Prem Watsa was rushing down Bloor Street in downtown Toronto one morning in 1974 to get to a job interview at an insurance company called Confederation Life. He was fresh from earning his MBA and looking for his first job in finance in his adopted country. The street was filled with police officers searching for suspects in a bank robbery that had just occurred, and one of them grabbed Watsa, a 23-year-old Indian immigrant, and pinned him against a police cruiser. He protested his innocence, explaining that he was hurrying because he didn’t want to be late for an important meeting. A few minutes later, the cops let him go. … Watsa ultimately got the job and, after 10 years working as an analyst and a money manager at Confederation Life, began building a company that would become Fairfax Financial Holdings, now a C$9 billion ($8.8 billion) conglomerate.
Joe Kaeser is transforming Siemens’s structure; changing its culture will be harder ... LONG-LIVED companies can change radically over time. Nokia, for example, began in 1865 as a pulp mill; recently it sold its mobile-phone business to Microsoft (see article) and now it mainly makes networking equipment. By contrast, Siemens has been quite consistent. The Economist first wrote about the company in 1868, when it joined a consortium to build a telegraph cable from Britain to Russia and India. In an 1882 article about another tech boom—the spread of electric lighting after the perfecting of the dynamo—we noted that Siemens was hedging its bets by making both alternating- and direct-current ones. To this day, when asked to sum up his firm’s business in a word, Joe Kaeser, its chief executive, says, “electrification”. ... Mr Kaeser is nonetheless hoping to remake Siemens, at least partly. After electrification, he likes to add two more words: automation and digitisation. The engineering giant is to focus on doing these three things profitably. Businesses that do not fit these criteria will be fixed or sold.
Every airline has its horror stories, of course—air travel is full of opportunities for customer disenchantment. But United has proved an industry leader: On all major performance metrics—delays, cancellations, mishandled bags, and bumped passengers—United has, since 2012, been reliably the worst or near worst among its competitors. In 2012, according to the U.S. Department of Transportation, United was responsible for 43 percent of all consumer complaints filed against U.S. airlines. It finished last among North American nondiscount airlines in the 2015 J.D. Power & Associates customer satisfaction survey. ... It’s been five years since United Airlines and Continental Airlines combined to form what was at the time the world’s largest carrier, and the merger hasn’t gone well. In 2012 and early 2014, when American Airlines Group, Delta Air Lines, and Southwest Airlines reported large, and in some cases, record profits, “the new United” lost money. ... Then there was the coffee, an issue that, while hardly central to its business, symbolized United’s inability to get things right. On Nov. 19 the airline announced it was changing the coffee it serves on its planes and in its lounges from a brand called Fresh Brew to the Italian premium roaster Illy. It was welcome news to customers and to the flight crews used to fielding complaints. It was also a tacit admission that the choice of coffee after the merger, a decision that consumed thousands of man-hours, took nearly a year, and involved everyone from Smisek to the airline’s head chef to the flight attendants, hadn’t worked out.
It’s a story that has become a part of business folklore in China. In 1985, Zhang Ruimin, the young general manager of the loss-making Qingdao Refrigerator Plant, decided it was time to turn things around. He got his factory workers to smash 76 defective refrigerators with sledgehammers. To drive the point home—that there would be no tolerance for low quality—he delivered the first blow himself. ... This moment marked a significant turning point in the history of Qingdao Refrigerator Plant (now known as Haier), so much so that the sledgehammer is now housed in the company’s in-house corporate museum. Three decades later, Haier is the world’s largest white goods manufacturer and boasts cutting edge innovation. ... None of this would have been possible without CEO Zhang Ruimin at the helm. He led the company through several path-breaking business model changes, which helped the company build a strong brand, grow both organically and through acquisitions, globalize and evolve a business model where the company “gets close to the customer”. The beauty of it is that he forced the company to change even before competition or technology made it imperative that it did so. ... Zhang is now leading the company through yet another transformation. He is, in essence, ‘breaking up’ the company and throwing rigid organizational structures and processes out of the window. The enterprise will, in effect, become an investment platform and the departments and divisions will be like entrepreneurial teams, which he calls “micro-enterprises”.
