Best and Worst Business Pivots of All Time
In today’s newsletter:
- Best (and Worst) Business Pivots of All Time
- Nuclear Future, Market Watch, and Maverick City Music Controversy
- The Nitty-Gritty of Disaster Relief – Where to Give and What’s Being Done
The world is always changing, and sometimes technology, culture, or some other force makes it so that the old way of doing things just isn’t going to work anymore. On the other hand, this also means tremendous opportunity, and every once in a long while businesses have the chance to get in early on something that’s going to revolutionize an industry and take off like a rocket.
Today, we want to highlight a few of the best product-line pivots in history, as well as some of the most hilariously bad pivots. Hopefully, there’s a lesson in it for all of us to know when to change tactics and when to stay the course.
Good Pivot: Nokia
When I say “Nokia” you probably think of cell phones, and for good reason. In the 1990s and early 2000s, Nokia was a dominant force in the cell phone market, and even today, the company still pulls in $24 billion a year and has a global influence, even if it has diminished from its peak. But what if I told you that this technology success story began as a Finnish paper mill?
In 1865, a mining engineer by the name of Fredrik Idestam went into the paper mill business, and by 1871 he built a second mill on the shores of a Finnish river called “Nokianvirta” – thus, “Nokia.” Eventually, Nokia started using the mill not only to make paper, but also to generate electricity, which put them into business with Finnish Rubber Works, and later Finnish Cable Works. In 1967, these businesses which had run semi-independently finally merged into the Nokia Corporation. At the time, they did produce some electronics – namely television sets, early computers, and communication cables. But they were still a paper mill, after all, and yes, they did produce toilet paper.
It is difficult to overstate Nokia’s importance in the global communications revolution. In 1979 Nokia launched the world’s first international cell network, which linked Finland, Sweden, Norway, and Denmark. In 1987 Nokia released one of the first handheld mobile phones, and they continued to innovate in the market for decades after. By 2007, Nokia held nearly 50% of the market share for the cell phone industry, and they brought in $75 billion in revenue that year.
Then, of course, the iPhone was released, crushing every cell phone manufacturer in its wake.
Still, Nokia is a great example of seizing new opportunities in the market and focusing on what is working best. Electricity generated by hydropower was originally a random and fortuitous by-product of owning a paper mill. However, the leadership at Nokia was wise enough to see the increasing opportunities that arose from having access to electricity early on, and later, the opportunities that arose from having expertise in electronics.
The lesson? Don’t overlook the incidental aspects of your business. There might be an aspect to your company that has allowed you to gain a unique resource or expertise, and, if so, that could be a goldmine.
Bad Pivot: Sharper Image
Sharper Image was founded in 1977 as a catalog retailer selling jogging watches, and it quickly expanded into a huge company with a footprint in malls around the country, selling home products and random curiosities/gadgets. Its strength seemed to be products that incorporated cutting-edge technology, even if it was in a sometimes gimmicky way, and they were also just cool. Sharper Image had a lot of brick and mortars, they had a thriving mail-order catalog, and they even had an early website. By 2003, Sharper Image had 140 stores and was pulling in over $750 million in sales.
Sales started steadily declining in 2004, however, which was not good considering how rapidly they had expanded into new physical locations. There were some internal shake-ups with leadership, and things went south. So what did this company do to turn it all around?
To be fair, this was just one product out of many, and the company didn’t sink just because of Trump Steaks. But man, was it a bad idea. A company known for selling massage chairs, futuristic fans, and other home technology products suddenly began heavily promoting a line of extremely overpriced flash-frozen steaks featuring real estate magnate Donald Trump.
To quote the company’s CEO Jerry Levin, “We literally sold almost no steaks.”
The failed venture was symptomatic of a larger problem. Sharper Image felt like it was trying too hard, that they weren’t the effortlessly cool company it had once been. Instead of revamping the brand, money was thrown around, debts and inventory accumulated, and the company declared bankruptcy in early 2008 after their stock went to zero.
They were sold for parts, and, ironically, some pretty good pivots were made by the new investors that focused on licensing home and technology products (not steaks) instead of producing them. Today, they sell online and are doing alright.
The lesson here? Even in a business known for fun, luxury, and coolness, the company still needs discipline in its branding and decision-making processes. Sharper Image relied heavily on the opinions and intuition of its founder, and at a certain point, that wasn’t good enough.
Good Pivot: Nintendo
“Nintendo” is, in many ways, synonymous with “video games.” When we think Nintendo, we think Mario and Luigi, old arcade games, GameBoy, the Nintendo Wii, and the Nintendo Switch, but Nintendo has a rather colorful history of finding its way into this category. It was founded all the way back in 1889 – and it (obviously) wasn’t selling video games.
