Why Essential Failed: A Case Study of a Startup Gone Wrong

Essential was a startup founded by Andy Rubin, the creator of Android, in 2015. The company aimed to create a premium smartphone that would compete with the likes of Apple and Samsung, as well as a smart home platform that would integrate various devices and services. Essential also promised to deliver timely software updates, modular accessories, and a minimalist design that would appeal to tech enthusiasts.

However, despite the hype and the backing of prominent investors, Essential failed to live up to its expectations. The company launched its first and only product, the Essential Phone, in 2017, but it was met with lukewarm reviews, poor sales, and technical issues. The company also faced several controversies, such as Rubin’s sexual misconduct allegations, a data breach that exposed customer information, and a patent infringement lawsuit. In 2020, Essential announced that it was shutting down, leaving behind a legacy of unfulfilled promises and wasted potential.

So, what went wrong with Essential? How did a company with such a visionary founder and a bold mission fail so spectacularly? In this blog post, we will analyze the main reasons why Essential failed, and what lessons we can learn from its demise.

Reason 1: Poor Market Timing and Positioning

One of the biggest reasons why Essential failed was that it entered the smartphone market at a very bad time and with a very unclear positioning. The smartphone market in 2017 was already saturated and dominated by established players like Apple and Samsung, who had loyal customer bases, strong brand recognition, and massive marketing budgets. Essential, on the other hand, was a new and unknown brand that had to compete with these giants, as well as other emerging players like Huawei, OnePlus, and Xiaomi.

Essential also failed to differentiate itself from the competition and to communicate its value proposition to the customers. The Essential Phone was marketed as a premium device that cost $699 at launch, but it did not offer any compelling features or benefits that justified its high price tag. The phone had a sleek design and a notch-less display, but it also had a mediocre camera, a lackluster battery life, and a lack of water resistance. The phone also did not support wireless charging, headphone jack, or microSD card slot, which were common features in other flagship phones at the time.

Essential also tried to sell its phone as a modular device that could be enhanced with magnetic accessories, such as a 360-degree camera and a wireless dock. However, these accessories were expensive, limited, and poorly executed. The 360-degree camera, for example, cost $199 and required a separate app to use, while the wireless dock never materialized. Moreover, the modularity of the phone did not appeal to the mainstream customers, who preferred simplicity and convenience over customization and complexity.

Essential also failed to deliver on its promise of timely software updates and security patches. The company claimed that it would provide Android updates for at least two years and security patches for at least three years, but it often lagged behind other manufacturers in rolling out the latest versions of Android. The company also struggled to fix the bugs and glitches that plagued its phone, such as poor signal reception, touch latency, and camera instability.

In summary, Essential failed to understand the needs and preferences of the smartphone customers, and to offer a product that was superior or unique in any way. The company also failed to create a strong brand identity and to build trust and loyalty among the customers. As a result, the Essential Phone sold poorly, and the company could not generate enough revenue to sustain its operations.

Reason 2: Poor Leadership and Management

Another major reason why Essential failed was that it had poor leadership and management, especially from its founder and CEO, Andy Rubin. Rubin was a brilliant engineer and a visionary entrepreneur, but he was also a flawed leader and a controversial figure. Rubin had a reputation of being arrogant, autocratic, and secretive, and he often clashed with his employees, partners, and investors. Rubin also had a history of sexual misconduct, which led to his departure from Google in 2014, and to a lawsuit from his ex-wife in 2019.

Rubin’s leadership style and behavior had a negative impact on Essential’s culture and performance. Rubin was reportedly micromanaging and controlling, and he did not delegate or empower his team. Rubin also made several strategic and operational blunders, such as launching the phone without proper testing, pricing the phone too high, and partnering with Sprint as the exclusive carrier in the US. Rubin also failed to secure enough funding for the company, and he rejected several acquisition offers from potential buyers.

