One of the biggest business news items this week was the launch of Apple's iPad for $499. Although perhaps overlooked by many big companies, and several IT departments. To some businesspeople, the iPad seems another consumer toy, thus not terribly noteworthy. Some see it as a small-market share sort of oversized iPhone for mobile telephony/data use. One executive commented to me this week "I don't understand why anyone cares, I don't own an iPhone and cannot imagine why I would ever want to download an app," He has a huge investment in Microsoft technology, has never used an iPhone or Palm Treo or even a Blackberry. Hes' never seen an iPhone app, and was amazed when I told him 1 billion had been downloaded. He's comfortable in his traditional IT solution, and doesn't see the importance of iPad.
But the iPad is another step demonstrating a big market shift is happening. With Apple's announcement, Amazon announced that it's sales ofKindle are about twice what most analysts had expected – see "During Apple Week Google and Amazon try to Remind You They Exist" at Fast Company. Further, it appears now that for every 10 books Amazon sells, it sells 6 Kindle books — a substantial number and indications of serious market change. The iPad is half the price most people expected, and now rumors are Kindle's will drop to $100 as competition heats up. It rapidly appears that while there is an emerging battle between Amazon and Apple, the biggest insight is that the market for BOTH is growing a whole lot faster than anyone expected. As are iPhone sales. These devices, and the technology solution embedded within them, are grabbing a lot of buyers, and quickly. The sales, in units and dollars, are growing much faster than anticipated. And new users are flocking toward this technology platform.
Thus, the iPad is likely to be a big winner for Amazon and Kindle – as well as Google. It is expanding the application base, and use patterns, for mobile devices. It is expanding the product breadth and price points. Quite simply, it is helping people do new things they couldn't do before – especially when mobile – that they could not do before. As a result, apps will grow and sales of both hardware and software will grow. And early adopters will gain an advantage as they use this new technology to create advantages for their customers. Apple and Amazon are both "winners" who are driving revenue and profit growth.
And Microsoft loses. Microsoft has never changed its Success Formula. Its Identity, Strategy and Tactics remain as they've been for three decades – to provide a one-stop near monopolistic, integrated (mainframe style – and certainly monolithic) solution. As the market has been shifting, however, this has been less and less successful.
As the chart shows, Microsoft's product strategies, product introductions, acquisitions and management changes have done nothing for growth – or valuation. Microsoft keeps trying to do what made it great in the late 80s and early 90s. But since then, the market has shifted dramatically and the sustaining innovations Microsoft has offered, while meeting customer requests for improvement, haven't really helped growth.
Microsoft has poured billions of dollars into a failed approach intended to Defend & Extend its Success Formula – but to no avail.The market is going a different direction – toward cloud computing with its distributed data, extremely small apps at very low (disposable) prices, easy to use interfaces and greatly lower device cost.
Even as large and cash rich as Microsoft was in 2000, it cannot stop a market shift. And even though this shift has been predictable, with competitors from the fringe like Google, Amazon and Apple bringing to market new products, Microsoft has chosen to try Defending & Extending its Success Formula rather than Disrupt and use White Space to develop new solutions. What can we expect from Microsoft in the future? Unfortunately, more of the same and most likely a dramatically deteriorating value. When the market's shift to these thin devices with a different architecture becomes clear, the inability of System 7 and Bing to make any difference in Microsoft results will be clear. And investors are likely to run for the proverbial hills – letting the stock price drop along with new users. Microsoft will increasingly be dependent upon legacy applications and maintenance – markets with little/no growth. Microsoft could soon be the next Unisys (remember that company?)
So, what is your company doing? Are you moving forward with new apps which will grow your revenues and profits? Are you looking forways to use these devices, and the underlying mobile computing architectures, to offer your customers better solutions? Are you bringing out new approaches that are potential game changers, bringing new customers to you and accelerating growth? Or are you trying to Defend & Extend your old processes, approaches and products? Are you planning a future that will be PC/laptop centric, and delivering traditional web pages? Are you following the laggard, Microsoft, or are you Disrupting your business, and market, with White Space projects that will change market behaviors using these new technologies and positioning you as the market leader? In 2015, will you look like Microsoft – frozen in place as the market shifts – or will you look more like Google, Amazon and Apple with new solutions that create excitement and new sales?
