The Profit

Business transformations: The good, the bad and the ugly

Business transformations: The good, the bad and the ugly

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Every so often, the best businesses will get stuck in a rut. Maybe it doesn't attract consumers the way it used to, or maybe its consumers have abandoned it entirely, leaving the business to the sound of crickets and the sight of tumbleweeds.

When this happens, businesses are confronted with a stark choice: Change or die. Given that choice, most will choose "change," but it's not always that simple. A company has to be able to leave behind its well-established identity and its credibility as a brand, and it's not always successful.

For those businesses that have managed to meet the demands of a changing marketplace, there can be a new and sometimes greater degree of success. But it's a tricky balance to strike, and some businesses that have transformed have been met with a collective shrug at best and a Category 5 consumer revolt at worst.

Serial entrepreneur Marcus Lemonis of CNBC Prime's new reality series "The Profit" has made his fortune in part by turning companies around, so he's seen his share of businesses that successfully transformed, and those that couldn't. He said in an interview that "pride of authorship" is one of the most frequent pitfalls he's observed when a businesses has failed to reinvent itself successfully.

"Businesses come up with a specific format, or a specific product or process," he said. "They fall so in love with themselves that they don't listen to what the consumer wants, and they become obsolete. … They don't anticipate tomorrow." But what about the successful ones?

"What I see is an acknowledgement of best practices," he said. "If it's a peer, you recognize what they do well and you recognize what they don't do well. When I go to a service-oriented company, I pay a lot of attention to what they're doing that creates a good experience, and I ask how I can correlate that to my life. I study, listen, learn and replicate."

Which companies have had notable transformations, for better or for worse? Read ahead to find out.

By Daniel Bukszpan
Posted 29 July 2013

Abercrombie & Fitch

David Pomponio | FilmMagic | Getty Images

Abercrombie & Fitch is a casual wear company founded in 1892 as a sporting goods company. It experienced a rebirth in the 1990s and has been very successful ever since, due mostly to the guidance of CEO Michael Jeffries, who reimagined the brand to project an aura of youthful sexuality.

His vision helped the company achieve its greatest success, but it also brought heavy criticism, both for its suggestive advertisements, and for statements he has made about the customers he wanted the brand to attract.

"In every school there are the cool and popular kids, and then there are the not-so-cool kids," he said in a 2006 interview with "Candidly, we go after the cool kids. ... Are we exclusionary? Absolutely."


Apple's flagship New York store.
Adam Jeffery | CNBC

The transformation of Apple is one of the most iconic ones. The company did well in the 1980s but experienced a slump afterward, so co-founder Steve Jobs, who had been ousted in 1985, returned in 1997 as an advisor to help it get back on track. As many people now know, he didn't advise for very long.

Apple's board of directors named him interim CEO,, and in 2000 he dropped the "interim" from his title. Under his guidance, Apple was reinvented as a mobile technology company, distinguished by such products as the iPhone and the iPad, products that continue to fly off store shelves. Jobs died in 2011, but the company he left behind had been irrevocably transformed.


in a file picture dated 05 February 2005, members of the US-based Blackwater private security firm scan Baghdad city centre from their helicopter.
Marwan Naamani | AFP | Getty Images

Blackwater was a private military company formed in 1997, and was perhaps best known as a contractor used during the Iraq War. In 2008, it undertook a campaign of major changes to its mission and its image after some employees were accused of causing the deaths of 17 Iraqi civilians.

The company shifted its focus from security contracting and changed its name to Xe Services. In 2011, it was renamed again, to Academi, in an effort to emphasize its "focus on regulatory compliance and contract management," according to The Wall Street Journal.


The Burberry shop in London, England.
Getty Images

The British luxury clothing company was founded in the 19th century as a manufacturer of rugged outdoor apparel. After Christopher Bailey became creative director in 2001, its entire image was given a face-lift.

On the basis of his successful reinvention of the company, he was made chief creative officer in 2009. "The Burberry brand today is more cohesive than at any time in the company's history owing much to the clarity, consistency and purity of his amazing vision," CEO Angela Ahrendts said in a statement. "Christopher has innovated, protected and modernized every aspect of this company, giving it an identity and point of view that is completely unrivaled."


Lionel Bonaventure | AFP | Getty Images

In 1985, Coca-Cola changed its formula and, hence, its flavor. This decision was so disastrous that almost 30 years later, the mere mention of "new Coke" still strikes terror in the hearts of even the most hardened executive.

