Table of Contents
Netflix, Ørsted, Nestlé UK&I, and Fyffes are 4 additional cases of businesses around the globe that have successfully navigated business transformations. The cases of General Electric, BBC, Co-operative Bank, Nike, and Procter & Gamble are 5 examples of unsuccessful business transformations. It is pertinent to note that while some of these transformations were initiated beyond the past three years, they are still relevant to the present time in terms of the impact of the transformations on each company to this moment.
Successful Business Transformation Case Studies
Case Study 1: Netflix
- Netflix is a company in the entertainment industry. Its core business involves subscription-based DVD rentals and streaming.
The Goal
- In 2013, Reed Hastings — CEO of Netflix — proposed to transform the business offering of the company from distributing content digitally to producing original content.
What They Did
- Netflix changed its business offering from “single-pay DVD rentals to subscription-based DVD rentals”.
- The company “mines audience data to create an astonishing range of new shows. Not only does Netflix use data to drive the compelling customer experience (e.g., even tailoring the images it uses for each show to match customer preferences), it has fundamentally changed the way that it makes decisions about which shows to pursue based on the data it collects on viewing behavior.”
The Result of The Transformation
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- This transformation has tripled the revenue of the company, rising by 6% from 2012 to 2018.
- Profit rose by 32 times and the company’s stock CAGR has since grown by 59%
- Original content published by Netflix accounted for 37% of its U.S. stream in 2018, a significant rise from 14% in 2017.
Case Study 2: Ørsted
- Ørsted is a company in the energy industry.
- Its core business involved oil and gas exploration and production prior to 2013.
The Goal
- In 2012, the power and energy industry witnessed industry-wide crises which resulted in a plunge in the price of gas by about 90%. This was caused by a prolonged period of gas overproduction globally. This threw Ørsted into financial crises.
- The primary focus of the company was survival.
What They Did
- First, the company brought in a new CEO — Henrik Poulsen — who had successfully navigated the business transformation at LEGO.
- Rather than trying to manage the crisis in the company, Henrik opted for a radical transformation of the company’s core business offering to move from black to green energy with an eye on sustainability.
- With coal, oil, and gas businesses on the decline, Ørsted switched to offshore wind power.
- Henrik went on to divest 8 of Ørsted’s 12 business divisions to invest in wind farming.
- However, the technology to run this project was too expensive that it would mean double the cost of onshore wind power production.
- Henrik was able to design a business model that “embarked on a systematic “cost-out” program to reduce the expense of every aspect of building and running offshore wind farms while achieving scale in this emerging market.”
The Result of The Transformation
- The company’s name was changed from Danish Oil and Natural Gas (DONG) to Ørsted — the name of the scientist that discovered the principles of electromagnetism.
- This transformation has made Ørsted the largest offshore wind company in the world, with a global market share of 30%.
- The company was also able to cut down the cost of offshore wind power by 63%.
- By 2018, green energy constituted 75% of the company’s energy production.
- The company’s revenue has grown by 5% from 2013 to 2018, profit margins rose from -2.2% in 2013 to 25.4% in 2018.
Case Study 3: Nestlé UK&I
- Nestlé UK & Ireland (UK&I) is a subsidiary of Nestlé SA in the food and beverage industry.
- While the company’s supply chain was effective with customer satisfaction on the high, the director recognized that standing still wasn’t an option.
The Goal
- The goal for Nestlé UK&I was to transform its service to maintain its position in the industry, with industry consolidation giving room for competitors.
- They needed to redesign an effective and high-performing supply chain.
What They Did
- The company partnered with On-The-Mark (OTM), a consultancy firm. OTM performed a holistic review of Nestlé UK&I’s supply chain and arrived at the need to design and implement a new organization design for the company’s supply chain.
- The new design was expected to “drive a value chain which is trusted, fast, more cost-effective, and reliable than the company’s competitors, enabling the supply chain to collaborate innovatively with its customers to deliver share, sales, and profit growth for all of its businesses”.
- As such, they developed 8 design criteria which the new organization must meet. This includes: deliver world-class service, demonstrate an appropriate cost base, simplify the company’s business processes to release time, accelerate speed to market, and others.
The Result of The Transformation
- The new organization was “more efficient, faster and more flexible than its predecessor, and was able to adapt quickly to changes in the broader Nestlé UK&I business.”
- The Nestlé UK&I Supply Chain won the Nestlé’s award for the top-performing supply chain in Europe.
Case Study 4: Fyffes
- Fyffes is a company in the produce industry.
