by Adam Hartung | Jun 28, 2006 | Disruptions, In the Swamp, Innovation, Leadership, Lock-in
Readers of this BLOG know I have been no fan of Roger Deromedi and Kraft. So, you probably think I’m delighted with his ouster this week by Altria (effective parent of Kraft). Actually, I’m unconvinced whether it will matter.
There is no doubt that Kraft was locked-into a Defend & Extend strategy which was producing declining results. The stock price had declined 30% since 2002, and the CEO had no plans for growth. Deromedi laid off 14,000 people and closed 40 factories in 2.5 years. His plans could be summed up in his own quote "strong execution of our strategies will deliver improved results in 2006 and beyond." Just like it had done in 2004 and 2005 – right. Obsessing about execution is one critical telltale signal of a failing, locked-in strategy. There was no plan for growth, sooner or later, as he kept selling brands and investing more money in no-growth categories like cheese. The Chairman of Kraft, currently the CEO of Altria, finally realized that there was no interest in an independent no-growth Kraft, so he’d better make some changes or the spin-out of Kraft was never going to be completed.
But, what’s needed at Kraft is a Disruption to the Lock-in, and replacing the CEO is more of a Disturbance than a Disruption. Changing the CEO doesn’t inherently change anything beyond the sign on the door. And the new CEO, for all the praise now heaped upon her, is a 20-year returning veteran of Kraft. She spent barely 1 year running Frito-Lay, so despite her $2.5million compensation, she wasn’t there long enough for us to know what difference she made, or might have made.
We do know that she left the job running Kraft North America, which was a $30B revenue business to later run Frito-Lay, only a $10B business. That indicates she was no fan of Deromedi when she split, nor most likely of his then co-CEO Betsy Holden. Nonetheless, her career was a pretty straightforward development up the management ranks of what has long been a low-innovation enterprise. But is she ready to create some growth engines inside this behemoth? Does she know how?
Top marketing gurus around Chicago have weighed in, calling for the first steps to include changing the culture toward product innovation from brand extensions, and using portfolio planning to milk some brands for cash while investing in growth with other brands and a refocusing on innovation and new product launches.
What is required, as I said earlier, is a Disruption. Kraft must stop viewing itself as being self-satisfied, and realize there are external Challenges to its brands and its business. Older Americans are changing their diets to live longer, and younger Americans no longer look to these old brands when thinking of meals. A great past does not assure a great future – just look at Brach’s candy company (bankrupt), ConAgra or Sara Lee (themselves drastically downsizing). The new CEOs first step must be to avoid reassuring the people of Kraft, and rather to hlep them see that these Challenges are placing Kraft – soon to be an independent company – at risk of having a viable future. There is no growth in Kraft, and without it the company is doomed to a very unhappy competitive reality.
And she must Disrupt Kraft. The mechanisms which keep Kraft acting like Kraft. She needs to attack Kraft’s critical metrics, its hiring practices, its centralized decision-making processes, its arrogant approach to retailers and end-users, its focus on "do no harm" brand tactics, its rewarding of "farmers" and punishment of "explorers" in the workforce, its deep hierarchy that vets out ideas which don’t look like guaranteed wins (and thus little more than extensions of old businesses), and its obsession with cost reductions. Of course, not all of these should be attacked at once. But, she must attack them. She must identify the Status Quo Police and reduce their numbers while gutting their influence – be they in finance, HR, or marketing. She must create a pattern interrupt in Kraft; she must Disrupt the old Success Formula.
And, she must put in place White Space. Something completely lacking at Kraft. We need to see her create project teams which have explicit permission to behave differently, outside the old Lock-ins. And she must show us that she is dedicating resources, in advance, to these teams so they have the wherewithal to actually create new Success Formulas for the company.
We must keep our eyes on Kraft. When Mr. Zander joined the cross-town company Motorola he too faced a seriously Locked-in organization. Yet, within only 6 months he effectively Disrupted Motorola and put in place White Space projects that almost immediately began changing the fortunes of the company. Let’s hope Ms. Rosenfeld does the same – so Kraft can once again take its place among the leading consumer goods companies of the world.
by Adam Hartung | Jun 5, 2006 | Defend & Extend, Disruptions, In the Swamp, In the Whirlpool, Leadership, Lock-in
I talk a lot about the deadly impact of growth stalls. Whenever companies suffer two consecutive flat or declining quarters, or a year-over-year decline, I call that a growth stall. And the results are deadly, with fewer than 10% of these companies ever achieving sustained growth of 2% again.
