In 2005 Frank Martin, CEO of Hornby, was feeling proud. Since joining in 2000, he had seen the company’s share price rise from 35 to more than 250 and his strategic transformation of the firm from a toy company into a hobby company had been a resounding success. The company dominated the UK market and was healthy and profitable.

However, in the subsequent year, despite the company’s strong financial performance, the share price started to slide from 250 to 200. The company’s analysts informed Martin that the market was worried where future growth was going to come from. Given their dominance of the UK consumer market, they saw little opportunity for further growth and although they valued the company’s transformation, they were uncertain about its future.