Have you tried a Kindle yet? iPad? iPhone? Do you have any White Space wher
e you are trying these new things? Have you Disrupted any of your organization and challenged them to apply this technology? Exactly what are you waiting on?
Most businesses have multiple analysts who spend day after day accumulating, analyzing and displaying data. Financial analysts, marketing analysts, IT analysts – they are all over the place. Then businesses will hire consultants who bring their own analysts to further find and review data – then present yet more charts and data summaries. When I worked for The Boston Consulting Group we used to say "the data will set you free!" And we believed that if we dug up more data and did more analysis than anyone else we would offer insight to change businesses everywhere.
Yet, more of our clients didn't take action than did. When I moved on to other firms, the results weren't really different. And when I was in corporate America at huge companies, like PepsiCo and DuPont I found that the army of analysts and mounds of data really had almost no impact on how decisions were made. or what decisions were made..
Once a business is prosperous, its Success Formula drives behavior. Its Identity is set, its strategy is in place and tactics are predetermined. Things don't change just because someone shows the leadership data. No matter how synthesized or analyzed or elegant, the data really makes little (if any) difference. It's easy for leaders to simply ignore data that is troubling, and highlight data which confirms previously held beliefs. And even if insight is created, insight has nothing to do with what people will do next. Insight doesn't change the decision-making processes, or any of the other Lock-ins keeping the Success Formula in place. Even though managers claim that they want to see "the data," in reality the data makes no difference.
Last night the U.S. President Barack Obama referred in his State of the Union address to the data which confirms global warming. This drew significant snarky laughter from some of the joint congressional attendees. And even though there are regular reports, like the recent New York Times article "Past Decade Warmest on Record, NASA Data Shows," there are regular polls showing an enormous amount of the population, at all income levels, who simply don't believe the earth is warming. The data, in the end, is ignored or discounted. It simply doesn't matter. And no one is going to change the opinions of anyone who doesn't think the earth is warming by trying to show more data.
Data leads to debates. Who's answer is right? Who's forecast is more likely? Debates about data can go on forever. An old business joke says if you strong all the econometric modelers together end to end they'd still never reach a conclusion. But you'd get a lot of debate.
Instead of data and debate, realize the limitations and move on. If we spent 1/10th the time digging for and analyzing data, we'd do just fine. Rather, we should spend the other 9/10th of the time building scenarios. Instead of debating a topic like global warming, we could build scenarios that ranged from global cooling by 5, 3, 2 or 1 degree to no change to warming by 1, 2, 3 or 5 degrees. The issues isn't which is most likely – but rather that we think through the implications of ALL, and prepare. What strategies would allow for success given that any of these are possible?
Business analysts, strategists and leaders spend a lot of time trying to guess the future. But their crystal ball is just as foggy as everyone else's. Their guesses are mostly wrong, because a dynamic marketplace is very hard to predict. So they plan to do something, but then shifts make the returns lower because the world/market didn't turn out as planned. Given that we KNOW that we're more likely to be wrong than right, why the fascination with trying to pick the future?
Those who win more than they lose develop a lot of scenarios. They don't try to pick a scenario. They try to think through the many possibilities and prepare for as many as possible. And they develop mechanisms to track the market so they can keep an eye on the multiple scenarios and anticipate things as time passes. It's never the things you expect that really hurt you, it's the one you didn't think about. To be prosperous for a long time you have to build the ability to think very broadly about the scenarios that can happen, and prepare.
So the next time you feel the urge to "get more data" think about global warming. Has all this data changed the debate? Has it helped any country to better prepare? Has anything really happened, as the mountains of data on the topic have been assembled, analyzed and distributed? Does anyone think the data will cause a change in policy, or behavior? If not, then maybe you can start to spend more time creating multiple, wide scenarios that will help you prepare – and possibly help you to develop new behaviors to protect your business from a range of potential outcomes.
We all love awards and lists. Who doesn't like being rewarded for their accomplishments. At the same time, we have acquired a strong taste for lists "The best…" Another verification of success. But both can be harbingers of potential problems – and even destruction.
Ben Bernanke became Time magazine's "Man of the Year" and now he's at some risk of losing his job (see 24/7WallStreet.com "In Not Bernanke, Who?" Think about the list of Great Companies that appear in books, like Good to Great, only to end up in big trouble – like Circuit City and Fannie Mae. Why does it seem those who top awards and lists end up shortly struggling?
