Lessons from Other Industries: From manufacturing TVs to growing strawberries
As businesses jockey for market position in the post-recession economy, the losers have to decide to either exit the race or pivot the company in a new direction. Neither being an easy choice, finding a new direction as a century-old electronics and appliance manufacturer is pushing the company a drastically new direction.
Sharp Corporation, an electronics company most-known for its televisions and office machines, has found itself at the back of the pack and facing a ever-shrinking profits. With plummeting revenues, operating income and depreciation of assets, a strategy for growth was necessary, and the company announced in September that the first step was to start growing strawberries in Dubai.
Typically, a recession is a bad time to start diversifying, just like Dubai isn’t the easiest place to grow strawberries. Volatility of the markets makes new investments too risky; shrinking profits leave little budget room for research and development, even on core products and less so for new product categories; and lower consumer demand pushes the surviving companies into greater competition. And shifting from LCD screen manufacturing to desert gardening is a bit of a head-scratching move for a company that announced $9 billion in net losses during fiscal 2011 and 2012.
How then does a company that lost several billion over two years choose to start shifting from big screen TVs to agricultural tech? Because the market demands it.
Japanese strawberries fetch a high price in overseas markets like the Middle East, the company said in a statement. But transportation to overseas markets from Japan is difficult because of the finicky nature of produce, especially the quick-to-spoil strawberry. All of the demand is there, but getting produce to the market is hampered by its perishability.
Sharp is using the opportunity it has to utilize its current portfolio of technologies, from controlled lighting LEDs to air and climate monitoring equipment, to position itself as the company providing the tech necessary to power the needs of such a facility. The Plasmacluster Technology employed in the test facility monitors air quality and reduces the amount of germs and mold in the air, along with other equipment manufactured by Sharp, to maintain conditions necessary to grow delicious strawberries in inopportune conditions.
Fields of gold
In the grand scheme, getting strawberries to high-end customers within a smaller affluent country in the Middle East may not be one of the world’s biggest problems. But it could eventually be used to tackle a larger problem looming ahead: Global food shortages.
There is only so much land on Earth, not all of it is arable, and the mass-produced technology necessary to grow berries in the desert could be adapted or expanded to grow corn, wheat or rice in desperate regions, at scale. And that could bring big profits again for the LCD screen maker.
There are companies within the boating industry that have made similar, albeit smaller, pivots during rough seasons. In 2010, Farm Island Repair and Marine expanded its business to include aluminum docks, training employees in the necessary skills to build the docks during slower times, like during the winter (read more about it in the 2011 Best Ideas white paper).
Recognizing the market, and knowing when to make the move to fill the demand, could bring Sharp back to a period of profitability. It could also spell disaster to a company that has been lying off staff, slashing managerial pay and bonuses and making further cuts all the way down the line.
Brand new day
Sharp faces the possibility that the large-screen LCD display industry may never recover to the level it once was. Following a recession, economies as a whole often never recover to the predicted levels and sit below the potential they once predicted. And as more consumers cut cable and satellite and start getting entertainment online through their computers, big HDTVs, one of Sharp’s specialties, could take second fiddle to the tablet for consuming media.
This is the same problem facing the boating industry. Consumers are spending money elsewhere, and that’s money that’s not going towards boats or boating. The market is rebounding, but it faces an aging customer and smaller pools of potential customers in the coming decades.
The company is already six months into its recovery and growth strategy that targets 2013 as a rebuilding year and 2014 and 2015 as the medium-term targets for net growth. The plan is pushing the company in the right direction. The second half of 2012 realized a surplus net sales of $2.7 billion compared to the first half.
Conventional wisdom says to bear down on the strongest products during a recession and looking for the opportunity to expand as profits return. But Sharp’s strategy could prove an unconventional success, as unconventional as growing fruit in the desert. And unconventional ideas (or aluminum docks) could help a few businesses find new profits and find strong positions to defend against the next recession.