They accumulated even more debt of LyondellBasell Industries NV (LYB), the world’s largest manufacturer of polypropylene, before it filed for bankruptcy in January 2009. … The Lyondell bet paid off. The $2 billion Apollo sank into the company, whose products are used to make tires and bathroom fixtures, has turned into a $9.6 billion paper profit, the biggest gain ever on a private-equity investment, according to data compiled by Bloomberg. … That eclipses the $7 billion that Henry Kravis’s KKR & Co. reaped from the 1986 buyout of supermarket chain Safeway Inc. and a similar profit that a group led by financier J. Christopher Flowers reaped from the 2000 takeover of the predecessor to Tokyo-based Shinsei Bank Ltd.
That now-infamous overhaul, under then-CEO and former Apple retail guru Ron Johnson, sought to reposition Penney as a flashier retailer with fancier merchandise. But it backfired: Customers fled, sales tumbled by almost a third, and Penney was crippled financially. Three years ago the board brought back Mike Ullman, the CEO it had unceremoniously chased out in favor of Johnson, to stop the U.S.S. Penney from sinking. And last summer he handed the reins to Ellison—an executive the opposite of flashy. ... It’s fitting that Ellison, a lifelong musician, plays electric bass, an instrument that rarely gets a flashy solo but without which no band can click. He made his reputation in retail at Home Depot, helping engineer that chain’s turnaround by focusing on unsexy but primordial things like the supply chain and the integration of stores and e-commerce. He’s a data devotee who grounds every decision in information—including that seemingly intuitive shoe move. ... The trees look nice, but the forest is daunting. Penney’s sales, an estimated $12.6 billion for the just-completed year, are still down 37% from their 2006 peak. Its nascent recovery, part of its fourth turnaround effort since 2000, hasn’t swayed Wall Street—its stock trades close to a 35-year low. In the long term, the problem isn’t just that Penney has been dysfunctional; it’s also that Penney is a department store, a practitioner of a business model under siege.
Once you leave the giant department stores of New York City and head to the malls of suburbia, Ralph Lauren becomes a few racks of Oxfords, polos, and pleated pants. Reliably found in your local Dillard's, and just as reliably found on sale. ... She likens the brand to Michael Kors — oversaturated and devalued. "I would never buy Polo at full price." ... Most shoppers haven't encountered the totality of Ralph Lauren's world. How could they? Since the early 2000s, Ralph Lauren Corporation has owned and operated at least 25 different brands. ... Lauren has stepped aside to make way for a new CEO, Stefan Larsson — the first person besides Lauren to ever hold that title in the company's 50-year history. The company has been in the process of whittling down the brand list and there are plans to refocus on just three main lines: Ralph Lauren (the new umbrella label for Women's Collection and Purple Label), Polo Ralph Lauren, and Lauren Ralph Lauren. ... At the same time that Ralph Lauren is reevaluating its structure and bringing in fresh leadership, it also has to contend with the fact that the specific style of Americana that's so deeply embedded in every inch of the brand isn't something shoppers are clamoring to align themselves with now. If the privileged, preppy aesthetic that Lauren built his company around is no longer the height of aspiration, what will the future of Ralph Lauren look like? ... Lauren got his first shot at professional tie design at Rivetz & Co., a high-end neckwear company. It didn't go over well. "Rivetz was a traditional firm," David Price, whose father used to own the Rivetz & Co. business, explains. "They were doing all sorts of crazy pinks and oranges and all the Ralph colors, and the industry and the customer base at Rivetz thought it was just atrocious."
American Apparel launched in 1988 as a T-shirt business that founder and former CEO Dov Charney ran out of his dorm room at Tufts University. After Charney opened his first retail store, on Los Angeles’s Sunset Boulevard in 2003, the brand quickly became a phenomenon, famous for its local, sweatshop-free manufacturing and notorious for its sexually charged advertising. ... As it became a public company in 2007 (through a reverse merger), American Apparel had 143 stores in 11 countries and was valued at nearly a billion dollars. ... It wasn’t just the merchandise that set the company apart. From the beginning, American Apparel eschewed fast fashion (the practice of copying new runway trends immediately and cheaply) in favor of generating its own iconoclastic staples. Instead of outsourcing manufacturing to low-wage overseas workers, it produced almost everything it sold for wholesale and retail in its own factory in Los Angeles ... Production and design now follow a strict calendar, set by Schneider. "You have to have your raw materials where they’re supposed to be, your bundling down, your product cut up and ready to sew—there are a thousand steps that go into making this run smoothly," Schneider says. "And it’s more complicated [at American Apparel] because you’re knitting your own yarn, you’re dyeing your own fabric, and you’re manufacturing everything here and shipping everything yourself." In part, as a result, niche items that fall outside of American Apparel’s knit-production expertise—sweaters, denim—are now being outsourced to other factories around Los Angeles.
