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Strategic Pivots – Necessary and Evil

Adam Hartung, Manny Teran
DVDs, trends, Disney, Bob Iger, Bob Chapek, Ford, Ford Blue, value proposition, value delivery

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We love how Netflix pivoted from delivering DVDs to streaming content, then pivoted from streaming other people’s content to making its own.  We love comparing how Netflix destroyed Blockbuster which refused to pivot from retail stores to other distribution channels.  But we forget that the Netflix’ CEO Reed Hastings was pilloried for making those pivots.  At the time every analyst wanted him fired.  He wasn’t a hero until he was proven correct.  But those same analysts loved Wayne Huyzenga, CEO of Blockbuster, for maintaining earnings in the face of declining sales – until the company went bankrupt in just 2 years as sales evaporated.  Huyzenga had the opportunity to buy Netflix twice, and turned it down both times, in order to “preserve earnings.”  If he had focused on sales his investors would have been far better off than his focus on earnings.

This podcast overviews how critical sales growth is to successful strategy, rather than looking at earnings.  Simultaneously, it warns leaders that there is no harder time to be a business leader than when you have to pivot.  Everybody loves doing more of the same thing better, faster, cheaper.  Most folks don’t want to have to do something new – especially entirely new.  In the current world we can see how Disney’s CEO was fired for implementing a much needed pivot, and how Ford’s CEO is wholly unloved for committing Ford to an all electric future.  Their pivots have never been more necessary – and yet for undertaking them they are seen as evil.  And the lesson is not effectively talking to all constituents about the importance of revenues over earnings.  Listen to this podcast to understand what you should do to win hearts and minds as well as the marketplace battle during a pivot.

Thinking points:

• Do you have a clear understanding of your Value Delivery System in such a way you can change it significantly to deliver your Value Proposition as markets shift?

• Do you treat sales difficulties as a greater sign of business problems than earnings difficulties?

• Do you hide sales problems by focusing on “managing earnings”?

• Are you willing to commit to a pivot even when lots of people tell you not to?