When is the right time to let go?

posted by 4 years ago in Features

With the fashion world reeling from the news that Ralph Lauren is to hand over the baton (or should that be polo stick?) of his clothing empire to Stefan Larsson, it got us thinking here at Businesscomparison.com about when, or if indeed ever, it is the right time for an iconic leader to step down? On one hand these case studies provide a cautionary tale, on the other an inspirational insight about what can be achieved by believing in your passion.

Timed to perfection?

Sir Alex Ferguson, Manchester United FC

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Sir Alex Ferguson shocked and saddened the sports world when he announced his retirement as manager of Manchester United FC on 8th May 2013, at the age of 71. The club’s army of fans were devastated and called for him to reconsider. What many dreaded but few predicted was that it did turn out to be the end of a successful run for the club.

Prior to his retirement, after 26 years at the helm, Sir Alex had won 38 trophies including 13 premier league titles, five FA cups, four league cups and two UEFA Champions League titles. He rocked the club, when in 2001 he announced that he planned to retire, however he credits his wife, Lady Cathy, for talking him out of the decision in 2002 which afforded him another 11 years of his successful career.

The club and its fans, however, were not so fortunate in 2013 when Sir Alex made his departure and was succeeded by ex-Everton manager David Moyes. Despite Sir Alex backing the decision to take on Moyes, who he has always claimed was the right man for the job, he lasted just 10 months before being sacked. A string of six league defeats at home, being beaten by Swansea in the FA cup and missing out on Champions League football for the first time since 1995 all added to the Scot’s demise. The disappointment felt by fans was so strong that some supporters chartered a plane to fly over the Red Devil’s match against Aston Villa with a banner reading “Wrong one – Moyes out”. This was in reference to a previous banner at Old Trafford claiming that David Moyes was the “Chosen One”.

United shares, which trade on the New York Stock Exchange, were up more than 6.5 per cent just after Moyes’ dismissal, signalling investor relief at the decision to sack him.

Whilst Sir Alex Ferguson’s departure wasn’t good news for the club he’d nurtured for over two decades, he left on a professional high note as one of the most successful and respected managers in the history of football.

Stayed too long

Andrew Mason, Groupon

When co-founder and CEO of Groupon, Andrew Mason, was offered in the region of $6 billion for the daily deals community by Google in 2010 he stunned the business community by declining the offer. This turned out to be a catastrophic move both personally and for the business he’d worked so hard to build.

Created in 2008, Groupon was set up by Mason and his co-founders and investors Eric Lefkofsky and Brad Keywell to allow users to get discounted services and merchandise by buying as a group and benefitting from a bulk discount. Groupon went about changing how people shopped. Their first deal was two for one pizzas from a pizzeria located in the very same offices as Groupon in Chicago. The company started trading in multiple cities in the first six months and had rooted itself in 160 US cities and 35 countries by 2011. Groupon were riding the crest of a wave that didn’t look like crashing. It was in 2010 that they turned down the  $6 billion buyout offer from Google and on 4th November 2011 the company closed its first day of trading up 31 per cent with a staggering market value of  $16.5 billion.

However, it was in this same year that things started to go wrong with advertisers being over whelmed with customers who, they claimed, then published bad reviews about their services. It was widely reported that many owners of high-end restaurants and services moved away from using the website leaving consumers with less choice on deals than they’d previously had. In addition to this many rivals had begun to take on the same business model. By June 2012 Groupon’s market cap had fallen to less than the  $6 billion that Google had offered to buy it at. By 2013 the value had fallen still to less than $3 billion and it was time for the wonder-kid, who had once been hailed as the next Mark Zuckerberg, to go.

Andrew Mason was ousted from his own company after a dramatic  $80 million loss in just three months that caused the share price to fall by another 24 per cent. The then 32 year old, who had been described in the press as a ‘goofball’, penned a heartfelt letter to Groupon’s 11,000 employees. To break the news, Mason wrote: “I’ve decided I’d like to spend more time with my family. Just kidding – I was fired today.” He went on to say: “If you’re wondering why … you haven’t been paying attention.”

Onwards and upwards

Evan Spiegel, Snapchat

Described by the Huffington Post as if he “suddenly looks like the smartest guy in the room” Snapchat CEO Evan Spiegel turned down tempting buyout offers to steer the photo messaging App Company towards a notional valuation that has been reported to top the $15 billion mark.

