The Week in Disruption: May 23, 2019
At close range, the journey of a legacy company remaking its business to adapt to present and future market realities is often bumpy. It might take the form of disappointing quarterly earnings reports, uncertainty around potential layoffs, or lingering questions about the value of recent acquisitions intended to transform its business model.
Ford CEO Jim Hackett developed the now, near, and far trajectory during his tenure at furniture manufacturer Steelcase to describe the need for companies to simultaneously stay focused on immediate, near-term, and long-term viability—instead of seeing each time frame as singular points on a continuum. Since Hackett joined Ford in May 2017, those efforts have included moving away from sedan manufacturing in the “now,” investing heavily in the company’s profitable pick-up trucks and SUVs in the “near,” and pursuing a broader mobility services focus in “the far” with electric scooters, self-driving pizza delivery cars, and even robots that ferry packages to your front door.
This week, Ford announced 500 immediate layoffs as part of its “Smart Redesign” reorganization that launched last fall that will ultimately eliminate 7,000 positions when the effort wraps up in August. In a letter to employees, Hackett noted that the effort has reduced the number of management layers from 14 to nine, while generating more than 5,000 ideas for changing how the company operates.
The transformation has led to inevitable criticism on multiple fronts, from low marks on an employee survey on internal communication to Wall Street skepticism that the planned layoffs go far enough. But while it’s tempting to narrow in on the moment-to-moment drama, the big-picture success or failure of a transformation of this magnitude won’t come into focus for quite some time.
CVS’s ambitious efforts to transform their stores into full-fledged primary care providers—punctuated by its $70 billion purchase of Aetna last year—is generating similar second-guessing from investors, from whispers that it overpaid for the insurer to sluggish earnings predictions.
But CEO Larry Merlo is confident that Aetna’s analytics on its members can help CVS’s pharmacists and wellness specialists identify customers at risk of developing chronic conditions, and point them to the services and goods they need to stay healthy. In theory, the combination will lead to increased retail sales while reducing costs for Aetna’s members.
“The average adult visits the doctor 1.6 times a year,” Merlo told Fortune recently. “People pick up prescriptions a lot more often than they see a physician.”