Ongoing business success requires great companies to adapt to change. Sometimes change is abrupt, as with a merger or a spin off; sometimes change is gradual and evolutionary. It insinuates itself in small, provocative ways until it becomes inevitable.
The coming year will be a pivotal one for three iconic Fortune 500 companies that are confronting evolutionary change. Microsoft and Dell, the two technology titans that gave the world access to personal computing and connection to the Internet, are at a point of evolutionary change but the solution to their brand problems must be brave and radical. Meanwhile, the management team at Dow Chemical, an older, more established company, must decide what they want Dow to be known for beyond the core businesses that made this company successful.
The companies are different but the brand challenges are similar: Each must surefootedly redefine its mission, reposition its brand and convince stakeholders that its future is bright. The coming year will be a turning point for each.
In 2013 the board of Microsoft confronted a critically important question: Even though the company makes billions of dollars, does that mean the CEO is doing an excellent job? Critics have long held that current CEO Steve Ballmer and Microsoft have missed one market shift after another and the board seemed to agree. Ballmer announced his retirement last August and the search for a successor began. In early 2014 Microsoft is expected to appoint a new CEO. Microsoft is on the verge of massive change. After almost four decades with just two CEOs, Microsoft is more laggard than leader. It is rapidly losing market relevancy as people look to Apple, Google, Amazon, Samsung, Facebook and other tech companies for cutting-edge products and innovative leadership. It’s very hard for well-established Goliaths to become scrappy, nimble underdogs again. Culturally, Microsoft doesn’t know how to be lean and mean but it needs a leader who is hungry and bold. Its next CEO must throw out Mr. Ballmer’s playbook of trying to insulate the company’s existing franchises and refocus the company on innovation in a post-PC world in which mobile + social + video will dominate.
With mobile traffic set to overtake desktop in early this year Microsoft’s new CEO must bring a fresh approach to the Microsoft brand and lead the company into the new computing world of mobile devices, where it has very little market share, and the cloud, where it competes with earlier entrants such as Amazon.com. The task will be nothing less than the creation of Microsoft brand 2.0. This can only be achieved by recapturing the sort of innovation that transformed Microsoft from a wild idea hatched in a New Mexico hotel room into a global technology icon.
In many ways, the fortunes of Dell are intertwined with those of Microsoft. The pioneer of the assemble-to-order PC business is still the world’s third-largest personal computer company but it, too, must reinvent itself beyond the collapsing PC business. Dell’s days as a PC powerhouse have to be misty memories for founder Michael Dell. Having closed a $25 billion deal last October to take the company he founded in his dorm room private he is now free of impatient Wall Street investors and has the latitude and flexibility in 2014 to craft Dell’s second act. Dell’s future will not be defined by the PC business, even if it stays in it. Selling commodity boxes on the cheap allows Dell in the door to upsell customers on lucrative software and services. And revenue related to data centers, servers, and networking is growing rapidly, so the company is not facing an imminent financial crisis. But it is facing a severe brand crisis: Today, the company is listing like the “E” in its iconic logo. Michael Dell says he will pour money into acquisitions and research and development, indicating that the company still has a major transformation ahead. But can the Dell brand credibly stretch from commoditized boxes to enhanced enterprise services? IBM couldn’t do it until it sold its PC business to Lenovo as a prelude to its reinvention as a software and service company. The second big challenge for Dell? What does he want the Dell brand to represent? And how does it need to be positioned to drive Dell toward a bright future?
When Dow Chemical Company CEO Andrew Liveris tentatively speculated about dropping the word “chemicals” from the company’s name recently, it was more than a passing conjecture about its moniker. Dow Chemical is at a strategic inflection point. The company plans to shed at least $5 billion worth of low-margin businesses, including the products that sparked its creation more than a century ago. The move is part of an effort to persuade investors that it has weaned itself away from the low-margin business of turning oil and gas into basic chemicals to make cheap grocery bags and drainage pipes. Dow and its competitors, including nylon inventor DuPont, are dropping many of the businesses that fueled growth over the past 50 years in favor of more profitable, patent-protected products developed in-house by its scientists. “Would I be brave enough?” Liveris said, musing Dow’s potential name change and confirming internal discussions have taken place at the world’s second-largest chemical company by sales after Germany’s BASF, which, ironically, is proclaiming itself “The Chemical Company”. Dropping chemical from the Dow Chemical name would be just the beginning of the brand challenge. Just as Apple Computer grew beyond its original business of computers and ditched “computer” in 2007, Dow Chemical has reached the same point. Dow without Chemical is a new Dow. It, like Microsoft and Dell, needs a new story to tell about what it offers the world and where it’s heading.