I’m often asked if two quarters, or year to year comparisons, aren’t too short. After all, I preach on the importance of White Space and using transformations for long-term good health. Aren’t I supporting the short-term thinking that gets leaders into trouble?
My answer is no. Leaders and managers must be impatient for results. The world moves quickly, and it takes precious little time for a company to falter and fail. Take for example Sun Microsystems. This was a high-growth tech company for 20 years and a big winner in the internet boom of the 1990s. But now the company has seen 4 consecutive years of declining revenue. It’s value has been lackluster that entire time as well. And now it has announced it is planning to cut another 4-5,000 jobs in an effort to find profitability.
Investors and managers can’t wait 4 years for improved results. In fact, they shouldn’t wait at all. If a company can’t grow, it will atrophy and eventually falter. The purpose of Disruptions is to constantly challenge Lock-In to old Success Formulas, and the purpose of White Space is to identify new opportunities that can create long-lived growth. The problem is that too many companies try to milk the Lock-in, and they wait too long before they Disrupt and seek White Space. They confuse short-term optimization of an old Success Formula with the requirement to continuously identify and develop growth opportunities ad infinitum.
When it was doing incredibly well, Sun Microsystem decided the right strategic action was to "identify its core strengths" upon the recommendation of Gary Hamel. Scott McNealy said the company’s future was "selling iron" (his macho-speak for selling computer server hardware.) As a result, Sun never moved into networking gear, like Cisco, or network software like Google. Also, Sun was pushing boxes so hard it missed the Challenge Linux placed on its own Unix software. Sun was a hot player in the center of the action, but by "sticking to its core" it wasn’t prepared when the marketplace determined it had sufficient server capacity and good a good software alternative. It’s market started collapsing. And Sun wasn’t prepared to move to the next market opportunity. The first two declining quarters led to nearly 20 declining quarters.
The best time to Disrupt and fund White Space is when your business is doing well. It is then that you can clearly evaluate new Success Formulas without the crisis of declining revenue making you "bet the company" on limited options – and do so quickly. By the time you see two consecutive bad quarters, or year-over-year revenue declines, the business is already stuck in the Swamp and well on its way into the Whirlpool. It might not look that bad, but it already has almost no hope of ever growing again.
by Adam Hartung | May 12, 2006 | Disruptions, General, In the Rapids, Leadership, Openness
Last week Starbucks beat analyst estimates as profit rose 27%. Same store sales were up 10%, the 57th consecutive quarter of sales increases in stores open a year or more. Starbucks now has over 11,000 stores. It has opened 900 so far this year, and will open 900 more before year ends. This is definitely one heck of a growth story, and the company stock has soared 7-fold in the last 5 years.
No company can achieve that kind of growth without significant Disruptions, and lots of White Space. Starbucks has no end to the many flavor varieties of coffee it offers. But, it also offers tea and has seen tremendous growth from Green Tea of late. And to keep promoting itself, the company did an advertising first as it gave away (as in free) 500,000 beverages on March 14 just to remind people it’s spring and time to get out and enjoy the Starbucks stores. And in Chicago, they are starting to sell hot sandwiches – a new test for growth.
Starbucks is not just a coffee shop, of course. Their coffee (as beans and ground) is available in grocery stores, and they are the #1 market player in prepared coffee with their Frappucino, Iced Coffee and DoubleShot drinks, bottled and distributed by Pepsi. You also can get Starbucks Ice Cream and Frappucino bars in most markets. And for the late night adult crowd there’s now Starbucks Coffee Liqueur at the liquor store.
