Corporate life cycles are linked, above all else, to product, says Robert Heller. Absolute size is no longer any guarantee of protection against life's ups and downs.
Companies, like products, have life cycles. In both cases, the process of rise, maturity and decline has been accelerating but it isn't immutable.
For every company like Laura Ashley or product like the typewriter, there's a Marks & Spencer or Mars bar that rolls on seemingly for ever.
Seemingly is the word, however. The shock 23% fall in M&S profits could be taken as warning that permanent downturn always lurks threateningly around the corner. When such continental lords of creation as Philips and Siemens announce enormous retrenchment (with Philips dooming a mind-boggling third of its plants) it is clear that absolute size has ceased to protect against the dreaded life cycle.
So has reputation. Household goods manufacturer Rubbermaid, for years one of America's most admired companies, was swallowed up in a takeover after a desperate cost-cutting exercise, in which 11 factories disappeared in three years.
Downsizing, as IBM found, may restore profitability, but only at greatly diminished levels of grandeur and growth.
The cycle turns down when the original story, the founding vision, loses originality and power. Management, unable to rewrite the script, sticks to the old formula, while markets move on. One possible explanation for a downturn is the loss of the founding genius. Though the problems of Laura Ashley did follow the founder's death, Anita Roddick remains the Body Shop's leading force. Her 'unique selling proposition' - kindness to animals - is no longer unique, however. Message and image are no longer so clear, loud and strong. In these situations, founders who have become the greatest strength of the business can easily become its greatest potential weakness.
Animating drive, passion and intuition can be offset by autocratic decision-making and devotion to the past ways of success. The textbook prevention or cure is to import top professional management. The Body Shop thus has a new managing director, Patrick Gournay. He may work wonders. That's never easy, though, as the Laura Ashley revolving door shows: new pros have a life cycle, too. They arrive to loud hosannas and tunes of glory. Swift moves, mostly downsizing, follow. Results improve for a season and then the downward slope resumes. The wonderman or woman makes way for the next, who repeats the cycle.
Witness the rise, decline and very near fall of Apple Computer, after John Sculley was imported from Pepsi Cola by founder Steve Jobs to undo his own damage. The new pro got rid of the old ways and the not-so-old founder. The old story, though, survived. Apple was the go-it-alone, high-margin, take-it-or-leave-it, maverick pioneer. When Sculley tried to rewrite the script (including a failed foray into the hand-held Newton), the end-result was nigh on catastrophe.
Exit Sculley: enter two successive pros who only deepened the dive. Re-enter Jobs, to prove that old stories can be retold. The iMac recognises that cyberspace has created a need for speedy access and ease-of-use, which bridges the home and office markets. Its daring design has interrupted Apple's market plunge and returned a massive money loser to profit. The lessons are powerfully instructive.
Corporate life cycles are linked, above all else, to products. In Apple's case, the product, brand and business are self-evidently one and the same.
As they are in the life-cycle specimens mentioned above. At Laura Ashley and the Body Shop, products have lagged behind the market. At Philips (mobile phones), Siemens (PCs), IBM (example after example), the explanation is identical.
If current criticism of M&S's quality and products is well-founded, that will prove far more damaging to the company/brand than Asian recession or the squabble over the top job. Market perceptions hold the key to sustained success. Hardened by his unsuccessful but highly original 'next venture' (the black box PC), Jobs rebuilt the perception of Apple round a rebuilt product and resurrected a moribund life cycle.
Missing, vital non-product pieces have also been slotted in: rationalised product lines, marketing and distribution; slashed inventory and speedier manufacture. This is standard wonderman stuff, but not enough to crack the life cycle.
The downward process is accel-erated by another ineluctable factor: time. Loss of product power is too often allowed to drag on. First, profits from the past conceal the damage to present and future; and, second, downsizing produces deceptive reversals of the cycle. The loss of brand vitality can nearly always be repaired, even unto a kind of after-life - as with the revived MG sports car. But time cannot be hauled back.
That fact may yet undermine the stirring comeback at Apple. A world market share of under 4% looks more like a dead weight than a launch pad. In life cycles innovative stitches in time save more than nine. Keep the products and the brands to the fore, in the market and the internal mind-set, and you stop the dreaded cycle in its tracks.
Robert Heller was founding editor of Management Today.