Why Did Ralph Lauren Fall Off His Horse?
Investors seemed surprised when the luxury apparel and accessories maker Ralph Lauren reported $400 million in restructuring charges and warned of lower sales. A Wall Street Journal article attributed the slip to a number of factors. However, it all added up to a strategy—or what Peter Drucker called “The Theory of the Business”— that no longer worked.
Drucker warned “the theory of the business has to be tested constantly.” Yet most companies fail to regularly assess their strategy and make necessary changes. Sometimes a strategy fails because its underlying assumptions are no longer valid. And then there are strategies that fail because the business grows without focus.
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