This is an excerpt from The Comeback Kids: Lessons from Successful Turnarounds.
In 2012, Olympus was at one of the lowest points in its history. The company’s imaging unit in particular suffered from the introduction of smartphones, which dramatically cut camera sales. Olympus’s medical unit also saw a drop in profits as a result of government constraints on health care spending. Revenue and profits for the company overall had been flat or falling since 2008.
To respond, the company’s leadership team launched a turnaround with four main objectives:
The operational focus has paid off in dramatic fashion. From 2012, when the turnaround started, to 2016, the share of revenue from the medical imaging business grew from 56% to 76%, and that division now represents nearly all of the company’s operating profit. It is the main growth engine for the company, and it has the resources and managerial attention to thrive. Overall, Olympus is roughly the same size in terms of revenue, but it is far more profitable, with a 100% increase in EBITDA margins. (See the exhibit.) Since 2012, the company’s market cap has increased 12-fold, to nearly $13 billion.
By focusing on its strengths, aggressively reducing costs, setting clear financial objectives, and putting the right governance and culture in place, Olympus has emerged from its turnaround program stronger than ever.
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