Commodore International (CI), the Commodore 64 manufactures is an example of a company that went out of business despite its previous successes.
I believe it is worth to analyze what happened there, so let's start from what seems to be its main success (after wikipedia):
- Commodore 64 was the highest-selling single computer model of all time
- Estimates place the number sold between 10 and 17 million units
- CI hold 40% marketshare at peaks
How it is possible that CI went bankrupt despite such a success?
Early signs of poor management
Let's build a map representing the pattern to understand the situation (real company names would work, too):
If CI had used mapping, they would have easily noticed a weak spot in their business - the supply chain belonging to their competition. But they did not spot it, thus did not secured it, and TI mercilessly used it against CI - TI offered their calculators below the cost of chips sold to other manufacturers.
As you can imagine, Commodore International nearly went bankrupt.
Learning from the previous failure, CI secured their supply chain by buying chip manufacturer, and with the acquired knowledge managed to build a computer with astonishing capabilities/price ration. Actually, the Commodore 64 was not their first product after calculators, but only it counts as important. Without it, there would be no CI back then.
Commodore International should not compete with price at that level. It took revenge on Texas Instruments, who left the field of computers not being able to compete, but CI forgot about the ultimate goal of every company - growing in value!
This could have and should have been played differently - if the demand is much bigger than supply capabilities - you should raise prices and earn more on lower sales. This will let other players into the market, but you will end up in much better position afterwards (having smaller fragment of the market, but a lot of space to evolve).
The last nail in the coffin
A number of companies was competing in the area of computers with longer words.
Then IBM made a great move - it open sourced PC architecture, causing a lot of smaller providers enter the market, which in turn made the PC standard for the next couple of decades.
Then CI commited suicide:
- I am not sure what was more disastrous, so start with this one: Amiga, the next CI product, was not compatible with C64. With this one design decision CI lost entire community of customers that knew the platform and the entire community of C64 software and software developers. A really big advantage was reduced to only the brand name, and Commodore International had to start competing with others providers from the very beginning.
- Initial Amigas were PC compatible. But at some point this compatibility got abandoned. CI found itself competing with the entire range of companies that had common standard, but CI had to reinvent the wheel again and again. Nobody can stand this without community.
Different companies, same problems
- Attacking a supply chain is indeed a powerful weapon. Have you ever wondered why Samsung does not build metal cases for their premium smartphones?
- Communities are a force multiplier. Consider the battle between BluRay and HD DVD (both being a standard of writing more information onto optical disc). Who won? The technology who managed to attract more users (actually, the biggest customer was entire adult industry which choose BluRay). Toshiba, the HD DVD capitulated.
- Lower price is not always better for the company. Even if you are getting marketshare, you may be loosing your future. You may raise prices to lower demand (Amazon did this with cloud).
Learning is painful...
Luckily, corporate gameplay got somewhat standarized by Simon Wardley. You can get a free book here.