Beware of success
Industry stars Logitech’s Bracken Darell and Strauman’s Gilbert Achermann recommend change even when on top
To launch the 2017 keynote speaker evenings of IMD’s prestigious OWP, the theme of Innovation & Transformation Unplugged was the springboard for both speakers whose companies had flipped from divas to paupers and been flipped back again.
Success should never be taken for granted, they cautioned, it should remain a steppingstone to change.
Bringing Logitech back into the game
When Bracken Darell joined Logitech in 2012, the company was experiencing dismal results following a ten-.year period, between 1998 and 2008, during which it was an incredible engine of growth. The prevailing opinion that PC computers were dead propagated the belief that Logitech’s demise was certain too.
The company had made big bets that had failed. According to Darell, business schools do not put enough emphasis on risk management: “We weren’t good at it.”
Furthermore, Logitech had stopped innovating and contented itself in the optimization of innovation. “There is a big difference,” he warns.
Born in West Kentucky, Darell attended Hendrix College in Arkansas before obtaining his MBA from Harvard Business School, but he keeps the jovial earnestness of a college student. With more than 20 years of experience in business and brand management in global consumer companies, including Whirlpool, Procter & Gamble and General Electric, he was excited by the prospect of bringing design back into a company that had previously been driven by design and no longer was.
He started by inviting everyone at Logitech to speak up, and he listened. The core business, what he calls the tree, was falling apart and a radical change was needed. He decided to redistribute 75% of the resources into “new plants and seeds”, which became the new categories of investigation.
Logitech needed to get back into the innovation game and the way forward, for Darell, was smaller teams, ideally between 5 to 8 people, and never across more than two time zones.
“The only way we were going to win was to build innovation in a really small way.”
Market increase value of 500% in just five years
“I didn’t ask, I just did it,” he says of the R & D redistribution.Within a year, Logitech was no longer an industry pauper.
By focussing on distinctive innovation and developing new lines, such as wireless speakers and ear phones (Wonderboom and Jaybird), game headsets (G433), a video ConferenceCam (Meetup), cross-computer control and file sharing (Flow), slim keyboard covers and an unbeatably-priced whole home security camera (Circle 2), the company has moved out of negative figures and quadrupled its profit in just four years.
“I didn’t come here to talk, I came here to sell,” he reveals with a disarming smile.
Not someone to rest on his laurels, Darrell is positioning Logitech not only as a design company, but one that thinks about design. “Our job is to figure out where change will come from.” From hardware to software, Logitech is exploring the potential of cloud services and delving into deep learning.
“Some people say we have come a long way, but we’ve just started.”
But success is never final, and Darell insists that it’s when things are going well that it’s time for change. “Raise your goals, go offer new things that are energizing.”
“I’m more worried about what we control, than what we don’t control. The only thing that could knock us off our feet is us!”
Straumann’s similar fate
Gilbert Achermann strolls on stage with the same easy energy and relaxed demeanour as Darell and the comparison does not stop there. “It’s astonishing how many similarities there are between their story and ours,” says the former CFO and CEO and current Chairman of Straumann, a global leader in implant and restorative dentistry. The publicly owned holding, which comprises a number of international companies around the world, declined around the same time as Logitech.
From good to great, then boom to gloom
The heyday of Straumann lasted from 1998 to 2007, a period during which the company’s market value soared from CHF 0.3 bio to CHF 5.8 bio. But when the crunch came, the company was hit harder by the stock market than the luxury industry. Straumann lost its diva investor status overnight.
There were two lessons to be learned, Achermann announces with disarming candour:
- If it’s beautiful, it’s not going to last.
- If you’re in deep trouble, there is always a tomorrow.
A graduate of the University of Applied Sciences (FH) St. Gallen, Achermann obtained his IMD Executive MBA in 2000 and is now an IMD Executive-in-Residence. “I owe a lot to IMD for my professional career.” As well as being Chairman of the Straumann board after several years with Vitra, he is also a member of the board of directors of Julius Baer.
“It was the perfect storm,” he says of the situation in 2012, when analysts were convinced that Stramaunn’s field of industry was dying. With new players in the field, margins declined and there was talk of selling out.
“We needed to address the dynamics of our core markets, target growth, both by segment and geography, and put strategy into action.”
From dire to flyer
With the appointment of Marco Gadola as CEO in January 2013, Straumann expanded its business portfolio and introduced a high-performance culture into the organisation, while working on diversity and inclusion.
The key to turn-arounds is to act fast and furious advises Achermann: “Don’t plan so much. Make decisions, it’s better to make bad ones than none at all.”
By deciding to become the total solution provider for tooth replacement, and putting in place the adequate strategic initiatives, including multiple acquisitions, the company’s share price development soared again, this time from its 2013 rock bottom of CHF 1.5 bio to CHF 9 bio in 2017.
Straumann now has around 4000 employees with sales in more than 100 countries, 48 subsidiaries and production sites in 7 countries.
To allow the multiple partners of the Basel-based company to be focussed and drive innovation, Achermann defines the four P’s that matter:
Purpose: Know why you do what you’re doing.
People: Have the right people and culture.
Passion: Lead, engage, communicate and innovate.
Process: Operational excellence at all levels.
“But the biggest threat to any company that is hugely successful is to take success for granted and not make sure that it continues.”
He mentions the unpegging of the Swiss franc in 2015 that could have brought the company down again, but glows with pride when he announces that employees accepted to forego their variable compensation to preserve employment for others.
in August 2016, Straumann brought in world experts from inside and outside the industry (including IMD) for a meeting to help identify what the industry was missing and where the next disruption could come from. Leadership needs to be agile, Achermann restates.
Don’t rest on your laurels
Both speakers admitted the discomfort of being at the top, because that’s when people don’t want change. On the contrary, they chimed, that’s when you need to stay ahead and the only way to do so is to keep all hands on deck.
“The majority of the people will follow if you’re convinced,” says Achermann.
“And raise your goals even higher when you’re at the top,” Darell repeats.