- The company’s core business is to market and distribute produce and selected private label items to retail stores.
The Goal
- The goal was to transform the company’s “operating model to adapt to a highly competitive marketplace, rapidly evolving consumer needs, and increasingly more demanding retail customers.”
What They Did
- Realizing that the past and present success of the company doesn’t guarantee future success of the company, the CEO recognized the need to drastically update the company’s organization to remain relevant in the industry. Therefore, the company partnered with Clarkston Consulting.
- Clarkston Consulting reviewed the organization of Fyffes and came up with a road map. A couple of several actions taken by Clarkston Consulting were:
- Accessing Fyffes’ organization to find over “75 discrete and detailed business challenges across key functions of the organization, (including finance, operations, logistics, sales, and marketing).”
- Developing and launching of a “Transformation Management Office following the assessment to orchestrate all initiatives, creating new governance and reporting mechanisms to drive accountability.”
The Result of The Transformation
- Following the transformation, financial metrics such as accounts receivable, SG&A, operating cash flow, and customer claims experienced double-digit growths.
- Improved collaboration and communication across all functional areas.
- Fyffes was able to get a “clear articulation and deeper understanding of the most critical challenges the company is facing today and into the future.”
Unsuccessful Business Transformation Case Studies
Case Study 1: General Electric
- General Electric (GE) is a company in the energy industry.
The Goal
- The goal for GE was to develop a new digitally-driven business.
What They Did
- In 2011, GE embarked on a mission towards digital transformation.
- They developed a huge IoT platform and changed its business model to relate to industrial products.
- In 2015, they launched GE Digital which was aimed at making the company a technology powerhouse, investing billions to this course.
- The company’s “digital operation was touted as building software capabilities that drive business differentiators and ROI across aircraft engines/supply chains, transportation & power.”
Why They Failed
- GE focused more on short-term goals (size) while neglecting long-term (quality).
Case Study 2: BBC
- BBC is a company in the mass media industry.
The Goal
- The goal for BBC was to modernize its operation towards embracing an increasingly digital world.
What They Did
- In 2008, the company launched the Digital Media Initiative (DMI).
- DMI was designed to transform how BBC manages data and provides content to audiences, as well as reduce costs.
- They overhauled the company’s data management system.
- Siemens was at the forefront of the development of DMI. However, BBC did not run a procurement process before awarding the project to Siemens. Delays and rising costs made Siemens pull out of the project.
- BBC couldn’t continue with the transformation when they brought BMI in-house because they lacked the technical ability.
Why They Failed
- According to PwC, the transformation effort completely lacked “oversight, due to no executive steering board keeping DMI on track, alongside an inability of the overall governance structure to manage the project’s complexity effectively.”
- While BBC prioritized technological advancement, they neglected business practices and operations.
Case Study 3: Co-operative Bank
- Co-operative Bank is a company in the banking industry.
The Goal
- To transform its legacy technology infrastructure.
What They Did
- In 2010, UK regulation required banks to offer a single view of customers. Co-operative Bank moved to replace its core banking infrastructure, rejecting an old-fashioned solution. The bank hoped to be the first full-service bank to overhaul its core banking system in the UK.
Why They Failed
- While the transformation was a complex one, Co-operative bank did not have the required capacity to execute such a major project.
- Also, prominent members of the bank’s IT leadership team left the bank in the process, and other top members of staff that were left didn’t engage fully in the transformation.
- Hence, the project was abandoned in 2013.
Case Study 4: Nike
- Nike is a company in the sports and apparel industry.
The Goal
- The goal was to “take the lead on digital initiatives and create new technological capabilities across the company.”
What They Did
- In 2010, the company launched Nike Digital Sport, followed by the release of FuelBand with ambitious plans of becoming the pioneer of digital wearable devices. These devices were able to track activities with detailed statistics.
Why They Failed
- Nike lacked an adequate data analytics platform to access the feasibility of this innovation before it was rolled out. They found it difficult to access the data gathered by the FuelBand.
- They also found it difficult to find enough skilled engineers amidst poor margins from the brand.
- As a result, the company reduced the Digital Sports workforce by about 70% to 80% and discontinued the FuelBand by 2013
Case Study 5: Procter & Gamble
- Procter & Gamble (P&G) is a company in the consumer goods industry.
The Goal
- The company’s goal was to become one of the world’s most digital companies.
What They Did
- In 2012, the company set out broad and ambitious goals.
Why They Failed
- P&G’s undoing was setting out broad initiatives without a clear purpose.
- They were competing with a “competition that was prepared to face it” amidst a slumping economy.
