red giant syndrome - how to turn around a tech juggernaut on the verge of implosion

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How to turn around a tech juggernaut on the verge of implosion

By Peter Mortensen

Jump Associates, October 2012

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once mighty tech companies are speeding toward sudden irrelevance at an unprecedented pace.

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nokia’s revenue is off 15%.

2011 Revenue Growth: -15.7%2011 Net Income Growth: -64.8%

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Research in Motion’s revenue is down 8%.2011 Revenue Growth: -8.5%2011 Net Income Growth: -66.9%

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And Yahoo!’s “growth” is negative 16%.

2011 Revenue Growth: -16%2011 Net Income Growth: - 2.8%

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Given these numbers, and all the negative press, you’d thinkthese companies’ revenues were just 200 dollars last year.

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but YAHOO! HAD ALMOST $5 BILLION IN REVENUE IN 2011.2011 Revenue: $4.99 billion2011 Net Income: $1.1 billion

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rim pulled in nearly $17.8 billion in revenue in 2011.2011 Revenue: $17.8 billion2011 Net Income: $1.1 billion

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and NOKIA EARNED NEARLY $50 BILLION IN REVENUE IN 2011.2011 Revenue: $48.3 billion2011 Net Income: -$3.25 billion

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While the growth engines of these massive enterprises have run out of fuel, they continue to survive thanks to scale and inertia.

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They have become the business equivalent of Red Giants –stars that try to postpone their deaths by consuming all the planets around them. (This will happen to Earth, eventually.)

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Unless something changes, these companies will go nova –scattering patents, people, and profits as they go down.

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Unless something changes, these companies will go nova –scattering patents, people, and profits as they go down.

Understanding that you’re at risk of becoming a Red Giantdoesn’t stop it from happening.

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RIM treated touchscreens as a niche market, and accordinglyjust created one touch phone.(and a terrible one, at that.)

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Nokia took too long to select a next-generation OS.

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And Yahoo!’s acquisitions could have worked if it didn’t sit on them. ( flickr could have been Instagram, for example.)

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So what’s a CEO thrust into the position of leading a Red Giant to do?

Is the company doomed, or can a new direction help?

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Apple successfully grew its revenue from $9 billion in 1996 to over $100 billion in 2011.

1996Revenue: $9.8 billionNet Income: -$816 millionRevenue Growth: -11%Net Income Growth: -92%

2011Revenue: $108 billionNet Income: $25.9 billionRevenue Growth: 62.8%Net Income Growth: 97.5%

1996

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And IBM, with revenue at $64 Billion in 1991, successfully turned itself around by 2011, to rake in over $107 Billion.

1991Revenue: $64.5 billionNet Income: -$5 billionRevenue Growth: -1%Net Income Growth: -78%

2011Revenue: $107 billionNet Income: $15.9 billionRevenue Growth: 7%Net Income Growth: 7.5%

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How did Apple and IBM reverse course on the edge of extinction?

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Here are 3 leadership imperatives to save a Red Giant

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1. Figure out what makes you great and organize accordingly.

Here are 3 leadership imperatives to save a Red Giant

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1. Figure out what makes you great and organize accordingly.

Here are 3 leadership imperatives to save a Red Giant

2. Buy time to reinvent the business with incremental innovations.

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1. Figure out what makes you great and organize accordingly.

Here are 3 leadership imperatives to save a Red Giant

2. Buy time to reinvent the business with incremental innovations.

3. Place big bets on a few adjacent markets,then double-down until you hit.

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1. Figure out what makes you great and organize accordingly.

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Steve Jobs shut down everything outside of integrated hardwareand software.

IN: Beautifully integratedhardware and software

Apple’s mid-1998 product line

Out: everything else(all businesses killed in 1997 or 1998)

Business and Consumer printers

Newton StandaloneSoftware

Video Games Clones

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2. Buy time to reinvent the business with incremental innovations.

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Apple released the iMac in late1998 – it went on to become the fastest selling Mac ever built. It created good PR for the company until OS X could be launched in 2001.until OS X could be launched in 2001.

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Motorola released the RAZR in 2004 and it quickly became the company’s hottest phone ever. It restored Motorola as aninnovation leader.

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But, Motorola had no sequel, which allowed Samsung and others to grow until the iPhone lowered the boom.

Motorola released the RAZR in 2004 and it quickly became the company’s hottest phone ever. It restored Motorola as aninnovation leader.

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RIM released the Blackberry Curve in 2007. It was their first big consumer smartphone and actually outsold the iPhone for the first year on the market.

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This bought the company time to create and launch a proper response to the iPhone and Android, but RIM never did.

RIM released the Blackberry Curve in 2007. It was their first big consumer smartphone and actually outsold the iPhone for the first year on the market.

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3. Place big bets on a few adjacent markets,then double-down until you hit.

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Over time, IBM has entered a number of new businesses that have become its new core.

2011Hardware & SoftwareIT ConsultingBusiness ConsultingeBusiness b2b InternetIntegrated SolutionsVertical InternetBusiness IntelligencePwC AquisitionSmarter Planet InitiativesBig Data

1994Hardware & Software

2011

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1. Figure out what makes you great and organize accordingly.

2. Buy time to reinvent the business with incremental innovations.

3. Place big bets on a few adjacent markets,then double-down until you hit.

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Red Giants don’t have to end in death and destruction,they can also lead to reinvention.

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