Western Union is a great example of a company that was able to transition from a leadership position in a waning business sector to a leadership position in a growing sector. This type of transition is sometimes referred to as ‘organic innovation’. The company rose to the top over 150 years ago as a communications company – first with telegrams and later with telexes. It established a proprietary network that was second to none. But that network was ill-equipped to compete with the the phone companies as the market for long-distance calls, faxes and even emails soared which caused its category to decline. After a volatile period during the 1980s and 1990s in which a levered recapitalization led to an eventual chapter 11 filing, Western Union reemerged this decade as a leader in the money transfer sector.
Western Union was formed in 1855 as a result of a merger between two large competitors: New York & Mississippi Valley Printing Telegraph Company and the New York & Western Union Telegraph Company. After the merger, Western Union dominated the telegraph business in the same way that AT&T dominated the telephone business a century later. For the next hundred years or so, the company stayed in the forefront of progress for telecommunications.
- 1861 – Completed the first transcontinental telegraph line.
- 1866 – Introduced the first stock ticker
- 1871 – Introduced its money transfer service
- 1914 – Offered the first charge card for consumers
- 1943 – Introduced commercial intercity microwave communications
- 1964 – Introduced a transcontinental microwave system to replace land lines
- 1974 – Became the first American telecommunications corporation to maintain its own fleet of geosynchronous communication satellites
Less than ten years later, the company was in shambles. After the recapitalization in 1987, the company made the decision to transition its core business from telegraph / telex into consumer-based money transfer financial services business. The next fifteen years included a name change to New Valley Corporation; a chapter 11 filing; a sale to First Financial Management Corporation (later re-named First Data Corporation); and finally a spin-off in 2006 which established Western Union as a independent publicly traded company.
Today, Western Union is a leader in the lucrative money transfer sector. Its 2009 revenues were over $5 Billion with reported net income totaling $848 Million. The company has 6,100 employees and there are more than 410,000 Western Union agent locations in 240 countries and territories.
Here’s the takeaway: Making the change from an established leadership position in a declining market to growing one where the uncertainly of success is high requires decisive management and the fortitude to make tough decisions and go through tough times. Western Union is the poster-boy for success in this type of situation.
