The largest company in its industry, Leaseco had been established by an International cast of players from Europe and Asia, with headquarters in the United States. Growth was phenomenal, and, in a few years, it was a dominant player in the industry. Such results attracted the attention of a Fortune 50 U.S. company (Parentco), and Leaseco was acquired.
Parentco had very aggressive growth targets for all of its businesses, and for the first several years after the acquisition, Leaseco successfully achieved those targets. By the mid-nineties, however, things had changed. Leaseco had not met its financial targets for the previous two years. It had demonstrated to Parentco that this business was cyclical in nature, and that it had been in the down-cycle. They were confident that the cycle was beginning to turn up again. However, there were other issues as well, that drastically inhibited the potential for future growth and profitability.
Leaseco was established when its business concept was new and there were very few competitors. As the concept was proven, however, competition increased rapidly because startup costs were low. In some ways, new entrants had an advantage in that their assets were also new, and customers preferred to lease the new products. Leaseco found itself with very large numbers of older (though still usable), less desirable assets on its hands. The resale market for these older assets was almost negligible, and Leasco could not dispose of them without taking a major loss on its books. That action was unacceptable to Parentco. Leaseco’s strength – its size and reach – had become its Achilles heel.
The President of Leaseco recognized that the company could not continue to operate as it had since its inception if it was to have a chance of being a growth business. Instead, it must change the very nature of competition. On top of that, it must do so while leveraging existing business to increase net income by 2.5 times the previous year’s results.
Scope of Project
The project to be undertaken was nothing less than the reinvention of Leaseco while mobilizing its employees to meet the challenging targets for the current year. Some likened this to “changing a tire while going 90 miles an hour down the road”.
By “reinvention” Leaseco meant renewal of the company through:
- Devising and implementing strategies that would enable Leaseco to break through its limitations and create a new competitive landscape for itself
- Developing cultural disciplines consistent with the new strategies
- Developing leadership skills required to carry the company through this undertaking