Too often businesses, and business people, "win" by doing more of the same. They work hard to optimize their Success Formula. They get really committed to practicing what they do (remember Outliers by Malcolm Glaldwell and his recommendation to practice, practice, practice?) They get better and better. And in fields like sports and music, where the rules are well understood and the approach is clear, this often works. And as long as they keep practicing top athletes and musicians often remain near the top of competitors.
But we have to recognize that most of the time those "at the top" in business have emerged within a given market. Then they are knocked off by a shift. Like Ed Zander of Motorola being named #1 CEO in 2004, only to be fired within 2 years as RAZR sales toppled. Like Sun Microsystems perfecting Unix servers for an emerging client/server technology market that became saturated and shifted to PC servers. Like Michael Dell (and Dell Corporation) which emerged when lower cost made supply chain efficiencies critical for PCs, before the PC market became saturated and iPhones plus Blackberries started dominating the landscape. Or WalMart which also used a new supply chain to grow the emerging discount retailing sector, only now it is laying off 10,000 employees as it shuts Sam's stores across the country. These companies created a Success Formula and honed it quarter after quarter to maximize performance in a high growth environment. But the market shifted.
In business the rules are not "set". There is no written music to
perform. Instead, the market is highly dynamic. New competitors
emerge, new ways of competing emerge, new technologies emerge and new
solutions emerge. The market keeps changing. Suddenly, what worked last year isn't successful any more. When the market shifts, the previous winner becomes the new goat. That optimized business starts to look like the world's best wrestler, only to be obsolete when a flood occurs making swimming the new, necessary skill. Being last year's best is impossible to repeat because the market shift makes the old approach less valuable – possibly obsolete.
"Best practices" are usually little more than copying last year's list topper. In the 1990s everyone wanted to copy product development practices at Sun, and supply chain practices at Dell. But both led to horrible returns when demand for servers and PCs diminished. Best practices are almost guaranteed to be a solution developed to late, and applied even later, to solve previous years' problems. They aren't forward looking, and not designed to meet the needs 2 years into the future.
Business success isn't about topping a list. And, to a great degree, the Outlier approach (as is a hedgehog concept) is very risky. If you spend 10,000 hours doing something, only to see the value for that something go away, what good was it? Remember when Cobol writers were in demand? Being the world's best at something in business can cause you to be optimized on the past and inflexible to market change.
Business success requires adaptability. And that requires a focus on future markets. It requires the ability to constantly Disrupt your approach, to build capability in many different areas and markets. It requires skill at establishing and operating White Space projects to learn about new markets and shifts – the ability to know how to test and then understand the results of those tests. In business adaptability trumps optimization, because you can be sure that things will change – markets will shift – and the highly optimized find themselves behind the shift and struggling.
Most people misunderstand evolution. They think that changes happen slowly. Imagine an animal with a 12 inch tail. Every generation or so it's imagined that the tail gets a little shorter, then a little shorter, then a little shorter until after some very long time it simply disappears. But that's not at all how evolution works.
Instead, most of the animals have a long tail. Some small number of animals are born each year with very short or no tails. For the most part, this matters little. If the tail is valuable – say for warding off parasites – those without tails may suffer and die off quickly. And that's the way things are, largely unchanged, for decades. But then, something happens in the environment. Perhaps the emergence of a predator able to catch these animals by the tail and hold them in place to let the pack kill it. Within one generation almost all of the tailed animals are killed by the predator, and only the no-tail animals survive. Some of these have developed an immunity to the parasite. So then this "evolved" animal becomes dominant. No-tail animals replace the tailed animals. That's how evolution really works. It happens fast, with drastic change (and this time of change is referred to as a punctuated equilibrium.)
Once we know how evolution really works, we can start to better understand business competition. A Success Formula works for a really long time, until something changes in the marketplace. Suddenly, the old Success Formula has far poorer results. And a replacement takes over.
Consider newspapers. They played a very important role in society for at least 100 years (maybe 200 or 300 hundred years.) But with the advent of the internet, their role is no longer viable. Printing and delivering a daily paper is too expensive for the value it can provide. So think of newspapers as the long-tail animal. And digital news delivery is a short-tail animal. The internet is the attack pack that kills the newspapers. And within short order, the world is a different place – in a new equilibrium. And everything about the surrounding environment is shifted. Regardless of how much you enjoyed newspapers, they simply cannot compete and new competitors are a better fit in the new marketplace.
