The Dead Horse Theory: A Cautionary Tale for Entrepreneurs

What you can learn from Kodak, Blockbuster, and Amazon Echo.

4 min readFeb 3, 2023


When should you hold on to a failing project and when should you cut your losses?

The “Dead Horse Theory” helps you answer exactly that.

I’ve seen many posts about this lately on LinkedIn. Oscar Berg even took a stab at illustrating it. So I thought I’d share my learnings with you.

The Dead Horse Theory — Illustrated by Oscar Berg

What is the “Dead Horse Theory”?

The “Dead Horse Theory” states that:

“When you discover that you are riding a dead horse, the best strategy is to dismount.”

In the context of business, a dead horse refers to a project or venture that is no longer viable, no matter how much effort you put into it. This could be due to changes in the market, increased competition, or simply poor execution. Whatever the cause, the result is the same: you’re putting time and resources into something that is very unlikely to succeed.

Companies that Have Tried to Ride a Dead Horse

One company that fell prey to the Dead Horse Theory is Kodak. Kodak was once the dominant player in the film photography market, but as digital photography took over, the company failed to pivot and adapt to the changing landscape. Kodak continued to pour resources into its film business, even as it became clear that the market was moving away from film. By the time Kodak finally acknowledged the shift and tried to pivot, it was too late, and the company filed for bankruptcy in 2012.

Another well-known example is Blockbuster, the former video rental giant. Blockbuster was slow to adapt to the rise of streaming services and online rentals, and it continued to invest in its brick-and-mortar stores even as its customers moved away from physical media. Blockbuster’s inability to recognize the shift in the market and pivot to a new business model ultimately led to its downfall.

But not every dead horse results in a completely bankrupt business. A single business unit, department, product line, or investment that is hemorrhaging money and resources can also be a dead horse.

Take Amazon Echo as an example. Business Insider reported in late 2022 that:

During the first quarter of [2022], Amazon’s “Worldwide Digital” unit, which includes everything from the Echo smart speakers and Alexa voice technology to the Prime Video streaming service, had an operating loss of over $3 billion, according to internal data obtained by Insider.

For a decade, Amazon has been trying to turn Alexa and Echo into the next big thing in voice purchasing. They priced the hardware at cost (mostly) and then planned to make the real profit from people using the devices to make additional purchases on Amazon.

There is only one problem — not enough people are using these devices that way.

In November 2022, Amazon laid off a significant portion of employees working on Alexa and Echo. While Amazon’s hardware chief, Dave Limp, is still all-in on the device, one has to wonder if they are beating a dead horse and this round of layoffs is the first step toward accepting that.

How to Avoid a Dead Horse

These examples show that even the most successful companies can fall victim to the Dead Horse Theory — in fact, it’s a common problem businesses face.

So, what can small business owners and executives do to avoid falling into the trap?

We touched on it yesterday — you need to “always be experimenting”. Mini-experiments will help you fine-tune your compass and identify which trends are actually worth investing in, which are worth ignoring, and which projects you need to cut off now before they eat up the rest of your business.

By granting your team autonomy to experiment (and some guidelines to follow) you end up having a company that is running tens or even hundreds of mini-experiments every year.

What if Blockbuster invested in a culture of thoughtful experimentation? If they had dedicated some resources to testing out mini-experiments all the time, perhaps they would have ended up ahead of a trend rather than behind one.

In Summary

The Dead Horse Theory is a powerful reminder that it’s important to be proactive about recognizing when a project or venture is no longer viable. By staying aware of changes in the market, monitoring your metrics, cutting your losses when necessary, and being open to changing your vision, small business owners and executives can avoid falling into the same trap that many other companies have fallen into before them.

And before I sign off, here are some more of Oscar’s photos for a good laugh:

The Dead Horse Theory — Illustrated by Oscar Berg

Want more business tips?

This post was originally published as the Mission Daily newsletter. Get that newsletter directly to your inbox every single day by subscribing below.

And don’t forget to listen to the Mission Daily podcast on Apple, Spotify, or wherever you get your podcasts! Just 20 minutes a day and you’ll learn at least one lesson that you can apply to your life and business.