Renewal for Survival

(clique aqui para versão em Português)

When starting to prepare a presentation on "management of start-ups applied to large enterprises", I decided to support my view about the importance of them reinventing themselves, analyzing the recent evolution of some NYSE corporations.

To this end, I selected Apple, HP, IBM, Kodak and Microsoft - all well known, frequently mentioned in news and over 30 year old companies.

Through Yahoo Finance, I generated a chart displaying their stock price variation, as well as of the Nasdaq Composite Index, from September 30, 2009 until yesterday, September 30, 2011.

Obviously I expected some trend that could be used to support my thesis of their need to reinvent themselves to survive. But I was astonished by how direct and precise was the correlation between the stock price evolution and the market perception on such matter! See the chart below:

In the last two years, the Nasdaq appreciated approximately 20%. Apple, which revived after Steve Jobs' return, and kept evolving with its Ipod, Iphone and the new Ipad, has been the current big star and appreciated over 100% in the period.

At the other end of the chart is Kodak, which has just announced the hiring of restructuring attorneys. Who did not use Kodak's cameras and films? But despite a few attempts, it was unable to introduce new products that could invigorate the company, while demand for their products was smashed by digital media and smart phones.

Surprisingly close to Kodak in the chart, with 50% of depreciation (58% compared with the index), is the respected HP! In this case, the pain of its attempts to reinvent itself has been exposed in the media: the indecision about the future of its PC division, the $10 billion acquisition of Autonomy, the tablet business failure and its several CEO replacements. HP seems to be lost and the market is not complacent.

Placed in the the middle of the chart is Microsoft, with no stock price change in the last two years (negative return compared to the index). The message from the Market seems clear: despite high profits, the company needs to position itself in relation to the future - without a growth strategy, there may be negative surprises ahead. I think Microsoft knows this and the decision to pay US$ 8.5 billion for Skype, still an unprofitable business, may be related to such consideration.

Finally, with a relevant 50% valuation, there is IBM, a company that seems to really have reinvented itself. Known for its mainframes and portables (they were not called notebooks in the 80s), IBM sold its PC division to Lenovo a few years ago and decided it would become mainly a solutions company. Apparently, the strategy is working: IBM has just overtaken Microsoft to become the second largest technology company in the world, after Apple!

But the game never ends for those who are alive. Apple and its new leader have a challenge to continue innovating its product line, because commoditization is fast. IBM can not be complacent with its own success. HP must believe in its brand and culture and go all the way in the efforts to renew itself. Microsoft needs to position itself on the subject and act. And to Kodak I wish good luck and hope it's not a goodbye.

Let's see where we will stand in 2013!