In Greek mythology, Icarus drowned after plummeting from the sky because, in his complacency and hubris, he flew too close to the sun and melted the wings his father had made. Danny Miller’s 1990 book The Icarus Paradox describes a similar phenomenon in which extraordinarily successful companies abruptly fail as a result of the very same factors that led to their success.
How many cannabis companies will fall victim to the Icarus paradox?
The market is exploding, jobs are plentiful, and thousands of brands generate billions of dollars in revenue…and that’s the problem. The maturity phase of a product’s life cycle presents enormous challenges. With sales reaching their peak and the market now saturated, it can be very difficult for companies to maintain their profits, let alone increase them. Additionally, companies face intense competition that brings on price decreases and narrower profit margins. Companies must look for innovative ways to differentiate their products and make them more appealing to consumers.
And this is the point at which many companies fail.
Don’t believe me? Just look at a handful of examples of once-leading brands that failed when their sector reached maturity.
Compaq: One of the largest PC sellers in the entire world in the 1980s and ’90s and the youngest-ever firm to make the Fortune 500 generated $3 billion in sales in 1991. About a decade later, Compaq was gone.
Atari: After practically inventing the videogame industry, Atari, founded in 1972, closed in 1984.
AST Research: Once a Fortune 500 computer and periphery powerhouse, AST shuttered in the 1990s due to a series of losses.
Woolworth’s: Despite growing into one of the largest retail chains in the world, the company failed to address increasing competition and shifting market conditions, causing its dominance to begin declining in the 1980s. Woolworth’s went out of business in 1997. The names of other once-dominant retailers that have met similar fates could fill books, including Toys R Us, Radio Shack, Sam Goody, Sports Authority, The Limited, Teavana, Sport Chalet, Levitz, Marshall Field’s, Circuit City, Tower Records, Kinney Shoes, Mervyn’s, and CompUSA.
Oldsmobile, Pontiac, AMC, etc.: Nothing lasts forever, and that is certainly true in the automotive industry. While today we have the Big Two U.S. automakers in Ford and General Motors (Chrysler was sold to Fiat during the Bush-era financial crisis), there have been, in fact, hundreds of automotive manufacturers in the U.S. over the past century. Most of them failed due to poor management, shifting consumer sentiments, and/or failure to keep up with new technologies.
Until its demise, Oldsmobile was America’s longest surviving automobile brand. The company produced more than 35 million vehicles before it shut down in 2004. Pontiac, another once-popular brand in the GM stable, produced its last cars in 2009. These divisions of General Motors died due to poor brand management and GM’s failure to create distinction among its extensive vehicle lineup.
AMC was formed by the merger of two other car companies; at the time, the deal represented the largest corporate merger in United States history. By 1987, AMC was dead.
Automotive history is filled with stories of other once-mighty car companies that are no more.
Eastern, Pan Am, TWA, Braniff, WOW, SwissAir, Aloha Airlines, etc.: Pan Am was the largest international airline from 1927 until its collapse in 1991. TWA was one of the four largest airlines in the U.S., existing from 1930 until 2001. World War I flying ace Eddie Rickenbacker served as Eastern Airlines’ chief executive officer in its early years as the company built its near-monopoly on some routes. WOW Air went out of business in 2019. Even Virgin America ceased to exist after it was absorbed by Alaska Airlines.
Schwinn: Existing today in name only, Schwinn once was the quintessential bicycle for Americans. By 1990 other brands were gaining traction, and Schwinn failed to update its brand and image. The company also began exporting production to save money. Schwinn declared bankruptcy in 1992, just three years shy of its centennial. and the company was bought by an investment group. In 2001, the company filed for bankruptcy again and the name was picked up at auction.
Magnavox: Known for producing everything from the world’s first home videogame console to camcorders, the electronics giant was shuttered in the 1990s after consumers began to lose interest in the Magnavox name which, due to poor brand management, began to convey technical inferiority compared to the competition.
General Foods: Among the company’s many product offerings were Post cereals, Sanka coffee, Tang, Kool-Aid, and Oscar Mayer. Late in 1985, Philip Morris acquired General Foods, and when the parent company acquired Kraft in 1988, the General Foods brand became extinct.
Blockbuster: In 2000, Reed Hastings, the founder of Netflix, approached Blockbuster Chief Executive Officer John Antioco with a partnership proposal. Antioco turned him down flat, because Blockbuster was at the top of the video rental market with solid profits, thousands of retail locations, and millions of customers. The meeting has gone down in the annals of business lore. Blockbuster’s business faltered due to its failure to see and adapt to the future, which Netflix embraced. The company declared bankruptcy in 2010.
Borders Group Inc.: The once-famous bookstore chain went public and then expanded throughout the 1990s. However, it was unable to compete with the rise of the internet, technological advances in e-readers and digital music, and online retailers like Amazon. After forty years in business, Borders declared bankruptcy and closed in 2011.
Many of the biggest brand failures resulted from over-confidence, complacency, and reluctance to try new strategies in order to keep ahead of the competition. If this list, which represents just a mere fraction of the brands that fell victim to the Icarus paradox, causes you heartburn, then good. Perhaps you won’t make the mistake of taking your brand for granted. Times change rapidly, and so must you in order to survive. Technology needs to be updated to stay current. Distribution models shift. Tastes change.
There are thousands of brands in the cannabis market. Most cannabis brands won’t survive over the long term. Company management will need to work hard to ensure their brands have relevance in a shifting, over-saturated market.
Remember: A brand is a promise. If that promise breaks or is no longer important to customers, you don’t have a brand.
Randall Huft is president and creative director at Innovation Agency, an advertising, branding, and public relations firm specializing in the cannabis industry. While working with blue-chip companies including AT&T, United Airlines, IBM, Walgreens, American Express, Toyota, and Disney, he discovered what works, what doesn’t, and how to gain market share.