I am often asked to speak about Turnaround Management. The most common flaw in most restructuring processes is waiting too long. Companies, especially ones with years of steady profits and well-known products, can become too comfortable and end up staying the course. It’s wise to remember that preventive care can help companies avoid a restructuring process that becomes necessary, instead of voluntary.
Companies are best off redefining themselves as markets change, and not being content to go along with what has worked. Too often, you see companies that need to restructure the entire organization and do turnaround management at greater costs of time, people, and resources. That’s why we at Vivaldi Partners Group help our clients constantly innovate for growth, so that major turnarounds are never needed.
It’s easy to spot the brands that have failed to innovate in time. What all companies must realize is that no one has the right to survive. Think of Sony or Kodak. At one point, Sony was synonymous with portable music with its popular Walkman. No one could imagine any company being more cutting edge in music technology. Kodak was similarly the leader in photography. Kodak was even part of the vernacular as consumers often had “Kodak moments.” But it’s not only the “older” brands that failed to innovate in time. You can see many former leaders in tech and social networking among the fallen – most famously, Myspace. Hard to remember, but at its peak, Myspace was valued at $12 billion and consistently beat Facebook in traffic.
What is a great example of a brand that evolves before being at a point where it is needed? Madonna. She is constantly evolving and stays one step ahead of all the other pop stars. But you don’t need to be a pop icon to look for a role model in innovation.
Nike may have started making shoes and sporting apparel, but then it became more than just a manufacturer of clothes. Nike started to connect people through its running clubs – and became about a community and how to live a better life through running. It was an inclusive community – since you could join the running club even if you were wearing Adidas. Then Nike progressed into Nike+, which broadened the community from local to global. You could compare runs with anyone in the world. Now the latest innovation from Nike is its Fuelband with its tagline, “Life is a sport, make it count.” Nike has moved beyond just sporting to the realm of health insurance companies. By innovating around an adjacent category, Nike is winning. Similarly this is why Sony failed and Apple won – Apple had the foresight to innovate around an adjacent category and has now become the most popular MP3 player and also quickly became the phone of choice.
Not that Nike is the only company to do this well, or even the only sporting goods company that is reinventing itself. Reebok has partnered with CrossFit, rebranding some gyms as “Reebok CrossFit” and sponsoring the CrossFit games.
Reebok was smart enough to realize that no company is too big to fail. After being a top fitness brand in the 1980s, they are now a subsidiary of Adidas. With new competitors like Lululemon coming up with a growth rate of 40% a year, Reebok is highly motivated to constantly innovate, lest they slip again.
Innovation, however, isn’t limited to just products. You can see a growth playbook in action with a company like Google. Google knows how to innovate around all three major markets: core, adjacent and new. Google doesn’t just create new products; unlike other companies, they have the right strategies in place to make sure they are always innovating.
Too often we see many companies which do not have a real innovation strategy nailed down. But the most successful companies are the ones who know they need to be constantly innovating.
- Hartmut Heinrich, Partner