About half of all startups fail within five years, according to the U.S. Bureau of Labor Statistics. But that’s a reality many business owners don’t even consider. It’s normal to avoid failure at all costs, yet, oddly enough, it’s often the reason innovation exists in the first place.
Many of today’s breakthrough technologies only exist because earlier versions crashed first. Companies pour billions into products nobody wants, then competitors learn from those mistakes and build empires.
In this article, we’ll walk through some of those expensive failures from tech giants like Kodak, Nokia, Xerox, Blockbuster, and General Motors. More importantly, you’ll understand why failed tech is more important to innovation history than the successes that followed.
So let’s learn from how each company couldn’t hold on to their future.
Why Do Some Innovations Flop While Others Prosper?
Some innovations flop because they’re ahead of their time, poorly executed, or fail to meet market needs. But these failures provide the foundation for future breakthroughs by showing what doesn’t work before someone figures out what does.
Think about how many failed experiments sit behind every successful product you use today. The technologies we enjoy are built on lessons from earlier versions that couldn’t find the market or solve the problem at the right time.
Here’s a breakdown of why these failures push innovation forward and how they fit into bigger economic patterns.
Mistakes That Pushed Technological Innovation Forward
Experiments that fail teach companies what doesn’t work, and save future innovators time and money. After that, engineers and product teams document what went wrong and share those findings across the industry.
Many breakthrough products were built on lessons from earlier flops that seemed pointless at the time. To give you an idea, the digital camera, smartphone revolution, and even the internet itself came from ideas that initially failed to gain traction.
When one company tests a concept, and it flops, the next company knows which features to keep and which problems to fix. That cycle speeds up technological innovation and helps the market move toward better and faster solutions.
Creative Destruction and Economic Growth
Joseph Schumpeter (Austrian economist best known for his work on innovation and entrepreneurship) showed how old industries collapse when better innovations replace them completely.
He called this pattern creative destruction, and it explains why railway companies dominated stock markets in the 1800s before cars took over. This cycle clears space for new technologies that boost economic growth across entire markets.
After that, railway monopolies, automotive factories, and tech giants all followed this disruptive pattern. It showed that each wave of innovation destroys the previous one while creating opportunities for massive companies to emerge.
Then the pattern repeats every few decades, and understanding it helps explain why some companies survive while others with better products still fail.
Nokia’s Fall to a Forgotten Brand
The advantage of studying Nokia’s collapse is that you can avoid making the same expensive mistakes with your own products. We all grew up watching Nokia dominate mobile phones for over a decade. They even controlled 49% of the global market in 2007. But then the iPhone launched, and everything changed.
Let’s study in detail what went wrong for Nokia.
Brand Power Couldn’t Save Them
For years, customers bought Nokia phones because they were reliable and affordable. And Nokia assumed its brand loyalty would carry it through the smartphone transition without rushing. The executives underestimated how quickly consumers would abandon familiar phones for touchscreen experiences.
As a result, by 2008, one year after the iPhone’s launch, Nokia’s response felt outdated and clunky. Compared to the new technology, Nokia’s interface was confusing, the app ecosystem was weak, and the hardware couldn’t compete with Apple’s design.
The Cost of Starting Late
After that, Nokia finally competed with Android in 2008, but its products couldn’t match the competition. The company partnered with Microsoft to build Windows phones, hoping the alliance would help them catch up. But it didn’t work because the market had already moved on.
The company lost market share every quarter as Apple and Samsung dominated smartphone sales. In the end, by2013, Nokia sold its phone division to Microsoft for $7.2 billion, which is just a fraction of what the business was worth six years earlier.
Nokia’s story shows how quickly market share can evaporate when you misread what customers want. The company had resources, talent, and distribution networks that most startups could only dream about. But none of them were relevant when they failed to adapt.
Kodak Invented the Digital Camera
Did you know that the company that invented digital photography was also the one that refused to sell it? That’s exactly what happened at Kodak.
Engineer Steven Sasson built the first digital camera at Kodak in 1975. The prototype weighed eight pounds and captured black-and-white images at 0.01 megapixels. But the management feared digital photography would destroy their profitable film business, so they buried the invention.
In fact, they had a 10-year head start and still lost. Kodak made over 85% of its revenue from film sales throughout the 1980s and 1990s. Yet still, the executives couldn’t imagine walking away from those margins, even when the future was sitting right in front of them.
Meanwhile, competitors seized the digital camera market while Kodak clung to film. Sony, Canon, and Nikon built empires from the same technology Kodak invented but refused to commercialize.
Unfortunately, by 2012, Kodak had to file for bankruptcy. And the lesson we learned is: holding on to yesterday’s profits costs you tomorrow’s market.
Xerox Built the PC, but Missed It
Like Kodak, Xerox made a similar mistake. Their Scientists at the Palo Alto Research Center created technologies that would define computing for the next 50 years. Their researchers invented the personal computer, graphical interface, and mouse in the 1970s.
But leadership thought digital technology was too expensive and kept its focus on copy machine profits. They even invited Apple and Microsoft to visit PARC in 1979, hoping to build partnerships. Instead, both companies saw the innovations and immediately understood their value (Steve Jobs basically got a free tour of the future).
After Apple and Microsoft visited PARC, they built empires from Xerox’s ideas. Steve Jobs used the graphical interface and mouse concept to create the Macintosh. Meanwhile, Bill Gates borrowed similar ideas for Windows.
