Chapter 13: Turnaround and monitoring


  • Lego
  • Future Publishers
  • Microsoft
  • Enel – Rome-based Utility
  • North Yorkshire Council, streetlighting
  • Olympus
  • Balanced scorecard
  • Puma and the six capitals
  • Indicative solutions to questions concluding the chapter


The story of Lego turnaround is detailed in the text. There is much more to draw from the case from an innovation perspective. Back in 2011 the CEO, Jørgen Vig Knudstorp, was talking about climate, intellectual property protection, digitalization and users. These are issues that are important for many firms from toy manufacturers to power-station builders.

On climate, Lego has produced its first bricks made from recycled plastic bottles.

The influence of the CEO and leadership can be observed in Jørgen Vig Knudstorp’s interview with Kirsty Walk (Google Zeitgeist)

Future publishers

Future PLC is a publisher of magazines, the kind that used to be picked up at railway stations and newsagents. The industry has been in decline for many years. Future – a publisher of a string of gaming titles – went into turnaround in 2015 on the arrival of a new CEO, Zillah Byng-Thorne. The story of the turnaround was published in the Guardian on 23 August 2021.

The case is a useful illustration of:

  • the application of turnaround formula – retrenchment and recovery
  • recovery has been to leverage content digitally and then build a revenue model around a digital platform as well as traditional publishing (“specialty media company that owns magazines”)

Recovery has also involved buying titles from other publishers, notably Dennis publishing and TI Media (scale). The company has also purchased GoCompare, a price comparison website (scope).

There are also some interesting governance issues. Having spectacularly turned-around the publisher, there is a discussion between the CEO and the board about remuneration. How much is she worth?


The turnaround of Microsoft was reported in the Economist of 24 October 2020. Satya Nadella became Microsoft’s third CEO in 2014 and it was certainly the case that Microsoft was “in a ditch” and potentially history rather than the future.

Nadella had other ideas, however. He repositioned the company away from Windows as the core product and replaced it with the cloud-computing arm, Azure. At the time of writing, Microsoft had a market capitalization of $1.6tn.

Azure operates in a market with (and against) Amazon Web Services (AWS), Google Cloud Platform, Oracle and increasingly, Alibaba Cloud and Tencent.

Nadella has streamlined the business units of Microsoft. In 2014 Microsoft was:

  • Windows
  • Office
  • server software
  • entertainment (incl. X-Box)
  • Search (Bing)

Post 2014 the business units are as follows:

  • Cloud
  • productivity software and business processes
  • personal computing

Azure becomes not only the backbone of Microsoft – a strategic resource that can host (programs, game, ERP systems) and scale-up, it is also a product in its own right. Whilst Office is a standalone product, it is also hosted on Azure ensuring that it maintains its grip on functions like spreadsheets and word processing.

Amazon, however, was the pioneer on cloud computing – it was quick and built an installed base largely without competition. It was – what we call – a first mover (see chapter 8). Microsoft was a second mover (maybe not even a fast second); but it had one advantage. It had Office and Windows that it could integrate and bundle.

The Economist article draws on some Gartner reporting that Azure is less reliable than AWS – with insufficient redundant capacity to deal with the inevitable breaks in service caused by bad weather or other problems that might affect data centres.

Microsoft has been changing the way in which its services are received. Previously users could practice “bring your own licence” whereby services could be run over rival networks such as AWS. This has changed. Customers wanting that kind of plurality have to buy an extra licence. And that is an added cost.

This seems to have arising from learning from the past. It makes sense from a business perspective to expect users not to run Windows and Office over competitors’ cloud services. In the words of Nadella: “We will absolutely monetise our intellectual property on their clouds” (p69 – Economist paper edition).

Two things to be wary of:

  • bundling like this can induce customers to look elsewhere for the whole bundle
  • anti-trust regulators may take an interest as it reduces choice

Nadella argues on the latter that Microsoft has actually brought competition to the market, not diminished it. Without Microsoft, AWS may have cornered the whole market and taken those monopoly rents.

Finally, why did Microsoft want to buy TikTok? Data. The users of TikTok generate huge amounts of data that are useful in other areas of the business, such as AI.

The conclusion – whilst Microsoft has achieved a remarkable turnaround, there is no room for complacency. The pace of change will not slow and customers are likely to value innovation over loyalty.

