The pressure on corporate boards to keep companies operating at an elite level is immense. After years of declining sales, the executive team and board of Allbirds made the decision to change the direction of the company—moving from the retail shoe industry to the AI infrastructure and hardware industry which is fueling the current AI boom.
Board members are tasked with looking out for the best interests of the company and its shareholders, and sometimes that means pivoting to a different business model that shows more promise than the current plan in place. While the decision to pivot probably should have been made sooner, news reports from CNBC.com and Quartz suggest the company’s transition was relatively quick and decisive:
- After company shares fell 99 percent from a high of $577.80 in 2021, the company sold its footwear assets to the American Exchange Group for $39 million and closed its brick-and-mortar stores this February.
- The company announced its decision to shift from making shoes to AI compute infrastructure, rebranding the company from Allbirds to NewBird AI in April. Market cap surged seven-fold.
- In June, the company replaced CEO Joe Vernachio with former Amazon Web Services executive Nadia Carlsten, who led the AWS quantum computer center, and has also served as CEO of AI infrastructure company DCAI, that recently partnered with AI chipmaker Nvidia.
- With a new CEO in place, the company then changed its name again to SmartBird, sparking a 39 percent rise in stock price.
By shifting to a technology focus, the new company has the opportunity to capitalize on a market that is expected to grow exponentially over the next decade. Companies have made these types of transitions before, and it is likely there will be more companies following this strategy in the future. In fact, because shareholders have increased the scrutiny on boards, directors might need to be more open to pivots of this kind now more than ever. Some key considerations that increase the likelihood that pivoting from one industry to another will succeed include:
• Selecting the right CEO. SmartBird has the good fortune of having selected Nadia Carlsten, a person who was a top executive at AWS, an AI industry leader. Carlsten also has CEO experience in the industry the company is now pivoting to, which should provide an advantage in creating a winning business strategy and an enhanced ability to anticipate customer needs. She appears well positioned to provide strong leadership for the newly formed company.
• Communication with investors and capital markets. Any time a major shift in a company’s direction is made, the board must give serious consideration to the reaction of the capital markets. If the markets reject the company’s planned moves, that could lead to disaster. SmartBird’s leadership appears to have communicated its rebrand well, as each time the company’s name changed, the market cap improved. How the company successfully alerted investors and the capital markets to the planned transition deserves examination.
• Selecting the most experienced board and executive team. With the right CEO in place, the next step is to fill out the company’s board with members who can be true assets to the new company. Directors with relevant experience on the boards of AI industry companies or have held key executive positions at AI related firms would likely increase the success of the new company.
