grade-school math error costs NASA $125 million.

Decimals and fractions cause headaches for many school children, and once, they even stymied some of the greatest minds in the country. In 1999, a Mars orbiter that Lockheed Martin designed for NASA was lost in space due to a simple error where the engineers at Lockheed used english measurements while the NASA team used metric ones. The mismatch led to a formation on the $125 million craft malfunctioning and the probe being lost. Though it was unusual for Lockheed to use english measurements for a NASA design (since NASA has stipulated using metric measures for many years), there were still numerous occasions where the error should have been caught and wasn't.

6. Quaker loses more than $1 Billion on Snapple.

You can still find Snapple beverages at most stores, but in the 90s, Snapple was a huge hit at small retailers. Quaker thought it could make billions by buying the company and getting the product into more stores. Quaker paid $1.7 billion for Snapple, but its plans didn't work as hoped. Other beverage makers had noticed Snapple's rise (and the amount Quaker was willing to pay for it) and they weren't going to stand idly by while Quaker cornered the fruity-drink-in-a-bottle market. With companies like Coca Cola developing Fruitopia in 1994 and the creation of SoBe in 1996, Snapple didn't turn out to be as profitable as Quaker had hoped. In the end, Quaker sold Snapple for just $300 million to Triac in 1997. Three years later, Triac sold Snapple to Cadbury Schweppes for $1.43 billion (to be fair, Cadbury got more than just Snapple).

7. Out-of-control controlled burn razes 48,000 acres in New Mexico.

In order to prevent wildfires from spreading too quickly, fire departments and forestry agencies use controlled burns to remove potential fuel. This went horribly wrong in May 2000, when a controlled burn in New Mexico got out of hand. The Cerro Grande Fire started as a plan to mitigate some of the wildfire risk at the Bandelier National Monument. The conditions that made the burn a seemingly good idea led to the fire spreading. In the end, 48,000 acres of land were burned, including the homes of 400 families. Though officials were trying to preserve the monument, their mistake was costly. The GAO estimated the damages from the blaze at around $1 billion.

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