Desperately Seeking WOW
Recently, some painful examples from global companies illustrate what business has to do during the limited twilight period when bright business conditions transition to dark and stormy. In my experience in a turnaround, the faster you stabilize the business in some way during the twilight period, the more time you have to figure out the next move, and vice versa.
Examples from both Avon and Nokia tell a story of the twilight period that exits between growth and decline. Both of these companies have failed thus far to both grab ahold of their business conditions during twilight and find a strategy to kick-start growth. Let’s look first at the situation today at Avon.
The shares for Avon Products Inc. fell almost 22 percent in the third quarter of 2013 after the company reported a net loss of $5.5 million and a 7% decline in global sales. The business continues to struggle in the U.S., with revenue sliding 19 percent.
The new Avon CEO has been crisscrossing the globe for the past year and half to work on a turnaround. The outcome of this effort seems to be a shift from global to local, in the familiar swing of the strategic pendulum, to centralize strategy but decentralize execution to better connect locally. For example, in the new strategy they plan to have the same Avon product and advertising around the world, but use local celebrities from the markets instead of an international celebrity. Not exactly a WOW idea. Prior to the earnings report CEO Sheri McCoy told Wall Street analysts, “We want to stabilize the business by taking a more evolutionary approach to changes.” Management believes they are headed in the right direction and making course corrections along the way. However, the third quarter earnings indicate twilight is almost over at Avon and in the absence of a more meaningful strategy, the dark reaction from analysts will soon dominate to bring about the necessary changes they are not getting from current management. A year and a half is simply too long to demonstrate a WOW strategy to turnaround the business.
Turning now to Nokia, a few more people should have stayed up at night, around this time last year, to fret about the incremental growth they were experiencing in 2012 on their mobile devices sales. Despite the promise of their 2013 marketing plan, what unfolded was much more than a “speed bump”. In the face of competition from Apple and Google, their handheld device sales sped off of a cliff into double-digit decline, each agonizing quarter at a time. One has to wonder if they thought they were too big to fail, because even today they remain the biggest manufacturer of hand- held devices. Twilight passed at Nokia and now their shareholders have recently voted to sell its devices and services unit to Microsoft for the bargain price of $7.34 billion based on today’s conversion rates. In other words, we can’t figure out a WOW strategy against Google and Apple, so maybe Microsoft can. Really?
The following video offers a point of view on what the Microsoft partnership may mean for rescuing Nokia:
So what can we learn from these two cautionary stories about the importance of prescient thinking and action when twilight arrives? The point is that the period of twilight must first be recognized and then acted upon to course correct the trajectory the business is on. WOW as a concept packs the significant energy necessary to change directions and drive to a meaningful new target. Everyone on the team should be looking for the constellation of strategy and action ( it is not just one thing) that will result in jumping the track the business is on and setting off in a new direction. The WOW reaction you should get from important stakeholders is based on the “potential” unleashed in the new strategy to bring about a more financially attractive outcome. Anything short of that means the business will run its course only to be resolved either by outside forces bringing about change, as we will no doubt see at Avon, or throwing your arms up in the air like a drowning man, as is the case at Nokia.
Here are some other points to consider when twilight arrives:
- Ban the use of words such as “incremental” and “evolutionary” in the dialogue and replace them with words like “disruptive change” and “wowing customers”. It will communicate that business as usual is over. Otherwise, the right mental models you need in the team will not be in place to pivot the business.
- The team must share their thinking with stakeholders and analysts in high definition formats to establish a rationale for the direction you are pursuing, or the experiments you have established to define the route forward. The goal should be to “paint a picture” of the difference you are trying to create and the timeline that it will follow so that expectations are reasonable.
- Seek external contributors and experts to broaden the perspective of the organization to avoid thinking from the inside out. Now is the time to think from the outside in. Deliberately reassess the fundamental basis on which your business competes.
- Get more creative than you have ever been before. Open up the boundaries of what you could do to explore those areas of growth that may have been outside of the current business model. You need to explore these innovative areas. The opportunities that open up in adjacencies and unmet customer needs may surprise you.
- Place some small bets quickly to learn and find the levers to stimulate a turnaround. Yes, this may be scary, but it is necessary because time is ticking away. Start with small experiments, led by some of your top talent. It will be some of the best live action learning they will ever get.
Every business struggles with decline from time to time and some are better than others at recognizing it. Just as self-awareness is a strategy for personal growth, it is also critical for business growth. Once the arrival of twilight is acknowledged, the company must move quickly to find a WOW strategy to transition out of the decline toward growth. When this doesn’t happen, both patience and time will run out, pressures move in against the weak position, and the consequences may be dire.
image credit:shocked goldfish image from bigstock
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Donna Sturgess is the President and Co-founder of Buyology Inc and former Global Head of Innovation for GlaxoSmithKline. She is also Executive in Residence at Carnegie Mellon University. Her latest book is Eyeballs Out: How To Step Into Another World, Discover New Ideas, and Make Your Business Thrive. Follow on Twitter: @donnasturgess
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