Standing still isn’t an option if you want to remain in business. Often the solution is evolution, but sometimes something much more radical is required.
It was celebrated management theorist Peter Drucker who famously declared that companies must ‘innovate or die’ (many of his other quotes are equally direct). But finding better ways to do things or new and more attractive products, perhaps even diversifying into new territory, can not only ensure survival, it can also drive a business on to even greater success.
When things aren’t going well, being an innovator can be a challenge, but it can be done. Sometimes difficulty can create opportunity.
Cutting losses and making partnerships: Apple
Global heavyweights that have used innovation to transform their fortunes include Apple. In the late 1990s, it was a PC maker with limited market share on the verge of bankruptcy. Microsoft’s 1997 $150m investment helped reverse the downward spiral, but so did Steve Jobs’s decision to give up on an advanced project (Newton) whose costs were spiralling. Within a few years Apple diversified to became a consumer electronics and media sales giant, first enabled by launching the iPod in 2001 and iTunes in 2003, the iPhone followed in June 2007.
According to Apple CEO Tim Cook in October this year, ‘Fiscal 2015 was Apple’s most successful year ever, with revenue growing 28 per cent to nearly $234bn. This continued success is the result of our commitment to making the best, most innovative products on earth, and it’s a testament to tremendous execution by our teams.’
Adapting to market shifts: LEGO
Such is the huge popularity of LEGO, it’s hard to believe that the famous Billund-based interlocking plastic brick maker has ever experienced tough times. Yet in 1998, according to Fast Company, LEGO lost money for the first time. ‘Then Jørgen Vig Knudstorp stepped in as CEO in 2004,’ who ‘cut costs and introduced soon-to-be-popular Lego lines like Ninjago. By 2013, Lego was the world’s most profitable toymaker.’ In 2014, Lego Group sales grew by 15 per cent, with net profit of DKK7bn (£660m) compared to DKK6.1bn in 2013. More than 85m children across the world played with LEGO during 2014.
Reputation management: Burberry
Thomas Burberry, a 21-year-old dressmaker, founded British luxury fashion house Burberry in Basingstoke in 1856. According to the Guardian, ‘Just over 10 years ago, Burberry’s famous check design was banned in pubs and clubs from Aberdeen to Leicester for its association with hooliganism. Today, the company boasts brand ambassadors including Emma Watson and Cara Delevingne.’
Fast Company credits ‘two American executives with reviving the British brand: Rose Marie Bravo and Angela Ahrendts. As CEO from 1997 to 2005, Bravo brought in designer Christopher Bailey’ and success was ensured by ‘deftly blending updates of the old (that traditional trench coat, that familiar check) with an embrace of the new (social media, aggressive China strategy). That led to an unprecedented resurrection, record financial results, and acclaim for a fashion house that is once again a luxury trendsetter.’ Selling from almost 500 Burberry outlets and with more than 10,000 employees, the company’s annual revenue to 31 March 2014 was £2.3bn.
Phoenix from the flames: ASOS
British online fashion and beauty store ASOS.com (it’s an acronym of As Seen On Screen) was founded in 2000. The business grew to a point where it was making some £200,000 in sales every day, but disaster struck in 2005, when the business had to close for six weeks at what would have been its busiest time of the year following the Buncefield Fuel Depot explosion in Hertfordshire, with £5m of stock destroyed.
In the eight years that followed, ASOS introduced free shipping, launched its own magazine and diversified into menswear. ASOS.com is now the ‘second most visited fashion website on the planet’ and its revenue in 2015 was £1,150.8m (an 18 per cent increase on 2014), with gross profit of £574.8m (an increase of 19 per cent on 2014).