I bet you’ve made some pretty big mistakes. But have you ever made a billion-dollar mistake?
If not, then rest easy: the world’s smartest and most successful entrepreneurs have made mistakes far greater than yours. One even made a decision that cost him $45 million bucks.
Learn from their mistakes today so that you don’t repeat them tomorrow.
#1 Steve Jobs Giving Up Control of Apple
Today, we all know that Steve Jobs was one of the greatest CEO’s of all time. Between 1997 and 2011, Steve led Apple to soaring profits with unparalleled charisma, leadership, and eye for innovation. But in the beginning, even Steve didn’t know that he was destined to be CEO of the company that he founded.
That doubt led Jobs to give up executive control of Apple Inc. in 1977 – a decision that would result in Jobs being fired by the company he founded.
Slipping out of his Grasp
Apple was a partnership owned entirely by Steve Jobs and Steve Wozniak until Jobs lured Mike Markkula out of retirement in 1977. Markkula was a seasoned entrepreneur and angel investor who provided Apple with much needed capital and business expertise.
It was the beginning of Jobs losing control of his own company. By the time Markkula stepped down as CEO in 1983, Jobs wanted control back. He was ready to be CEO. The only problem was that it was no longer Steve’s decision – and the board at Apple Inc. wasn’t too keen on hiring a 28-year-old to run the fast-growing company.
Powerless, Jobs agreed to recruit John Sculley, who was currently the head of Pepsi-Cola. Sculley took the job, but a power struggle between the two strong-willed men ensued.
When the conflict reached a breaking point, Markkula sided with Sculley. Steve Jobs was fired from Apple Inc. in 1985. Sculley had this to say:
Looking back, it was a big mistake that I was ever hired as CEO. I was not the first choice that Steve wanted to be the CEO. He was the first choice…
The reason why I said it was a mistake to have hired me as CEO was Steve always wanted to be CEO. It would have been much more honest if the board had said, “Let’s figure out a way for him to be CEO. You could focus on the stuff that you bring and he focuses on the stuff he brings.”
John Sculley, Former CEO of Apple Inc.
Without Steve’s unique vision, Apple soon began to falter. A string of failures in the early 90’s opened the door wide for the competition, specifically Bill Gates and Microsoft.
Lesson Learned:
Steve Jobs wasn’t the most experienced choice for CEO of Apple, but he loved and understood his company better than anyone on the planet.
If you want your startup company to grow, you have to give up some control. But be careful about how much control you give and who you give it to. You don’t want to be in Jobs position, betrayed by the very person who you put in power.
Note: If you want more on what Jobs has done right, check out this article I wrote called 21 Life Lessons from Steve Jobs.
Honorable Mention: Selling stock in Apple
When Apple went public in 1980, Steve Jobs was awarded 7.5 million in Apple shares. When he was fired from Apple, Jobs sold all but one share. (He would have sold all of his shares, but he didn’t want to stop receiving the company’s annual report.)
As of April 2012, with Apple stock trading for over $600, those 7.5 million shares would be worth over $45 billion dollars. That alone is almost as much as the April 2012 worth of the world’s richest man, Carlos Slim ($49 billion).
#2 Bill Gates Ignoring Search Engines
Gates has proved himself a visionary by founding a computer software company in 1975 (Microsoft), pioneering a graphical user interface in 1985 (Windows 1.0), and by introducing millions of Americans to the Internet in 1995 (Windows 95 came bundled with Internet Explorer).
But by 2005, it was clear that Bill had failed to predict a billion-dollar opportunity: the search engine.
Walking Past a Gold Mine
“Google kicked our butts.”
Bill Gates, former CEO of Microsoft
Microsoft introduced MSN Search in 1998, the same year that Larry Page and Sergey Brin founded Google. Google was fast, innovative, and good at delivering relevant results. MSN Search was none-of-the-above.
Microsoft hadn’t even bothered to develop a search engine of their own. They used results from Inktomi, an existing search engine. Search simply wasn’t a priority. Microsoft was more focused on defeating Netscape Navigator in a battle of the browsers.
Still Searching for Results
By 2002, it was painfully obvious to Gates that search had been a big missed opportunity. Google had earned $348 million in revenue that year. A year later, in 2003, Google almost tripled its revenue to $962 million. Finally, Microsoft started developing a search engine.
The company launched Windows Live Search in 2006 but it failed to compete with Google. In 2009, Microsoft rebranded once again and introduced Bing. Billed as the first “decision engine”, Bing has taken a small bite out of the search market, but it hasn’t been cheap. In the fiscal year ending June 2011, Bing cost Microsoft $2.5 billion more than it earned.
The Lesson:
In 1998, no company had more leverage online than Microsoft. Imagine if Gates had prioritized the development of a great search engine back then: Google would probably be the world’s second biggest search engine.
But since Gates owed all of his success to software, it isn’t surprising that he overestimated the importance of Internet Explorer. Bill said it best himself:
Success is a lousy teacher. It seduces smart people into thinking they can’t lose.
As long as the world is spinning, your industry will keep changing. Just because a strategy worked for your business in the past, don’t count on it being the best method today.
Note: If you want more on what Gates has done right, check out this article I wrote on 10 lessons from Bill Gates.
Honorable Mention: Playing Monopoly
Remember when I told you Bill Gates was determined to defeat Netscape Navigator? He may have been a little bit too determined: in 1998, Microsoft was slapped with a lawsuit alleging that it was in violation of anti-trust laws.
