Just as employees often must learn new skills to meet changes in their careers, so companies must repeatedly reinvent themselves to stay strong.
Faced with mounting global competition, companies can't survive as they once did by churning out the same products or services in the same way year after year. The most successful companies don't wait until they're in trouble or are overtaken by rivals to make changes. The trick is to analyze portfolios constantly, to move quickly to shed weak businesses and to gamble on new opportunities without making the company unstable.
Whereas in the past decade, the concern among companies was reinventing their businesses for new technologies, today it's staying ahead of foreign rivals who produce items more cheaply, and are working their way up to more high-end products.
"Windows of opportunity open and close so quickly today, you can't just mull decisions right in front of you. You have to look around the corner and figure out where you need to go, without becoming spastic or jerking your company in too many different directions," says Michael Fraizer, CEO of Genworth Financial, the insurance company based in Richmond, Va.
To test his own decision making, Mr. Fraizer regularly fires himself -- at least in his own mind. It's a tactic he learned from former Intel CEO Andy Grove in his 1996 book, "Only the Paranoid Survive." When Intel's memory-chip business was getting battered by Japanese rivals in the 1980s, Mr. Grove asked Intel co-founder Gordon Moore: "If we got kicked out and the board brought in a new CEO, what would he do?"
Mr. Moore answered that a new CEO would get Intel out of the memory-chip business.
"Why shouldn't you and I walk out the door, come back and do it ourselves?" Mr. Grove retorted. He then did just that, reshaping Intel from a memory-chip producer to a microprocessor maker.
Two years ago, Mr. Fraizer and other Genworth Financial employees had to learn how to change directions fast. Their former parent, General Electric, decided to exit the insurance business and expand into health-care information technologies and other businesses it believed would yield higher profits. Persuaded that Genworth could prosper as an independent business by focusing on mortgage, life and long-term-care insurance, Mr. Fraizer led the company through an initial public offering.
The company looked to Spain, Italy, Portugal, Poland, Mexico and other countries, where the housing market for first-time and lower-income buyers -- who can't afford large down payments and need mortgage insurance -- was about to boom, Genworth managers predicted.
They hired local managers and worked with overseas banks to understand mortgage-lending requirements in different countries and to help them evaluate risk. "We both underwrite the loan and do the valuation of the property so we are growth partners with [overseas] banks," says Mr. Fraizer.
He also urged managers to think of new ways to reach the growing population of senior citizens as well as younger consumers who don't have the pensions or lifetime health benefits to sustain them through retirement. Among its new products: Clear Course, a variable annuity with a fixed guarantee income that will be offered in 401(k) plans.
"We thought about how a packaged-goods company would come into our business and think about retirement -- and came up with something simple" for risk-averse consumers who don't feel confident making investment decisions, says Mr. Fraizer.
Reinvention isn't a short process. At International Business Machines, it has been going on for more than a decade.
Former IBM CEO Louis Gerstner brought the company back from the brink of bankruptcy by transforming it from a computer-hardware dinosaur to a technology-services giant. Current CEO Sam Palmisano, who took over four years ago, has accelerated Big Blue's transformation to a technology expert that helps companies adopt more-sophisticated management processes.
Steady revenue growth has been hard to come by in technology services, where IBM must compete against Hewlett-Packard, Accenture and various India-based outsourcers to get contracts to run companies' computer operations. So, Mr. Palmisano is emphasizing executive-level consultant work and also expanding IBM's highly profitable software division.
Its programmers and research scientists work side-by-side with employees of big customers to help them rethink, and sometimes help run, everything from payroll processing to customer service. Top IBM executives hope the close customer relationships will pull in more software and hardware sales.
"I send my lab teams to work with customers every day -- and I want their noses rubbed in what isn't working," says Steve Mills, senior vice president of IBM's software group, which has 40,000 employees and has acquired 40 specialized companies since 2000.
There isn't a day that goes by, he adds, that IBM executives don't talk about how to move the company into more-profitable businesses.
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