Ignominious Ends- Sears and Malls

Ignominious Ends- Sears and Malls

TRENDS: Covid-19 has accelerated a lot of trends. Few more than retail. Oddly some people have taken the view that Covid-19 changed retail. Actually, it didn’t. The pandemic has merely accelerated trends that have been driving industry change for almost two decades.

Back in 2004, Eddie Lampert bought all the bonds of defunct Kmart and used those assets to do a merger with Sears – creating Sears Holdings that encompassed both brands. The day of announcement Chicago Tribune asked for my opinion, and famously I predicted the merger would be a disaster.  Clearly both Kmart and Sears were far, far off trends in retail, both were already struggling – and neither had a clue about emerging e-commerce.

Why in 2004 would I predict Sears would fail? The #1 trend in retail was e-commerce, which was all about individualized customer experience, problem solving for customer needs — and only, finally fulfillment. By increasing “scale” – primarily owning a lot more real estate – this new organization would NOT be more competitive. Walmart was already falling behind the growth curve, and everyone in retail was ignoring the elephant in the room – Amazon.com. Loading up on a lot more real estate, more inventory, more employees, more supplier relationships and more community commitments – old ideas about how to succeed related to fulfillment – would hurt more than help. Retail was an industry in transition. All of these factors were boat anchors on future success, which relied on aggressively moving to greater internet use.

Unfortunately, Eddie Lampert as CEO was like most CEOs. He thought success would come from doing more of what worked in the past. Be better, faster, cheaper at what you used to do. In 2011 Sears asked its HQ town (Hoffman Estates) and the state (Illinois) for tax subsidies to keep the HQ there. Sears had built what was once the world’s once tallest building, named the Sears Tower. But many years earlier Sears left, the building was renamed, and Sears was becoming a ghost of itself. I pleaded with government officials to “let Sears go” since the money would be wasted. And it was clear by 2016, that Lampert and his team’s bias toward old retail approaches had only served to hurt Sears more and guarantee its failure. Now – in 2020 – Hoffman Estates has taken the embarrassing act of removing the Sears name from the town’s arena,  admitting Sears is washed up.

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It was with a multi-year observation of trends that I told people in 2/2017 that retail real estate values would crumble . Now mall vacancies are at an 8 year high and 50% of mall department stores will permanently close within a year. We are “over-stored” and nothing will change the fast decline in retail real estate values. Who knows what will happen to all this empty space?

Trends led me in March 2017 to advise investors they should own NO traditional retail equities. Shortly after Sears filed bankruptcy Radio Shack and storied ToysRUs followed. And with the pandemic acting as gasoline fueling change, we’ve now seen the bankruptcies of Neiman Marcus, JCPenney, J Crew, Forever 21, GNC and Chuck e Cheese (but, really, weren’t you a bit surprised the last one was still even in business?) After 3 years of pre-Covid store closings, Industry pundits are finally predicting “record numbers of store closings”. And, after 15 years of predictions, I’m being asked by radio hosts to explain the impact of widespread failures of both local and national retailers ( ).view of a closed mallIgnominious ends are abounding in retail. But – it was all very predictable. The trends were obvious years ago. If you were smart, you moved early to avoid asset traps as valuations declined. You also moved early to get on the bandwagon of trend leaders – like Amazon.com – so you too could succeed.

As we move forward, what will happen to your business? Will you build on trends to create a new future where growth abounds? Will you align your strategy with the future so you “skate to where the puck will be?” Or will you – like Sears and so many others – find an ignominious end to your organization? Will the signs change, or will the signs come down? The trends have never been stronger, the markets have never moved faster and the rewards have never been greater. It’s time to plan for the future, and build your strategy on trends (not what worked in the past.)

But don’t lose sight of the lesson. TRENDS MATTER. If you align with trends your business can do GREAT! Like Facebook. But if you don’t pay attention, and you miss a big trend (like demographic inclusion) the pain the market can inflict can be HUGE and FAST. Like Facebook. Are you aligned with trends? What are the threats and opportunities in your strategy and markets? Do you need an outsider to assess what you don’t know you don’t know? You’ll be surprised how valuable an inexpensive assessment can be for your future business (https://adamhartung.com/assessments/)

Give us a call or send an email.  Adam @Sparkpartners.com

Cost of Ignoring Trends- Facebook’s Fiasco

Cost of Ignoring Trends- Facebook’s Fiasco

In my recent “Rebooting Business” on-line conference I was asked if Black Lives Mattered and other protests should affect strategy. I said “of course!!” These demonstrations clearly show a segment of the marketplace with unserved and under-served needs. Needs so badly served people have taken to the streets!

