P25 Innovation’s Greatest Company Turnarounds Part One.
“Welcome to the Proven, Practical, Profitable Innovation podcast! I am Richard and I thank you very much for taking time out of your busy day to listen to this podcast.
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Information in this podcast focuses on some of the biggest company turnarounds in recent history and the role that innovation played in those turnarounds. In part one you’ll learn the dramatic stories of Netflix, Disney animation and Pabst blue ribbon beer. As you will see, innovation can come in many forms – new products, new business model, new target customers, and new mediums to name a few.
If after listening to this podcast you feel a need for more help, please contact me directly—my email is richard@i2ge.com. You can also go to my website—i2ge.com– where you can explore many innovation topics, especially check out the DIY Innovation Training on the menu bar. We customize all the training programs to our clients’ unique needs and circumstances.
Here are some thoughts on the major company turnarounds and the role that innovation played in these turnarounds.
Today Netflix seems to be an unqualified success. They are growing subscribers worldwide. Some recent research suggests that as much as 40% of the audience that the major networks have lost recently traces to people moving to Netflix.
That is not always been the case. When they started they were a distant second to blockbuster video. Blockbuster had thousands of retail stores all around the country, especially near the suburbs and families. Netflix was at a serious disadvantage since its primary form of distribution was the mail which had a serious time delay versus getting in your car and driving down to your local Blockbuster. Despite this, Netflix experience growth in its DVD by mail business model.
But as we know, the media world changes rapidly. Early on Netflix was far more nimble than blockbuster in realizing the world would eventually moved to streaming media content online. In fact, Blockbuster was so slow to react to an obvious trend that they are now essentially out of business.
But all has not been roses for Netflix. Netflix had serious challenges getting movie studios and television networks to allow them to show their programming. This was putting Netflix in a serious and precarious business situation – Accounts Payable climbed 218% in one year to $435 million.
Netflix also knew that competition like Hulu and Amazon were also showing much of the same content. Netflix needed a competitive advantage.
Netflix innovated its business model when they decided to get into the studio business of creating great content – often referred to as backward business integration.
Netflix now has award-winning original content like House of Cards, Orange Is the New Black, and many others. Netflix has added millions of new subscribers, cut the number of subscribers who quit, and seen its stock price hit new highs.
You’ll recall in the science of persuasion podcasts, we talked about how much a dramatic difference versus your competition can dramatically increase your chances for success. This is a perfect example – you could only get the great programming of House of Cards and Orange is the New Black on Netflix.
The major innovation – create differentiation with proprietary, award-winning original content. In doing this, Netflix is known for giving studios and writers great artistic freedom which seems to be paying off in great programming.
In the critical business facts confirm Netflix’s turnaround. Subscribers have grown from 33,000,000 to 57.4 million. Revenue increased from $3.6 billion to $5.5 billion and not surprisingly the stock prices up almost 400%.
A quick cautionary note – Netflix’s history has been a bit of a roller coaster. They need to stay observant and nimble to remain relevant in what is still a rapidly changing media world. They’ve taken a potentially big step forward and staying relevant and vibrant by acquiring the right to air five new Marvel series.
Disney animation.
For decades Disney animation was synonymous with animation. If there was an animation hit like Cinderella all the way up to the Lion King, it had to come from Disney.
Unfortunately for Disney they had duds like Hercules and Fantasia 2000, which seriously questioned their animation abilities. These failures in the early 2000s resulted in a major downsizing. Despite numerous leaders and efforts, the inspiration of Walt Disney the founder did not revitalize this long-term stellar capability.
Most companies when faced with a situation like this let their pride and arrogance blind them to the best way to move forward. And if there was ever a high potential for a high level of pride and arrogance it was Disney animation – for so long they were the one and only.
Fortunately for Disney they demonstrated out-of-the-box thinking. In 2006 they acquired Pixar and the creative talents of John Lasseter. The industry had moved beyond artist doing drawings to high-end technology driving animation. Instead of trying to internally develop this capability, Disney leadership made the decision to acquire the proven high-end technology and creativity of Pixar.
In a major business, especially a creative business, there has probably never been a bigger turn around. Today the studio has roared back with major successes like Tangled and the all time dominating animation success – Frozen.
There are a couple of important innovation lessons here. First, pride and arrogance are often major enemies of innovation. Disney is one of the few companies that demonstrated the ability to swallow their pride and take bold action. Second, when they made the decision to acquire, they acquired the very best technology and creative talent with Pixar. Many companies would try to acquire all of this on the cheap, but not Disney. The transformation and rejuvenation of this important Disney business is one of the most impressive turnarounds in recent business history.
Again, this is an example of the power of a dramatic difference that we talked about in the science of persuasion podcasts. Disney made a bold and dramatic improvement that greatly enhanced their success.
Pabst Blue Ribbon.
Yes, this is a beer brand, and may be one you’re not familiar with because it’s peak sales were decades ago. In the United States with mega brands like Budweiser, Miller, and Coors, Pabst Blue Ribbon experienced long-term declines from its peak when 8-track cassettes were popular.
The lessons of innovation are that if you want to turn around a business like this you need to question everything that you’re doing and be willing to do the opposite of what has been right for the brand for decades. Most brands are not capable of this dramatic, out-of-the-box thinking.
Pabst started by doing research. In the very few places they still had a strong business, they discovered a startling fact – young people were driving their business success. These are people that never knew the brand when it was even a strong fourth-place brand. What they discovered were young people liked it because it was the anti-Budweiser – no-frills, lack of cheesy advertising and affordable.
When the business bottomed out in 2001, the company hired a 27-year-old CEO. The new leadership went all in on building a younger consumer base. They sponsored cool events and maintained the integrity of the image their younger customers loved.
The results are impressive – since 2001 national sales have grown by 165%.
There are a couple of important insights and lessons that drove innovation in this case. First, understand who your biggest and most enthusiastic group of consumers is. Then learn why they are so enthusiastic. Let your consumers teach you and lead the way to a better place. Second, when you’ve confirmed your insights and understandings, go all in. Major innovation requires major effort to be successful. You can’t tiptoe to success – you need to charge forward with everything you’ve got. Put another way, like Pabst, you need to go all in.
Ongoing close.
What you can do today with this information. First, like Netflix recognize the power of being the only one who provides benefits that customers want—they provided unique and highly desirable content like House of Card. Second, Disney did not let their pride get in the way of saying the old ways are no longer working and we need to take bold, out of the box action. Third, Pabst learned startling information from its most enthusiastic customers. With that information that went all in to produce dramatic sales increases.
If you would like to see the key written points from this podcast, you can find them in my blog – i2ge.com/blog.
If you would like to contact me, please email me at richard@i2ge.com.
If you would like to create far more robust innovation capabilities within your business, I have a complete portfolio of training programs that we tailor to your unique needs. If you would like to learn more, go to the Innovate2Grow Experts website – i2Ge.com and click on DIY Innovation Training.
One of my six books is Proven Practical Innovation That Delivers Results. This very low-cost book is available at Amazon in paperback and has a Kindle book. Is truly packed with lots of practical help.
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A preview of some future podcast.
Upcoming podcast focus on specific case studies with broadly relevant innovation insights.
The next podcast shares part two of some of the biggest business comebacks of the last five years and the major role that innovation played in those turnarounds. As usual, the lessons from these turnarounds can help you immediately to either turn your business around or take proactive action so that you will not be faced with the need of a turnaround.
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Thank you very much for your time and I look forward to reconnecting with you soon. Please have a great day.
