Stopping the sale of tobacco products on September 3rd will cost CVS an estimated $2 billion annually, or about 15% of annual revenue, but the US chain of pharmacies and drugstores took the step anyway, ahead of its competitors.
“By eliminating cigarettes and tobacco products from sale in our stores, we can make a difference in the health of all Americans,” Larry J. Merlo, CEO of CVS Health, said in an announcement the company issued the day the decision took effect.
The stand CVS’s leadership took against tobacco and its health risks impressed Hubert Glover, CPA, CGMA, who chairs the accounting department at Drexel University’s LeBow College of Business. “That took guts,” Glover said during his presentation on leadership at the AICPA Global Manufacturing Conference.
To Glover, CVS set an example for the kind of tough decisions businesses need to at least consider in an environment in which the influence consumers have on what products and services companies offer is increasing and change promises to be constant. It’s an environment that harbours challenges but also offers opportunities, especially for management accountants.
“I hope accountants were in the room saying, ‘Don’t worry. It lowers our risk and it increases opportunities to put other products on the shelves that generate a greater return,’” Glover said.
The past decade is littered with examples of toppled icons, reminding business leaders that there’s no room for complacency in the 21st century, regardless of how young an industry is or how commanding a lead a company enjoys.
US video rental chain Blockbuster failed after revolutionising the video industry in the 1980s and 1990s because customers abandoned its rental stores in favour of fewer late fees and more conveniently available videos from its competitors such as Netflix. Blackberry’s command of the smartphone market ten years ago shrank as customers flocked to Apple and Android phones with larger screens and more functionality.
Examples of more mature industries that either no longer exist or are struggling for relevance include imaging company Kodak, electronics and appliance retailer Circuit City, and Borders bookstores.
Mature companies that are still thriving, such as diversified machinery conglomerate General Electric, automaker Ford, Macy’s department stores and Harley-Davidson motorcycles, have escaped a similar fate, Glover suggested, because rather than rest on their laurels, their leadership focused on innovation and constant learning and is willing to experiment and go the distance to do what’s difficult – just as CVS did.
Along with taking cigarettes and other tobacco products off its shelves, CVS changed its name to CVS Health and announced the upcoming launch of a comprehensive and personalised smoking cessation campaign aimed at millions of US smokers.
“This is the right thing to do,” Merlo said in a CVS video announcement.
“You can’t get away with bad behaviour any longer,” Glover agreed. At the heart of each success story, he said, are the following four time-tested qualities of good leadership:
- Listen to your customers.
- Care for your employees.
- Keep up with technological developments.
- Know your business and its cycles.
Related CGMA Magazine content:
“Inspiring Collaboration Is Critical for Higher Growth”: “Network leadership” – the ability to facilitate employee collaboration across business silos – is a key to growth, according to a report from earlier this year. Research suggests that many leaders are lagging in this important skill.
“Innovation: Five Key Questions Organisations Should Ask Themselves”: Visionary leadership and a culture that supports innovation are the two most important ingredients for successful innovation at a company, according to a PwC survey of CEOs.
“A Taste for Innovation”: Cross-functional, self-governing employee boards help global spice company McCormick & Co. identify business process improvements and other innovations. McCormick executive Ken Kelly, CPA, CGMA, explains how it works – and how employees benefit.
—Sabine Vollmer (firstname.lastname@example.org) is a CGMA Magazine senior editor.