Every organization needs to assess its strategy to determine if it is on this trend toward inclusion. Are you sensitive to the needs of these under-served segments? Or are you sloppily still out there with old stereo-tropes like the Aunt Jemima syrup – which Quaker Oats finally pulled. Do you know if your organization, products, suppliers, customers and communities are meeting market needs for inclusion? Or are you just assuming you’ll be OK?

Amazingly one of the biggest trend creating companies has demonstrated the cost of missing trends. Facebook is a remarkable company. Where MySpace failed, and countless others never created a marketplace, Facebook used its initial platform, then added Instagram, then Messenger, then WhatsApp to take an enormous lead in social media. Facebook built on trends in our desire to be mobile, and to communicate asynchronously, to attract billions of people to its platform – and as a result advertisers.

But…. Inexplicably…. the CEO Mark Zuckerberg and his leadership team have been tone-deaf to the events since George Floyd was killed. And they were remarkably blindsided, showing they truly weren’t prepared. Zuckerberg has long refused to even look for false information on Facebook – and never really considered removing it. Lies, falsehoods, misstatements – Facebook let people of all stripes (good, and very often bad) say anything they wanted on the platform. This wasn’t inclusion, it was allowing loud voices to present harmful content – and it was clearly disturbing a whole lot of people.

Now is the comeuppance. Advertisers have decided not to advertise on Facebook. They realize that their ads, presented next to false, and sometimes truly hateful, content gives the impression that they support this content. So, in droves, they have said their ad dollars will go somewhere else. Giant consumer goods companies Honda, Unilever, Proctor & Gamble, Coca-Cola, Diageo and Hershey as well as one of the world’s largest mobile providers Verizon, and mercantile suppliers North Face and Patagonia have joined retailers like Starbucks and REI as just some of the larger boycotters – out of over 100 on the growing list. So serious is this problem that some advertisers are “pausing” social media ads all together, suggesting another possible trend

Nobody can fight trends and hope to win. Nobody. No matter how big. And this is a sharp rebuke for one of the trendiest companies on the planet. That the leadership team didn’t see this coming is astonishing. In a late reversal, Facebook has made new efforts to identify hate content (including harmful posts by politicians), but that they didn’t react much quicker is just absurd. That they appeared to think they could platform political ads, and political content, and not have viewers associate Facebook with politics is downright bizarre. This has been the dumbest self-inflicted move by a big company in a very long time. And all they had to do to avoid this nightmare was admit that inclusion was a very big global trend that they had to build into their offering.

But don’t lose sight of the lesson. TRENDS MATTER. If you align with trends your business can do GREAT! Like Facebook. But if you don’t pay attention, and you miss a big trend (like demographic inclusion) the pain the market can inflict can be HUGE and FAST. Like Facebook. Are you aligned with trends? What are the threats and opportunities in your strategy and markets? Do you need an outsider to assess what you don’t know you don’t know? You’ll be surprised how valuable an inexpensive assessment can be for your future business https://adamhartung.com/assessments/

Scenario Planning post Pandemic – What About the Dollar?

Scenario Planning post Pandemic – What About the Dollar?

Americans take it for granted that all currencies are measured against the US Dollar. It’s been that way since WWII, so they just expect it will always be that way. But, things have a way of changing.

In this pandemic the US Federal Reserve is printing money as fast as possible to help prop up the economy. That’s better than the alternative, which would be another Great Depression. But, eventually we have to create value via goods and services to put value in those dollars, or they will be worth a whole lot less. In other words, if we don’t change our fiscal policy to improve production of goods and services, the US Dollar will fall in value – maybe a lot – and it could even lose its status as the world’s “reserve currency.”

Back in 2008,  I wrote that there was no inherent reason the US Dollar would be the benchmark for all currencies. It gained that position as the dominant economy after WWII. American’s like to assume superiority, and therefore the US Dollar will always reign supreme. But as I also said in 2008, that’s an assumption that can easily be changed – especially regarding currencies. Lots of factors could cause the US Dollar to suddenly lose a whole lot of value – creating inflation rates that make the 1980s (>18%/year) seem tame.

