The NYT Times has worked hard to cut costs and get people to pay for digital content. It has been more successful in this quest that many other newspapers around the world. But as more and more people read their news on smartphones, it faces challenges from digital-only news sources. Politico has published an insightful piece on the big transformation that still lies ahead for the NYT if it wants defend its position as leading news organization.
As far as I can tell, Thian is trying to move Credit Suisse in the right direction to make the firm more sustainable. But a large fraction of employees is in open revolt again him. Will be successful. The NYT reports: “When Tidjane Thiam took over at Credit Suisse last July, he laid out a new direction for a financial giant with a storied investment banking history: Do less investment banking. [...] One year in, Credit Suisse stock is down 50 percent. And the investment bank, the second largest in Switzerland after UBS, is in open revolt.” Read full story.
Michael Dell believes that the stock market will be able to stomach further profit declines that are required to make investments for the turnaround.
Mr. Dell told the board that the only way out involved changes in the company’s business model and expensive investment in new products and services. “Implementing such initiatives would require additional investments that could weaken earnings and cause greater volatility in the performance of the common stock,” the filing said Mr. Dell argued in a Dec. 6 meeting.
“Mr. Dell stated his belief that such initiatives, if undertaken as a public company, would be poorly received by the stock market because they would reduce near-term profitability, raise operating expenses and capital expenditures, and involve significant risk.”
To win more time to turn around Dell, Michael Dell with the help of a private equity partners is taking Dell Computer private again. One of the reason the turnaround since 2007 has not been sufficient is that tablets have eaten into the market for PC in a way that Dell did not expect. The WSJ reports: “When asked in a 2011 interview with The Wall Street Journal what surprised him most since he returned as Dell CEO in 2007, Mr. Dell said the rise of tablets had been unexpected for him.
“I didn’t completely see that coming,” he said, before adding that he didn’t anticipate business users would give up PCs soon.”
HP once was the icon of good management. But for the past 10 years it has gone through several CEOs and the middle of a turnaround has to write off $9 billion dollars because it acquisition of Autonomy turned out to be a fiasco. HP alleges that Autonomy mis-represented its financial worth. The founder of Autonomy claims that HP destroyed Autonomy within one year.
Read the stories in
But here is also a voice that articulates that if you are buying a company to secure your future, many deals will go wrong but some may go right and prevent you from becoming irrelevant.
Acquisitions is like doing R&D with a high failure rate.
HP has been falling behind Apple and Google and the race to be the leading Silicon Valley company. Now Meg Whitman is trying to turn this former star company around. The NYT reports.
So now Ms. Whitman is focusing her energy on H.P., the company founded by the tech legends William Hewlett and David Packard. Bill and Dave, as they are referred to at the company, spawned Silicon Valley. Last year, H.P. posted revenue of $127 billion. It employs 320,000 people directly, and easily that many again through a network of manufacturers and computer resellers across 170 countries.
TWENTYyears ago, people like Steve Ballmer at Microsoft, Larry Ellison at Oracle, and John Chambers at Cisco Systems heard Kenneth Olsen, then the leader of Digital Equipment Corporation, deride the PC as unsuited for business. Within a few years, DEC had been gobbled up by Compaq Computer. Everyone knows viscerally how fast change can overtake a legacy business — and how hard it is to change.
There’s little glory in managing decline, particularly in an industry in love with what’s next. Apple’s tablets are taking share from PC makers like H.P., but only after Apple had a near-death corporate experience that ended with the return of Steve Jobs. He created a new reality for Apple with its retail stores, something that H.P. can’t copy to sell PCs. I.B.M. also transitioned successfully after billions in losses and years of cuts. Most others ended like DEC.
Home Depot is not the first company to find out that the strategy that worked well back home does not work in a foreign country. Wal-Mart failed in Germany not realizing that the competitive landscape was different. Starbucks failed in Australia, closing most of its shops because the Australian consumer was used to much sophisticated coffee. The WSJ journal reports on the changes in the Home Depot China strategy after failing to implement the previous one successfully.
Home Depot Learns Chinese Prefer ‘Do-It-for-Me’
The largest U.S. home-improvement retailer, which entered China in 2006, has struggled to gain traction in a country where cheap labor has stunted the do-it-yourself ethos and apartment-based living leaves scarce demand for products like lumber.
Home Depot conceded that it misread the country’s appetite for do-it-yourself products. “The market trend says this is more of a do-it-for-me culture,” a Home Depot spokeswoman said of China.Home Depot is shaking up its strategy by focusing on specialty stores. Three months ago, it opened one paint-and-flooring store and one home-decorations outlet in the northern port city of Tianjin to cater to specific needs and shopping preferences shown by Chinese consumers, the spokeswoman said. It also plans to launch online operations with a Chinese partner, she said, without naming the company.
Home Depot debuted in China with a 12-store acquisition six years ago and the number has since dwindled as it found that Chinese consumers differ from their global counterparts. As Swedish furniture giant IKEA discovered, Chinese consumers will pay for people to do the work for them. Several years ago, the furniture store added services to help customers assemble their furniture.
Home Depot’s closures will cause the company to take a $160 million after-tax charge in the third quarter, a company statement said. The charge will be equal to about 10 cents per diluted share, and will include the impairment of goodwill and other assets, lease terminations, severance and other charges associated with closing the stores.