But a disastrous 2015—including the flubbed launch of a new camera—punctured that enthusiasm. Revenue for the first quarter of 2016 was down year over year, and a much-anticipated drone release was delayed. When Woodman arrives at the GoPro Games, the company’s stock is flirting with all-time lows, down almost 90% from its peak. ... It’s a ride that could make even the most seasoned extreme-sports enthusiast dizzy. Woodman takes a seat on an off-duty ski lift, the high Rocky Mountain sun behind him. And then he dives into his plan for reviving the company he loves. He says that a trio of new products being released this fall—including that delayed drone, called the Karma—will help win over a swarm of fresh consumers. New software will make video editing easier and content even more shareable. He is relentlessly optimistic. ... Woodman sees GoPro as a sort of mini Apple, a hardware company that is evolving into a software platform with social networking features. Its business model will even include monthly subscription fees alongside steady hardware upgrades.
Ferro, who declined to be interviewed for this story, began his career as an entrepreneur, launching companies in the 1980s and ’90s, including a software startup. By the time he met Fiasco, Ferro had long since transitioned from creating businesses to buying them—especially ones in financial trouble. And for an investor in distressed companies, few industries have targets as numerous and tempting as newspapers. ... The Ferro era at Tribune has quickly become one of the more baffling chapters in media history. Within eight months, Team Ferro has rejected one purchase offer, angering shareholders; promised to unveil a “content monetization engine” that would unleash newspapers’ true potential as a “rock star business”; posted a want ad for an employee to assist “news content harvesting robots”; rejected another, more lucrative purchase offer; rebranded Tribune as Tronc, or tronc, as the company insists; and split and re-rebranded tronc into troncM, for media, and troncX, for exchange. ... corporate renaming ignited extended spasms of #tronc mockery on social media. Sample tweet: “WHAT YOU GONNA DO WITH ALL THAT JONC ALL THAT JONC INSIDE YOUR TRONC.” ... yet, until recently, Ferro was on the verge of laughing all the way to the bonc, as it were. ... now the spotlight is back on Ferro and his vision for saving journalism.
Lego is an idea as much as it is a toy; if you try hard enough, you can fit the entire story of the last century of child’s play and the hopes and desires of every parent into one of its 9.6-millimeter-tall rectangular plastic bricks. Molded in a thermoplastic polymer, acrylonitrile butadiene styrene, Legos are known for their durability, which is why you can pull out the 30-year-old Legos stashed in your parents’ basement and, dated color schemes aside, they’ll be the same as they ever were. Not only will they look the same, but they will fit together with every other one Lego has ever made, even those going back to 1949, when a Danish toy-maker named Ole Kirk Kristiansen made his first plastic brick. Lego calls it the System of Play, and it is both a manufacturing principle, allowing the company to reuse the same molds to make infinite new sets, and a play proposition: The more bricks you own, the more you can build. ... Like all 6,500 Lego elements — cubes, rectangles, octagons, wheel beds, arches, even the tiny semi-circular hands of yellow mini-figures — the standard brick has a variation of just 0.004 millimeters, which means Legos are more precisely crafted than your coffeemaker, your television, even your iPhone. ... By 2003, the company was on the brink of financial collapse, just three years after Fortune had named it “Toy of the Century.” ... In Lego lore, the crisis provoked a companywide soul search. And where the soul was located was in the brick. Henceforth, the brick would be the center of everything it did, toy trends be damned. ... play researchers argued that toys should foster more open-ended creativity and exploration — toys that forced the child to do the work, like Lego.