People get sick, and back in the Middle Ages they use leeches and razors until they get better (it’s once again really happy that you weren’t alive in the Middle Ages). This practice did not work well – yet if we look at what we do to sick divisions and companies, it is effectively the same thing. We cut investments, cut salaries, lay off, and cut marketing expenses and then fascinate when firms don’t recover.
I completed a review of the Lenovo acquisition of the IBM x86 server division, which IBM thought was unbelievable – as it thought its PC company was unforgivable – and damned if Lenovo didn’t fix it. To me, this suggests that firms have a more efficient way of recovering, giving them a good chance of turning them around rather than just making them sick.
I’ll share some thoughts on that and close with my product of the week: an interesting online service that allows people to gather around initiatives they believe in and bribe companies to do the right thing. My column is on fixing companies, but these kinds of activities can help fix the world.
Apple for Samsung: What makes companies
If you look at Apple now, it’s hard to remember that it was on death watch in the 1990s. It was burning cash at an impressive rate, burned through most of its loyal customer base, and seems to have lost its reason for being. Apple was a company that was impossible to fix until Jobs returned and turned it into a company that was impossible to beat.
Apple’s latest quarter was the first quarter when its performance was directly attributed to Tim Cook’s strategy, and reflected that he could actually make it better than Apple when jobs were there – at least from a financial performance standpoint. .
What often happens at the core of a failed company or division is an obvious mistake. The firm loses track of what it wants to its customers (Apple, Palm, etc.), the industry moves and the company does not run with it (Yahoo, Netscape), or executives cannot execute (Fiorena’s HP) .
Instead of trying to understand and then fix the problem, are officials generally trying to get out of the problem due to a growing nervousness that Intel’s Andy Grove clearly stated does not work. It amazes me how layoffs happen, which cause tremendous additional damage to a company, making it seem like it was used as a common miracle cure (like bloodshed was in the Middle Ages).
Of course, the textbook stupid trick, if sales decline, is to cut marketing, which is the company’s demand-production engine. If the plane is not flying fast it is like dumping your gas. Granted, the plane can go really fast, but the direction (below) can be problematic.
So a firm loses its way, and early improvements appear tied to activities that make the company weak – not on understanding the problem and solving the solution that will actually make the company well and successful again .
Steve Jobs and IBM-Lenovo
Jobs’ turnaround was a matter of correcting. Yes, they cut the firm, but only after keeping a close watch on it. In addition, he aggressively went after additional funds to strengthen the firm at the same time. Recall that he received US $ 100M from Bill Gates which opened the flood doors for additional investment.
Jobs didn’t cut the working division much – he triaged. They stopped making cameras, PDAs, printers and corporate PCs, to ensure that they had the resources to fix consumer PCs. Apple recovered and then kicked everyone’s butt. This does not happen often, but what if this process can be institutionalized?
Lenovo actually appears to undercut this process, and what makes it even more interesting is the only effort, with Ashton Kutcher, to recreate the Steve Jobs product advocacy model. I am thrilled by the number of officers who admire what Jobs did and then do everything they can to avoid doing so.
When Lenovo took over the PC company, it did not cut it. Instead, it provided resources and eliminated a lot of things that were killing the division. Lenovo is now the worldwide PC market leader.
I was briefed on the change of IBM x86 server business last week, and it appears to be going down the same path. Lenovo analyzed the problems, fixed them (most occurred because the partition was buried at IBM), and the end result is that it is far more agile and capable.
Indemnity models were fixed, and replaced as a cobbler by legal impediment. Lenovo gained cleaner command and control, tight customer focus, overcome product conflicts, a much better supply chain, growing economies of scale, and a more nurturing corporate environment. Oh – and it gave a broad push to simplify the business, removing almost all unnecessary complexity.