P26 Innovation’s Greatest Company Turnarounds Part Two.
“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.
My goal is to make sure you get a high return on your time investment listening to this podcast. I want you to immediately be able to use the information in this podcast to help you sell more and make more.
Please be sure to listen to the end of this podcast where I give you an exciting preview of future podcasts.
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 Marvel and Nintendo. 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.
Marvel’s story has some elements that are similar to the Pabst blue ribbon beer story in the previous podcast. Namely, it was a very big and popular business that declined dramatically before being rejuvenated through dramatic moves.
In case you’re not aware, Marvel is where Spiderman, Capt. America and other action hero characters originated and prospered. They originally prospered as comic book heroes. Comic books in the mid-1900s were very popular and a great business to be in. Unfortunately for Marvel, by the mid-1990s the comic book business crashed. Marvel went broke and no superheroes could stave off bankruptcy.
In July 1999 Marvel came out of bankruptcy but was a skeleton of its former self. In 2000, it found itself with only $3 million in the bank – barely enough to cover their needs, only 250 employees and a stock price of $.96 per share. The new CEO had a three-year turnaround plan that he said would be completed by 2002.
One of the first steps was to change the business model and to rely more on licensing of their superhero properties. This immediately improved their finances. They moved into video games, which quickly became their second-largest merchandise contributor after toys. They even grew their comic book market share from 25% in 1999 to about 50% today.
When the first part of the turnaround was completed in 2002, they made a number of other important and eventually very successful decisions. They expanded internationally. They produced animated television shows as a way of keeping their superheroes available to their audience every week. Lastly they launched their own in-house movie studio in 2005. Their first films were Iron Man and the Incredible Hulk.
By 2009, they had unquestionably hot properties and dramatic success. This caught the eye of Disney who purchased them for $4.3 billion late in 2009.
Marvel is the story of a company that was on life support and barely worth anything to becoming one of the hottest movie companies that commanded a valuation over $4 billion.
There is a theme that is developing in many of these business turnaround stories. It takes bold, dramatic changes to turn a company around. As this story illustrates, it often requires dramatic changes in multiple dimensions. In the case are Marvel, innovation was brought to the business model – licensing and entering entirely new businesses – television and movies. Again, recalling the importance of dramatic differences in the science of persuasion, when you create the kind of dramatic differences that Marvel did – movies, video games, international presence – you have the potential power to dramatically increase your chances for success. In Marvel’s case they fully realized the power of this potential.
Nintendo
Nintendo is another turnaround story about a company that was hot only to fall on hard times when major competitors introduced products that were dramatically better than theirs.
The company dominated the videogame business in the 1980s and 1990s. Will anyone ever forget ubiquitous Game Boy?
Then Sony and Microsoft launched the PS2 and Xbox. With both hardware and software these two companies leapt ahead of Nintendo.
Nintendo fell on hard times, but responded rather quickly with the innovative Wii. This innovative hardware and software enabled a new level of personal interactivity that its competitors initially did not have. It subsequently expanded with products like Wii U, Nintendo 3DS XL and 2DS. The 3DS XL had innovative super stable 3-D plus a face tracking feature that uses the system’s inner cameras to adjust images based on the viewing angle.
Again, these were all significant innovations that on certain key dimensions made them dramatically better than their competition. We again see the importance of being dramatically better if you want to turn a business around.
This is not been an absolutely smooth and flawless turnaround. Nintendo like all of its competitors knows that software drives hardware sales in this business. There have been times when Nintendo do not have fully competitive software programs soon enough.
Having said that, they now pretty much have their act together and the financial results show it. As I write this, first half results of 2014 show that total hardware sales are up 60%. Total software sales are up 135% versus previous year. By any measure, these are dramatic improvements.
When it comes to innovation, there are multiple lessons to be learned here. First, Nintendo got into trouble because they didn’t have a strong ongoing innovation program even though they knew they had potential major competitors like Sony and Microsoft. In rapidly changing businesses like this, an exceptionally strong internal innovation program is critical to long-term success. Second, when their innovative products were introduced, they were dramatically better on some important dimensions. If there’s a drum that I’m beating in this series it is that dramatic differences are needed to turn a business around and/or to get competitive customers to switch to your product. We know from the science of persuasion that when you do this you can dramatically increase your chances for success.
Ongoing close.
In these two case studies we’ve seen some strong examples of bold, dramatic innovation making a big difference. Marvel started their rebound by licensing their products to reduce capital costs and increase cash flow. They found powerful ways to extend their superhero properties from one medium –, which printed on paper – to another powerful medium – action hero movies. With Nintendo we see the importance of having an ongoing innovation program so that major moves by competitors don’t cause major business distress. When it does happen, the company needs to realize that a me to product response is doomed to failure. Unique products that are dramatically better on at least some very important dimensions greatly increase your chances for success – just as the science of persuasion tells us.
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.
Importantly, if you found this podcast helpful, please consider helping us with a five-star rating for these podcast. Thank you in advance for your support.
A preview of some future podcast.
There is been a tremendous amount in the news recently about innovation. There are some great things going on that I believe can help almost everyone is listening to sell more and make more. So the next series a podcast will focus on some of this late breaking and very interesting news.
The immediate next podcast focuses on innovation that Google is bringing to the workplace. Yes what they’re doing is important for the workplace, but as you will see it is far, far more important for its contribution to creating a highly productive and highly innovative working environment and company culture. I hope you will join us for this provocative exploration of what one of our most innovative companies is doing today.
Thank you very much for your time and I look forward to reconnecting with you soon. Please have a great day.