Now consider Netflix. Netflix played a major influence in obsoleting traditional movie rental shops – like Blockbuster. Netflix was a winner. But markets – new attack packs – keep emerging. And the latest shift are products like the Kindle and Apple Tablet (as well as other tablet PCs.) These products make Hulu and YouTube a lot more viable. Suddenly, Netflix is the long-tail animal, and the short-tail animals are doing relatively better.
According to The Wall Street Journal, in "Apple Sees New Money in Old Media" Apple is close to a deal with several newspapers to deliver their content to readers via their internet device. They also are negotiating rights to deliver movies and television (small format) entertainment. Simultaneously, Amazon keeps marching forward as MediaPost.com reports in "Take That Apple: Kindle Introduces Apps." We see that there are a LOT of potential different versions of the short-tail animal. Tablets, phones, netbooks, etc. Which will be the biggest winners? Not clear. But what is clear is that the old long-tail competitors (newspapers, print magazines, network television, traditional PCs) are not going to flourish as they once did. The market has permanently shifted. Those competitors are in the back end of their lifecycle.
Simultaneously, this market shift causes ripple effects through the environment. The market shift affects ALL players – not just the one most visibly being attacked. So, as SiliconBeat.com reports in "Looks Like Netflix is Dead, Again" this change suddenly imperils Netflix which has mostly counted on postal delivery rather than digital. And it provides a boost to short-tail players like Hulu and YouTube which could see much larger revenue given their digital-based delivery models.
And this affects you. What do you print, or say, that could be better handled on a mobile device? Could you deliver user instructions via an iPhone or Kindle app? If so, why aren't you doing it? Are you still working on traditional web pages, with embedded text in graphics that can't be seen by a mobile phone, when most people are likely to find you first on their mobile device? Are you busy working on your web site, while ignoring having a Linked-in or Facebook account? Are you advertising on television, or in newspapers, and ignoring Facebook ads – or YouTube links? Do you have a YouTube channel with short clips to instruct users on your product, or how to install an upgrade, or even why to buy? Are you still competing with a long tail, while the pack is rapidly killing off the long-tail species?
Market shifts are happening fast today. If you don't react, you just may find yourself deep into the pack with declining results. Or you can shift with the market to keep your business competitive.
Over the last week everyone has heard stories about how Facebook, and Twitter, became primary communication conduits for people with connections in Haiti. Telephone and slower communication vehicles simply have not been able to connect family and friends in this crisis like Facebook. When shift happens, it accelerates as new uses come to the forefront quickly. For everyone trying to connect with employment candidates, suppliers and customers this shift has immediate and important impact on behavior.
For advertisers, the impact is significant. Where should ad dollars be placed? On a traditional home page and search site – like Yahoo! – or on Facebook?
And it's not just the sites themselves, but how long people are on these sites. From an advertising point of view, you can start to think about Facebook – and YouTube – almost like a "channel" from early television days. Where the audience comes back again and again – offering you not only a large audience, but more opportunities to reach them more often. Facebook and YouTube are beginning to dominate the "user views."
Of course, the impact isn't just regarding the web, but how any business would use media to reach a target audience. Most advertising agencies, and ad people, are still focused on traditional media. But, as we can see, that WILL shift — even more than it traditionally has.
Anybody investing in newspapers, expecting a resurgence in value, is pretty foolish. Newspapers are going to lose ad dollars – not gain. Relatively, newspapers already are getting too much of the ad spend. Talk radio has growth. And clearly the web. Since we can expect that newspaper and magazine readership will continue recent downward trends, and television is fragmenting as well as stalling, the big growth is on the internet.
The market shift is really pretty clear. We aren't speculating about the market direction with this data. The question becomes, will you be an early adopter of these new media channels or not? Given that the web and mobile have the lowest ad rates of all media, why wouldn't you? Over the last 2 months Pepsi has decided to NOT advertise on the Super Bowl, instead putting the money into social media. And after introducing the Granite Concept car at the Detroit auto show, even behind-the-times GM is now considering a launch of this vehicle, intended for buyers under 35, using only web advertising.