In the case of United States v. Microsoft, the plaintiffs alleged that Microsoft had unfairly restricted the market for competing web browsers by manipulating APIs and bundling Internet Explorer with Windows 95.
The judge initially ruled against Microsoft and ordered that the company be split into two divisions, but after years of litigation Microsoft won an appeal and reached a settlement that allowed the company to continue its operations.
#3 Larry Page Missing Out on Social Networking
Google has done so much right since Larry Page and Sergey Brin founded the search engine in 1998. They’ve monetized carefully, kept things simple, and expanded their services (e.g. Google Maps, YouTube, Gmail).
But just as Bill Gates failed to capitalize on an opportunity to dominate search, Page missed an equally massive opportunity to dominate a coming web revolution: social networking. The worst part is that Page saw the potential of social networks, but he simply didn’t act on it.
Friendster: The Google Network that Wasn’t
Google had offered $30,000,000 to buy the social networking site Friendster in 2003. But Friendster didn’t sell. Larry Page should have used his position as “president of products” to start developing a Google social network right then and there.
But he didn’t. Google didn’t roll out Google Buzz until February 2010. Buzz was discontinued in 2011 to make room for Google Plus, which has also struggled to make a dent in the market.
Looking back on the missed opportunity, Page has expressed regret:
“I clearly knew that I had to do something and I failed to do it.”
Can you imagine if Google had used its team of developers, mountain of resources, and hundreds of millions of users to launch a social network back in 2004? Facebook wouldn’t have stood a chance. Instead, Google’s on the outside looking in.
Lesson Learned:
Page says that he “knew he had to do something” with social networking. But after Friendster declined to be bought out by Google, Page temporarily gave up on Google having a social network.
Don’t make the same mistake. Next time you absolutely know your business is missing out on a big opportunity, stop at nothing to capitalize on it.
Note: If you want more on what Page has done right, check out this article I wrote on the eight simple rules that Google followed on its way to being the world’s biggest website.
Honorable Mention: Google Wave
Page oversaw the development and release of this real-time collaborative editing application. Wave stumbled out of the gate because it was released before it’s time (the software was buggy).
#4 Mark Zuckerberg Deciding to be the Face of Facebook
Nobody can call Mark Zuckerberg stupid. It took great vision for Mark to imagine Facebook in 2004; it took analytical genius to program it into reality.
But nobody can call Mark charismatic either. Mark is a strong-minded individual. He tends to be very blunt and a little bit arrogant. That’s why it’s surprising Zuckerberg chose to be the public face of his company.
Missteps, Miscues, and Misunderstandings
“I just killed a pig and a goat.”
Mark Zuckerberg, CEO of Facebook
The above sentence stirred up a small controversy when Zuckerberg posted it on his personal Facebook page in May 2011. Animal lovers found it offensive – even though Zuckerberg was only killing animals because he wanted to reinforce that “a living being has to die for you to eat meat.”
These types of misunderstandings have marred Zuckerberg’s PR career.
In interviews and presentations, Mark has been underwhelming and uninspiring. The worst example may be this interview at the D8 conference in 2010. When facing scrutiny over Facebook’s privacy policy, Zuckerberg stumbled over his words and began sweating so profusely that Forbes wrote a story about it called ‘Great Perspirations’.
Of course, Zuckerberg’s most memorable (and perhaps most damaging) portrayal in the media was in the 2010 film The Social Network. The fictionalized account of Facebook’s rise to online dominance characterized Zuckerberg as ruthless, callous, and cocky – not exactly qualities you want associated with the face of your company.
Lesson Learned:
“Basically, any mistake that you think you can make I’ve probably made or will make in the next few years.”
Mark Zuckerberg, CEO of Facebook
Zuckerberg is getting better at PR. Lately, he’s been almost charismatic.
And obviously, Facebook is doing just fine with him as the face of the company. People will continue loving Facebook as long as it’s the best way for them to connect with their friends online.
But had Zuckerberg stayed in the shadows and allowed a silver-tongued “Steve Jobs type” in the spotlight, Facebook would have a clearer message and a better brand. The world’s biggest social networks would be more trusted, more loved, and – simply – cooler.
So, as your company grows, remember that you may not always be the best person for the job. Play to your strengths and, in the words of Warren Buffett, stick to your “circle of confidence.”
Note: If you want more on what Zuckerberg has done right, check out this article I wrote on nine ways Zuckerberg has been essential to Facebook’s success.
Honorable Mention: Facebook Beacon
Under Mark’s direction, Facebook has gotten into a lot of hot water for privacy issues. Their strategy seems to be invading their users’ privacy first, asking questions later, and apologizing if necessary.
Facebook Beacon is the most egregious example. Launched in November 2007, Beacon was an aggressive advertisement system that sent information from certain websites back to Facebook.
When users started seeing their online activity automatically posted on their Facebook page, they were surprised and displeased. After a storm of controversy and a class action lawsuit, Facebook shut down the service in September of 2009.
What’s the Common Thread?
Steve Job’s mistake left room for Bill Gates to dominate the personal computer industry. Gates’ mistake left room for Larry Page to dominate the search engine industry. Page’s mistake left room for Zuckerberg to dominate the social networking industry.
Before long, we’ll be talking about the entrepreneur who capitalized on Zuckerberg’s mistakes.
That entrepreneur could be you. Start keeping a close watch on the leaders in your industry with an eye for the opportunities they’re letting slip through the cracks.
If you don’t, then you’re making a big mistake.
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