Industry Trend
In recent years the data storage industry was showing rapid growth as the Internet and other factors drove up data storage demands exponentially. IBM's domination of the storage industry was ending as competitors' offerings began appearing that stored data faster and cheaper. Many large corporations, however, were having a difficult time migrating their existing data to the newer technologies.
The Company
The parent company, based in California, was a $420 million NASDAQ:NM document imaging and data storage company that was looking to divest its storage division for cash to invest in the core growth strategy of providing document management services online. Its $100 million magnetic media division was a leading manufacturer of removable storage media, competing with Imation and BASF, but had recently experienced a significant slowdown in sales growth due to the new competitive dynamics.
Situation
With mature product segments across the board and no cash to invest in the newer storage technologies, the division attracted no buyers and appeared to have little choice but sunset its products and try to optimize profitability as it rode the curve down. However, senior management recognized that the division's customer base of approximately 10,000 was quite rich and included many of the Global 1000, especially in the financial verticals of insurance, banking and investing.
- Key Strength. The storage division was rich in hidden assets including the 400 employees thorough knowledge of data center operations and needs. Many employees had been in the storage business for decades and had accumulated highly saleable knowledge about solving data center problems .
- Key Weakness. The company had no recent successful experience with new product or service introductions. The corporate culture was not one of innovation and was hampered by the recent bankruptcy.
Strategy
Capitalize on the new industry trends by developing a line of data migration products and services that would allow enterprise data centers to migrate their existing data to the newer, better storage technologies. Use the deep knowledge of current employees to specify and design the new products and services.
Next Steps
- Recruit outside help to lead the new effort.
- Retain all current employees.
- Systematically collect and organize all necessary information about the industry trends, competitors and internal strengths and weaknesses.
- Based on the new information, innovate new products and services, including software, focusing on data conversion, data migration and disaster recovery. The new bundle could be offered as a service or could be sold directly to data centers so they could develop the capability in-house.
- Create a marketing plan around direct marketing, telesales and personal sales calls.
Results
First year sales were $5.7 million and at a significantly higher margin than the legacy products. Eighteen months after the turnaround was started, the division was sold to a group of private investors who saw strategic fit with their portfolio.