Is there a formula for success? Is guaranteed success possible?

The problem with business startups

According to statistics, 90% of businesses fail in the first 5 years after they are founded. Of those 10% that survive the first 5 years as a founded business, another 90% fail in the following 5 years.

So, according to statistics, you have to be a complete lunatic to even think about starting a business – because the numbers are clear. Starting a successful business is almost impossible according to statistics.

Or is it?

What if there was a formula for entrepreneurial success? What if products and services could be developed, designed and marketed in such a way that exactly the right customers immediately crave the product? Can’t you make a product so irresistible in its features that it actually becomes impossible to say “no” to it?

To answer these questions, let’s go back in time a bit in economic history. In the 1950s, one of the largest corporations in the U.S. at the time was trying to do just that – design a product that would exactly match the customer’s expectations, that would exactly match the consumer’s tastes, and that would leave nothing to be desired. Once on the market, this product would make the company the most successful in the world and yield unimagined profits.

The theory

The company that developed this miracle product was none other than Ford Motor Corporation. And the product was supposed to be a car that would be tailored to the exact desires of the customers to make it irresistible. This happened in the 1950s in the USA, when cars became accessible to the masses. Accordingly, the 1950s were some of the most fruitful years ever for the automotive industry in the US.

Ford conducted internal studies of which buyer groups were active in the market and analyzed them closely to better understand them. Market analyses and customer surveys were still something revolutionary at the time. The aim was to better understand what customers were thinking and to produce exactly the car that everyone simply had to have – a formula for success.

The implementation

In those days, it was common for the working class to prefer more affordable brands like Fords, and from a career or other economic advancement, subsequently move to the next better pedestal of the mid-range, including Oldsmobile, Buick, GMC and others. These were thus Ford’s biggest competitors. Due to the economic rise of the time, Ford was breeding customers for the competition, because they already knew that as soon as their income increased, they would switch to another brand and not to Mercury, Ford’s own brand for the middle class.

Ford wanted to change this and offer a premium car that would keep Ford’s current customers with Ford in the long term. The risk of developing a completely new car model was well known and analyzed in detail. It was known that since the beginning of the automobile era in the USA, of the 2900 different models that had been developed since then, only about 20 were still being sold. They also knew all too well about the car manufacturers that had to file for bankruptcy in those years or were very close to it, such as Crosley or Kaiser Motors, which disappeared completely from the market in 1954.

Because of these risks, this time they wanted to do everything right. The design of the car, the name and even the marketing for it were meticulously aligned according to the results of dozens of customer surveys. For years, every detail was studied, according to which customers orient themselves when buying a car. A huge marketing budget was allocated to capture every detail of the car buying process from the customer’s point of view:

• Do people like large or small taillights better?
• Do they want the bumper in chrome or would they rather have it in body color?
• Do customers prefer round or square lights?
• Do they want a sporty vehicle with improved handling or a car that can accommodate the whole family?

Ford wanted to give the customer exactly what he or she wanted. Precise data was available on what customers liked and disliked about cars, what they would want, and what cars they would like to buy. The design studio for the Edsel, which had previously been named “E-Car” internally, was guarded by security 24 hours a day, 7 days a week. “E” still stood for “Experimental” at the time. Photographic studies were even made of the various models of all 19 different car brands on the market, and it was found that from a distance they were so similar in their construction and design that they were almost indistinguishable. The chief designer of the E-Car wanted to create a completely new line that would be distinguishable from the structure and shape of the other cars, even at a distance.

The prototype for the Edsel was located on a site where there were no hills or anything similar, which would have made it possible to look into the windows. Even the locks to the building were prepared so that they could be changed within 15 minutes should a key fall into the hands of a competitor. Every detail was watched, and all employees working on the project were subject to strict confidentiality agreements. Only those whose work performance was mandatory for the project were aware of it. Strict and meticulous secrecy applied to all plans because they were so confident of the success of this project. The security measures for the Edsel would have made many a James Bond movie jealous. Every detail was debated by the design team, from the placement of the door handles to what pattern to follow with the chrome. They were convinced that they were building the most successful car in the history of mankind. All the data matched, every detail was laid out exactly according to the customer’s wishes. No question was left unanswered. All the opinions of the customers were taken into account, it was to be an absolutely irresistible vehicle – the data finally proved this. The data were clear – a formula for success had been found here!

Inspired by customer wishes, the Edsel was available in a whole 18 different variants. This was a very unusual approach for the time, when entire car brands offered only a handful of different models. Needless to say, the effort involved was enormous. At his first, Ford-internal presentation, there was silence for over a minute, according to eyewitnesses, before the crowd began to cheer. Not since Henry Ford designed his first automobile has there been a comparable reaction at a presentation of a new vehicle. This level of effort over a period of years had never before been put into the development of a consumer product.