But, the Starbucks White Space goes far beyond the beverages for which they are famous. Starbucks has emerged as a major player in the music business. In 2005, they demonstrated their growth skills as they launched and were the #1 distributor for Ray Charles final release Genius Loves Company. Unbeknownst to many, Starbucks has a music division. Of course it creates all its own in-store music – and offers that on CD. But it also is a major force behind bringing new acts to market and distributing major artists such as Alanis Morissette, ColdPlay and the Dave Mathews Band. Starbucks has even inked an agreement with the famed William Morris Agency to find new talent for them to release.
And Starbucks just co-produced the LionsGate movie Akeelah and the Bee. Although it has gotten off to a sluggish start, the mere fact that Starbucks is into movie production demonstrates the lattitude with which the company will use White Space to drive new business opportunities. Look for tie-ins and promotions in your local store.
Could you imagine CD’s or movies made and distributed by McDonald’s? Or purchasing a frozen Pizza Hut pizza at your grocer? Why not? Any company can keep itself constantly Disrupted and filled with White Space. And for that, you will be rewarded with growth, and a high P/E multiple for investors. And you can provide ALL of your employees with benefits, even health benefits for part-timers (hear that Wal-Mart?). Everyone wins when you avoid the tendency to Lock-in on your first Success Formula and instead focus on White Space.
by Adam Hartung | Mar 25, 2006 | Disruptions, In the Rapids, Innovation, Leadership, Lifecycle
In my presentations I impress upon people the need to look into the future to recognize Challenges and unearth opportunities. Don’t let Lock-in keep you projecting the future from the past.
A great example showed itself recently. The Chicago Tribune (see article) wrote about an emerging new jet (as in airplane) that was smaller, cheaper to buy and cheaper to operate. Now, you might say "but I don’t need a jet" and pass this article by. That is Lock-in; the decision to fly by the ariticle was created by what you do today, not what you could do tomorrow.
We all know that air travel has become grueling in recent years. Long gone are the days when flying meant you were treated well, with good service and a nice meal. Today, the airline charges for everything from pillows to potentially an aisle seat. Free meals are a thing of the past. And overworked, underpaid flight attendants struggle to keep a smile as they herd passengers, like so much cattle, onto and off the plane as fast as possible in an effort to drive up usage — and maybe someday create a profit for the lackluster industry.
And all that is after you deal with the struggle of simply getting your ticket, boarding pass, checking bags and clearing that long TSA security line (where you got to take off your belt and shoes, while tearing apart your handbag to place items in separate bins for x-ray screening.)
The whole process of air flight is simply not glamorous – not fun. In fact, it is stressful, and tedious. And for business travelers, the grief and cost have become so great that it’s harder and harder to justify those trips to customers and vendors that you know you really should make.
That’s today. Does it need to be the future? Several new firms – air taxi services – have emerged that offer flight service the way we use taxis – "Take me to there, and maybe back again." They provide the equipment, the pilots, everything to make the trip. They fly from very convenient, small airports nearer to more offices (as well as the large airports). The pre-flight screening is a comparative breeze, the stress of missing flights is gone, flexibility grows immensely, and you can get more done since you aren’t hanging around airports and struggling with the crowds.
You’ll say that sounds good, but isn’t it expensive? And that’s where the Tribune article comes in. While we weren’t watching, lots of these new taxi and charter services have brought on-line aircraft that are cheaper and more fuel efficient. They also have streamlined their business processes to make the system more efficient. The result is much lower cost to use a taxi plane than most of us imagine.
Could the future have business travelers bypassing United and American to visit customers? Maybe. And that makes this a trend worth watching, and considering. If a salesperson makes twice as many calls as her competitor, or is first on-site to deal with a customer problem by using this service it just might lead to more revenue. It could be a competitive edge. And as more people use these services processes will improve and technology will be applied, and who knows what the future opportunity will be in just 10 years?
We have to avoid defining the future by looking in the rear-view mirror. We all have a tendency to project the future off our past. We fall into the mode of extending our old Success Formulas. But, innovations appear that change the environment. And we need to be looking for them. We have to keep our eyes on the windshield if we are to identify Challenges to old ways and start looking for White Space opportunities to test new ideas.
