Will Dunstone's Gamble Pay Off?
Charles Dunstone clearly understands that innovation -- and disruption -- is the route to ongoing success.
His sale of 50 per cent Carphone Warehouse's retail business to US electronics retailing giant Best Buy is the latest in a series of bold moves by its founder and CEO -- whose hero is said to be maverick entrepreneur Richard Branson.
A couple of years ago Carphone launched a "free" broadband offer to the market that led to horrendous customer and operational problems.
The initiative has paid off, but many CEOs would still be licking their wounds and ensuring nothing like that happened again.
Not so Dunstone -- the Best Buy deal proves his focus is on growth and innovation rather than operational problem-solving.
The problem with problem-solving is that it can lead to insularity and incrementalism. It may work in a steady-state environment but it cannot help businesses in a non-linear world.
If you spend all your time and focus resolving current problems the risk is that you:
- Fail to identify important changes in your market
- Do not build the capabilities required to exploit these changes
- Lose out to new and more agile players
A key task in developing winning strategies is to pick scan the horizon for changes and opportunities.
When Steve Jobs returned to lead Apple in the late 1990s he was asked about his longer-term strategy for the company. His reply? "I'm waiting for the next big thing!" The end result was iTunes and the iPod, innovations that have made Apple the dominant influence on the market.
Dunstone, too, has his eyes on the horizon. He recognises the relentless convergence between digital and wireless technologies and understands that integration of mobile phones, computers and other electronic equipment is inevitable.
The Best Buy deal gives Carphone a head-start in leading the UK and European electronics market, particularly as DSG (which owns Currys) continues to struggle.
The electronics retail market may not be the most attractive but Best Buy can bring huge scale and expertise to help deliver Dunstone's ambitions.
Economist Joseph Schumpeter called innovation "creative destruction". Dunstone has had to accept the likely destruction of the retail model he created for Carphone Warehouse as a natural consequence of his growth strategy. The stores will be transformed from phone shops to computer and electronics superstores.
Only time will tell if the deal is going to pay off. But Dunstone's ability to transcend the arrogance, defensiveness and inertia common in successful organisations has to be applauded.
What are you willing to destroy in order to take your business to a new level of growth?