The Vision Driven Leader Question 9

• Many failures occur because people give up before realizing how close they are to success.

LEGO's Near Collapse and Revival

• LEGO almost went bankrupt in the early 2000s despite rising revenues since the 1970s.
• Increased competition and the rise of video games impacted LEGO's profitability in the 90s.
• Children had less time for unstructured play due to scheduled activities, affecting LEGO's assembly.
• LEGO tripled new toy production between 1994 and 1998 and expanded into clothing, jewelry, theme parks, and video games in an attempt to overcome market erosion.
• Revenues surged but costs increased more, and management lacked systems to assess what worked.
• In 2003, the company was heavily in debt and couldn't manage its inventory.
• Jørgen Vig Knudstorp was promoted to CEO and led its reinvention.
• Companies can recover from the brink of failure through re-envisioning, known as the Vision Zag.

The Vision Arc

• The Vision Arc depicts a standard business trajectory and potential decline in profitability over time.
• Seven stages of a business: Startup, Rising, Transitioning, Mature, Legacy, Zombie, and Dead.
• These stages aren't rigid but points on a continuum, helping plot businesses based on their stage.
• Companies can "Zag" back to life at any stage, renewing viability through a Vision Zag.
• Profit and time on the Arc are relative to each company, and not every business goes through each stage.
• The life expectancy of Fortune 500 firms has dropped from 75 to less than 15 years.
• Defining a new vision leads to fresh investment, energy, and market growth, even for failing businesses.

The Startup Zag

• The Startup stage is driven by dreams and passion but can flounder without a clear vision.
• Startups face challenges in finding customers, connecting with them, and ensuring product viability.
• Relying on hunches instead of defining a vision is a common pitfall for Startups.
• Successful new ventures often abandon their original business strategies based on market learning.

Airbnb's Zag

• Airbnb’s original vision was for cofounders to make extra cash to cover rent.
• Founders rented out airbeds during a conference in 2007 for $80, including breakfast.
• They applied the approach in 2008 during the Democratic National Convention.
• The realized their vision was too small and created a worldwide network of hosts renting spare rooms to travelers.
• The new vision of Airbnb initially frightened the founders, and investors showed no interest.
• Airbnb is now the world’s largest accommodation provider, owning no property, valued at $35 billion.

YouTube's Zag

• The original vision for YouTube was a video-dating site with the slogan "Tune in, Hook up."
• They offered to pay women $20 to upload a video describing their dream date.
• Co-founder Chen suggested to forget the dating aspect and open it up to any video.
• Karim posted "Me at the Zoo," which led users to share videos of all kinds.
• YouTube was revamped to be more open and general.
• Google acquired YouTube for $1.65 billion in 2006.

The Rising Zag

• The Rising stage involves excitement and growth but can face issues without a guiding vision.
• Companies may chase wrong opportunities or miss right ones without clear vision.
• Rising companies can course-correct with a Vision Zag, yielding astonishing results.

Instagram’s Zag

• In 2010, Kevin Systrom developed iPhone app Burbn, as a competitor to Facebook.
• Burbn allowed users to check in, earn points, and post pictures.
• Users preferred taking and posting pictures, so Systrom and Krieger removed all other functions from the app except the ability to take, comment on, “like,” and post photos.
• They relaunched Burbn as Instagram and within 24 hours, 25,000 users had downloaded it.
• Facebook bought Instagram for $1 billion and is worth over $100 billion today.

Starbucks’ Zag

• In 1971, Bowker, Baldwin, and Siegl sold bulk coffee beans and grinding gear in Seattle.
• Howard Schultz joined Starbucks in 1982 and proposed turning it into a café, but the owners rejected the idea.
• Schultz opened Il Giornale Coffee Company, and, after rapid growth, acquired Starbucks in 1987.
• Schultz rebranded his coffee shops as Starbucks and grew to over 30,000 locations worldwide with $24 billion in sales.

The Transitioning Zag

• The Transitioning stage requires pruning and revising the original vision.
• Time to validate and revise the original vision focusing on assumptions to see what remains true,.
• Smart choices must be made about the future, especially about products, customers and brands.