Nintendo began in Kyoto, Japan as a decorative playing card company founded by Fusajiro Yamauchi. Yamauchi had a head for business and quickly figured out how to manufacture his cards, and he eventually built a distribution company that took his product all over the world. In 1959, Nintendo began selling cards with licensed Disney characters on them, perhaps foreshadowing the coming days when licensing popular cartoon characters would become a major part of their business. By the 1960s, Nintendo began manufacturing other games besides just playing cards.
The breakthrough came in 1970 when Nintendo released the “Beam Gun,” an optoelectronic toy that revolutionized the toy market in Japan. This technology was leveraged to create virtual clay-shooting arenas, which were a big hit for a while. From there, Nintendo developed projector technology to pair with their products, and as early as 1974, Nintendo was manufacturing arcade-style video game machines and shipping them all over the world.
Nintendo has had to pivot, rebrand, and innovate many times over the years, but as one of the earliest players in the video game space, it’s all been in that direction since. Even though video games seem like a massive departure from playing cards, the Nintendo pivot has a lesson to teach us:
Some pivots lead to other pivots. These things can take time. It isn’t always a drastic, all-or-nothing decision to take your company into a wholly new direction. Cards to board games to electronic toys to projectors to video games actually makes a lot of sense. Sometimes the chain of innovation keeps moving for a while, and we as business owners need to keep up. Cards to video games isn’t weird at all, when viewed in context.
However, it’s worth noting that at various times throughout its history, Nintendo has also sold or manufactured vacuum cleaners and instant rice, and at one point they were selling taxi services and “love hotels.”
…That part is, admittedly, pretty strange.
Bad Pivot: Hooters
We saved the best for last. Yes, we are in fact discussing the notorious restaurant chain Hooters, which has made a brand out of employing waitresses of a certain appearance, but it isn’t their restaurants that are in focus here – it’s a hilariously bad pivot that they attempted in the early 2000s, which flopped spectacularly.
If you had to guess what this bawdy restaurant chain decided to move into, you might think food delivery service, frozen food products at the grocery store, or even some kind of cross-over cooking entertainment content.
But you would be wrong. No, in 2003, Hooters launched an airline.
And, believe it or not, it did experience some success at first, but by 2006 the venture was defunct. Turns out that there is more to aviation, air traffic logistics, and aerospace engineering than in-flight meals and Hooters girls shadowing the stewardesses.
Hooters Air offered direct flights for a flat rate to a select number of destinations, which was an attractive offer to consumers, but they had some problems.
For one, the airline industry was still recovering from the fallout of 9/11, and a lot of people were still wary about flying too often. Also, there was increased competition in the low-fare space, which was an integral part of the Hooters Air value proposition. Add to this the rising price of jet fuel, changing regulations, and a brand image that likely alienated key demographics (such as families), and you have a disaster on your hands.
Hooters Air declared bankruptcy, citing a $40 million loss.
If there’s a lesson in Hooters Air, it’s probably this: Just because you can do something doesn’t mean that you should.
INDUSTRY INSIGHTS
Nuclear Future, Market Watch, and Maverick City Music Controversy
Nuclear Future
We need more power. In the U.S. alone, we consume over 4 TRILLION kWh per year, a 14x increase since 1950, despite the U.S. population increasing just over 2x. Certainly, we have seen an influx of new technology since then, but widespread adoption of cryptocurrencies, AI technology, and/or electric vehicles would require an exponential ramp-up of power production again. That’s why tech firms such as Microsoft, Amazon, and Google are betting billions on the production and implementation of new, miniature nuclear reactors for electricity production. We may soon see these small nuclear reactors outside of the U.S. as well, specifically in Southeast Asia, as American companies seek to meet the growing electricity needs abroad. India has thrown its hat into the ring as well, however, and we may be in the early stages of a scalable, micro-nuclear-reactor “arms race.” One thing is for sure as we become increasingly reliant on technology with vast electricity requirements – whoever has the “power” will dominate the global economy.
Market Watch
A CNBC report says that the recent inflation numbers don’t mean as much good news as some might think. Despite the rate trending downward, prices remain extremely elevated when compared with just a few years ago, and we are starting to see growing debt among consumers. Despite the longshoremen’s Union going on a short strike recently, ports will likely not disrupt the supply chain and contribute to price burdens unless a new strike happens in January. Meanwhile, two of the largest shipowners in the world are trying something new to improve international shipping on-time rates: Bigger ships and fewer port calls per ship. Time will tell if this brings delivery times (and costs) down in any meaningful way. In the stock market, the S&P continues to shatter previous all-time highs as the index stretches closer to 6,000, and the Dow continues its rally as well, topping 43,000 to set a new record also. The NASDAQ remains strong, but it has not yet set a new record, as this index has seen more back-and-forth movement recently, though the general trend is still up. Despite the bull market, some experts warn that a large correction is coming after the election, due to government overspending, debt, and a likely bond sell-off.