Maybe next time you want to visit a vendor in Omaha, or a customer in Wichita, you should hit the web, find some air taxi services, and find out just what the possibilities are. And keep your eyes open for these new jets – they potentially might change our whole view of personal travel.
by Adam Hartung | Feb 13, 2006 | Disruptions, General, In the Swamp, Leadership, Lifecycle, Lock-in
My three weeks in India were fantastic. I visited twenty-some companies, all developing new business models in their pursuit of new revenues. From company to company, I saw people working in White Space as they sought out Success Formulas that would provide short-term gains and create long-term advantage. Even for companies with tens of thousands of employees, it was clear that operations in India are constantly disrupting themselves as they seek to compete with each other, and continue driving enhanced value.
While there, I thought about all the U.S. companies that are blissfully ignoring this phenomenon. What I saw in India wasn’t just low-cost competitive undercutting, but in fact people doing the work differently – and as a result creating considerable new value for not only themselves but their customers. I kept wondering, "why do so many U.S. and European business leaders remain so unmoved by what is happening here?"
Then I recalled the story of CSC. Entering 2000, CSC had a robust commercial consulting business with revenues reportedly over $1B. According to industry analysts, this consulting division was by far the most profitable part of CSC, contributing nearly 3 times the profit for its revenue base compared to other divisions. Further, it was claimed to be growing at nearly 20%+ year.
Now, just 6 years later that same division is reported to be under $200M revenues (an 80% decline). And insiders say it has operated at losses to break-even since 2001. The division simply ignored the oncoming avalanche of opportunity being created by the internet and offshore IT services vendors – an avalanche they could readily see from their perch creating e-business opportunities and installing new technologies.
Unfortunately, as they missed the first wave of offshoring their revenues slumped and their profits vanished. In reaction, they brought back a President who had left during the dot-com days in order to provide new "focus" to the business. Upon his return, this President declared that from his 20 years of experience he knew that customers wanted their IT services to be done locally. He re-opened a slew of local offices in the U.S. and moved the P&L from a national service line model to a geographic P&L. He expected these local offices to get into clients and "slug it out" for revenues against the competitors. And he repeatedly said that he knew this would work – because it had worked in the 1970s and 1980s.
He was Locked-in to his old Success Formula. Unfortunately, he was perilously ignorant of the oncoming wave of qualified IT consultants in India now available to his clients across the internet. Year after year he, and CSC, watched as business was lost to new competitors, layoffs followed to "stabilize" the business, only to be followed by more pressure on prices, and fewer revenues and more layoffs. A vicious circle that was inevitable.
To this day, CSC has practically no commercial consultants in India. While Tata has 60,000, Infosys 40,000, Cognizant 30,000 and WiPro 30,000 – the vast bulk of which are supporting U.S. clients. Not to mention the dozens of smaller companies doing everything from IT services to business processes. Even Accenture has nearly 20,000 and Office Tiger (both U.S. companies) has 6,000. In reaction, CSC has retrenched to large outsourcing contracts (the profitability of which is highly doubtful) and increased its federal government business – where it can avoiding competing with Indian firms.
Lock-in leads to blinders. Blinders lead to ignorance (as my teacher once said "ignorance can be fixed"). When CSC commercial consulting faced its Challenge (offshore competitors) leading to a big problem (declining margins and revenues) they did not use this Challenge to Disrupt their model and create White Space. Many American companies, such as Accenture and IBM, did just that – creating large and very viable Indian organizations supporting clients competitively. Those companies are using the White Space to develop their own new Success Formulas. But CSC has lost the commercial consulting market. And they are threatened in all their commercial business. They are under attack from hedge fund operators who want to split up the company and capture value before more is lost.
Ignorance is perilous. If we allow Lock-in to determine our behavior we lose the ability to Disrupt and face our Challenges – leading to failure. Instead, we have to use Challenges to Disrupt and open White Space so we can find new Success Formulas. And via that route, we can remain competitive in the new marketplace.
by Adam Hartung | Jan 15, 2006 | Disruptions, General, In the Rapids, Lifecycle, Lock-in, Openness
I’m a boomer, and for my generation going to the movies was a primary pastime. With only 3 channels of TV, we looked forward to the movies as an alternative. We also enjoyed the big screens, the color, and the immersion experience that the theatre provided. And all of it was available for as little as $.25 for a matinee or just a dollar or two for a weekend feature with your date.
