by Adam Hartung | Apr 18, 2005 | Disruptions, General, In the Rapids, Innovation, Leadership, Lifecycle, Openness
Far too often we see companies merge in an effort to save an old Success Formula. The goal of the acquistion is to Defend & Extend an outdated business model by bringing together two less than stellar competitors. Because this is so common, it’s easy for analysts and pundits to become very jaded regarding acquisitions and mergers.
Today, however, just the opposite happened. Two good, high growth companies decided to merge in order to create new growth opportunities. Rather than merging to find cost synergies, they are merging in order to find new markets, develop new products and further grow.
The two companies are Adobe and Macromedia. According to MarketWatch "Both companies said the long-rumored acquisition was not to consolidate and cut costs but to help Adobe expand into new markets, particularly in the area of providing content to mobile phones and other handheld devices….This is not a consolidation play. This is all about growth," said Bruce Chizen, Adobe’s chief executive."
Because most acquisitions are about D&E, the stock market punished Adobe upon the announcement – sending it’s stock down about 10%. However, acquisitions and mergers can be very effective tools for creating white space and developing new growth opportunities. We should keep our eyes on Adobe, and consider it for a long term investment, since this could be the move that spurs its growth for another decade.
by Adam Hartung | Apr 12, 2005 | General, In the Rapids, Innovation, Leadership, Lifecycle, Openness
Louis Gerstner’s best selling book on IBM was "Who says elephant’s can’t dance." Now his successor looks to be a pretty good elephant trainer himself.
IBM has loaded itself up with more White Space projects. This behemoth is fast moving out of hardware (selling its PC business, for example) and moving into value-added process management. It’s using both divestitures and acquisitions to disrupt itself, and then using White Space to develop new opportunities.
Read the latests article in BusinessWeek for details. Let’s just say here that if IBM keeps spawning these White Space projects it can keep itself in the Rapids for quite a long time. You don’t have to be small to succeed – just willing to be disruptive and use White Space
by Adam Hartung | Apr 4, 2005 | Defend & Extend, Disruptions, Ethics, General, Leadership, Lifecycle, Lock-in
Those of you familiar with The Phoenix Principle are familiar with our statistical review demonstrating the high failure rates of companies. Company longevity is far shorter than most of us realize. One significant impact of this phenomenon affects all of our company retirement accounts.
America largely depends upon private retirement. Social Security is considered substistence funding, and we are expected to make up the difference with either private funds or a retirement plan. For our parents, who expected near lifetime employment, these private retirement plans were their safety net. They depended on "the company" to fund their retirement and health care.
But let’s consider someone today who wants to retire at 65. They need to work, and pay into, a corporate retirement plan for at least 10 years, so they have to start at age 55. And they would expect to live until 80 (the current average). So, they want that company retirement plan to be around for at least 25 years. Yet, when we look at performance of the S&P 500 we know that only about 1 in 3 companies (yes, only 1/3) of the S&P 500 can expect to survive for 25 years. So where does that leave your retirement plan?
It’s even worse if you start your retirement planning at 45. Now you need your employer to stick around for you for 35 years. The odds of that are no better than about 1 in 4 (25%). So, where comes the funding for the retirement plan?
Now look at the problem from a large employer’s viewpoint. US Steel and GM are just 2 recent examples (out of several dozen) where the company has said they can’t afford to maintain the retirement program. Not surprising. Their lock in to their old Success Formula has pushed them way out into the swamp. So what happens to those retirees? Or those near retiring that had planned on that pension? They have gone along for 10, 20, 30 or more years believing in the Myth of the Flats, thinking that their employer would always be there for their retirement. But that myth is about to implode on them with painful consequences.
In an age of Creative Destruction, corporate retirement programs are little more than a wish. If the companies don’t succeed long enough to support the programs they are of little use to retirees.
