Changing Corporate Cultures: The Bad, the Ugly and the Good: Part 3

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The Good

There are many examples of organisations experiencing and overcoming great crises, to become very successful, well-known and reputable organisations. Some of them are listed below.

Apple was founded in 1976 to develop and sell personal computers. For many years, Microsoft continued to gain market share with Windows by focusing on delivering software to cheap commodity personal computers, while Apple was delivering a richly engineered but expensive experience. Apple relied on high profit margins and estranged many customers who could no longer afford their high priced products. Apple also experimented with various other unsuccessful consumer targeted products during the 1990s.

Steve Jobs was brought back as advisor in 1997 and ultimately CEO – he began restructuring the company’s product line and worked collaboratively with Jonathan Ive to rebuild the company’s status. In the following years, Apple introduced a new all-in-one computer (the iMac), the iPod and the iPhone, and the iTunes store. All of these products became phenomenally successful. Between early 2003 and October 2010 Apple shares went up from around $6 a share to over $300. Apple’s resurrection is seen by many as the most profound business comeback in the last few decades.

IBM had a powerful reputation and extraordinary success in the 1960s and 1970s. It dominated the IT industry until the early 1990’s. Then it underwent a major crisis, and was in danger of becoming extinct. By 1994, IBM had lost almost $16 billion due to the changing dynamics in the IT Industry. This was attributed to its elephantine size, an individualistic corporate culture and inability to integrate the business to offer a suite of appropriate solutions to its clients.

Over the next decade, Lou Gerstner (who became the new CEO) showed that even elephants could dance. “Transformation of an enterprise begins with a sense of crisis or urgency,” he stated. “No institution will go through fundamental change unless it believes it is in deep trouble and needs to do something different to survive.”

Gerstner saw the need for integrating the company as a team, common technical standards, and a culture focusing on client needs and performance. While Gerstner initially didn’t see culture as significant, he subsequently stated, “The thing I have learned at IBM is that culture is everything.”

General Motors once the world’s most respected carmaker, faced disaster in 2007 when it sacked tens of thousands of workers and filed for bankruptcy. The government bailed it out and just a year later, GM regained profitability. After trimming costs and killing struggling divisions, it raised $20 billion by going public again. By the end of 2013, the government sold off the last of its GM shares – the end result was an incredible turnaround which saved around 1.2 million jobs.

Delta evolved from a fleet of crop-dusting biplanes into one of the USA’s biggest airlines. Squeezed by higher fuel prices and increased competition, it filed for bankruptcy in the mid-2000s. It then renegotiated union contracts and expanded its fleet with used planes rather than new ones, and implemented other strategies. Delta merged with Northwest Airlines in 2008 to subsequently become the world’s largest airline.

Lego suffered in the 1990s because of the rise of video games and other competition, and in 1998, made a loss for the first time. In 2004, Jørgen Vig Knudstorp became CEO, cut costs and introduced some lines which became very successful. Lego was recently the world’s most profitable toymaker and in 2015, replaced Ferrari as Brand Finance’s “world’s most powerful brand.”

There are many other examples of such dramatic turnarounds. A common theme is the crisis and threat of extinction due to changing markets, technology and competition, and sometimes poor leadership. The turnaround then typically occurs with a new and visionary CEO (such as Steve Jobs and Lou Gerstner), who makes drastic changes, foresees future market needs, and implements successful far-reaching strategies. Such CEOs also recognise the need for ensuring corporate cultural change that will align with the organisation’s new vision, values and strategies. These case studies reinforce the critical importance of leadership. Of course, leadership is vital at all levels in the organisation – the CEO cannot do it alone.

Narayan van de Graaff

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