Dinosaurs, Unicorns, Unicorpses and Zombies
The more finely adapted an organism or species is to a specific set of conditions, the more likely it is to succeed... provided those conditions remain relatively stable. Part two in a mini-series from the authors of Adapt or Fail!
Shifts Happen Fast! Click here to catch up on the first part of this blog series.
If conditions become unstable, then the more finely adapted are more likely to fail, independent of their intelligence, size, or experience.
Given that 99.9% of all species that have ever lived on the planet are now extinct, it seems clear that most species have found it hard to adapt to adverse change, especially if it happens quickly. They must at least keep pace with the external rate of change or die. They didn’t have a choice. Either they were suited to changes in their environment, or they were not. More coarsely adapted species have better chances of survival, but they still have no choice.
The same challenge applies to boards of directors and their corporations, except they do have a choice: whether to adapt, and if so, how? No board chooses to fail. So why do so many organizations succumb?
The board has a critical role in enabling success. Good governance is about making better choices. It means being better prepared for inevitable adversity, having viable options in place before they are needed, recognizing and seizing existential opportunities before they become existential threats, and developing and maintaining decision discipline.
“According to Darwin’s Origin of Species, it is not the most intelligent that survives; nor the strongest; but the one that is best able to adapt to the changing environment.”
Lesson Worth LearninG
Dinosaurs, Unicorns, Unicorpses, and Zombies – No One is Immune.
Dinosaurs
“Dinosaurs” are companies that fail to adapt to changing market dynamics, technologies, or consumer preferences, resulting in outdated business models. These companies can become obsolete and lose market relevance quite quickly. Blockbuster, Kodak, BlackBerry, and, more recently, Bed Bath & Beyond failed to adapt to technological advancements and/or shifting consumer behavior.
BlackBerry introduced its first pager in 1999. The company’s smartphones were so popular that they were called “crackberries” because users seemed addicted to them. Then, in 2007, Apple introduced the iPhone. Ten years later, BlackBerry devices had no users.
BlackBerry’s failure to innovate and adapt to changing consumer preferences and technological trends was a major factor in its decline. While competitors like Apple and Android introduced touch-screen smartphones with advanced operating systems, BlackBerry continued to rely on its traditional physical keyboard and proprietary operating system.
BlackBerry’s reputation for security and reliability initially attracted corporate and government clients. However, as other platforms improved their security features and offered more attractive devices, BlackBerry lost many of these lucrative contracts. Its security features also resulted in perceptions of a lack of user-friendliness.
Blackberry also lacked an app ecosystem, which made it less attractive to both users and developers. Employees increasingly began using their personal smartphones for work purposes, a trend known as “Bring Your Own Device,” eroded BlackBerry’s dominance in the enterprise market. Employees preferred using consumer-focused smartphones with more features and apps.
BlackBerry was slow to respond to the changing market landscape.
Leadership changes and management issues, including internal conflicts and a lack of strategic direction, hindered BlackBerry’s ability to make timely decisions and execute effective turnaround strategies.
Ultimately, BlackBerry’s inability to adapt to the changing smartphone landscape, coupled with missteps in product development and marketing, led to its decline. While the company continues to exist and has shifted its focus to software and cybersecurity services, it is no longer a player in the smartphone market.
Unicorns
“Unicorns” are companies valued at $1 billion or more without being publicly listed. These startups are known for rapid growth and innovation. Unicorns often disrupt traditional industries. Examples include Airbnb, Uber, Stripe, SpaceX and DoorDash.
Founded in 2008, Airbnb has transformed the way people find and book accommodations and changed the dynamics of the short-stay market. In December 2020, Airbnb went public through an IPO. It has a market capitalization of almost $94 billion as of this writing. That is almost twice the market capitalization of Hilton, a traditional hotel company with a hundred-plus-year history.