Since WWII, a lot has happened. Economies in Europe grouped into the Economic Union (EU) making the Euro more powerful. And the economy of China has grown enormously. (China’s economy will be bigger than the USA economy sometime in 2020 or 2021.)  Simultaneously, isolationism has hurt growth in America, and caused the EU to lose the UK. What’s rapidly happening is a shift in economic power away from the US and Europe to China.

Additionally, the largest holder of US debt is China. As I pointed out in 2009, this policy of supporting US debt has aided China’s desire to grow. But, as China becomes larger it will no longer need to prop up the US Dollar by purchasing Treasuries. Once bigger than the USA, China could demand that its trade be in Yuan and the value of the dollar could fall very far, very fast.

China has developed enormous inroads into the global economy, across dozens of countries, with its “Belt and Road Initiative” created in 2013. China has quietly become more important to the economy of 70 countries than the USA.  Instead of supplying countries guns, China gave them infrastructure and facilities – and jobs – and economic growth.  In most of these countries, the USA is more feared than adored, while the Chinese are seen as a very good friend.  Meanwhile, the USA “put America first” policies, including trade wars and social justice, have isolated the USA from not only rivals but its global friends – including Europe (threats to kill NATO, for example.)value of money is declining

Now, we are in a pandemic.  The Chinese are very determined to control its impact.  Meanwhile the USA, UK and many other democracies are being far less careful.  If this plays out with a full pandemic recession in the USA, China could stop buying American bonds and the value of the dollar could disintegrate in weeks.  Disintegrate as in $1 could be worth 1 penny.  It would take bushels of dollars to buy imported goods in stores.

In this election year, the biggest concern is, do those leading the USA realize the peril? Do business leaders?  Do you?

Microsoft:  Value Creation Is About New Markets and Growth – Not Defending Your Base

Microsoft: Value Creation Is About New Markets and Growth – Not Defending Your Base

People who follow my speaking and writing – including my over 400 Forbes columns – know that I preach the importance of growth. Successful organizations are agile – and agility is the sum of learning + adaptability. Smart organizations are constantly looking externally, gathering data, learning about markets and shifts – then structured to adopt those learnings into their business model and adapt the organization to new market needs.

Steve Ballmer was the antithesis of agility. For his entire career he knew only that Microsoft stock price post BallmerWindows and Office made all the money at Microsoft. So he kept investing in Windows and Office. He failed at everything else. False starts in phones, tablets, gaming – products came and went like ice cream cones on a hot August day. Ballmer laughed at the very notion of the iPhone ever being successful – while simultaneously throwing away $7.2B buying Nokia. Then there was $8.5B buying Skype. $400M buying the Borders Nook. Those were ridiculous acquisitions that just wasted shareholder money. To Ballmer, Microsoft’s future relied on maintaining Windows and Office.

So as the market went mobile, Ballmer kept over-investing. He spent billions launching Windows 8, which I predicted was obviously going to fail at growing the Windows market as early as 2012. And it was easy to predict that Win8 tablets were going to be a bust when launched in 2012 as well. But Ballmer was “all-in” on Windows and Office. He was completely locked-in, and unwilling to even consider any data indicating that the PC market was dying – effectively driving Microsoft over a cliff.

It was not hard to identify Steve Ballmer as the worst CEO in America in 2012. When Ballmer took over Microsoft it was worth $60/share. He drove that value down to $20. And the company valuation was almost unchanged his entire 14 years as CEO. He remained locked-in to trying to Defend & Extend PC sales, and it did Microsoft no good. But when the Board replaced Ballmer with Nadella the company moved quickly into growth in gaming, and especially cloud services. In just 6 years Nadella has improved the company’s value by 400%!!!

Success is NOT about defending the past. Success IS about growth. Don’t be locked in to what worked before. Focus on what markets want and need – learn how to understand these needs – and then adapt to giving customers new solutions. Don’t make the mistakes of Ballmer – be a Nadella to lead your organization into growth opportunities!

Do You Grow with Market Shifts – or Slowly Lose Relevancy?  The Advertising Story

Do You Grow with Market Shifts – or Slowly Lose Relevancy? The Advertising Story

In 2020, internet ads will represent over 50% of all advertising money spent. Think about that factoid. An ad medium that wasn’t even important to the ad industry a decade ago now accounts for half of the industry. It took three years after the Dot Com bubble burst for internet advertising to hit bottom, but then it took off and hasn’t stopped growing.

