From Huffington Post
GoPro’s recent loss of $107.5 million is certainly dramatic. After all, last year it announced a profit of $16.8 million. However, it’s also a cautionary tale for all new companies that find themselves in a similarly precarious financial position after enjoying rapid financial success. When this happens, it’s time to take a hard look at the business model.
The big question the company should ask is whether it aspires to be more like Crocs, Chrysler, or Apple. These three companies have all found varying degrees of success through very different models. Each offers substantial pros and cons so it is important for GoPro to know its vision and find the right fit.
The Crocs model – finding a new normal
When Crocs launched its unique line of shoes in the early 2000s, the products became extremely popular. At one point, its stock price was $75 per share, however it soon fell to $40 per share as sales plateaued then declined, and is now around $10 per share. The problem was that part of the initial sales came from the trendiness of the shoes, and this portion of the sales was not sustainable. When the trend dissipated, the trendy customers left. The customers who remained loyal were those who needed comfortable shoes that were easy to slip on and off, easy to clean, and provided arch support. Think kids, gardeners, healthcare workers, oil rig workers, and people with orthotic needs.
GoPro can relate to this story. After selling its portable camera to the masses, the number of sales substantially decreased. Unless you are into extreme sports and really want a camera on your helmet to film your experience, you probably aren’t in the market for a second GoPro, even if it has more features.
John Carrier is a Senior Lecturer of System Dynamics at the MIT Sloan School of Management.