The Economist reports an amazing on an amazing turnaround of Honeywell. It appears to be a great example of strategy implementation.
Honeywell likes its meetings short but plentiful. Every production cell, as the smallest shop-floor unit is called, starts the day with one. The aim is to try to identify problems and ideas for improvements, which are then pushed up to senior managers. Even the lowliest worker is expected each month to come up with two implementable ideas for doing things better. As an illustration of the firm’s devotion to “continuous improvement”, this is one of the pillars of what has become known as the “Honeywell operating system” (HOS).
This new production system, introduced over the past eight years, has helped transform Honeywell from a troubled giant to one of America’s most successful companies. Honeywell’s sales in 2011 were 72% higher than in 2002, and its profits doubled to $4 billion. A new emphasis on generating cash also means the firm has more money in the bank for every dollar declared in profit.
Full Story at Economist.com
John John Baldoni writes on CBS.com.
Enter Sergio Marchionne. With Fiat was on the brink of solvency in 2004, Marchionne was named CEO and completely revamped the enterprise. He would later do the same at Chrysler. As Clark writes: “Marchionne’s unusual ability is that he can see what actually needs to be done, and then cajoles and goads his flat management structure of dozens of direct reports in weekend meetings to achieve the goal.” “Marchionne doesn’t let go,” A UBS analyst adds. “That’s what his strength is. He is good at strategy and at execution.” Under Marchionne, both Fiat and Chrysler have turned the corner (at least for now).
The balance between vision and execution is akin to right- and left-brain thinking. A visionary thinks about what can happen. He or she has a highly specific vision of the future—and not simply as a set of desired outcomes, but rather in terms of what must occur to produce those outcomes. By contrast, executing the vision requires putting the right people in place and providing them with the necessary resources to succeed. It also means holding people’s feet to the fire. Marchionne is known for firing people who aren’t up to the task. It’s never pleasant, but it is imperative.
Read Full Article on CBSnews.com
The leaders of Blackberry did not realized that the iPhone was a real threat until their marketshare had been decimated. The smartphone market is moving so fast that leaders quickly quickly becomes losers because the cannot change quickly enough. The NY Times reports today:
At the time the first iPhone appeared in 2008, RIM had successfully moved the BlackBerry into the broad consumer market from its base of government and corporate customers. But the company was totally unprepared for the popularity of a phone that lacked a physical keyboard and ran thousands of applications — in effect a versatile Web-connected handheld computer.
RIM’s co-chief executives were initially dismissive of the challenge from Apple, and Mr. Balsillie boasted that the iPhone would enhance RIM’s fortunes by increasing awareness of smartphones.
But the iPhone introduced two broad changes to the smartphone market that had severe consequences for RIM and other phone makers, including Nokia.
The iPhone and its apps shifted the emphasis from hardware to software. Then, the iPhone’s popularity led corporate information technology departments, which once allowed only BlackBerrys to connect to their e-mail networks, to support employees’ iPhones. The arrival of Android-based phones from a variety of manufacturers only compounded RIM’s woes.
Read full story here.
Related: The New Yorker on BlackBerry’s troubles.
Click on “More” for an video message of the new CEO to employees.
Economist’s commentary behind the reasons of Chapter 11 filing.
The WSJ reports:
ROCHESTER, N.Y—After three decades of serial reorganizations, Eastman Kodak Co. is struggling to stay in the picture.
The 131-year-old company lost much of its film business to foreign competitors, then mishandled the transition to digital cameras. Now it is quickly burning through its cash as it remakes itself into a company that sells printers and ink.
On July 26, Kodak reported its fifth consecutive quarter of losses. The company’s junk-rated debt coming due in two years has moved below 80 cents on the dollar, signaling the market sees a risk of default. The company’s already battered stock has taken an especially tough pounding in recent days, falling 10% Wednesday to $1.77. Prior to this week, Kodak hadn’t closed below $2 since the 1950s, according to the Center for Research in Security Prices at the University of Chicago.
Feb 1, 2012: Wharton Professors comment on the demise of Kodak. What’s Wrong with This Picture: Kodak’s 30-year Slide into Bankruptcy
May 2, 2012: John Kotter traces to failure of Kodak to complacency that set in even before the digital revolution. Read Barriers to Change: The Real Reason Behind the Kodak Downfall
Nokia is in trouble. The CEO realized that to win time before new phones based on Microsoft Operating system are coming out, he needs to win back confidence of key stakeholders. It will be fascinating to watch whether Nokia will be able to stem the market share loss. Clearly, the CEO understands the urgency of the situation and his communication strategy seems to be on target. Read the full article about Nokia’s new N9 smartphone on NYTimes.com. Click on more to find stats on how Nokia is losing market share.
This fascinating excerpt from Bob Lutz’s book highlights a couple of key issues: one needs to have deep knowledge about an industry to make the right decisions, one needs to select the right leadership style for the organizational context, and finally if one wants to have a long last impact, one needs to institutionalize the change. The reason why Lutz failed to institutionalize is product develop process at Chrysler but believes that it will stick may have nothing to do with him: GM went through bankruptcy and the old ways may have been forced to retreat.
A few days later Lutz was interviewed about the book and the article by the WSJ. Click on