Around ten years ago I was working on the marketing for a US software firm, when its chief executive decided to take the company off the NASDAQ. The new burden of Sarbanes-Oxley regulations were costing the business large amounts of money, and its executive team lots of time. But more importantly than that, the CEO recognised that the business needed to go through a lot of change. Change that would be hard to communicate to the market — a market that likes stability and consistent growth, not radical transformation.
A few years later we all watched a big, listed company fail because it failed to transform. It’s an oft-used example (by me as much as anyone) but HMV was beaten by the orders of magnitude greater efficiency with which purely digital competitors could deliver largely the same products. I don’t believe its executive team were blind to what was coming. There are well publicised examples of them being told what to expect for their business (as well as some I know of that haven’t been made public). They even made some efforts (belatedly) in the right direction. Yet they couldn’t change course in time. Why?
I believe the reasons are the same. Being a publicly listed company gives companies an enormous weight of inertia. Risking shocks to the share price dissuades companies from making radical changes when they are required. Sure you can — and some do — manage change through gradual transformation, even in declining markets. But HMV would have needed to shed an enormous number of it staff and rapidly closed many of its stores (many of which were only relatively recently acquired) in order to survive. As a private enterprise that may have been possible, but its management may not have survived the shareholder’s challenges long enough to complete the surgery.
Daisy is not in the same position as HMV. But the market for minutes and megabytes is undoubtedly facing challenges. Every network provider, fixed and mobile, fears becoming a ‘dumb pipe’, eeking out a meagre margin on bandwidth it sells. Daisy has made acquisitions to move it up the value chain, but for me the next few years for the business as it completes integrations and polishes its proposition, will be absolutely crucial.
Completing this process in private hands will be much easier than trying to bring an army of shareholders along for the ride.
Note: I have done work for Daisy Group PLC in the past, including speaking at its most recent customer event, but I am not currently engaged by the company and have no information about today’s news beyond what has been widely published.