JVC’s Zag

• JVC and Sony battled for supremacy in the videotape recorder market in the 1970s.
• JVC, focused on televisions and audio, experimented and introduced the lower-cost VHS format.
• VHS had lower picture quality, but provided two hours of tape, allowing people to record entire movies.
• Sony missed this shift in consumer demand and lost the market.
• The video-rental market emerged, and it was too late for Sony to respond.

Netflix’s Zag

• Netflix decided to transition from mailing DVDs to streaming in 2007.
• Netflix transitioned from a DVD subscription model to a streaming model.
• Blockbuster’s CEO rejected the vision of running Blockbuster’s brand online while Blockbuster ran Netflix’s brand in their stores.
• The transition was rooted in their ability to adapt to changing technologies and consumer demands, now a producer of original content.
• Netflix has had great success in streaming and original content, earning twenty-three Primetime Emmy awards in 2018.
• The company's annual revenues spiked from $997 million in 2006 to more than $16.61 billion on March 31, 2019.

The Mature Zag

• Companies in the Mature stage are well-established and face competition from other mature players.
• Optimization of resources and acquisitions are common to appease investors.
• Companies lacking vision become complacent and lose control, innovation is key.

Apple’s Zag

• Steve Jobs returned to Apple in 1997 when sales had tanked and the company was near bankruptcy.
• Apple dropped a lawsuit against Microsoft in exchange for $150 million.
• Jobs cut 70% of Apple's products and focused on four key areas.
• Jobs dumped the current board members and created a new fresh team.
• The iPhone's release in 2007 propelled Apple to a $1 trillion valuation.

Amazon’s Zag

• Instead of becoming a Legacy company, Amazon continues to innovate like an aggressive Startup.
• Amazon has created innovative products such as Alexa-enabled devices and Amazon Go retail stores, focused on the customer.
• "Day 2 is stasis, followed by irrelevance," says Bezos, and Amazon stays young through constant Zagging.

The Legacy Zag

• At Legacy stage, the original entrepreneurial spirit is lost, but decline can be avoided with a fresh vision from leadership.

Microsoft’s Zag

• Bill Gates handed over leadership to Steve Ballmer.
• Ballmer’s reliance on the Gates legacy hurt innovation, and Ballmer killed products which then went on to be successful for other companies.
• Nadella Zagged, switching from focusing on "devices and services" to a mobile and cloud connectivity future.
• Nadella's vision led to an increase in stock valuation and Microsoft becoming the third company in US history to reach a $1 trillion market valuation.

The Zombie Zag

• Zombie companies often can't cover interest payments on their loans and may face bankruptcy.
• Zombie companies often fail to see warning signs from disruptive innovators.
• They can shift however, if market forces unexpectedly shift, or the company is resurrected by a Vision Zag.

United Record Pressing Company’s Zag

• Vinyl sales dropped after CD sales surpassed them in 1988.
• Vinyl records shifted once again in 2008, by millennials and hipsters drawn to experience of vinyl.
• United staffed up from 40 to 150 employees and is running their pressing plant twenty-four hours a day, six days a week to try keep up with the current demand.

Marvel’s Zag

• In 1996, Marvel Entertainment Group filed for bankruptcy after their stock value collapsed.
• After selling the rights to their most popular superheroes, Marvel refocused on movies rather than comic books.
• They leveraged other heroes as collateral to secure $525 million from Merrill Lynch to bankroll their vision of ten movies.
• Marvel created movies out of minor characters that would also make great toys.
• Marvel's Avengers: Endgame had a record-breaking $1.2 billion worldwide.

The Dead Zag

• Zagging is possible even when a company is dead, because many companies have come back from failure.

Stewart Butterfield’s Zags (Flickr and Slack)

• Stewart Butterfield founded Ludicorp in 2002 to build a computer game that ended two years later however, it gave birth to Flickr, an online photo-sharing and management app, which he sold to Yahoo.
• In 2009, Butterfield launched Tiny Speck to create multiplayer, browser-based, game, Glitch. This shut down four years because it could not generate a large audience.
• Butterfield and a few core members realized they could use a communications platform to bridge the divide between their offices.
• This resulted is Slack, a success because it was a solution to the issues, and simple and efficient to use.

The Permanent Zag

• The Vision Zag is an ongoing mindset for vision-driven leaders.
• Every company faces obstacles and opportunities to pivot, adjust their vision based on where they are on the Vision Arc.