So what are your plans? Do you have scenarios where Facebook and YouTube are integral to your marketing? Do you have pages, groups and channels on these sites? Do you post content? Are you using them to interact with potential customers, vendors and employees? If not – what are you waiting on? Do you need a Disruption to create some White Space and get started? If so – isn't it time to get going?
Many people think the best way to grow is by setting big goals – even Big Audacious Hairy Goals (BHAGs). But increasingly we're learning that goal setting is not correlated with success. At AmericanPublicRadio.org there's a partial text, and MP3 download, of a recent interview between General Motors leaders and a University of Arizona Professor titled "It's not always good to create goals."
The story relates how about a decade a go, with market share hovering at 25%, GM set the goal of moving back to 29%. It became a huge, multi-year campaign. Lapel pins with "29" were made and all kinds of motivational programs were put in place. The GM organization had its goal, and it was highly aligned to the goal. But it didn't happen. Despite the goal, and all the energy and talent put into focusing on the goal, GM continued to struggle, lose share – and eventually file bankruptcy. The goal made no difference.
Worse, the interview goes on to discuss how goals often lead to decidedly undesirable, sometimes unethical – even illegal – behavior. Instances are cited where goal obsession led company employees to falsify documents, even ship bricks in place of products to meet sales targets. No executive wants this, but goals and goal obsession – especially when there is a lot of reinforcement socially and monetarily on the goal – can become a serious problem.
Results are exactly that. Results. They are an outcome. They are the way we track our behaviors and activities – our decisions. When we focus on goals – usually some sort of result – we lose track of what is important. We have to focus on what we do. And for most organizations a big goal merely leads people to try working harder, faster,better, cheaper. But when the Success Formula is mis-aligned with the market – even when the whole organization is aligned on maximizing the Success Formula results will still struggle – even falter. Goals don't help you fix a Success Formula returning poor results. Just look at GM.
In fact, it can make matters worse. In "White Bears and Other Unwanted Thoughts" (available on Amazon.com) the authors point out that when you try to turn a negative (a problem) into a positive (a challenge, or goal), you often achieve a rebound effect making people obsess about the problem. Tell somebody not to think about a white bear – and it's all they think about. When your company has a problem and you try to tell employees "hey, don't think about the problem. Go do your job. Work harder, increase your focus, and all will work out. Sure share is down, but don't think about lost share, instead think about the goal of higher market share" frequently the employees will start to become obsessive about the problem. It will reinforce doing more of the same – perhaps manicly. Instead of becoming innovative and doing something new, obsessive devotion to trying to make the old methods produce better results becomes the norm. Goals don't produce innovation – they produce repetition.
So what should you do when facing a problem? Disruptions. GM didn't need a big goal. GM needed to Disrupt its broken Success Formula. GM needed to attack a Lock-in (or two). GM leaders needed to admit the market had shifted, and that competitors were changing the game. GM needed to recognize, admit and encourage employees to engage in attacking old assumptions – and recognize that market share would continue eroding if they didn't do things differently. Setting a big goal reinforced the old Lock-ins and even an aligned organization – working it's metaphorical tail off – couldn't make the outdated Success Formula produce positive results.
Only a Disruption would have helped save GM. After attacking some Lock-ins, like the desire to move all customers to bigger and more expensive cars, or the desire to focus on long production runs, GM should have set up White Space teams to discover new Success Formulas. Instead of putting all its management energy and money into growing volume at Chevrolet, Cadillac, Buick and GM nameplates, General Motors leadership should have revitalized the innovative Saturn and Saab to do new things – to develop new approaches that would be more competitive. Instead of pushing Hummer to have 3 identical cars in 3 sizes, GM leadership should have unleashed Hummer to explore the market for truly unique, limited production vehicles. GM should have allowed Pontiac to really take advantage of the design breakthroughs happening at the Australian design studio – to change the nameplate into a performance car segment leader. By attacking Lock-ins, Disrupting, and using White Space GM really could have turned around. Instead, by creating a BHAG GM reinforced its focus on its Hedgehog concept – and drove the company into bankruptcy.