An example of rapid, disruptive change. A market shift of tremendous proportions that has forever changed the media industry, and how we all consume both entertainment and news. Did you prepare for this shift? And is it helping you sell more stuff and make more money?

This was easy to predict. Seven years ago (12/10/12), I wrote “The Day TV Died.” The trend was unmistakable – eyeballs were going to the internet. And as eyeballs went digital, so did ads. These new, low cost ads were “democratizing” brand creation and allowing smaller companies to go direct to consumers with products and solutions like never before in history. It was ushering in a “golden age” for small businesses that took advantage.

However, small businesses – and large businesses – largely failed to adjust to these trends effectively. By 3/21/13 I pointed out in “Small Business Leaders Missing Digital/Mobile Revolution” that small businesses were continuing to rely on the least economical forms of media outreach – direct mail and print! They were biased toward what they knew how to do, and old metrics for media, instead of seizing the opportunity. Likewise, by 12/11/14 in “TV is Dying Yet Marketers Overspend on TV” I was able to demonstrate that the only thing keeping TV alive were ad price increases so big they made up for declining audiences. The leaders of big companies were biased toward the TV they knew, instead of the better performing and lower cost new internet media capabilities.

Three years ago (1/6/17), I pointed out in “Four Trends That Will Forever Change Media… and You” it was obvious that digital social media advertising was making a huge impact on everyone. Fast shifting eyeballs were being tracked by new technology, so ads were being purchased by robots to catch those eyeballs – and this meant fake news would be rampant as media sites sought eyeballs by any means. And Netflix was well on its way to becoming the Amazon of media with its own programs and competitive lead.

So the point? It was predictable all the way back in 2012 that digital media would soon dominate. This would change advertising, distribution and content. Now digital advertising is bigger than all other advertising COMBINED. Those who acted early would get a huge benefit (think Facebook/Instagram Path to Media Domination) while those who didn’t react would feel a huge hurt (newspapers, radio, broadcast TV, brick and mortar retail, large consumer goods companies that rely on high priced TV.) But did you take action? Did you take advantage of these trends to make your business bigger, stronger, more profitable, more relevant? Or are you still reacting to the market, struggling to understand changes and how they will impact your business?

The world continues to be a fast changing place. Mobile phones and social media will not go away – no matter what Congress, the UN or the EU regulators do. Global competition will grow, regardless what politicians say. Those who understand how these big trends create opportunities will find themselves more successful. Those who focus on the past, try to execute better with their old “core,” and rely on historical biases will find themselves slowly made irrelevant by those who use new technologies and solutions to offer customers greater need satisfaction. Which will you be? A laggard? Or a leader? Will you build on trends to grow – or slump off into obsolescence? The choice is yours.

The Remarkable, Predictable Decline of TV

The Remarkable, Predictable Decline of TV

Seven years ago (12 December, 2012) I said it was “The Day TV Died.” There were a LOT of skeptics. At the time, TV was by far still the dominant medium. But the trends were absolutely clear – ad revenues were quickly moving toward on-line opportunities. Print was already well into the grave, and radio was sputtering along with no growth at all. Eyeball momentum had shifted on-line, and thus ads moved on-line, and it was obvious that programming dollars would soon follow – meaning that TV programming was already in Stage 4 termination.

Trends and Tech drove Netflix growth

Meanwhile, Netflix and its brethren were poised to have a fabulous, furious growth. These same trends led me to a full-throated pitch to buy Netflix nine years ago (Nov. 2010.) After Netflix made the decision to raise prices for DVD distribution in order to push people toward streaming the stock crashed, but trends indicated that customer preferences would lead Netflix to be the content winner so despite widespread despair, I called for people to buy the stock in Oct. 2011. In Jan. 2012, I made Netflix one of my top 4 picks for the year. So by Jan. 2013, I was making it clear that TV was has-been, and Netflix was the company to own.

Now, Statista has produced the numbers showing that in 2019 internet media consumption exceeded TV consumption – for the first time ever. And this trend will not stop. It was wholly predictable years ago – and the trends all say this will only accelerate. Where once the competition for entertainment was Netflix, now there is Amazon Prime, Disney+, Comcast Peacock, AT&T HBO Max and Apple TV+. The traditional networks simply don’t have a chance.