Enel – Rome-based Utility

The case of Enel is captured in The Economist published on 28 November 2020. Enel is Europe’s biggest utility company and has a market capitalization of €85bn. It is headed up by Francesco Starace a charismatic leader who turned around a classic utility by investing in renewables. Shortly after becoming CEO he put up for sale/decommissioned 23 coal-fired power stations as the start of the transition. This raises the question of stranded assets in an age of climate change.

Symbolically, Starace wears crew-necked sweaters, reads poetry and drives a Tesla.

Starace argues that the Pandemic has been useful in that it has pointed the way to a renewable future. It acted as an experiment to test the resilience of networks to intermittent wind and solar power. The lockdowns, “crushed” demand for fossil-generated electricity in favour of cheaper and greener electricity generation. This experiment enables Starace and Enel to invest heavily in onshore wind and solar (€16bn by 2023) and “promising” to raise core earnings (EBITDA) by 13%.

The investment is not just in generation, but also in distribution, a Cinderalla industry. The digitisation of networks is seen as important as it enables the optimisation of networks – dealing with peak demand.

There are seemingly lessons here for oil and gas companies. Enel’s investments seemingly dwarf those of oil majors such BP, Shell and Total. The oil majors lack the right skills – capabilities. They are often vertically-integrated and well linked to regulators and customers. On the former, regulation has enabled them to have financial discipline, something that oil majors are not subject to. Yet.

Enel has growth plans. Strategically, these should be evaluated; for example, a move to India and potentially over-bidding for ownership of networks.

Two other utility firms are named in the report as worthy of note and observation: Iberdrola (Spain) whose main subsidiary in the UK is Scottish Power; and NextEra (USA).

North Yorkshire Council – streetlighting

Offsetting carbon emissions by carbon capture technology

In the text a formula for calculating CO2e for any electricity consumption. In that case the carbon offsetting was managed by trees. The conclusion was that trees in-and-of-themselves cannot absorb the carbon for 100 PCs let alone other carbon-intensive activities that humans engage in. Carbon capture, however, is calculated into the Paris Agreement. Without carbon capture – and firms and individuals paying for it – the targets will not be met.

Elizabeth Kolbert in her book, Under a White Sky, took a flight out to Iceland (from the USA) to meet the entrepreneurs Christophe Gebald and Jan Wurzbacher behind Climeworks, a carbon capture enterprise. Pulling carbon dioxide out of the the environment is not new (think about submarines where CO2 has to be expelled), but at scale is new and difficult. The geology has to be right to lock the CO2 into rocks.

In 2020, Climeworks was charging $1000 per tonne. That was enough for Kolbert to offset her flight to Reykjavik, but not return. The founders, Christophe Gebald and Jan Wurzbacher, believe the price – with enough capture units installed, could reach $100 per tonne.

The author has a monthly subscription to pull out 600kg of CO2 per year from the atmosphere.


In the text there is a discussion on Japanese firms and the cultural differences that can cause misunderstandings when transferred, particularly to Europe and North America. They are perfect examples of how sensitivity to other cultures – and a desire to understanding them – serves us well.

In the case of Olympus, a wrote a review of a BBC TV documentary on so-called fraud. On closer scrutiny, all may not be as it seems: my review is here

Balanced scorecard

One of the simplest demonstrations of the balanced scorecard is Erica Olsen’s

Puma and the six capitals

Gleeson-White, in her book Six Capitals (p140-43), tells the story of Puma – the sports equipment firm – worked with a partner Trucost to create the world’s first environmental profit and loss account (EP&L). This EP&L put a monetary value on its environmental impacts, marrying it with the ecosystems that were used to source, produce, market and distribute its products. In 2011 this was calculated to be $198m worth of nature. That included land use, water consumption and GHG emissions. This embraced “scope 3” emissions – i.e. those from across the supply chain, not just the company’s own scope 1 and 2 operations (for more on scopes, see chapter 1). It is important to note, too, that 94 per cent of the costs were in the supply chain. In other words, firms that only concentrate on their scope 1 and 2 emissions are being disingenuous – they tell a partial truth and push the true costs onto their suppliers.

What Puma did not do was subtract these costs from it P&L account. Had it done so, writes Gleeson-White, profits would have plummeted by two-thirds and shareholders would probably have been unhappy. However, Puma has continued to develop its methodology and pushed it down to a product level. For example, it presented data on two of its most sustainable products – a pair of running shoes and a t-shirt – and compared against similar products that came from the normal production regime. With these data, the company was able to see the value to nature of creating new products from more sustainable sources that were also biodegradable. The shoes were one-third less costly to the planet (though they are still a cost). These data can then be used to inform product and business strategy.

Indicative solutions to questions concluding the chapter