Turnarounds can be challenging. Furthermore, companies often seem to choose turnaround strategies that take the business far afield from where it had been previously. As a result, a turnaround often does not go as smoothly as it should.
A good example of this appears in the October 29-30, 2022 Wall Street Journal article “A Turnaround That Wasn’t So Sweet” by Ben Cohen. The article discusses what Hershey’s did to turn itself around.
The article reports that Hershey’s turnaround “required the company to rethink what business it was in.” As the company diversified away from chocolate, “it tried mixing candy with jerky. This didn’t go well,” the article said. According to the article, “beef-jerky maker Krave Pure Foods in 2015 was a surprising acquisition that signaled to Wall Street the company’s broader ambitions.” As the article points out, “Hershey would have to eat chocolate-covered crow” and it later exited the beef-jerky business.
“Soon it tried again with popcorn,” according to the article. As the article points out, “popcorn would be a much better fit” and “salty grew faster than sweet for two consecutive quarters.” As the article explains, “this version of corporate reinvention worked because Hershey at its core remained the same. It’s a snack company. Now, it just has more snacks.”
As someone who has been researching business success for 25+ years, I see this pattern over and over again. When facing growth challenges, it is ever so common to try to redefine the business in a way that signals broader ambitions and makes major changes to the nature of what the company does. Sometimes, companies even go so far as to try to reinvent their business in a way that takes it as far as possible from what it was before.
But, despite frequent warnings that companies should disrupt themselves, making drastic changes generally doesn’t work. On the other hand, it is better to build on strengths and identify ways to diversify without drastically changing the business. This approach can be extremely successful, just as it was for Hershey.
Unfortunately, too many companies do not adhere to this repeatable success principle. Many executives seem to think that it is time for big changes if the company is not doing well. But, that is not the case. In troubled times, companies need to make changes that are a good strategic fit for the business. That means paying attention to a company’s existing strengths and making changes that build upon and improve what is there, generally without drastically altering the nature of the business.
If you’d like a presentation or a sounding board on making the right kind of changes to revitalize your business, just contact us.