Impact of Trends

These trends are having an enormous impact on how we behave, how advertisers behave, what technology we buy, what entertainment we watch, how we use other technology like social media, how we absorb news — and more. So the question is, did you see the trends 7,8,9 years ago? Have you adjusted your strategy? Are you sure where trends are headed, and are you prepared for the future? Will you be a winner as the world changes – in a pretty predictable way – or will you lose out and say “you know, way back when……”

Mighty Oaks from Tiny Acorns Grow – Beyond Meat

Mighty Oaks from Tiny Acorns Grow – Beyond Meat

The newsletters of Adam Hartung.
Keynote Speaker, Managing Partner, Author on Trends
Adam Hartung photo

Mighty Oaks from Tiny Acorns Grow – Beyond Meat

TREND: Beyond Meat (BYND, NASDAQ)

A big, new trend is emerging. Sales of plant based protein products may be small, but growth is remarkable. Could Beyond Meat be the next Netflix?

BEYOND MEAT plant based patties

In Q3 2019, Beyond Meat’s revenue is up 2.5x (250%) vs Q3 2018 — which was up 2.5x (250%) over Q3 2017. Yes, you can say this growth is on a small base, given that last quarter was $100M revenue.

Imagine what it’s like growing that fast. Imagine the exhilaration of solving problems – like funding your accounts receivable that’s growing with accelerating orders. Or amping up production faster than ever imagined. Or meeting needs of your customers, retailers and restaurants. Or paying out big bonuses due to beating all your planned metrics.

It’s not that much fun to work at Cargill. Or Tyson Foods. Or Smithfield. Or any other traditional company producing beef, or pork, or chicken. Those are huge companies, with lots of people. But they aren’t maxing out sales and profits – and bonuses – like Beyond Meat.

It’s easy to ignore a start up. But one has to look at the relative growth of a company to judge its future. There were cracks in the growth rate at Blockbuster 6 years before it failed. And during that time, Blockbuster kept saying Netflix was a nit that didn’t matter. But Netflix was growing like the proverbial weed. Netflix wasn’t even half the size of Blockbuster when Blockbuster filed for bankruptcy.

A Threat Enters

With growth like Beyond Meat it didn’t take long to upset an entire industry biz model. Amazon still doesn’t sell as much as WalMart, but it wiped out a significant number of retailers by changing volumes enough to erase their profits. Think about the changes wrought on the advertising industry by Google, which has pretty much killed print ads. Look at what’s happened to other media ad models, like TV and radio, by Facebook’s growth. And entertainment has been entirely changed – where today the onetime distributor is one of the biggest content producers – Netflix.

In traditional marketing theory, Beyond Meat, like Netflix, is selling new products to existing markets.

Most disruptors enter the markets in the new product/new market quadrant of the Ansoff matrix. They create the new market just by entering. If they even see them as competitors, established businesses dismiss these potential disruptors because of established focus on current markets/current products with sustaining innovations. Selling new products to existing customers is the first step companies take as they start to innovate.

Kraft was on this path when they acquired a new productc with its purchase of Boca Burger in 2000.  Kellogg’s and General Foods jumped into the alternative meat products at about the same time.  Vegetarian burger substitutes threatened the success formula of meat products and were relegated to niche products. In 2018, Kraft’s incubator tried to relaunch Boca, but the smaller, more nimble start-ups had already captured consumers’ attention and reframed the market.

The Acorn Sprouts

Beyond Meat had morphed quickly into a direct competitor to the meat industry by selling this new product to existing meat customers!

Riding the trends of climate change, sustainability and organic foods, Beyond Meat is starting to look like a true game changer. It may be small, but those other companies were too (along with Tesla, don’t forget, considered immaterial by GM, et.al.) Those who are in the traditional protein market (beef especially) had better pay attention – their profit model is already under attack!!

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“The creation of a thousand forests is in one acorn.”

Ralph Waldo Emerson

What’s on your company’s radar today?

Spark Partners is here to help as your coach on trends and innovation. We bring years of experience studying trends, organizations, and how to implement. We bring nimbleness to your strategy, and help you maximize your ability to execute.

Let us do an opportunity assessment for your organization. For less than your annual gym cost, or auto insurance premium, we could likely identify some good opportunities your blinders are hiding. Read my Assessment Page to learn more.

