CORPORATE VIEW

Five business strategy changes – and why they worked

Disruption is nothing new for companies. These inspiring stories show why there’s always a way back from the brink.
Lego

Lego rebuilds

Why was change needed?

The Danish plastic brick company seems to have been a ubiquitous presence from our own childhoods to those of our offspring. But it hasn’t all been plain sailing: by the early 2000s Lego was wobbling: sales fell 30% in 2003. Frantic attempts at diversification into video games and theme parks – advocated by an expensive army of consultants – simply accelerated its cash burn: the company was facing a real risk of bankruptcy.

How did it change its business strategy?

Lego’s problem was never a lack of innovation – by 2003 it was generating more new ideas than ever before. However, many of those ideas were unfocused as Brick by Brick author David Robertson notes. Lego sold a majority stake in its theme parks, where it had no expertise, and cut costs by moving manufacturing to lower cost locations and slimming down the number of brick types produced. Most importantly it engaged with Lego consumers and invested significantly to improve its understanding of how kids play (including funding the world’s first professor of play at Cambridge University). The result has been a burst of targeted creativity that has stayed true to Lego’s core values and made the company one of the world’s most valuable brands, paving the way for recent smash hits The Lego Movie and The Lego Batman Movie.


Apple

Growing a new Apple

Why was change needed?

Apple spent the 1980s as the world’s coolest underdog: its stylishly designed Apple Macs and slick operating system outclassed beige IBM clones but, largely because of their high price, failed to compete in terms of market share. In 1985, Apple’s legendary co-founder Steve Jobs was forced out following a boardroom spat and the company began a steep creative and sales decline.

How did it change its business strategy?

In 1996, a troubled Apple acquired Jobs’ company NeXT and he returned as CEO the following year. After shoring up Apple with a $150 million investment from arch rival Microsoft and a commitment from the software giant to continue to develop Microsoft Office for the Mac, Jobs set about reinventing the computing world with the iMac, iTunes, the iPod and the iPhone; all of which prized simplicity and elegance. Most importantly, in July 2008 Apple launched the App Store, introducing third-party app development and distribution to the platform, creating value for developers ($70 billion in revenue by June 2017) and reinforcing the strength of Apple’s products for consumers. By 2010, Apple had overtaken Microsoft in market value and by 2016 it had become the most valuable publicly traded company of all time. 


General Electric

The GE legend

Why was change needed?

General Electric was by no means a failure when Jack Welch took over in 1981 but the household name’s growth was slowing, it was huge, enormously complex and incredibly bureaucratic in its decision making. As a sprawling industrial conglomerate, it faced increasing competition from multiple sides: something had to give.

How did it change its business strategy?

Welch became GE's youngest-ever chairman and CEO and set about changing almost everything about how the company operated. His famous straight-talking, down-to-earth style cut a swathe through GE’s bureaucratic inertia and planning regime, according to Jacked Up by Bill Lane. In practical terms, Welch made massive job cuts – a quarter of the workforce went in his first four years – sold off businesses where GE wasn’t number one or two in the market and removed 29 layers of hierarchy within the company: he fired the bottom 10% of managers every year and rewarded the top 20%. The results bore spectacular fruit, with GE’s share price increasing 50 times between 1981 and 2001 and revenues growing from $26.8 billion in 1980 to $130 billion in 2000, the year before he left.


Burberry

Burberry goes back to its roots

Why was change needed?

Burberry wasa storied British brand that invented the Gabardine waterproof trench coat, supplied Ernest Shackleton’s Antarctic adventures and dressed royalty. By the 1990s, however, the company had licenced its iconic check pattern to dozens of manufacturers: a large part of the brand’s glamour had been diluted by novelties such as Burberry dog coats (and counterfeit scarves). To make matters worse, the Burberry check came to be associated with football hooliganism: it looked like a brand without a future.

How did it change its business strategy?

Burberry’s turnaround took it back to its roots by reining in license agreements that devalued the brand, emphasising heritage and placing a greater priority on quality. Old favourites such as the legendary raincoat were redesigned while use of the ubiquitous check pattern was dramatically scaled back. Crucially, design was centralised so that every market was selling the same high quality products and reinforcing the brand’s values: salespeople were completely retrained so they could communicate why Burberry was special. At the same time, the company grasped the potential of social media and rapidly growing markets such as China and millennials. The result is that Burberry is now financially robust and is recognised for its style; recently it has even managed to reintroduce its famous check, now rehabilitated through limited exposure.


Vivendi

Fine tuning Vivendi

Why was change needed?

Vivendi’s transformation from a French water utility into a global entertainment business following a series of spectacular acquisitions, including Universal Studios, in the late 1990s and early 2000s was an archetypal example of business hubris turning to nemesis. By 2003, the company was almost bankrupt and faced a series of lawsuits from shareholders and business partners.

How did it change its business strategy?

Under Jean-René Fourtouand (from 2005) his successor Jean-Bernard Levy – Vivendi set about selling off many of its acquired businesses, including Universal Pictures (the music business was retained and EMI was later added to Vivendi’s stable). By the end of Levy tenure (he stepped down in 2012 over a disagreement about strategy) Vivendi was focused on the music industry, European TV company Canal Plus, and video game publisher Activision Blizzard. While there have been further subsequent changes, Levy took the company back from near-collapse and set it on track to a stronger future.

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