My how times have changed. As demonstrated at the recent Consumer Electronics Show, one of the hottest items is home theatre. We now have huge screens, crystal sharp images, bone jarring audio systems and even the ability to put in place theatre seating to give viewers the "movie experience" right in our homes.
Yet, most movie producers still release movies to the theatres. Maybe that’s why movie viewership, revenues and profits were down in 2005. They are still following an outdated distribution model. For many of us, going to the movies means a trip to our family room. And the movie itself might come from the video store, or from the video showing up in our mail, or via a download from the cable or satellite TV company – or maybe even a download to our PC.
USA Today ran an article about changes in the wind. Small producers are starting to distribute their films straight to video (on-demand or on DVD) the same day they go to theatres. Why fight (and pay big bucks) for distribution to theatres if the majority of viewers are waiting for home release? While the big studios aren’t doing this yet, the appeal to most consumers is clear.
This is the way markets shift. Slowly, but following definitely, in an evolutionary road toward the needs of customers. Who fights this? Those most invested in the old ways and are Locked-in to them. Just like the music industry largely missed the shift from CD to MP3, the theatre operators and the large studios run the risk of missing this shift in movie viewership. The studios’ largest customers are the theatre operators, and they will trumpet their superior environments and the rare viewer that will watch a movie multiple times there. The risk to studios is they listen to these customers, who are ignoring the Challenges, and they too miss the shift until its too late.
The opportunity exists for the small player. The companies that can move quickly to meet customer needs with equipment (hardware and software) to augment the trend, and the new producers who aren’t vested in the old system of distribution.
For investors, the threats are real. Investing in theatres is very risky going forward. And investing in studios that don’t recognize the shift, and take advantage of it, has risks as well. The opportunity, likewise, exists for investing in those who will be leading this shift by offering the products that consumers want when they want them.
Today each of my 3 teenage sons has a home theatre audio systems, with those thumping subwoofers, that make the house shake. Their auto systems rival the ones in their rooms – and we have video in at least one car. They are acquiring better monitors all the time. They still like an occasional movie on a date, but 90%+ of their movie viewership is at home. What do you think movie viewership will be like in 10 years when they are in their own homes and starting their own families? Are you positioned for the shift – or are you planning on an extension of the past?
When markets shift, you can’t Defend and Extend your old Success Formula. And you can’t count on participants in your distribution channel to point out the shifts of end users – because they are busy defending their own business. You have to be very wary of emerging new competitors. And it is critical to create White Space to explore and learn about new ways to compete. The Challenge today is very real for Disney and other large existing players. Look for effective White Space in those companies – or find the new players who offer better opportunities for growth.
by Adam Hartung | Jan 2, 2006 | Disruptions, General, In the Rapids, Innovation, Leadership, Lifecycle
Most people I know think Howard Stern is an oddity. Although he’s had a loyal following for 30 years, most business people never listen to his show. And they can’t believe he’s being offered $500M to change his broadcast to satellite radio. Of course, few of them listen to satellite radio, either.
But, I think anyone who uses radio advertising had better get serious about Sirius. Many electronics stores (Best Buy, Circuit City) sold out of satellite radio equipment this Christmas. Sirius now has over 3 million subscribers. XM Radio (the competitor) has over 5 million subscribers. Quarterly subscriber growth, before Christmas, exceeded 20%.
Back when Ted Turner launched 24 hour news, and "America’s Team" (the Atlanta Braves) to fill programming for his cable TV stations most people thought cable TV was an oddity. Now, the networks have long lost their grip on market share as customers flock to targeted stations on cable TV and increasingly avoid commercials with Tivo and other Digital Video Recorders. Do we think the transition in radio will be slower, or faster? History would say that the adoption rate of similar technologies is exponentially quicker.
If you own stock in a radion station, and think people want "local programming", you’d best be taking stock of Sirius and XM. This is a serious shift in behavior. Sirius only needs 1 million new subscribers to make the Stern offer profitable. Since they added nearly 360,000 new listeners in the third quarter that looks pretty likely.