Do all good ideas originate outside the organization? Of course not.Motorola understood all the critical technologies for smart phones, and taught Apple how to use them in a joint development project that created the ROKR. That's just one example of a company that had the idea for growth, but didn't move forward effectively. In this case Apple captured the value of new technology and a market shift.
On the Harvard Business Review blog site one of consulting firm Innosight's leaders, Mark Johnson, covers two stories of companies that had all the technology and capability to lead their markets, but got Locked-in to old practices. In "Have You Already Killed Your Next Big Thing" Mr. Johnson talks about Xerox and Kodak – two stories profiled in my 2008 book "Create Marketplace Disruption." Both companies developed the technology that replaced their early products (Xerox developed desktop publishing and Kodak developed the amateur digital camera.) But Lock-in kept them doing what they did rather than exploiting their own innovation.
One of the causes is a fascination with metrics. Again on the Harvard Business Review blog site Roger Martin, Dean of the Rotman School of Management at the University of Toronto, tells us in "Why Good Spreadsheets Make Bad Strategies" that you can't measure everything. And often the most important information about markets and what you must do to succeed is beyond measuring – at least in the short term.
Measurements are good control tools. Measurements can help force a focus on short term improvements. But measurements, and the concomitant focus, reduces an organization's ability to look laterally. They lose sight of information from lost customers, from small customers, from fringe customers and fringe competitors. Measurement often leads to obsession, and a deepening of Defend & Extend behavior. It's not accidental that doctors often find anorexia patients measure everything in (liquids and solids) and everything out (liquids and solids).
Measurements are created when a business is doing well. In the Rapids. Like Kodak during the 1960s and Xerox in the 1970s. Measurements are structural Lock-ins that help "institutionalize" the behavior which makes the Success Formula operate most effectively. And they help growth. But they do nothing for recognizing a market shift, and when new technology comes along, they stand in the way. That's why a powerful Six Sigma or Total Quality Management (TQM) or Lean Manufacturing project can help reduce costs short term, but become an enormous barrier to innovation over time when markets shift. These institutionalized efforts keep people doing what they measure, even if it doesn't really add much incremental value any longer.
To overcome measurement Lock-ins we all have to use scenario planning. Scenarios can help us see that in a future marketplace, a changed marketplace, measuring what we've been doing won't aid success. And because we don't yet know what the future market will really look like, we can't just swap out existing metrics for something different. As we proceed to do new things, in White Space, it's about learning what the right metrics are – about getting into the growth Rapids – before we tie ourselves up in metrics.
Note: To all readers of my Forbes article last week – there has been an update. The very professional and polite leadership at Tribune Corporation took the time to educate me about the LBO transition. As a result I learned that what I previously read, and reported in my column as well as on this blog, as being an investment of employee retirement funds into the LBO was inaccurate. Although Tribune is in hard times right now, the very good news is that the employee retirement funds were NOT wiped out by the bankruptcy. The Forbes article has been corrected, and I am thankful to the Tribune Corporation for helping me report accurately on that issue.
So out of the blue I got called by a reporter asking me what I thought of Google posting an advertisement for the new Nexus One on its homepage. It was an easy question – the Google homepage isn't sacrosanct. Like everything, it needs to be used in a way that's most valuable for customers and suppliers. Times change, and it should change. So I answered that the Google home page wasn't a sacred cow, and it's smart for Google to try things.
"Has Google changed its stance on using the
home page as a promotional platform? Adam Hartung, an analyst with
Spark Partners, refers to Google's home page as a "sacred cow." The
company has something that almost seems like a religious idol. This ad
demonstrates that Google is willing to change that and "attack a sacred
cow to step the company forward," he says. "And that's a very good sign
for investors."
I didn't record myself, but it sounds like me. Sacred cows get you into trouble. You have to constantly test, try new things.
But the CEO of Burst Media didn't agree with me. Picking up on my quote, in the HuffingtonPost.com "Google Should Not Give Up the Sanctity of Its Homepage" Mr. Coffin takes me to task for violating what he considers a sacred public trust. He fears that anything added to the Google homepage creates cracks in Google's foundation putting the company at risk.
How does anyone in web marketing get so Locked-in? It just goes to show that you don't have to be old, or a big company, or have a lot of money to be Locked-in to something. Google's homepage isn't even a decade old. Nor is Burst Media, an on-line marketing company, I don't think. But here a reputation leader in on-line marketing is working, working hard actually, to defend a sacred cow. "Sanctity" of a web page??? Give me a break.