Perhaps this should be part of the current debate regarding the future role, and funding, of Social Security. For sure it should be part of your plans for retirement.
by Adam Hartung | Oct 26, 2004 | General
Definition: How a company wins in the marketplace. It includes beliefs about who we are, what we do, how we do it, and why we do the things we do. Early in the lifecycle, it serves as the source of continued growth and prosperity. Later in the lifecycle it becomes locked-in and eventually causes the failure of the organization. For example, the key elements of Tupperware’s Success Formula are the home party sales approach, highest-quality products, and their relationships with their independent sales agents. [Source: The Phoenix Principle] See also: Success Formula Pyramid, lock-in, challenge, river lifecycle model.
by Adam Hartung | Oct 14, 2004 | General
Definition: Mind-sets and practices related to establishing a Success Formula, then improving on it and protecting it against competitors by doing it better, faster, or cheaper. D&E Management sees the historical Success Formula as the solution to the problems that arise from marketplace challenges and seeks to defend or fix it. For example, Tupperware became successful in the 1950’s using the home party model and providing high-quality products. In the 1990’s, struggling to grow revenue and profits, they continued clinging to their original model—asserting that the home party sales model was still viable and developing products so high in quality as to be bullet-proof. As a result, the company continues struggling along in the Swamp. [Source: The Phoenix Principle] See also: Phoenix Principle, challenges, Success Formula, lock-in, Swamp.
by Adam Hartung | Oct 14, 2004 | General
We’ve added a new feature to our website, what we’re calling the “Phoenixionary” (see the links in the left-hand column). This is a dictionary of terms that we’ve used in the Phoenix Principle along with terms other thought leaders have used in describing a new model for management for the 21st century economy. We’ve started populating the Phoenixionary, but eventually want it to become “open-source” so that many people can participate in defining the new world of work. If you have a contribution to suggest, just email us. Periodically, we’ll feature one of the Phoenixionary terms as a blog entry.
Business can be SOOOOO serious, don’t you think? To do our part to lighten things up a bit, you’ll notice a second link below the Phoenixionary which is for a humorous dictionary. This is our way of being playful and letting off steam. We’re creating humorous definitions of terms related to experiences in the workplace. Check it out, and feel free to share your own humorous definitions with us and we’ll add them to the site.
by Adam Hartung | Oct 8, 2004 | General
I heard a radio announcer say the phrase “Scared money is dead money.” How true! During the tough times and periods of uncertainty do you play it safe or take risks to take advantage of the disruption?
by Adam Hartung | Oct 6, 2004 | General
As we move into the new millennium, we’re also moving into new models of organization–interdependent, networked, organic. This change will call for different metaphors than those we’re used to, which are dominated by machine references and war words. I think women will have a lot to say in creating these new metaphors.
Check out Kirsten Osolind’s website. Kirsten offers marketing services to women-owned businesses. I find the metaphors in the cycle shown on the “process” page to be very different from those you’d normally find in business. Quite organic.
Checking out her reinvention model, you will find some steps that are usually ignored, like getting real by discussing the undiscussable. However, what isn’t evident is a step to disrupt the current mind-sets and organizational lock-in to create the space for innovation. I wonder how she addresses that?
by Adam Hartung | Aug 14, 2004 | General
This is the inaugural posting on our weblog. In this space you will be hearing from Adam Hartung . In this space, I will be exploring many different ideas about what it will take to succeed in the new economy. Adam brings a strategist’s perspectives to this dialogue.
Through these postings I hope to educate, disrupt, amuse, and provoke our readers. The topics about which I write are perhaps the most important facing business managers in today’s economy. They need to be discussed, debated, and acted on.
Here’s some starters. I think the author Jim Collins is all wet and we’ll tell you why. I think Clayton Christenson has a terrific point of view but I disagree with him in a profound way. In general, I believe that business leaders don’t know what to do to prosper in today’s economy, and most of what they’re doing not only doesn’t help, but actually accelerates their company’s demise.
I have strong points of view, but don’t pretend to think that I’m right—I simply think my models and lines of thought are very useful, while most historical management models are not because they were created for different conditions in a completely different time.
I am eager to stimulate a rich dialogue and encourage you to share your thoughts. Thank you!
