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ResearchBuster: New Leaders and Strategic Change

Jim Riley

18th June 2012

The appointment of a new CEO often arises when a business wants and/or needs to achieve a significant change in performance and strategic direction. Students writing about key topics such as leadership, internal causes of change, culture and strategic decision-making need to have some real-life examples in mind when they write their exam answers. This research buster will provide a series of examples of firms which had opted to seek new leadership as part of a strategic change programme. We’ll add additional examples and update relevant resource links as often as we can.

Case Study: Thorsten Heins (Research In Motion / BlackBerry)

A tough road ahead for Thorsten Heins
BlackBerry maker RIM abandons battle with iPhone and Android
Thorsten Heins is not RIM’s patsy - Honesty and composure is exactly what’s needed
RIM CEO: We need to become a lean, mean hunting machine
Heins faces up to RIM’s problems

Strategic issues facing RIM / BlackBerry
- Rapid falls in revenues and profits
- Significant fall in share of smartphone market
- Substantial reduction in cash reserves
- Disastrous launch of BlackBerry PlayBook which was meant to challenge the iPad ($500m stock write-off)
- Struggling to compete at the high-end of the smartphone market against Apple iPhone, Samsung and other mobiles using the Google Android platform
- Disastrous 2-3 day outage pf the BackBerry network in Europe in October 2011
- No clear product USP

Heins’ Strategy
To pull back from trying to compete with Apple’s iPhone and the Android mobile platform and instead return to its original focus on business users.

Key Heins quotes in March 2012:

“We believe that BlackBerry cannot succeed if we tried to be everybody’s darling and all things to all people,” Heins said. “Therefore we plan to build on our strength.”
“We can’t do everything ourselves but we can do what we’re good at,”

Heins insists that RIM, the 78m users of BlackBerry devices and the BlackBerry brand will be saved by the introduction of the BlackBerry 10 operating system.

Stephen Elop (Nokia)

The Nokia change management case study is comprehensively covered in this tutor2u business blog

Kazou Hirai (Sony)

Like Stephen Elop at Nokia, the appointment and change strategy of Kazou Hirai at Sony is being covered extensively on the tutor2u business blog. Please refer to the following resources:

Sony - All Change at the Top with a new CEO
Sony - Can Hirai Turn the Business Around?
Sony - Hirai’s Turnaround Strategy - in Video Clips

Jonathan Hart (Thorntons)

Saving Thorntons
Retrenchment for Thorntons following strategic review
Thorntons’ sales hurt by store closure programme
Thorntons set to close up to 180 shops

The strategic issues facing Thorntons
- Cash-strapped UK consumers are opting for less-expensive goods in supermarkets, while stand-alone Thorntons stores were grappling with declining footfall on the UK high street
- High level of fixed costs
- Significant seasonality to sales which can also be dramatically affected by extremes in weather

Hart’s strategy
- Thorntons plans to close 180 outlets in the next three years (among the 364 stores directly owned and run by the company)
- Wants sales and profits to become less dependent on seasonal events such as Easter and Christmas
- Introducing a new range of smaller chocolate gift products for birthday presents, anniversary gifts or thank you presents.
- Improved store merchandising (an operational/marketing change rather than a strategic change, really)
- Increased sales of products made for other retailers (by the Thorntons factory)
- Grow the Thorntons franchise portfolio
- Aim to cut operating costs of around £2m per year from the supply chain

Quotes from Jonathan Hart:

“Our goal is to refocus the business across all channels, and seek to deliver industry competitive results over the next three to five years”

Case Study: Moya Greene (Royal Mail)

Moya Greene is appointed by the Royal Mail

Royal Mail chairman Donald Brydon said Ms Greene would bring “energy, clear thinking and a proven leadership track record” to the role.

The strategic issues facing Royal Mail
- Traditional ‘snail mail’ declining by an estimated 5pc a year, as the public transfers its communications to email, social networks, iPads and other faster, modern devices
- Letters and parcels business makes substantial losses
- Successive UK governments have attempted to introduce competition into the UK mail market
- Entrants into the market have tended to focus on the most profitable parts of the letters/parcels market, taking market share from Royal Mail
- The Royal Mail has 165,000 staff, which makes it the second-biggest employer in the UK after the NHS.

Greene’s strategy:
- Substantial rationalisation as part of an agreed business plan with the UK government (the owner of Royal Mail) in advance of a privatisation process.
- Greene claims to be putting in place ‘the biggest modernisation and change programme of any company in Britain’.
- Substantial rises in stamp prices (April 2012)

Key quotes from Greene:

“We have always been clear that Royal Mail would be a smaller and more efficient company over time. This change is naturally a difficult process for our people and we are committed to working closely with unions.”
““We have some of the lowest stamp prices in Europe and amongst the highest service standards. To maintain this vital service, price rises are really needed, given Royal Mail’s financial position.”

Spring 2012 Update:

April 2012: UK government passes legislation to privatise the letters and parcels business, while hoping to mutualise the Post Office network.
Source: “The task now is to improve Royal Mail’s efficiency and profitability while hoping market conditions will be right to sell or float at least part of it by autumn 2013. Its modernisation programme will see tens of thousands more of its 163,000 jobs go during the coming years.”

Research links

Interview with Moya Greene - Britain’s Chief Postie Needs to Deliver (June 2011)
Royal Mail plans to shed 40,000 jobs by 2016
More posts to go after £120m loss
Royal Mail faces a spiral of decline (April 2012)
Stamp price rise plans are affordable, says Royal Mail

Case Study: Adam Crozier (ITV plc)

Career highlights 1995-1999 Saatchi & Saatchi, joint chief executive; 2000-2002 Football Association, chief executive; 2003-2010 Royal Mail, chief executive; 2010-present ITV chief executive

ITV appoints Adam Crozier
ITV boss Adam Crozier admits ‘a lot needs fixing
Crozier puts ITV to rights (March 2011)

Key strategic issues facing ITV:

- Over a 10-year period ITV lost about 40pc of its share of viewing because of increased choice (proliferation of digital channels + growth of online)
- Exposed to highly cyclical advertising revenues
- “For the past decade ITV has not faced up to the challenges presented by the rise of internet-based platforms, the continuing growth of pay TV and subscription services and the globalisation of content.”
- “Re-shaping the economics of ITV will require changes not only to the strategy but also to ITV’s management, culture and organisation and to deliver this we are today announcing a five year Transformation Plan.”
- When Crozier arrived, ITV’s debt looked too high (£600m+), there was a deficit in the pension fund and ITV needed to invest in new programmes

Progress with the change programme:
- Debt has fallen to

- Friends Reunited sold + other disposals of non-core businesses
- New senior management team recruited
- Staff development programme for the top 150 employees launched
- Delivered annual cost efficiencies of £31 million

Four priorities of Crozier’s Transformation Plan [change management]
- Create a new lean, creatively dynamic and fit for purpose organisation
- Maximise audience and revenue share from existing free-to-air broadcast business
- Drive new revenue streams by exploiting our content across multiple platforms, free and pay
- Build a strong international content business

Jim Riley

Jim co-founded tutor2u alongside his twin brother Geoff! Jim is a well-known Business writer and presenter as well as being one of the UK's leading educational technology entrepreneurs.

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