Enduring success relies on the occasional bold, innovative, or even lucky move—a smart call that positions a company to grow, ideally by better serving its customers’ needs rather than just exploiting them.
J.C. Penney brings back sales
It’s questionable whether this or anything else will save the ailing midmarket department store, or indeed the very concept of the midmarket department store. But it’s clear that the company’s effort to reinvent itself under former Apple retail chief Ron Johnson as a slick, Wi-Fi-enabled, no-discounts shopping experience was a catastrophic flop. This year they brought back an old CEO, brought back discounts, and even though they’re still struggling, sales trends are in the right direction.
Apple hires Angela Ahrendts. The Ron Johnson Catastrophe at J.C. Penney also managed to leave Apple’s retail operation adrift and listless. Tim Cook brought in John Browett, CEO of British mass-market superstore Tesco, who promptly alienated loyalists with a misguided cost-cutting drive before getting fired. Ahrendts, CEO of the far more upmarket British company Burberry, is a much better choice.* Apple’s retail stores are already insanely successful. They don’t need a retail chief who can squeeze extra dollars out of them; they need one who can build a lot more—especially in Asia—where Burberry has opened many more shops than Apple without compromising the brand’s value. Adding a woman to the executive team can’t hurt, either.
Yahoo buys Tumblr. The success of Yahoo shares under Marissa Mayer’s leadership is mostly a question of financial engineering—the company has restructured its Asian holdings and done share buybacks—which is really what Dan Loeb, the activist investor who put her in charge, was interested in. But Mayer’s had the strength and vision to sell the board on a strategy that isn’t just financial engineering, and throwing $1.1 billion in cash into buying Tumblr—rather than handing it to shareholders—is key to that deal. Tumblr brought tangible assets in terms of audience and social presence to the table, but it also served as a crucial signal to current and possibly future Yahoo employees that the company is serious about investing in its own long-term future. It might not work, but making the visionary play is an appealing contrast to an American corporate culture that tends to excessively focus on quarterly fluctuations in share prices.
Google makes dirt-cheap hardware. Google’s Chromecast television add-on isn’t revolutionary technology, but the $35 price point is beyond aggressive. Chromebook laptops starting at $199 aren’t quite as cheap but are in some ways even more aggressive. The culture of pursuing aggressive growth for the long term at the expense of short-term profits is common in Google’s online-services homeland, but it’s bracing to see Mountain View bringing the same spirit to consumer hardware. In a world where the global average income is still just $10,000 a year and all the population growth is happening in poorer places, making things cheaper still counts for a lot.
Starbucks hires veterans. The coffee giant has a perennial need for reliable people to do not especially glamorous work, and the Defense Department faces a constant challenge in finding gainful civilian employment for discharged veterans. Forging a partnership between the Pentagon and Starbucks is a natural solution to a concrete labor market issue. It’s also great brand extension. Starbucks is associated with a certain kind of upscale, effete lifestyle, but it’s already become ubiquitous in those markets and faces pressure for even more upscale joints with pour-over coffee and more complex flavors. A partnership with the military is a great way to give the company more of an all-American image and convince a broader swath of the population that they want to make room in their budget for pricey takeout coffee.
Uber offers affordable car loans. Though it continues to face regulatory roadblocks in many cities, at this point the biggest barrier to the growth of Uber’s ride-hiring service is on the supply side: You can’t sell a ride unless you’ve got a driver. With the national labor market still weak and Uber’s per-vehicle revenue high, demand for driving jobs is also high. But you still need a car to drive. By reaching a bit outside its core competences of software and customer service and partnering with Toyota and General Motors to get discount car loans for Uber drivers, Uber has taken a big step to solving the bottleneck. The car-loan program should also start turning Uber into a jobs machine, both on city streets and in the factories where the cars are built.
Beyoncé drops a secret album. The Internet has basically crushed the music industry’s traditional revenue model. Beyoncé’s unorthodox decision to release an iTunes exclusive album in the dead of night with no promotion was a brilliant (if hard to replicate) countermove by a superstar. In a social media world, free publicity is the best kind of publicity, and the combination of surprise and artificial scarcity was a great way to get people to actually open their wallets for content.
Netflix gets into content. It’s easy to forget now, but it’s not so long ago that Netflix looked like a doomed company, having bungled the transition from discs in the mail to streaming video with the Quickster fiasco. But they reversed course, apologized, and plunged boldly ahead into producing and purchasing original television series on a mission to become the next decade’s HBO. After a little bit of stumbling, it seems to be working. Their streaming back end gives them a unique level of insight into what kinds of things viewers might want to watch (their adaptation of House of Cards was partially cast by algorithmic analysis), and Orange Is The New Black has definitively established the nonnetwork as a potential destination for genuinely innovative programming.
Amazon pre-announces an illegal product. One big problem with Amazon’s plan for same-day delivery of small items via quadrotor drone is that they don’t have the technology working yet. Another problem is that it’s currently illegal. Announcing the nonexistent product on 60 Minutes is a smart way to make some lemonade. Get people talking about the potential benefits of this kind of delivery and you’re doing some prelobbying on behalf of commercial drone legalization.
T-Mobile becomes the uncarrier. Blocked by the Federal Communications Commission and the Justice Department from selling its T-Mobile unit to AT&T, Deutsche Telekom had to do something with the perennial laggard of the U.S. mobile phone industry. And in 2013, they did—breaking with the faux-subsidy model in which carriers offer you a high-interest loan to lock you into overpriced mobile service. Now T-Mobile has the best phone plans around and amazing free data deals for tablets. The “uncarrier” strategy has been so successful that Sprint now wants to buy them, posing a tough question for regulators—would a merger help scale up T-Mobile’s business innovations or throttle them in the crib?
So, where are you? What moves you have planned for 2014?
Suresh Shah, M.D., Pathfinders Enterprise