Why This Historic Ford Flop Is One Of Bill Gates' Favorite Case Studies

Ford was so confident in the product that it pumped $250 million into it. But instead of starting a revolution, the company lost $350 million on the gas-guzzler, making it a great example of how not to develop and market a new product.

In the late John Brooks' book "Business Adventures," a collection of New Yorker articles from the '60s, Brooks explains what went wrong in "The Fate of the Edsel."

Bill Gates recently revealed that "Business Adventures" is his favorite business book, and that he finds the Edsel piece especially interesting. He explains in his blog:

[Brooks] refutes the popular explanations for why Ford's flagship car was such a historic flop. It wasn't because the car was overly poll-tested; it was because Ford's executives only pretended to be acting on what the polls said. "Although the Edsel was supposed to be advertised, and otherwise promoted, strictly on the basis of preferences expressed in polls, some old-fashioned snake-oil selling methods, intuitive rather than scientific, crept in." It certainly didn't help that the first Edsels "were delivered with oil leaks, sticking hoods, trunks that wouldn't open, and push buttons that…couldn't be budged with a hammer."

Here are some key takeaways from the launch that make it one of Gates' favorite case studies:

Don't let egos trump research.

Ford's designers and marketers began development on the car in 1955, with the intent of creating an automobile tailored to the desires of the American people, as determined through seemingly endless polling.

Ad men got to work thinking up thousands of names and testing them in focus groups with civilians and Ford execs, and even consulted the Pulitzer Prize-winning poet Marianne Moore for the perfect name for the perfect car (Moore suggested such absurd names as the Utopian Turtletop and The Intelligent Whale). Despite endless hours of testing and consultation, the chairman of the board decided at the last minute that he was going to go with Edsel, the name of Henry Ford's son.

"As for the design," Brooks writes, "it was arrived at without even a pretense of consulting the polls, and by the method that has been standard for years in the designing of automobiles - that of simply pooling the hunches of sundry company committees."

Focus your vision.

In the late '50s, American consumers had a limited choice of car models, and there weren't tremendous differences in performance from model to model, at least by today's standards. Edsel's designers knew that they were creating an image, a character, but instead of refining their vision, they decided to make it everything at once.

In a lazy attempt to please everybody, they made the terrible decision to debut 18 variations of the car at launch. The academic S. I. Hayakawa dubbed the car the Edsel Hermaphrodite because it seemed as if it were explicitly trying to be masculine and feminine.

And, because it was 1957, Ford decided to have two media previews, one for male reporters and one for their wives. In the former, the Edsel was driven around a stunt course as if it were in a Hollywood blockbuster - at one point an Edsel almost flipped.

Gates mentions in his blog that the women's event, a fashion show, was one of his favorite passages in the story because the host was revealed to be a "female impersonator," which was not only bizarre but, as Gates says, "would have been scandalous for a major American corporation in 1957."

Don't put yourself in a situation you can't get out of.

A year before launch, Ford began a teaser campaign for the E-Car, the code name for the Edsel as it was being developed. It gave customers the expectation that they were going to get an irresistible car of the future.

Ford execs seemed to never once consider failure to be an option. They created an entire Edsel division and persuaded dealerships to order a certain number of cars before the Edsel was even finished.

Had they acted more cautiously and avoiding betting so much on the car, they could have pulled back once the stock market took a nose dive in the summer of 1957 and people stopped buying mid-priced cars. Mere weeks before the car's launch in September, Brooks writes, "Automotive News reported that dealers in all makes were ending their season with the second-largest number of unsold cars in history."

If you fail, accept it and move on, all the wiser for it.

At launch, the car was too expensive, used up too much gas, and was mocked in the press. A redesigned 1959 Edsel debuted to better reviews, but the damage was done. Nobody wanted an Edsel. A 1960 Edsel came out in limited production, but Ford president and future secretary of defense Robert McNamara finally pulled the plug in 1960.

Brooks estimates that "every Edsel the company manufactured cost it in lost money about $3,200, or the price of another one."

Even though Ford recovered from the setback, the executives who led the project expressed to Brooks no recognition of their countless mistakes, and even looked back fondly on their time developing and marketing the car.

J.C. Doyle, an Edsel marketing manager, even went so far as blaming the American public for the failed launch. He tells Brooks:

People weren't in the mood for the Edsel. Which is a mystery to me. What they'd been buying for several years encouraged the industry to build exactly this kind of car. We gave it to them, and they wouldn't take it. Well, they shouldn't have acted like that... And now the public wants these little beetles. I don't get it!

The previously out of print "Business Adventures" is being re-released in September, and the ebook version is available now.