The answer as to why Creative Memories needs to transform itself into something different is relatively simple: mathematics and the direct sales business model, which relies largely on growth of the sales force to drive sales. The current company has declined about 20% per year, every year for the past decade. On the other hand, a successful direct sales company can grow at 50% per year or more, if the sales force also grows. So, even if Creative Memories loses 80% of its current sales force when it becomes a new company, it will still be better off. For simplicity I have assumed that Creative Memories has a sales force of 10,000, although the exact number is unknown since Creative Memories has stopped deactivating members of the sales force for failing to meet sales requirements.
The real question isn’t why Creative Memories needs to change. Instead, it is “Will the bankruptcy court allow Creative Memories to start a new company, and if it does will that company succeed?”
The answer to these questions is far from clear. The bankruptcy court may decide Creative Memories is worth more dead than alive. Creditors may lose confidence in the current management. The new business model may be fundamentally flawed. Any number of problems may arise.
Me? I will be watching from the sidelines, and I will be interested to see what happens.