Analysis of Pebble’s Organizational Failure
Start-up organisations are predisposed to both threats and opportunities. Some of the opportunities presented are the possibilities of attracting a cult following and disrupting industries in their favour. On the other hand, these organisations are threatened by a lack of managerial experience and low funding (Lien, 2016). If not properly managed, these factors could lead to failure of a business, that would have instead been successful. Pebble and Jawbone are examples of organisations that failed despite possessing disruptive products (Canal, 2017; Callaham, 2019). This consultative report uses root cause analysis and other frameworks to analyse why Pebble failed despite the previous success and its cult following. Secondly, the report analyses and compares Pebble’s failure to Jawbone’s while the last section proposes an exit or turnaround strategy.
- Root Cause Analysis
Figure 1: Pebble’s Root-cause Analysis
A root-cause analysis for Pebble is summarized using the fishbone diagram above. According to the representation, external and internal factors pushed the firm to its demise. The external environment had unfavourable factors such as rapid changes in technology as rivals such as Apple rapidly introduced new features into their smartwatches. Khalid (2019) reports that the smartwatches proved less admirable to potential customers which forced manufacturers to introduce new advanced features to attract them. Changes in regulatory environment, coupled with greater demand for increased security features led to increased production costs for the Pebble brand. Demographic changes coupled with demand for more sophisticated smartwatches made it hard for Pebble to catch up (Lien, 2016). Ecological factors that led to the fall of Pebble include; rapid increase in number of rivals, deep pocketed incumbents, and the young age of the organization, also known as liability of newness.
Internal factors leading to the failure of Pebble include organizational factors such as internal inefficiencies associated with start-ups. Pebble lacked the experience to engage in all the activities that would promote its brand. This includes lacking knowledge of the market dynamics, as well as incurring high costs of setting up operations (Gavett, 2014). The operation costs were higher than the funding and revenues received. As a result, Pebble failed to break-even in spite of the high initial funding of $10,266,845 (Levy, 2016). The second internal factor is psychological where the management failed to anticipate and recognize changes in the external environment that could compromise the future of the firm. Lien (2016) notes that Migicovsky should have focused on creating their own operating system and ecosystems instead of depending on android and iOS. Collectively, these shortcomings led to the failure of Pebble.
- Multi-level Analysis
This analysis evaluates the impact of the macro, meso, and microenvironment on the success and failure of an organization. According to Bruton, Oviatt and White (1994), the PESTEL analytical framework can be used to understand the factors in the external environment that contributed to the failure of Pebble. A PESTLE analysis of the wearables and smartwatch industry is summarized in the table below.
– The significance of technology to the economic development of the USA has influenced government’s decision to support the wearable and smartwatch industry through direct government grants for research development, protection of Intellectual Property (IP), and tax incentives (Ong, 2017).
– Cybersecurity is a major concern for the wearables and smartwatch industry (Avey, 2019). This forces firms such as Pebble to adhere to the cyber security laws to safeguard client’s data.
– The prolonged unfavourable economic factors across most global markets reduced the disposable income available to individuals and households (Wu, Wu & Chang, 2016).
– Unfavourable economic factors have the effect of reducing demand for consumer electronics such as smartwatches and wearables.
– This implies low sales for the smartwatch industry.
– Boxall (2018) reports that changing consumer behaviour in favour of wearables, skin patches, fitness trackers, and smartwatches have created a demand for these products.
– Companies that fail to keep up with consumer trends could easily fall out of the industry (Mills, 2016).
– The wearable and smartwatch industries are rapidly changing. Levy (2016) reports that rapid change requires companies to have deep pockets to embed new technologies continually.
– Firms such as Apple, Fitbit, Google, and Samsung have continuously added new features such as fitness trackers, and skin patch technologies to enhance the effectiveness and marketability of their products (Goode, 2016).
Table 1: Pebbles PESTLE Analysis
A detailed analysis of the internal environment at Pebble can be facilitated using the ST of the SWOT analysis, where the two elements represent strengths and weaknesses.
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