Challenges to business don’t often present themselves like a hurricane. They are subtle. Business people have to read the Challenges to catch winds early and make changes. The Telltales are showing that something is happening in radio-land. Don’t take long to prepare. If you invest, or if you depend on radio advertising, you had better pay close attention and start making your contingency plans. As shocking as Howard Stern is, he won’t cost you money like the shock of missing the lastest shift in behavior.
You don’t want to be committed to CDs when iTunes hits. You don’t want to be long on newspapers when Google’s classified ads start making inroads. And right now, I’d be paying close attention to listener behavior in radio — and thinking about how it will impact your business and investments.
by Adam Hartung | Dec 23, 2005 | Disruptions, General, Innovation, Leadership, Lifecycle, Lock-in, Openness
This week before Christmas, 2005 I had a great lunch. I was in L.A. and I called an old acquaintance to join me for lunch. He’s a great guy, somewhat trapped in an "old-line" American manufacturing company that’s been Locked-in for several years. They’ve not done their shareholders, nor their employees, much good for a decade. Executive turnover hasn’t helped as new leaders just follow worn-out strategies that have eroded their pricing and competitiveness.
"How about some Sushi?" I asked. Now, this buddy was a "meat and potatoes" guy, so my question was intended as a ribbing. I was surprised when he said, "Sure. Whatever you like." "You must be kidding" I said, "since when do you eat so adventurously?" "Over lunch" he said, leading me to wait for a juicy answer.
During the last year, he had taken on a new role helping develop a company strategy. In that role, he had made a half dozen trips to China. "You know" he said to me "I never really understood just how dramatic the globalization changes were going to be to our business until I went to China. They do work entirely differently than us. It’s beyond culture and how smart we versus they are. The Chinese are using resources we ignore, and approaching the opportunities differently. If our company doesn’t change – fundamentally change – we won’t survive another 10 years. The decision, the opportunity, is up to us. If I can get our top management to see what I’ve seen, and we step up to the Challenges, we can get out of our Lock-in and create a future that exceeds everyone’s expectations. But, if we sit doing what we’ve done – well, we’re a gonner."
My friend got outside the box. When he changed roles and entered strategy he Disrupted his thinking about the business. He visited foreign companies, and he saw opportunities for sales, marketing, product development, and manufacturing that he believes obsolete the existing Success Formula and create opportunities for a new one. And, while doing this, he changed himself. His personal Lock-ins to "the way this business is done" for the last 20 years disappeared and he sees a new industry competition developing.
Now he eats Sushi. And he eats all kinds of Chinese food I’ve never had the opportunity. He also eats Indian, or whatever food is served. He got outside the box, he started thinking, and the old barriers fell away as he moved toward a new definition of success
I hope everyone enjoys their Christmas, Hanukah or Kwanzaa meals in joy and peace this year. Whether it’s roast beef, turkey, goose, lamb — or Sushi.
by Adam Hartung | Dec 12, 2005 | Defend & Extend, Disruptions, Leadership, Lock-in
Can you tell the difference between a disturbance and a Disruption? I’ve found in my speeches that most people can’t.
There’s actually a big difference. A disturbance will cause you to pause and think about how to get your Success Formula to react quickly. But a Disruption causes you to stop and think about the viability of your Success Formula. It creates a pattern interrupt that it causes you to think about your Lock-ins and consider entirely new Success Formulas. A disturbance is often externally generated, a whack to your head so to speak, while a Disruption comes from within the organization because it attacks your Lock-in.
I’m going to reach out of business for this example. When Katrina hit the Gulf Coast I urged the government to stop business as usual, and create White Space for rebuilding the area into a better, more powerful economic environment. Katrina created a severe Challenge to the area. The problems left behind were so large that business as usual could not deal with them. But would the area actually change, or be left to cope via its old means and resources?
The President went on television in front of bright lights (powered by portable generators) to say that yes, New Orleans needed to be rebuilt. And he promised lots of money. But there were no specific agenda items that would change the old ways we had of dealing with catastrophes, nor solutions to the patchwork of local, parish, state and national approaches that often conflict. At the time of the speech we all wished for a quick rebuilding, but it was clear that would not happen – and it hasn’t. It couldn’t if we didn’t change our way of operating – change our Success Formula.
