Abbott Lab chairman and CEO Miles White: The Reinvention Imperative

The Reinvention Imperative

by Miles D. White

“Failure isn’t fatal, but failure to change might be.” Those are the words of John Wooden, the legendary UCLA basketball coach, who won 10 NCAA national championships in just 12 seasons because of his ability to constantly adapt—to new players, new rivals, and new styles of play. In business, too, leaders are continually faced with complex changes: an aging population, the growth of the middle class in emerging economies, constant technological advancement. In a shifting environment, consistent business performance is not enough to perpetuate itself. To keep their organizations relevant, CEOs and other leaders must heed the reinvention imperative.

That has happened at such long-term leaders as IBM, Xerox, and Samsung. Over the past century IBM has gone from manufacturing adding machines to inventing the PC to earning the majority of its revenue from services. When Xerox began, it was so closely identified with photocopiers that its name became not only the eponym for its product category but a common verb. Then the company went on to invent Ethernet, and today it competes in areas such as mass-transit ticketing systems and e-discovery solutions. Just 10 years ago Samsung was known only for consumer electronics; today it spans advanced technology, construction, petrochemicals, fashion, medicine, finance, and hotels.

This kind of reinvention has been our goal at Abbott. Fifteen years ago we recognized a need to change; since then adaptation has been at the heart of our strategy. As a result, our revenue has more than tripled, and we have delivered industry-leading earnings growth and shareholder returns.

What have we learned along the way? More than anything, how essential it is to get beyond pride in “what we are really good at”—which can blind people to changes in what the world needs and customers value most, and turn a onetime differentiator into the ball and chain of “the way we’ve always done it.”

Two related elements of reinvention are similarly difficult and dependent on judgment. People scanning the horizon for signs of change must somehow separate the important and enduring trends from those that are short-lived and ultimately irrelevant. (Mistaking fundamental change for a temporary disturbance can be fatal.) And decision makers must be willing to take short-term hits to performance to lay the groundwork for long-term advantage. Pressure from Wall Street to deliver in the next quarter is a given. Your job as a business leader is to counter it with a point of view on where the industry is headed in the next five or 10 years. If your strategy strikes outsiders as unexpected, that’s fine. They don’t know your business as well as you do.

Considerations like these continue to guide our reinvention. Recently, we made the most radical move in our 125-year history: We relaunched our proprietary pharmaceutical business—our largest single business—as the biopharmaceutical company AbbVie. And our reinvention process will continue. As a more globalized and consumer-facing company than ever before, we recognize that the way we go to market should depart from our former, pharma-oriented model. We can no longer rely on standardized global programs and must instead tailor our approach country by country. Similarly, it’s time to move away from a product-brand orientation and invest in a more powerful and meaningful corporate brand.

These are big changes that carry nontrivial risks. But after 15 years of continual reinvention, Abbott has the confidence to make them. John Wooden had something to say about this, too: “Success is never final, failure is never fatal. It’s courage that counts.”

Miles D. White has been the chairman and chief executive officer of Abbott Laboratories since 1999.