The practice

A huge marketing machine began a year in advance with campaigns about the brand and the new car. September 4, 1957, was dubbed “E-Day” well in advance, and the greatest possible hype was generated about the product and its debut. To justify the cost and effort, 200,000 Edsels were expected to be sold per year. The market position was to be significantly improved and the hearts of customers were to be taken by storm with this product.

The data finally proved it – the Edsel was everything customers said they wanted.

The problem was that in the dozens of surveys, customers themselves didn’t seem to know what they actually wanted or what the sum of various desires transferred to a car would probably look like.

In over two years, only 109,466 Edsels were sold, most of them to Ford employees or dealers themselves who were desperate to make the project a success.

The example proves that even the best planning, the biggest budget and the most accurate data are no guarantee of success in a new project. Converted to today’s value, the Edsel cost Ford a loss of about $2 billion (Brooks, 2019).

Why does a “perfect” product fail?

There are now a variety of possible reasons that attempt to explain why the Edsel failed despite such investment and effort. The hype generated and the grandiose promises made by the marketing are now often considered to have been part of the failure, because expectations of the “car of the future” were so high as a result that disappointment was almost inevitable. Another possible cause is that the premiere of the Edsel took place precisely at the beginning of a recession – an event that no one could have foreseen years earlier, of course. Because of the expense, and because considerable demand was expected, the Edsel was also priced very high. Ford was then, as now, a brand with rather moderate prices and typical mid-range. Buying an expensive Ford in an economic crisis would therefore probably have been contradictory for many customers. Similarly, the design of the Edsel was described by many as simply ugly, and this despite the fact that it reflected exactly what customers wanted in their surveys – this detail alone should be on the tip of your tongue when managing a project for digitization or any other transformation!

Another major factor in the failure of the project was probably the large gap of years between the initial designs and the final release of the car. In the meantime, the economic climate has changed dramatically and, arguably, so have consumer tastes. Even in pre-digital times, it was already a mortal sin for a project to drag on for so long that the basic conditions changed. A new class of “compacts” was later prevalent on the market, and no longer the wide and long cars of the middle class with their wasteful engines and bulky appearance.

What ultimately was the decisive factor in the failure of the Edsel will probably remain a mystery. It is conceivable that it was a series of different misjudgments and unfortunately very bad timing for the launch. However, the most likely and widely accepted explanation is that customer surveys and the then brand-new study of buying motives really only reflect a spontaneous thought. Likewise, it’s easy to give your opinion on a subject, but it’s much harder to actually buy a high-cost product like a car with your hard-saved money.

Even with the most accurate data, there is no predicting how accurate a product needs to be to find a group of buyers. There is no “formula” for a beautiful product. There is no patent recipe for entrepreneurial success. Until the Ford Edsel, there was no comparable project or product that had ever been brought to market with such meticulous preparation. Thus, at that time, we could only assume what logic would lead us to believe – that if we give the customer exactly what he wants, he is most likely to buy our product. Reality then proved that unfortunately there is no guarantee for human behavior and certainly no patent remedy for optical beauty or entrepreneurial success.

Conclusion

In our digital world, we have more and more data at our disposal, work more and more with this data and also make more and more decisions based on this data.

We are inclined to believe that this data necessarily represents reality. Increasingly complex algorithms create predictions and models of how things will develop in the future.

The example of the Ford Edsel shows that even with a far-reaching budget and accurate data, one component can never be predicted: People’s behavior.

As entrepreneurs, marketers, salespeople, or anyone else who wants to change the world and has to work with people, we thus always have an unknown variable. To find out what exactly this looks like, we can only test and experiment to see what really works in practice and what doesn’t.

David Schneider

David A. Schneider hat über 10 Jahre an vorderster Front im Vertrieb und im direkten Marketing verbracht. Sein erstes Unternehmen hat er mit 18 Jahren gegründet und war seither von den Möglichkeiten und Auswirkungen des Unternehmertums auf unsere Gesellschaft fasziniert. Seit Jahren hat er es sich zur Aufgabe gemacht, ein Buch pro Woche zu lesen und die Inhalte in der Praxis anzuwenden. In diversen Branchen hat er damit bereits überdurchschnittliche Ergebnisse erzielt, indem er seine Arbeitsweisen stets an die neuesten Technologien anpasst und orientiert. Derzeit hat er eine leitende Funktion in einem Familienunternehmen mit 150 Mitarbeitern und teilt sein Wissen als Autor, Blogger und Unternehmensberater mit seinen Kunden und Lesern.