Snapchat, the app that allows users to take and send disappearing photos, was the brainchild of Stanford University students Evan Spiegel, Bobby Murphy, and Reggie Brown. The app was first launched under the name of Picaboo in July 2011 from Spiegel’s father’s living room before it was relaunched as Snapchat.

Initially it appealed largely to users who wanted to send personal pictures to friends without the longevity of them appearing on a social media site. Growth of the company was rapid with 25 images being sent per second in May 2012. Snapchat was launched on Android in November 2012, having accumulated a user base that was sharing 20 million photos per day. To these users it was becoming addictive which strengthened the brand further. By mid-July Snapchat was valued at $860 million. It was widely reported around this time that Facebook offered to buy Snapchat for $3 billion. Spiegel and Murphy dug in their heels and declined.

It seems that this reluctance to hand over their business has stood the entrepreneurs in good stead. Since 2013 Snapchat has expanded the brand to include Snapkidz for users under 13 years old. Snapchat is now said to have 100 million daily active users.

Spiegel is now chasing profit for the company he is so averse to letting go. $200 million of investment from the Chinese e commerce company Alibaba rocketed the notional value of Snapchat to a stellar $15 billion. The latest initiative is a new lenses device that allows users to superimpose animations onto their faces. It seems this creative force is boosting the company’s value even further as Snapchat plans to charge up to $750,000 for brands to sponsor lenses and advertise to their massive user base. With this in mind it would appear the creative company will go from strength to strength.

Gone but not forgotten

Steve Jobs, Apple

It was a case of right company but wrong time to go for Apple visionary Steve Jobs. Despite being ousted from the business that he’d founded, he returned to engineer one of the most astonishing turnarounds of the 20th Century.

Steve Jobs’ career in technology began when he teamed up with Steve Wozniak, the engineer he’d been introduced to by his High School friend Bill Fernandez. Jobs and Wozniak met again whilst on a summer internship at Hewlett-Packard and they became friends. The two went into business together in 1975 and started working on the prototype of the Apple I in Jobs’ parents’ garage. The Apple I was mainly sold to hobbyists (one was bought recently at auction for $905,000) but generated enough revenue to fund the development of the Apple II which was their first breakthrough product. Launched in 1977 it was the first personal computer with colour graphics and a keyboard. It was a massive success with first year sales topping $3 million. Two years later they rocketed to $200 million.

The company, however, hit a wall in the 1980s with less sales of the Apple III and its follow up, the LISA. Added to that was the disappointment of the Apple Macintosh, which at $2,495, was too expensive for most consumers. Jobs subsequently clashed with directors and, in 1983, was ousted from the board. He eventually sold his shares of Apple stock and resigned in 1985.

This didn’t dampen Jobs’ appetite for innovation though. He launched NeXT Computer Co., but again his pricing proved too high for consumers and he failed to sell enough to keep the company afloat. Much more successful was his 1986 purchase of Pixar productions and the making of smash hit film ‘Toy Story’. Pixar went public in 1996 and, by the end of the first day of trading, Jobs’ 80 per cent share of the company was worth $1 billion. Then Apple, whose share of the PC market had dropped to just 5.3 per cent, bought NeXT for  $400 million and re-appointed Jobs to Apple’s board of directors as an advisor in a desperate attempt to help turn the company around.

Jobs seized the opportunity to once again take the helm of Apple when, in 1997, the firm announced a quarterly loss of $708 million. He struck a co-operation deal with Microsoft whereby the technology giant invested $150 million for a nonvoting stake in Apple. By the end of 1998, Apple boasted sales of $5.9 billion largely thanks to Jobs’ guidance.

Innovation came back to the top of the agenda for Apple once again and the company thrived with the iPod portable digital audio player in 2001, the Apple iTunes Store in 2003, the iPhone handset in 2007 and the iPad tablet computer in 2010.

Sadly, full time retirement was never on the horizon for Steve Jobs who stepped down as CEO of Apple in August 2011. He became chairman of the board and named Tim Cook as his successor. The Apple brand he’d lost and then built back up is now the most valuable brand in the world (quarterly net profit sales reached $10.7 billion in 2015). Jobs continued to work for Apple right up until the day before he died six weeks later aged just 56. In tribute the U.S President, Barack Obama, said “The world has lost a visionary.”