What a successful turnaround looks like

by Editor

August 21, 2013 | 9:51 am
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You’re CEO of a once great company, now beleaguered on all sides by competitors and a rapidly changing industry. How do you get back on top?

That’s the question Michael Dell has been asking himself since 2007, when he retook the top job at the computer company he founded in 1984.

And last year, he decided that the answer was to take the company private, to escape the hectoring of the public market. But even if he succeeds in convincing shareholders to let him buy back his company, the real challenges lie ahead.

Luckily for Dell the history of corporate turnarounds provides clues as to what the company must do to get back on track.

If Michael Dell and Silver Lake Partners, the private equity firm that helped take the company private, are to succeed, they should look to the case of IBM in the 1990s.

The firm’s transformation under CEO Lou Gerstner is the subject of a Harvard Business School case study by Lynda Applegate, Robert Austin and Elizabeth Collins.

Two decades later, it offers hints at what Dell must do to succeed.

There are two basic patterns to a successful turnaround, HBS professor Jan Rivkin told me in a recent interview.

(Rivkin wrote a 2010 case study on Dell’s decline.) The company must identify some assets from which it can squeeze more cash, in order to improve its short-term position.

Then it must pick the right areas to reinvest in, to fuel the company’s longer-term success. Both strategies are evident in the case of Gerstner and IBM.



by Editor

August 21, 2013 | 9:51 am
  |     |     |   Start Conversation

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