How we can help
For more on how to include trends in your planning, I’ve created a “how-to” that you can adapt for your team.  See my Status Quo Risk Management Playbook.
Give us a call today, or send an email, so we can talk about how you can be a leader, rather than follower.  Or check out the rest of the website to read up on what we do so we can create the right level of engagement for you.
.

Hartung Recent Blog Posts on Leadership, Investing, Trends

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Responding to Market Disruptions? Get Ahead of the Next One!

The newsletters of Adam Hartung.
Keynote Speaker, Managing Partner, Author on Trends
Adam Hartung photo

Responding to Market Disruptions? Get Ahead of the Next One!

Market Threat Assessments

Recent studies of senior managers have shown that being blindsided by a disruption is the largest unresolved concern in strategy development today. That fear is too often real because disruption typically begins where it is least visible to management- on the fringes of the existing target markets. And, once the disruption “pirate ship” is sighted on the horizon, not only is it probably too late, but companies react poorly.

Threat Responses

Research of corporate responses to disruption has shown that most companies ignore the threat, fortify existing positions or attempt to buy innovation. The first choice is not an option for an ongoing business. Fortification through distribution changes, product model proliferation and discounting only buys some additional time while wasting resources. Once a disruption enters the market, there’s little time for organic innovation efforts or “random acts of innovation” (Forbes) so companies often make acquisitions attempting to buy innovation.

Sadly, given the risk profile and limited experience in innovation, these are often sustaining innovations which are swept aside by the wave of disruption.

A very large example is when Microsoft fell behind in the lumia smartphone mobile market in 2014 and purchased Nokia, a weak player in mobile phones to get access to this market. The joint project, the Lumia phone, failed to catch on and Microsoft’s share fell by 50%- fail. Cisco tried to catch up with the photography trend by acquiring Pure Digital, the maker of low cost Flip cameras. Unfortunately, shortly after the acquisition, the high-resolution sensors included in smartphones took photography to a new level. Bye, Flip! Trend monitoring would have predicted this natural evolution as a high risk threat.

Anticipate Threats

Even in successful acquisitions, founders often leave the firm, losing the source of innovative ideas long term. (Time, Inc.)

To anticipate external changes, marketing departments have embraced big data as a powerful tool to help companies identify new markets and consumer preferences. These tools use the past to predict the short-term future which is reasonable in a steady market. The problem is that big data cannot accurately anticipate dynamic disruptions.

But, you and your staff can.

Uncovering market opportunities that can deliver improved returns at a manageable risk for the firm is the goal. New products will also generate an increasing percentage of revenue leading to continued growth. Companies that master this process have a long range radar to identify potential opportunities in a process called, “continuous innovation”.

What’s on your company’s radar today?

Spark Partners is here to help as your coach on trends and innovation. We bring years of experience studying trends, organizations, and how to implement. We bring nimbleness to your strategy, and help you maximize your ability to execute.

Let us do an opportunity assessment for your organization. For less than your annual gym cost, or auto insurance premium, we could likely identify some good opportunities your blinders are hiding. Read my Assessment Page to learn more.

Add me to the email list!

“Don’t plan for what you know. Plan for what you don’t know.”

Adam Hartung, Create Marketplace Disruption

How we can help
For more on how to include trends in your planning, I’ve created a “how-to” that you can adapt for your team.  See my Status Quo Risk Management Playbook.
Give us a call today, or send an email, so we can talk about how you can be a leader, rather than follower.  Or check out the rest of the website to read up on what we do so we can create the right level of engagement for you.
.

Hartung Recent Blog Posts on Leadership, Investing, Trends

Add me to email list!

logo-footer

GET THE BOOK

Adam's book reveals the truth about how to use strategy to outpace the competition.

Create Marketplace Disruption book

PRESS & MEDIA

Follow Adam's coverage in the press and in other media.

FOLLOW ADAM

Follow Adam's column in Forbes.

Plan for the Unseen Disruptions to Your Business…Now.

Plan for the Unseen Disruptions to Your Business…Now.

Market Threat Assessment

Recent studies of senior managers have shown that being blindsided by a disruption is the largest unresolved concern in strategy development today. 

That fear is too often real because disruption typically begins where it is least visible to management- on the fringes of the existing target markets.  And, once the disruption “pirate ship” is sighted on the horizon, not only is it probably too late, but companies react poorly.