Rubin’s sexual misconduct allegations also tarnished Essential’s reputation and credibility, and caused a lot of internal turmoil and external backlash. Rubin was accused of coercing a female employee into performing oral sex on him while he was at Google, and of running a sex ring with his ex-wife. These allegations were reported by The New York Times in 2018, and they sparked a lot of outrage and criticism from the public, the media, and the tech industry. Rubin denied the allegations, but he also took a leave of absence from Essential, leaving the company in a state of uncertainty and chaos.

Rubin’s absence also exposed the lack of leadership and vision at Essential, and the company struggled to find a new direction and a viable product. The company tried to develop a second smartphone, a smart speaker, and a smartwatch, but none of these projects came to fruition. The company also tried to pivot to a new product called Project Gem, which was a small and colorful device that resembled a remote control. However, Project Gem was also met with skepticism and ridicule, and it was ultimately canceled.

In summary, Essential failed to have a strong and effective leader who could inspire and guide the company, and who could handle the challenges and crises that the company faced. Rubin’s personality and behavior alienated his team, his partners, and his customers, and he failed to provide a clear and compelling vision for the company. Rubin also damaged the company’s reputation and credibility, and he left the company without a successor or a plan.

Reason 3: Poor Execution and Innovation

The final reason why Essential failed was that it had poor execution and innovation, and it could not deliver a product that was reliable, functional, and desirable. Essential had a lot of ambition and potential, but it also had a lot of flaws and limitations. Essential tried to create a product that was different and better than the existing products, but it also failed to meet the basic expectations and standards of the customers.

Essential’s poor execution and innovation were evident in its product development, marketing, and customer service. Essential’s product development was slow, inefficient, and inconsistent, and it resulted in a product that was buggy, incomplete, and underwhelming. Essential’s marketing was vague, confusing, and misleading, and it failed to generate enough awareness, interest, and demand for the product. Essential’s customer service was unresponsive, unhelpful, and unsatisfactory, and it failed to address the issues, complaints, and feedback of the customers.

Essential also failed to innovate and to create a product that was truly original and groundbreaking. Essential’s product was largely derivative and imitative of other products, and it did not offer any significant advantages or improvements over them. Essential’s product also lacked a clear and distinctive identity and personality, and it did not resonate with the customers on an emotional or aspirational level. Essential’s product also did not adapt or evolve with the changing needs and preferences of the customers, and it became obsolete and irrelevant in a fast-moving and competitive market.

In summary, Essential failed to execute and innovate, and to create a product that was worth buying and using. Essential’s product was flawed, mediocre, and boring, and it did not meet the expectations or solve the problems of the customers. Essential’s product also did not stand out or make a difference in the market, and it did not create any value or loyalty for the customers.

Conclusion

Essential was a startup that had a lot of promise and potential, but it also had a lot of problems and failures. Essential failed because it entered a crowded and competitive market with a poorly timed and positioned product, because it had a poor leader and manager who made bad decisions and caused scandals, and because it had poor execution and innovation that resulted in a subpar product. Essential failed to understand and satisfy the customers, to differentiate and distinguish itself from the competitors, and to create and deliver a product that was reliable, functional, and desirable.

Essential’s failure is a cautionary tale for any aspiring entrepreneur or innovator who wants to create a successful product or business. Essential’s failure teaches us that we need to do a thorough market research and analysis, to have a clear and compelling value proposition and brand identity, to have a strong and effective leader and team, to have a fast and agile product development and launch, to have a smart and strategic marketing and distribution, to have a responsive and helpful customer service, and to have a constant and consistent innovation and improvement.

Essential’s failure also reminds us that failure is inevitable and unavoidable in any endeavor, and that we need to learn from our failures and use them as opportunities to grow and improve. Essential’s failure is not the end of the story, but rather the beginning of a new chapter. Essential’s failure is not a sign of weakness, but rather a source of strength. Essential’s failure is not a reason to give up, but rather a motivation to try again.