Airbnb tapped into the sharing economy concept, allowing individuals to rent out their homes, apartments, or spare rooms to travelers. This created an alternative to traditional hotels: a vast and diverse inventory of accommodations that catered to various tastes and budgets. Travelers could stay in local neighborhoods and live like locals, which resonated with those seeking authenticity in their travels. The variety of houses available with multiple bedrooms appealed to families that otherwise would have needed to rent multiple hotel rooms.
Airbnb transformed the way people think about accommodations and travel. By disrupting the traditional hospitality sector and providing travelers with more options and hosts with income opportunities, Airbnb has created a nearly $100 billion business.
UniCorpses
Unicorns are not immune to situational blindness and inability to adapt. Unicorns can quickly become “unicorpses.” Unicorpses boasted high valuations at some point but then struggled to sustain their growth and experienced rapid declines in their market capitalization. Examples include WeWork, 23 and Me and Peloton.
Peloton Interactive, Inc. is an American company that specializes in exercise equipment and media, including stationary bicycles, treadmills and indoor rowers, all equipped with Internet-connected touch screens.
Peloton experienced a surge in demand for its products and services during the COVID-19 pandemic as people sought home fitness solutions. Its stock price peaked in December 2020, reaching a valuation of almost $50 billion. However, the company faced challenges in sustaining that growth rate as pandemic-related restrictions eased and competition in the home fitness industry intensified.
Like many companies, Peloton grappled with supply chain disruptions caused by the pandemic. These disruptions led to delays in product deliveries and frustrated customers. Peloton also faced safety-related incidents involving its treadmill products. There were reports of accidents, injuries, and even the death of a child associated with these products. Peloton had to recall two treadmill models, leading to financial losses and reputational damage. There were also changes in Peloton’s executive leadership, including the departure of its CEO, John Foley, as the company navigated these challenges. Its share price has since fallen by 80%, and its market capitalization is now just $1.5 billion.
Zombies
“Zombies” are businesses that continue to operate for lengthy periods of time despite being unable to cover their operating costs, including debt servicing expenses, with their current revenues. These companies may be insolvent, highly leveraged, and unprofitable. They often rely on external support or lenient creditors to stay afloat. Examples of zombie companies included, at various times, Sears, RadioShack, Toys “R” Us and Hertz.
Hertz, the car rental company, filed for bankruptcy in 2020, citing the impact of the COVID-19 pandemic on its business. Despite its bankruptcy status, it continues to operate and has attempted to raise capital through stock offerings. It made a huge investment in electric vehicles, but in January 2024, Hertz announced it planned to sell a third of its U.S. electric vehicle fleet (20,000 vehicles). It said it would reinvest in gas-powered cars due to weak demand and high repair costs for its battery-powered Teslas.
Not only are there zombie businesses, but there are also zombie industries.
At times, the airline industry has been a zombie industry with ongoing losses, heavy debt burdens, and reliance on external support to stay afloat. Since 2000, in the United States alone, 72 airlines have sought some form of bankruptcy protection through Chapter 7 (liquidation) or Chapter 11 (debt restructuring). Due to their need for liquidity, those challenged carriers often reduced fares to attract flyers, thereby putting margin pressure on their competitors, some of whom filed for bankruptcy. In effect, like a bad movie, the zombies infected the healthier companies.
Clearly, life at the top can be very short indeed. Where some companies may thrive and innovate (unicorns), others fail to adapt and become obsolete (dinosaurs), some struggle to maintain their valuation post-IPO (unicorpses), and others persist despite financial challenges (zombies). Adverse regulatory change, competition, change in the competitive environment, or just failure to stay abreast of technology, consumer trends or business context can quickly impair an organization. The ability to adapt, innovate, and overcome inertia is crucial for companies to remain competitive in such an extraordinarily volatile and uncertain business environment.
This blog was adapted from Rick Funston and Jon Lukomnik’s Adapt or Fail: A 5×5 Governance Framework for Boards of Directors (De Gruyter Brill, 2025).
Coming next week: “When things go wrong, where was the Board?”
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