Google has excelled, grown and made more money, because it has been willing to Disrupt its Success Formula and use White Space to test new things. That's why it's become a household name – and in the process almost singlehandedly destroyed the newspaper industry. And now is threatening to change how we do personal computing (with Chrome) and enterprise applications (with Google Wave) and even mobile computing (with Android and Nexus One). Google should consider nothing sacred, because that's the kind of Lock-in which kills tech companies. Sun Microsystems was busy protecting its sanctity while the market shifted right out from under it
Lock-in is inevitable. But winners – those who grow and make above average rates of return – learn how to manage Lock-in. They are willing to Disrupt and use White Space. Good for Google. I would have expected nothing less!
The accepted wisdom that the customer is king is all wrong.
That's the start to my latest Forbes column (Read here.) Think about it. What would Apple be if it had listened to its customers? An out of business niche PC company by now. What about Google? A narrow search engine company – anyone remember Alta Vista or Ask Jeeves or the other early search engine companies? No customer was telling Apple or Google to get into all the businesses they are in now – and making impressive rates of return while others languish.
But today Google launched Nexus One (read about it on Mobile Marketing Dailyhere) – a product the company developed by watching its competitors – Apple and Microsoft – rather than asking its customers. In the last year "smartphones" went to 17% of the market – from only 7% in 2007 according to Forrester Research. There's nothing any more "natural" about Google – ostensibly a search engine company – making smartphones (or even operating systems for phones like Android) than for GE to get into this business. But Google did because it's paying attention to competitors, not what customers tell it to do.
No customers told Google to develop a new browser – or operating system – which is what Chrome is about. In fact, IT departments wanted Microsoft to develop a better operating system and largely never thought of Google in the space. And no IT department asked Google to develop Google Wave – a new enterprise application which will connect users to their applications and data across the "cloud" allowing for more capability at a fraction of the cost. But Google is watching competitors, and letting them tell Google where the market is heading. Long before customers ask for these products, Google is entering the market with new solutions – the output of White Space that is disrupting existing markets.
Far too many companies spend too much time asking customers what to do. In an earlier era, IBM almost went bankrupt by listening to customers tell them to abandon PCs and stay in the mainframe business —– but that's taking the thunder away from the Forbes article. Give it a read, there's lots of good stuff about how people who listen to customers jam themselves up – and how smarter ones listen to competitors instead. (Ford, Tribune Corporation, eBay, Cisco, Dell, Salesforce.com, CSC, EDS, PWC, Dell, Sun Microsystems, Silicon Graphics and HP.)
As we start 2010 the plan, according to The Financial Times, "WalMart aims to cut supply chain costs." Imagine that. Cost cutting has been the biggest Success Formula component for WalMart for its entire career. And now, the company that is already the low cost retailer – and famous for beating its suppliers down on price to almost no profitability – is planning to focus on purchasing for the next 5 years in order to hopefully take another 5% out of purchased product cost. How'd you like to hear that if Wal-Mart is one of your big customers? What do you suppose the discussion will be like when you go to Target or KMart (match WalMart pricing?)
Will this make WalMart more admired, or more successful? This is the epitome of "more of the same." Even though WalMart is huge, it has done nothing for shareholders for years. And employees have been filing lawsuits due to unpaid overtime. And some markets have no WalMart stores because the company refuses to allow any employees to be unionized. This announcement will not make WalMart a more valuable company, because it simply is an attempt to Defend the Success Formula.
On the other hand according to Newsweek, in "The Customer is Always Right," Amazon intends to keep moving harder into new products and markets in 2010. Amazon has added enormous value to its shareholders, including gains in 2009, as it has moved from bookselling to general merchandise retailing to link retailing to consumer electronics with the Kindle and revolutionizing publishing with the Kindle store. Amazon isn't trying to do more of the same, it's using innovation to drive growth.
And the CEO, Jeff Bezos freely admits that his success today is due to scenario development and plans laid 4 years ago – as Amazon keeps its planning focused on the future. With the advent of many new products coming out in 2010 – including the Apple Tablet – Amazon will have to keep up its focus on new products and markets to maintain growth. Good thing the company is headed that direction.
So which company would you rather work for? Invest in? Supply?
