Adaptation and survival often go hand in hand. True, some companies, such as Coca-Cola (NYSE:KO), can figure out one thing, do it extremely well and enjoy success for decade after decade. For other major companies, though, continued prosperity has come from management teams willing to see a different future for the company and unafraid of making large scale changes to the enterprise. (For related reading, also take a look at Behind The Big Brands.)
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DuPont (NYSE:DD) is a great starting point when talking about companies that have adapted over time. Now known as one of the world's largest chemical companies, DuPont got its start in gunpowder. DuPont was so successful in gunpowder, in fact, that the company supplied something like half of the Union's needs during the Civil War.
From its origins in explosives, DuPont ultimately added other businesses like lacquers and synthetic rubber before inventing the first polyesters, nylon, Teflon and the first phenothiazine insecticide. Along the way, the company continued to pioneer new plastics and synthetics, but also products in fields like crop science (seeds and fertilizers), healthcare, electronics and nutrition. In many cases, DuPont has been the first in the field to develop a new compound or product, and the company continues to support a rare commitment to R&D for a company of its size and age.
From its legendary start in a garage in Palo Alto, Hewlett-Packard (NYSE:HPQ) has changed a lot over the years. Starting off with audio oscillators, the company quickly expanded into a range of electronic test equipment products like voltmeters, oscilloscopes, wave analyzers and so on. It wasn't really until the 1960s and 1970s that HP started to look more like the HP of today (the test equipment business was spun off with Agilent (NYSE:A) in 1999). At that point the company added products like computers and calculators before expanding in the 1980s, 1990s and 2000s into printers, storage, services and so on.
Readers may argue that DuPont has always been a chemical company (gunpowder and explosives are chemicals, after all) and Hewlett-Packard has always been an electronics firm. Fair enough. But what of Nokia (NYSE:NOK)?
Known now as the world's largest cell phone maker, Nokia started off as a pulp-and-paper company in the mid-1800s before expanding into power generation around 1900. Nokia ultimately added operations in fields like rubber and telephone equipment and cables through a merger in the 1960s. Even more diversification followed, bringing the company into markets like televisions, computers, plastics and so on.
As time went on, though, the company increasingly saw better opportunities in telephony, electronics and radio products, and ultimately combined these into mobile communications. Once the company realized the potential of its mobile communications products, it began to divest and sell those other operations and Nokia became what it is today - a company focused on telecommunications technology.
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4. Berkshire Hathaway
There is a lot of writing about Warren Buffett that characterizes him as stubborn and inflexible, but that does not match the record of his stewardship at Berkshire Hathaway (NYSE:BRK.A). After merging his several investment partnerships into one in 1962, Mr. Buffett began accumulating the stock of textile firm Berkshire Hathaway. While Buffett did try to make a go of it in the textile business, he also began to expand his investments into other fields like insurance as he realized the prospects in textiles were not as rosy as he once thought.
Through the 1970s and into the 1980s Buffett continued to accumulate more and more insurance operations under the Berkshire umbrella, as well as investment positions in other companies like Washington Post and Coca-Cola. Berkshire Hathaway has maintained a position in the apparel industry, but has also expanded significantly into fields like building products, retailing, logistics, utilities and railroads. (To learn more about Buffett, see Rules That Warren Buffett Lives By.)
Ask someone about what they think of when they think of Apple (Nasdaq:AAPL) and the answer may well say a lot about that person's age. Anyone born before 1985 probably still thinks reflexively of Apple as a computer company - one of the pioneers of personal computers and the inventor of the still-popular "Mac" brand. If Apple had just remained a computer company, though, it is uncertain that the company would still even be in business.
It took only about a year to develop the iPod, but its launch radically changed the company. Building on the success of this portable media player, Apple then effectively created the touchscreen smartphone industry before then moving on to make the tablet computer concept a real product and an actual success. Once just a computer company, Apple is now a consumer electronics giant and whatever Apple's next move will be, nobody is expecting it to be in the traditional computer space.
The Bottom Line
"Adapt or die" may seem like a harsh directive for corporate managers, but there does seem to be a certain necessity to constantly move forward and adapt to new market opportunities. What's more, even decades of success are no guarantee that the future will work out - witness the bankruptcies of companies like Woolworth, Bethlehem Steel and Pan-Am.
Adaptive companies give themselves and their shareholders multiple shots on goal. If DuPont had never moved past gunpowder or Berkshire Hathaway has stayed focused on textiles, neither would be what they are today.
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