Introduction
Gregory Slayton became the CEO of MySoftware company at the end of 1997. Having extensive experience working under pressing conditions and in various countries, Slayton was initially not interested in a new job. However, personal reasons, as well as the potential and new opportunities that he saw in the company, forced him to accept the offer. Even though the organization has long been a leader in creating software for small businesses, it was experiencing severe difficulties when the new head arrived.
Discussion
Before Slayton, MySoftware’s essential products were mail and marketing communication solutions and annuity-based products; that is, shrink-wrapped software formed the basis of sales. The company’s sales channels were retailers, direct marketing, original equipment manufacturers (OEMs), and international trade. It is important to note that small businesses comprised a fast-growing segment in 1997. Companies that represented the segment faced specific challenges and needed to find new customers, maintain their professional image, and expand and promote their business. As of 1997, MySoftware’s revenues were declining, and operating losses were growing for two years in a row. The Internet had become the new marketplace for software sales, and competition intensified, causing problems for MySoftware. Their Internet strategy was not working, and their stock price dropped. Nevertheless, from Slayton’s perspective, the company had significant assets – a strong management team, 4.5 million in cash, and a brand. He noted the organization’s need for strong leadership and a new strategy.
The company required significant changes in its model and strategy. After meeting with senior managers, Slayton highlighted several reasons for the transformation and established especially urgent tasks. MySoftware was in financial turmoil; new products failed, leaving the product pipeline empty. Moreover, the development of these products was expensive, and essential products did not receive the required attention. A similar situation has appeared in marketing – employees focused efforts on outdated and unprofitable opportunities.
Another problem was unfavorable contracts with retailers and the termination of cooperation with the biggest of them. Finally, Slayton drew attention to the low morale of employees, which interfered with effective work. As a result, the new CEO identified several most urgent tasks – to stop the leakage of resources, fix the core business, and find new opportunities and tools for the company’s growth. For the reasons listed, Slayton needed to change the business model and strategy of the company in a short time.
Slayton’s actions included changing the company’s current work processes and developing new directions for the strategic development of MySoftware. After presenting the detected problems at the meeting with directors and vice presidents, the CEO took an uncompromising position on the need for changes and began to act. First of all, Slayton managed to reduce costs by 20% thanks to several measures. The office dealing with Internet products that did not succeed was closed. Moreover, employees whose work was ineffective were fired, which affected even vice presidents. Secondly, the CEO implemented the practice of “responsibility budgets,” following which vice presidents were accountable for the budget of their departments and had to make sure that it was consistent with the company’s goals. The third measure affected compensation, and since Slayton believed in financial motivation, he changed the formula for its calculation. The salary became dependent on several aspects, including the performance of employees concerning the company’s purposes.
Two more measures that became effective thanks to Slayton’s faith in financial motivation are re-pricing and providing new stock options for employees and a change in the approach to relations with retailers. With the first of these changes, employees received more options than before, which affected their compensation. The new approach to retailers, in turn, allowed changing contracts and offering incentives beneficial to two parties. Moreover, retailers have been included in the product development process by providing ideas tailored to customers’ needs. The new business model improved the company’s position, allowing it to focus on strategy.
Together with a team of employees, Slayton has developed four possible areas for the company’s future work and its expansion. They included increased sales through annuity products, more broad collaboration with OEMs, search for new distribution channels, and online business. Each area has its risks and advantages and requires different investments in its development. For this reason, Slayton and his team had a difficult choice requiring consideration of all essential factors. Nevertheless, preparing a future strategy is a sign of the company’s readiness for growth and the effectiveness of the measures taken to strengthen its position.
Conclusion
The measures implemented by the new CEO have had favorable consequences for MySoftware, although they have required more effort than expected. The success was evidenced by the fact that the employees’ morale rose, improving their performance. Moreover, the company resumed cooperation with the largest retailer, and its shares’ value rose from $3 to $4. The reduction in costs contributed to the return of the organization’s breakeven. Stabilization of the company’s position returned the favor of investors to its activities. Thus, although MySoftware still had to choose a new strategy and invest significant resources in it, the business model suggested by the new CEO worked well.