If corporate America needs a role model about reinvention, it should turn to Madonna.
Although the pop superstar is not as wealthy as Warren Buffett and might think QE2 is a luxurious cruise ship, she knows plenty about transforming her image to appeal to the ever-changing tastes of pop music fans. She even called her sixth world tour “The Re-Invention Tour.” Madonna’s strategy has enabled her to sell millions of albums and last for decades in a business that chews up and spits out acts at an alarming speed
Reinvention is difficult for pop stars and politicians alike, but it’s especially difficult for corporations, which spend tens of millions of dollars trying to convey a certain image to the public. If that message no longer resonates, it’s difficult to find a new strategy that works, particularly when economic times are tough. But companies eventually must innovate if they are to survive. This requires a willingness to take big risks and make big changes for a potential big payout.
Sometimes, companies make a change so massive that it alters the DNA of the companies involved. Here are three companies that have survived …IBM
When Louis Gerstner became CEO of IBM (NYSE:IBM) in 1993, he was shocked by the poor state of the company. Big Blue had become complacent, suffocated by a stodgy, paternalistic culture. Businesses were run like personal fiefdoms, meaning that one end of the Armonk, N.Y.-based company didn’t know what the other end was doing, The results were chaos.
“An internal company study had revealed that Big Blue had failed to capture value from 29 separate technologies and businesses that the company had developed,” according to a study published last year by the Stanford Graduate School of Business.
One reason why so many promising technologies, including Internet routers (Cisco) and MS-DOS (Microsoft), passed the company by was that IBM executives were so focused on reaching short-term goals that they missed the bigger picture. Gerstner orchestrated a massive overhaul to change IBM’s culture by laying off thousands and unloading poorly performing assets.
After Gerstner retired in 2002, the changes continued. In 2004, IBM unload its PC unit to China’s Lenovo Group for $1.75 billion and took a minority stake in the joint venture running the business. This allowed IBM to focus on more profitable business customers. It turned out to be the correct move.
Wall Street has rewarded IBM’s shareholders handsomely. Its shares have more than doubled during the past five years.
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