According to Advertising Age, the company changed its cola because it was losing market share to Pepsi. The new product was released in April 1985 to a hostile reception, prompting the company to bring back the original flavor only three months later.

When the decision to do so was made public, ABC News anchor Peter Jennings broke into the afternoon airing of "General Hospital" to inform the nation of the old taste's triumphant return.

Fortune Brands

Photographs of several Fortune Brands Home & Security Inc. products are displayed at the company's office in Deerfield, Illinois, U.S.
Tim Boyle | Bloomberg | Getty Images

Fortune Brands was a seller of a wide variety of products, including golf accessories and home furnishings. In 2010, it announced that it was selling off those concerns to focus on two things—liquor and home security.

It split at that point into two different companies, Beam and Fortune Brands Home and Security. Beam sells such spirits as Jim Beam and Maker's Mark, and Fortune Brands Home and Security is the parent company behind Moen and Master Lock.

The transformation has been good for both companies' bottom lines. On July 24, Fortune Brands Home and Security reported a net sales increase of 11 percent year-over-year to $1.04 billion for the second quarter of 2013, and Beam, which has not yet released its second quarter report, reported a 37 percent increase in operating income in the first quarter of 2013.


Daniel Acker | Bloomberg | Getty Images

Marvel Comics is the home of such legendary superheroes as the Hulk, Iron Man and Spider-Man. The company has had its ups and downs over the years, but when it filed for bankruptcy in 1997, it seemed like the end of the road.

The company merged with Toy Biz and formed Marvel Enterprises, and in the new millennium the X-Men and Spider-Man led a long line of extremely successful film franchises. The 2002 "Spider-Man" went on to gross $822 million at the box office, and in 2012 "The Avengers" took in over $1 billion after less than two weeks in release.


Website pages from
Chris Ratcliffe | Bloomberg | Getty Images

The social networking site of choice used to be MySpace. Rupert Murdoch's News Corp bought it in 2005 for $580 million, the type of investment one only makes when one smells a winner. Unfortunately for Murdoch, Facebook came along, and the rest is history. News Corp. sold MySpace to Specific Media Group and musician Justin Timberlake in 2011 for $35 million—a loss of 94 percent of the original investment.

The site relaunched in June, so don't count MySpace out. Andy Cohn, publisher of the FADER music magazine, took to Twitter to say "there are some seriously talented folks over there that I would not bet against."


Target's Bullseye the bull terrier mascot.
Steve Russell | Toronto Star | Getty Images

Target is one of the largest U.S. discount retailers, but it wasn't founded with that intention. It was the brainchild of the corporate leadership of Dayton's department stores, all of whom were the grandsons of the company founder. They took the reins in 1950 and began expanding, and 10 years later they developed the idea for a mass-market discount store that felt like something a little more upscale.

The concept was not embraced by industry experts, who couldn't understand why Dayton's would want to deviate from its successful family-run department store model.

Needless to say, the experts were wrong, and 51 years after the 1962 opening of the first Target location in Roseville, Minn., the company has 1,788 locations in the U.S., 67 in Canada and 361,000 employees. Its reported revenue in 2012 was $70 billion, according to SEC filings.


Bottles of PepsiCo Inc. Tropicana brand juices.
Daniel Acker | Bloomberg | Getty Images

Tropicana Products has been in business for almost 70 years, and it is primarily known for Tropicana Pure Premium orange juice. In 2009, for reasons best known to the organization's higher-ups, the decision was made to scrap the tried-and-true container design depicting an orange skewered by a straw, and replace it with a new look.

That new look was so unpopular that sales plummeted 20 percent, according to Advertising Age magazine. The backlash was in fact severe enough to make the company reinstate its old design, less than two months after the new one had been rolled out.

'The Profit'

When Marcus Lemonis isn't running his multibillion-dollar company, Camping World, he goes on the hunt for struggling businesses that are desperate for cash and ripe for a deal. In the past 10 years, he's successfully turned around over 100 companies.

Now, he's bringing those skills to CNBC Prime, and doing something no one has ever done on TV before—putting over $2 million of his own money on the line. In each episode, Lemonis makes an offer that's impossible to refuse; his cash for a piece of the business and a percentage of the profits.

And once inside these companies, he'll do almost anything to save the business and make himself a profit; even if it means firing the president, promoting the secretary or doing the work himself.