Blog | Entrepreneurship

Lessons on Better Business Systems from a $1.75 Billion Failure

Focusing on the Rich Dad B-I Triangle as an entrepreneur and investor to achieve massive success

Quibi. Have you heard of it? Maybe it rings a bell but you can’t place it. A headline in the news perhaps?

What if I told you it was supposed to be the next revolution in online streaming video, backed by $1.75 billion in investments by some of the biggest of big whigs in Silicon Valley and Hollywood, as well as major advertising brands like Pepsi, Taco Bell, Anheuser-Busch, and WalMart?

How could you have missed it?

Quibi invested in product not business systems

To catch you up, Quibi was supposed to rival Netflix but with a different format that would take the market by storm: celebrity driven, short-form content. As “The Guardian” reports (“The fall of Quibi: how did a starry $1.75bn Netflix rival crash so fast?”), “The service offered a tsunami of celebrity-fronted shows segmented into ‘quick bites’ (hence, ‘qui-bi’) of 10 minutes or less – a Joe Jonas talkshow, a documentary on LeBron James’s I Promise school, a movie with Game of Thrones’s Sophie Turner surviving a plane crash, all straight to your phone.”

Since its launch in April 2020, it’s failed to deliver.

The Guardian’s Adrian Horton continues:

"Since its launch, Quibi has been battered by a slew of disappointing news. The app staggered early, falling out of the top 50 most downloaded within a week of its launch, and only attracted about 1.5 million active users by the end of May, according to the Wall Street Journal – a drop in the bucket compared to over 50 million subscribers drawn to Disney+, which launched in December 2019, and Netflix’s whopping 183 million global users (Quibi is only available in the US and Canada). Most of those users were on the service’s free trial, which ends this month (a Quibi subscription is $4.99 a month with ads and $7.99 a month without). The company anticipates landing just 2 million paying customers by the end of the year, less than 30% of its first-year target of 7.4 million subscribers."

What is the cause of this seeming colossal failure? How does a product with such massive investment flop so badly?

Turns out it was a simple case of weak business systems.

Meanwhile, several unflattering reports have depicted internal strife behind the scenes. The Wall Street Journal detailed longstanding friction in Katzenberg and Whitman’s working relationship. Its head of brand marketing, Megan Imbres, departed in April – another high-profile executive exit after the departures of the head of daily content Janice Min and Tim Connolly, the head of partnerships and advertising, last year. Staffers reportedly “seethed” at Reese Witherspoon’s $6m salary for voiceover work on six-minute episodes of the nature series Fierce Queens as Quibi’s poor performance threatened layoffs, according to Page Six. (Witherspoon’s husband Jim Toth is the head of talent and content acquisition at the company.) Quibi’s signature “Turnstyle” technology, which allowed content to flow from portrait view to landscape and back again seamlessly on your phone, is tied up in a patent lawsuit with a deep-pocketed hedge fund.

While the Quibi investors and founders blame poor viewership on the COVID-19 pandemic, the paragraph above makes it clear that they have a weak business system foundation in a number of areas including Team, Leadership, Legal, and Cash Flow, to name a few. All of these are key to success when you look at the Rich Dad B-I Triangle (which we’ll cover later in this article), and none of them are optional.

What could have helped Quibi be more successful? Less focus on product and more focus on a better business system.

A better business system is not about product

Many people come to me excited about a new product idea that they believe is truly innovative and worth investing in. My response is that the world is full of great products.

Many people also come to me thinking that their product is the best, better than any other existing product on the market—not unlike I’m sure Quibi’s founders and investors felt. This, they think, also makes it worth investing in. My response is that only those in the E (employee) and S (self-employed) quadrant of the CASHFLOW Quadrant, where being the best or highest quality is important for success, think that having the best product is most important.

In the B (big business) and I (investor) quadrant, however, the most important thing is the system behind the product or idea. Case in point, most of us can cook a better hamburger than McDonald’s, but few of us can build a better business system.

Rich dad said, “The product is the least important piece to inspect when evaluating a business.”

The best business systems excel in all eight integrities of Rich Dad’s B-I Triangle

Rich dad believed that a truly successful business was built on systems and that the product didn’t have to be the best if the systems were world class. It still had to be good, just not the best. That is why he always placed Product in the smallest portion of the B-I Triangle, his model for building the most successful businesses.

The B-I Triangle as a whole represents a strong system of systems, supported by a team with a leader, all working towards a common mission. It is made of eight vital components (or integrities), each of which are essential for success–the most important foundations being Mission, Leadership, and Team.

Cash flow always follows management

If any of the management functions of the B-I Triangle’s five internal levels (cash flow, communications, systems, legal, and product) are weak, the company will be weak. If you are personally having financial difficulty, or not having the excess cash flow you desire, you can often find the weak spots by analyzing each level. Once you identify your weakness, you may then want to consider turning it into your strength, or hiring someone else with that strength.

In the case of Quibi, it is clear that power struggles at the Leadership level are a major problem. Additionally, this may have led to exits of key talent, which is a weakness in Team. Their underlying technology is in a legal battle over patents (Legal and Systems weaknesses). And they’re spending money like drunken sailors, a weakness in Cash Flow.

Any one of these business system weaknesses would be enough to sink less-funded companies. All of them most likely led to such a lackluster launch for a highly touted product.

Some of the best investments and businesses are the ones you walk away from

If any of the five levels in the B-I Triangle are weak and the management is not prepared to strengthen them, it is best to walk away from the investment.

Too many times I have discussed the five levels of the B-I Triangle with a management team with which I am considering investing and I hear arguments instead of discussion. When business owners or business teams are weak in any of the five levels, they will become defensive rather than receptive to questioning. If they do become defensive rather than excited to identify and correct a weakness, I usually walk away.

If I had been invited to invest in Quibi and saw the weaknesses in their business systems, I would have done the same.

The digital age makes Rich Dad’s B-I Triangle available to everyone

The good news is you can learn from Quibi’s colossal mistakes when it comes to your own business or a business you wish to start.

It has never been easier to access great wealth than in today’s day and age. In the Industrial Age, you needed millions of dollars to build a car factory. Today, with a used computer, some brainpower, a phone, and a little education in each of the eight integrities of the B-I Triangle, the world can be yours.

If you want to build your own business, there has never been a better time for success. I recently met a young man who sold his small Internet company to a major software maker for $28 million. All he said to me was, “I made $28 million at the age of 28. How much will I make when I am 48?”

If you want to be a successful entrepreneur who builds successful businesses or invests in them, the entire B-I Triangle must be strong and interdependent. If it is, the businesses will grow and flourish.

The good news is that if you are a team player, you don’t have to be an expert at every level. Just become part of a winning team with a clear vision, a strong mission, and an iron stomach. Find that, and you’ll be well on your way to success.