The height of the Zip disk's popularity was in the mid-'90s, when CD burners were still way too expensive for the consumer market.
To the best of my knowledge, Iomega's big mistakes were skimping on quality control, which led to the infamous "click of death" scandal that killed the Zip disk's reputation; and trying to build on the early success of Zip by rolling out multiple new products in a rush like the Jaz and Clik drives, none of which were the slightest bit compatible with any of the others (including Zip).
It probably didn't help matters that Iomega also became an early case study in how the entry of individual investors in the market could have disorienting effects, as Iomega stock became extremely hot in online communities focused on the then-quite-new individual-investor market, particularly The Motley Fool (see https://www.deseretnews.com/article/491232/FOOLS-RUSH-IN-SEN...). The Fool's founders tapped Iomega as one of their highly recommended "Rule Breakers," and there were people on the Motley Fool message boards who were so convinced that Iomega was The Next Big Thing that they called themselves "Iomegans" (!), preaching the Gospel of Iomega with quasi-religious fervor. All that hype drove the price of Iomega stock to dizzying, unsustainable heights.
All of which makes me wonder in retrospect how connected the bad management decisions and the stock pumping were; it's not hard to imagine managers, confronted by staff with big internal problems, pointing at the stock and saying "if we're doing so badly, why does it keep going up?"
(The Fools sort of apologized for their role in all that in a book they published in 2000, after the Iomega bubble had popped; see https://books.google.com/books?id=3TDjULa4nO4C&lpg=PA148&ots.... But it couldn't have comforted their readers much to learn in that same passage that they had cashed out half their position in Iomega in 1997, earning a 650 percent return.)