Big Shoes to Fill Case Study Analysis Hbr
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Innostat was once the world’s best-known maker of prosthetic limbs and surgical implants and had established a reputation for technological innovation and manufacturing quality. With three manufacturing locations and over 5,000 employees, Innostat had reached revenues of over $2 billion. The CEO or self-titled “Chief Passion Officer”, Jack Donally, had been the driving force behind the company’s success: he was the idea generator for new products, the driving force behind the quality and precision of all manufacturing and the face of marketing and sales.
While his micro-management was rooted in commitment and passion for the company, it caused a rapid deterioration in performance and innovation in the years leading up to and immediately following his retirement and subsequent unexpected death. The siloed marketing, sales and R&D departments never developed the skills required to maintain the same performance standard and lacked the incentive to think beyond their immediate function. No major new products have been introduced into the market in the past 4 years and as a result, other companies have found ways around Innostat’s patents and have developed competitive products which is causing strategy concerns for Innostat’s investors.
Even amidst declining profit margins Innostat is well equipped to recover: they have held to their commitment of quality and precision, access to the global marketplace via an international presence and key players within the company that contribute expertise in quality practices and who nurture close connections to end users of the products manufactured. Additionally, consultants from PK Henderson performed a review of the company and compiled a report to the board of directors including recommendations to improve profitability through an organization restructure. These recommendations have yet to be implemented.
Stephanie Fortas, a PhD from Stanford with advanced technological skills and advanced business savvy has been brought in to turn the company around and must decide the best course of action. The deterioration of product innovation and performance caused Innostat’s market share and profitability to decline. Fortas must decide the best course of action to recover Innostat’s performance and company morale while also securing her leadership within the company.
Before Stephanie can make the best choice as to how to proceed she must examine all underlying issues. It is evident that the loss of Jack Donally has had a ripple effect on the organization, both in regard to company morale and pressure from Wall Street due to poor performance. Stephanie must examine why the loss of Donally has created this undercurrent of uncertainty.
Donally failed to empower and instill trust within the organization. While he was a charismatic and talented R&D leader, he did not provide his employees with the empowerment to be the same. Innostat’s company culture relied on Jack’s passion to drive business. This stifled employee’s motivation to innovate and lead product development initiatives. The sales and marketing team lacked high levels of marketing and general management skills which is important to define new product opportunities and push them through the organization.
With the employees lacking motivation to bring forward new ideas and products on their own, Innostat’s competitors are finding a competitive edge. With advancements in technology, other companies are finding ways to innovate around Innostat’s proprietary patents. While an expanding global market does provide additional opportunity for growth, it also attracts more competition and presents regulatory and economic challenges.
Stephanie also must consider that the main reason the board hired her could also be one of the biggest hurdles she faces: the board wants results, and they want it now. Their focus on short term success instead of long term strategy could be detrimental to the future of both Stephanie’s career and Innostat’s long term sustainability.
Stephanie has a lot of options to consider. She should first analyze if she is the right fit for this position. She just went through a messy divorce, relocated from California and is accustomed to a more organized form of management. If she were to step down she likely would deal with long-term speculation about her ability to be a successful CEO. The board and employees may also feel betrayed which could further worsen Innostat’s position in the market. She should consider that she is a highly skilled professional with the technical skills required to lead the company back to profitability. The board has exhibited trust in her by choosing her over Frank. Furthermore, Frank has exhibited trust in her by divulging his honest feelings about the company. If she is fully committed to this new venture she has the tools and trust needed to succeed.
The JK Henderson report contained a lot of valuable information and options for Stephanie to choose from. Overall the report provides a comprehensive road map to long-term sustained profitability. There is strong evidence organizational changes need to happen to drive innovation. However, the board and Jack both dismissed those findings by burying the report. If she chooses this option implementation could be problematic. A massive overhaul so early into her tenure without the proper experience and execution is likely to backfire. If she chooses this route she may lose the political capital she has gained with the board and executive team.
The option of business-as-usual using Jack’s micro-managed product development model is not without risk.