It’s spring again, and financial reports are coming in from many consumer electronics companies — some of which are reporting higher year-over-year sales and profitability while others are reporting lower sales and profits or even losses. It illustrates a stark contrast from one company to another; some are growing and profitable, others are shrinking and losing money.
The demand for consumer electronics, as projected by the Consumer Electronics Association, will cause factory sales to increase to $208 billion in 2014, representing growth of 22.4 percent since 2009. That’s a healthy multiyear industry trend. So why isn’t every company in the CE industry enjoying better times?
Companies make money and lose money through a combination of factors too numerous to list. Some reinvest their profits for tax purposes; others take extraordinary charges for reorganization or acquisition. Some companies simply lose money — sometimes for years — and this causes one to wonder how companies can book ongoing losses in an industry that is trending upwards. You have to ask: What is their strategy?
We know that most companies have a strategy for being in their chosen business. There is likely an over-arching corporate mission alongside company goals, followed by a series of tactical initiatives intended to achieve desired results. What appears to be lacking is a strategic vision.
Once established, a strategic vision serves as the guiding force that permeates all company activities. Long-term principles formulated in support of the strategic vision are not sacrificed for short-term business gains. Companies prepare themselves for the occasional reset in the market, economic downturn or other temporary business setback while following the strategic vision that keeps their bearings true.
You can look up the words “strategic” and “vision” and come up with another phrase: Evolutionary imagination. A strategy stipulates how the business will evolve, while a vision is the imagining of a new reality. We already know that in the long term, anticipating where the business is going is more important than where it is currently. Coupled with an imagination of future business opportunities, the resulting strategic vision is a powerful corporate asset.
Articulating a strategic vision can be a squishy exercise that many managers simply can’t (or won’t) grasp. Alternatively, it can be a very satisfying and liberating process that motivates people in the right direction and unlocks a company’s true potential for long-term business viability. In many cases, the strategic vision comes from a single person who, through leadership and example setting, acts as the “visionary” and creates the filter through which every strategic idea flows.
A strategic vision is important in all industries and is absolutely vital in mature markets such as consumer electronics. Our most successful CE companies have not only redefined themselves and have become more relevant to today’s consumer, they constantly evolve and imagine new realities. Look at how connected technologies are continuously advancing markets and meeting consumer expectations that did not exist only a few years ago. CE companies in that space are enjoying robust sales, higher profits and a bright future.
The CE categories that have shown decline in recent years have failed to evolve and imagine; thus price erosion and predatory business practices rule the day. These are smart companies with capable management and good products, yet they are struggling.
Has the market changed so quickly that their products are no longer in demand? No, the market began changing a long time ago as consumers demanded products and services that met their heightened expectations, brought on largely by the penetration of smartphones, tablets and the broad range of advanced products embedded with connected technologies.
Today’s successful CE companies had the vision to see what was evolving before their eyes and took strategic measures to become relevant to those future realities. Today’s struggling CE companies put their priorities on short-term gains for too long and are now becoming irrelevant to their audience.
Short-term gains are not all evil. The sacrificing of profitability for sales volume can make sense — provided it is short term. Companies may choose to capture market share in pursuit of a derivative business channel, or spike sales volume that would allow for manufacturing scale that can economically benefit worldwide affiliates in emerging markets. But long-term business viability requires a strategic vision and the creation of checkpoints and markers that guide companies to sustainable positions through the successful capture of profitable sales.
It isn’t too late to adopt a new strategic vision in today’s connected world. A company’s leadership team can begin by identifying the genuine value currently being delivered to their customers and visualizing what that value will look like as the company and its chosen businesses evolve over the next three to five years.
Take into account the expected technological, economic and sociological trends. If done properly, what you will produce is a projected business reality in which your company will find itself, and you can then determine how your company can thoughtfully and successfully respond.
Here’s a caveat, though: The right strategic vision for a company will likely cause a lot of hardship along the way, breaking down old belief systems and creating discomfort among those that are quite content with their current reality regardless of what’s best for the company in the long term. How ironic it is that the people capable of effecting the change in a company will typically be the ones fighting against it.
Keith Lehmann is a 30-year veteran of the CE industry, most recently executive VP of Kenwood USA Corporation. Today, Lehmann is a CE industry consultant and advisor to companies, organizations and media outlets.