Maverick City Music Controversy
Popular Gospel and Praise band “Maverick City Music,” known for such hits as “Jirah” and “Promises,” has become the center of controversy recently in the world of Christian music after releasing a song with American rapper GloRilla. (For a short review of the album’s contents, click here – the article contains some explicit language.) Some Christians, are scandalized that Kirk Franklin, Chandler Moore, and Maverick City Music would appear on an album so rife with graphic sexual descriptions, rampant vulgarity, and the degradation of women. Others argue that the song “Rain Down on Me” is a wonderful Christian addition to an otherwise not-so-Christian album, potentially reaching people with a message of God’s grace and love who might not hear it elsewhere. The song itself is not explicit (the only track on the album to boast a “clean” certification), and it raises the question of where Christian artists should and should not participate in culture.
Sunday School
Q. Who was emperor of Rome at the time of Jesus’ birth?
A. Caesar Augustus (see Luke 2:1)
“Ok, ok, so we lost money on the airline thing. But this next batch of ideas are SURE to be winners. Imagine a Hooters Ride Sharing App, Hooters Theological Seminary, and Hooters Baby Formula!”
TIPS & TRICKS
The Nitty-Gritty of Disaster Relief – Where to Give and What’s Being Done
Recently, two major hurricanes have blown through the Southeastern United States, and the devastation has been overwhelming. Both storms seem likely to cross the $50 billion mark in damage, and they will likely both be on the list of top ten most destructive hurricanes in modern American history. Naturally, Christians and other people of conscience want to help as they can, and the donations have come pouring in. But it’s worth asking the question – What does disaster relief actually look like on the ground? Who does the work; what does the money go to; and where are the best places to give?
Today, we want to shine a brief light on those questions.
Who Does the Work? Where Should I Give?
Most people have heard of the government agency FEMA, and likely they have also heard of high-profile non-profits such as Samaritan’s Purse and the American Red Cross as well. Thankfully, however, there are others, and in such large-scale disasters, many hands are needed.
There are groups in the U.S. called “National Voluntary Organizations Active in Disaster” or NVOADs. These are the groups that show up with shovels, temporary shelters, rebuild grants, food, supplies, etc. NVOAD.org is a great resource for finding out which groups are actively helping in the aftermath of a given disaster, and this knowledge can help direct your giving.
Immediate relief is important, but it’s worth mentioning that most of the real healing in a community comes through medium and long-term relief efforts. Samaritan’s Purse grabs a lot of the headlines, but they do have a reputation for being the first in (good) and the first out (not great), often leaving with hardly any notice and with open work orders hastily shoved off to other organizations. It’s been said that the organizations that do the most good in these disasters do their work quietly and without a lot of fuss. Among experts, faith-based organizations such as the Southern Baptist Convention, the Global Methodist Group, Mennonite Disaster Service, Christian Aid Ministries, and the United Methodist Corps all have excellent reputations for doing the most good.
As with all charitable giving, if you want to make sure that your money has the best chance to help those in need, always earmark your donation for the specific relief effort you are trying to give to, otherwise, donations can often end up in underutilized general funds.
What Does the Money Go To?
In the wake of a major disaster, reputable organizations spend donations on temporary shelter, supplies, and meals for displaced families. Some organizations will give “immediate needs money” to people who ask for it. Organizations such as the American Red Cross do case management in these scenarios, where people apply for aid, and then the Red Cross sends someone to survey the damage to that person’s property or livelihood, and then they meet their needs as they are able. Long-term, a good organization will give grants to local relief efforts or provide direct money for rebuilding damaged buildings and homes.
According to experts, it is best practice for these aid organizations to buy supplies as close to the disaster as possible, as this helps to get the weakened economy back on its feet. The American Red Cross and the Salvation Army are known for being good about keeping to this rule.
Most organizations are focused on relief efforts, but some Christian ministries are more focused on evangelizing and ministering even as they do offer some assistance to those who have been affected by the disaster.
What Now?
The devastation of these back-to-back storms is truly startling, and it’s important to keep in mind that building back Western North Carolina and parts of Florida, Tennessee, and Georgia is going to take years. We Christians ought to check in from time to time and love our neighbor through the long haul as much as possible.
Quick Hits
- Netflix shifts priority from growth to profitability, Q3 numbers show.
- Is the A.I. boom for real? TSMC says a resounding “Yes!” as AI-related revenue is set to triple next year for the chip-maker.
- Ericka Anderson of World sounds the alarm for Christian businesses and organizations that require employees to sign a statement of faith, as recent government actions attack the practice.
- Relevant magazine writes on how to find meaning in a normal, 9 to 5 job.
- Is the honeymoon over for Open AI’s relationship with Microsoft? The New York Times weighs in.
- Even if the machinist strike ends, Boeing may still be in BIG trouble, according to the Wall Street Journal.
- McDonald’s has a new fry cook: Donald J. Trump.
For Kingdom Leaders, By Kingdom Leaders
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