In the end, Xerox kept making copy machines while those two companies built trillion-dollar businesses from technology sitting in Xerox’s own lab.
Blockbuster Didn’t Take Netflix Seriously
In 2000, Blockbuster’s CEO laughed Netflix out of the room when they offered to sell for $50 million. The meeting lasted less than an hour, and Blockbuster executives thought the DVD-by-mail concept was ridiculous.
Blockbuster had 9,000 stores, so they dismissed Netflix’s DVD-by-mail service as a niche hobby. The company was making billions from late fees alone, and management couldn’t imagine customers wanting to wait for movies in the mail.
Instead, they believed customers preferred browsing physical stores over waiting for mail delivery (apparently rewinding VHS tapes was peak entertainment). Unfortunately, that assumption proved to be expensive.
Fast forward to 2010: Netflix was worth billions while Blockbuster filed for bankruptcy. The company that controlled video rentals for two decades disappeared because it couldn’t imagine the concept of streaming.
General Motors and the Electric Car Nobody Wanted
GM’s EV1 story shows how killing a popular product to protect short-term profits can cost you the entire market. Drawing from our investigation into electric vehicle programs, GM had consumer demand, which they deliberately ignored.
EV1 in 1996 was the first mass-produced electric vehicle. The car had a 100-mile range, zero emissions, and a sleek design that turned heads everywhere it went. And customers in California and Arizona lined up to lease them.
But the company recalled and destroyed nearly every EV1 by 2003. Surprisingly, they cited battery costs and lack of profitability as reasons for the decision. The company prioritized SUV profits over environmental innovation during the early 2000s, and executives saw electric vehicles as a threat to that revenue stream.
On the other hand, Tesla later proved that the electric vehicle market GM had abandoned was worth billions. Elon Musk studied the EV1’s failure, learned from GM’s mistakes, and built an entire company around premium electric cars. That’s how today, Tesla is worth more than GM, Ford, and several other automakers combined.
The Pattern Behind Failed Tech
Now that you’ve seen these failures, here’s the pattern they all fit into: history keeps repeating itself. Every major tech failure follows the same cycle, and understanding innovation history helps you spot the warning signs before they become expensive problems.
Let’s break down why some companies survive change while others don’t.
The Six Innovation Cycles
Innovation comes in waves. That wave started with textiles, railways, electricity, automobiles, computers, and gradually dropped onto digital networks. Each wave disrupts old industries and creates new monopolies that dominate for decades.
The first wave started around 1785 with water power and textile mills. And the fifth wave brought the internet in the 1990s, connecting billions of people and changing how we work, shop, and communicate. Currently, we’re in the sixth wave, focused on artificial intelligence, renewable energy, and biotechnology.
We’re talking about these waves because during their wave in the late 1800s, railways made up 60% of stock market value, similar to Big Tech today (imagine if Tesla owned half the entire market today). In fact, a handful of companies controlled transportation across entire continents and generated returns that were unbelievable by modern standards.
That’s a pattern we recommend every startup owner consider.
Survival is a Strategy
Successful companies adapt when market conditions change instead of protecting old revenue streams. Nokia, Kodak, and Blockbuster all had opportunities to swap direction, but they chose to hold onto their existing business models. Innovation history shows this exact pattern repeating across every industry and every wave.
Businesses that overvalue their current position and ignore trends often end up failing later. They assume brand loyalty, market share, or distribution networks will protect them from disruption. Sometimes they’re right, but usually they’re just delaying the inevitable. Which is why timing is impeccable, because being too early can be just as deadly as starting late.
How Modern Companies Can Dodge These Pitfalls
The patterns are consistent across decades, and companies that study failed tech usually make more strategic decisions when facing similar situations. Which is why learning from innovation history helps you spot warning signs before they become expensive problems.
Take a look at how you can make use of history.
- Study Innovation History: The first things you need to do are read case studies, track industry changes, and pay attention when successful companies start changing direction. The signs are usually visible months or years before the collapse.
- Test New Ideas: Yes, even when they threaten your profitable products. Our examination of Fortune 500 collapses shows that rigid thinking kills more companies than bad products.
- Listen to Customer Feedback: Never assume you know what they want because markets tell you what they need if you’re willing to listen. We saw how Blockbuster ignored signals that people valued convenience over selection, and GM crushed cars that customers were begging to buy.
- Move Quickly: Speed always defeats perfection when disruptive innovation enters your industry. You need to be quick, especially when markets begin to change, because waiting for perfect timing usually means you’re too late.
Companies that survive disruption always know when to let go of old ideas. By paying attention to past failures, modern businesses can recognize inflection points early and respond before change becomes irreversible.
Your Next Step Carries More Weight Than You Expect
Every breakthrough in innovation history was built on lessons from expensive failures that came before it. Along with making strategic decisions, companies need to measure timing, market conditions, and have the courage to abandon what’s working today for what might work tomorrow.
That’s why learning from innovation history can influence companies that prosper from those that go bankrupt. You don’t need to make the same mistakes Kodak, Nokia, or Blockbuster made. So don’t wait for competitors to force your hand and start testing, listening, and adapting before the market leaves you behind.
If you want more insights on emerging technologies, check out The Demo Blog for the latest trends and analysis.