Some research of corporate responses to disruption has shown that most companies ignore the threat, fortify existing positions or attempt to buy innovation.  The first choice is not an option for an ongoing business.  Fortification through distribution changes, product model proliferation and discounting only buys some additional time while wasting resources.  Once a disruption enters the market, there’s little time for organic innovation efforts so companies often make acquisitions attempting to buy innovation.  Sadly, given the risk profile and limited experience in innovation, these are often sustaining innovations which are swept aside by the wave of disruption.

A very large example is when Microsoft fell behind in the mobile market in 2014 and purchased Nokia, a weak player in mobile phones to get access to this market.  The joint project, the Lumina phone, failed to catch on and Microsoft’s share fell by 50%- fail.  Cisco tried to catch up with the photography trend by acquiring Pure Digital, the maker of low cost Flip cameras.  Unfortunately, shortly after the acquisition, the high-resolution sensors included in smartphones took photography to a new level.  Bye, Flip! Trend monitoring would have predicted this natural evolution as a high risk threat. 

To anticipate external changes, marketing departments have embraced big data as a powerful tool to help companies identify new markets and consumer preferences.  These tools use the past to predict the short-term future which is reasonable in a steady market.  The problem is that big data cannot anticipate dynamic disruption. 

But, you and your staff can.

As a key input to your next strategy workshop, use trends!  As a start, gather info from the people closest to your market and further using Porter’s five force model.  See my articles on Scenarios to expand these trends to actionable goals.

What’s on your company’s radar today?

We are here to help as your coach on trends and innovation. We bring years of experience studying trends, organizations, and how to implement. We bring nimbleness to your strategy, and help you maximize your ability to execute.

Go the www.adamhartung.com and view the Assessment Page. Send me a reply to this email, or call me today, and let’s start talking about what trends will impact your organization and what you’ll need to do to pivot toward greater success.

Find Opportunities Out of the Box

Find Opportunities Out of the Box

Find Opportunities Out of the Box

If your company is like most businesses, your list of new product or service ideas looks like a sales wish list- new features at a lower cost. Marketing or product management may go a step further and group the ideas into product line extensions or possibly entries into new market segments. Unfortunately, while generating revenue in the short run, this process leaves the company vulnerable to competition and missing opportunities in the long run.

Well, you are not alone. Since about 2012, the pace of innovation has slowed even in the popular market of social media. According to KeyMedia, “What was once a world of diversity and originality has slowly started to look like a bad case of déjà vu… (as platforms are) becoming more similar to each other…”

Most companies devote resources to a quadrant on the innovation matrix known as “sustaining innovation.” They improve existing products sold to existing customers. It’s low risk, true, but it’s also low return. Why do companies follow this death spiral? It’s because “innovation” has gotten a bad reputation.

According to Inc. magazine, “…many (business) people have come to equate the idea of innovation with disruptive innovation. But the fact is that for most businesses, placing big bets on high-risk ideas is not only unfeasible, it’s unwise.”

The Ansoff matrix of new and existing markets and products is usually interpreted as 4 quadrants. It is much more than that: it is a continuum between sustaining and disruptive innovation. .

Adam Hartung often tells clients, “Get out of the box, then think!” This applies directly to the Ansoff model. Once a company sees the matrix, not as fixed “boxes” but as a spectrum of opportunities, markets are viewed not as filled with risk, but filled with opportunities!

Consider Ricoh’s new “clickable paper” that combines the print channel, with an app and that integrates to social media or a website. Not disruptive in the classical sense, but an adjacent product and adjacent market segment that makes print relevant to tech savvy consumers. Or Dr. Dre’s Beats headphones that combine pre-equalized sound with noise cancellation and style- a clever and highly successful blend of existing technologies, vigorously marketed.

Uncovering these market opportunities that can deliver improved returns at a manageable risk for the firm. New products will also generate an increasing percentage of revenue leading to continued growth. Companies that master this process have a long range radar to identify potential opportunities in a process called, “continuous innovation”.

What’s on your company’s radar today?

We are here to help as your coach on trends and innovation. We bring years of experience studying trends, organizations, and how to implement. We bring nimbleness to your strategy, and help you maximize your ability to execute.

Go the website and view the Assessment Page. Send me a reply to this email, or call me today, and let’s start talking about what trends will impact your organization and what you’ll need to do to pivot toward greater success.