The future of public transportation will shortly be a thing of the past. Later this month, Segway will produce the last of the two-wheeled personal transporters after which the company was named.
The Segway PT is now better known for the extraordinary hype around its top-secret launch in 2001 than for the revolution it failed to trigger.
Its manufacturer now generates far more revenue from kick-scooters, e-skates and other “micro-mobility” products that threaten pedestrians’ pavement stroll. Still, it is a little sad that the device should roll silently into history in the middle of a pandemic that emptied city streets and, in theory, created perfect conditions for an untroubled PT outing.
Segway is not the only company to have axed or cast off a signature product during the crisis.
Olympus agreed last month to sell its camera division, part of the group since 1936, following three consecutive years of operating losses. In May, General Electric finally announced the sale of its lightbulb business, which traced its history back to Thomas Edison’s invention. The merger of the inventor’s Edison General Electric Company and a rival in 1892 created GE.
GE, still in the middle of a radical rationalisation, and Olympus, under pressure from activist fund ValueAct, had longstanding reasons to sever their roots. Judy Cai, Segway president, said coronavirus had hit PT sales but it had not been “a deciding factor” in the decision to stop making the two-wheelers.
Still, I can’t help thinking the crisis may have — apologies, nervous Segway-riders — tipped the balance. The onset of lockdown forced companies to take quick decisions, and accelerate pending changes. In the same way, as businesses enter a lengthier, but no less brutal, period of uncertainty, their owners, directors and executives are unlocking strategic changes that might otherwise have become bogged down by sentiment or inertia.
The buzzword, as ever, is focus. As I have noted before, it can be dangerous to sweep away old habits hastily, but numerous chief executives attest that the crisis is stripping away resistance to big corporate decisions.
Another Japanese company, Lixil, which makes building materials, was able to drive through the sale of its Italian engineering business in May. While acknowledging the human cost of the virus, chief executive Kinya Seto told the Financial Times the crisis was a “disguised blessing” for those who want to change corporate norms and shake up strategy.
BP’s new chief executive Bernard Looney has announced a writedown of up to $17.5bn in the value of its assets in the second quarter and is conducting an overhaul of the energy group to face up to tumbling demand for fossil fuels. Mr Looney said the group was taking “difficult decisions rooted in our net-zero ambition and reaffirmed by the pandemic”.
The Swiss-Swedish industrial group ABB is pushing through a strategic review to “deliver financial focus”, according to its new chief executive Björn Rosengren, with a radical decentralisation. He paints the crisis as an opportunity, despite the shadow of ABB’s chequered history as a case study in how, and how not, to manage and organise a multinational. Cevian Capital, the activist investor with a large stake in the group, has urged Mr Rosengren to proceed in a “fact-based and unemotional manner”. If he does, it seems inevitable that ABB will put some of its “heritage brands” on the block in due course.
Plenty of companies now face questions of survival. Some may be forced into fire sales of assets. Those who are likely to succeed, though, will simply be speeding up a process of constant, cold-eyed assessment of their assets that was under way well before the pandemic incinerated their strategy plans.
Such companies, whether they realise it or not, are disciples of Peter Drucker’s philosophy of “systematic abandonment”, which the management thinker considered to be a prerequisite for future growth. Every two or three years, Drucker advised, executives should ask themselves: “If we did not already produce this product line or did not already serve this market, would we now, knowing what we know now, go into it?”
After I wrote about systematic abandonment a few years ago, a reader wrote to tell me he had once heard John Reed, then CEO of Citicorp, compare his company to an accordion, “with alternating cycles of expansion and contraction”. Each “contraction” — eliminating projects and products that had not succeeded — freed up resources for the next round of expansion.
Knowing what we know now, clinging on to underperforming businesses merely for emotional or historical reasons is unwise. It is time for executives to get out the squeeze box and start playing.