This happened similarly when we responded to the attacks of September 11, 2001. We gave families of the dead money, but otherwise we lost our opportunity to change how we prepare, how we manage first-responders, and how we operate our airlines. Those things are all still the same – and unlikely to change – because we did not Disrupt our way of doing things and create White Space to develop new solutions.
We didn’t Disrupt the way we deal with catastrophes. We didn’t change the way we’d always operated. To mimic a recent clever TV ad, all that was really offered was "throwing money at the problem." And that, in fact, hasn’t happened because the way we distribute money is so broken the process can’t allocate funds quickly enough to help. The money is promised, but not distributed and it looks increasingly like it won’t be due to chronic government deficits and urgent needs from elsewhere (such as Iraq, Medicaid, etc.)
Katrina was a Challenge. It demonstrated our inability to prepare for and respond to catastrophes. It begged for a Disruption to our Lock-in to old government approaches so we could develop new solutions. But, rather than undertake a Disruption we instead mired ourselves in disturbances as lawmakers and spending officials haggle through the problems of our dysfunctional process. The Challenge pointed out the flawed approach, but we have not done anything about it.
Some have said to me that these government examples are unfair – because government can’t be Disrupted. And that is simply untrue. After December 7, 1941 we Disrupted government allowing businesses to react quickly in the production of Liberty Ships, airplanes and all manner of military apparatus to move us expeditiously into WWII. We opened the floodgates to new ideas for fast action – and we produced more equipment (and solutions) faster than anyone, including our enemies, believed possible.
Challenges expose weaknesses. But we too often focus on the problems created by the Challenges rather than the Challenge itself. We quickly reach for Disturbances that make a lot of noise, but don’t really change our Success Formula. When that happens, you can predict the future quite well – for behavior will remain unchanged. Only by Disrupting – implementing pattern interrupts that cause us to question the status quo – and bringing in committed White Space can we meet the Challenge head-on and create Success.
by Adam Hartung | Oct 25, 2005 | Disruptions, General, In the Rapids, Innovation, Leadership, Lifecycle
What is ESPN? Many people would say "a TV channel about sports." What an understatement. ESPN has not one, but several channels (in multiple languages) and radio channels. Beyond that ESPN is a magazine, an internet portal (over 17million hits/month), a provider of on-demand video, book publisher, apparel maker and retailer, restauranteur, video game producer, and soon to be provider of cell phone services.
Is all this just so much brand extension? I don’t think so. All of these are different businesses that ESPN has entered, learned, and now makes money on. Cable TV content is a tough, low margin business with more failures than successes, yet ESPN has grown its viewership and revenues by more than double digits every year for a decade. Radio listenership has been declining for almost a decade. Periodical publishing has had negative growth in ad dollars and pages printed for over 5 years (just review the declining fortunes of New York Times and Gannett). Apparel makers and retailers are struggling with changing market tastes and offshore competitors, while restaurants is the #1 most likely to fail start-up business and video games are dominated by a handful of very large, trendy shops. And ESPN has entered all these extremely competitive businesses and turned a profit within only a few months.
ESPN has profitably grown by staying in the Rapids, rather than resting on it’s original Success Formula to provide sports news over cable TV. The company has overcome its Lock-In to the past by hunting out opportunities which aren’t obvious, and certainly aren’t core competencies, and then openings White Space for these opportunities to succeed. Instead of trying to optimize its old Success Formula, the company keeps trying to invent a new one. Every time you’d think the growth would flatten, they run right past the market Challenges to put more projects into the Rapids for ongoing growth.
At the top of ESPN is a mild-mannered 47 year old named George Bodenheimer who for the last 7 years has led the charge into all these initiatives. Like all leaders that keep their organizations growing, he constantly Disrupts his organization. He creates White Space, and he works to make the new projects a success. He’s atypical of many executives (especially media executives) in his emphasis on teamwork rather than ego, and success rather than promotion. Things simply get done – maybe not because he tries to "own" all the success and instead by unleashing his organization to succeed.
