by Adam Hartung | Sep 15, 2009 | Current Affairs, General, In the Whirlpool, Leadership, Lock-in
The Real Blindness Behind The Collapse
Adam Hartung,
09.14.09, 05:00 PM EDT
The exact same failing brought down Wall Street, Detroit and Main Street's real estate speculators.
"Too big to fail" is a new phrase in the American lexicon, born in the economic crisis that gave us a bankrupt Lehman Brothers and the shotgun marriage of Merrill Lynch with Bank of America.
Nobody really knows what it means, except that somehow in the banking
world, central bankers can decide that some institutions–like AIG, Citigroup, JPMorgan Chase and BofA–are so big they simply have to be kept alive.
This is the first paragraph in my latest column for Forbes. There is much EVERY business leader can learn from the collapse of Lehman. Learn about risk, and about how to succeed in a shifting marketplace. Please give the Forbes article a read – and put on a comment! Everybody enjoys reading what others think!
by Adam Hartung | Sep 8, 2009 | Current Affairs, Defend & Extend, Food and Drink, General, In the Swamp, Leadership, Lock-in
When they can't figure out how to grow a business, leaders often turn to acquisitions. This despite the fact that every analysis ever done of public companies buying other public companies has shown that such acquisitions are bad for the buyer. Yet, after no new products at Kraft for a decade, and no growth, "Kraft shares fall on Cadbury bid, Higher offer awaited" is the Marketwatch.com headline.
Some analysts praise this kind of acquisition. And that's when we can realize why they are analysts, in love with investment banking and deals, and not running companies. "Kraft is demonstrating its operational and financial strength" is one such claim. Hogwash. After years of cost cutting and no innovation, the Kraft executives are worried they'll get no bonuses if they don't grow the top line. So they want to take a cash hoard from all those layoffs and spend it, overpaying for someone else's business which has been stripped of cost by another CEO. After the acquisition the pressure will be on to cut costs even further, in order to pay for the acquisition, leading to more layoffs. It's no surprise that 2 years after an acquisition they all have less revenue than projected. Instead of 2 + 1 = 3 (the expected revenue) we get 2 + 1 = 2.5 as revenues are lost in the transition. But the buyer will claim revenues are up 25% (.5 = 25% of the original 2 – rather than a 12.5% decrease from what the combined revenues should be.)
With rare exceptions, acquisitions generate no growth. Except in the pocketbooks of investment bankers and their lawyers through deal fees, the golden parachutes given to select top executives of the acquired company, and in bonuses of the acquirer who took advantage of poorly crafted incentive compensation plans. These are actions taken to Defend & Extend an existing Success Formula. The executives want to do "more of the same" hoping additional cost cutting (synergies – remember that word?) will give them profits from these overpriced revenues. There is no innovation, just a hope that somehow they will work harder, faster or better and find some way to lower costs not already found. Kraft investors are smart to vote "no" on this acquisition attempt. It won't do anybody any good.
Simultaneously we read in MediaPost.com, "Del Monte To Hike Marketing Spend 40%." If this were to launch new products and expand the Del Monte business into new opportunities this would be a great investment. Instead we read the money is being spent "to drive sales of Del Monte's core brands and higher-margin businesses." In other words, while advertising is off market-wide Del Monte leadership is attempting to buy additional business – not dissimilarly to the goals at Kraft. By dramatically upping the spend on coupons, shelf displays and advertising Del Monte will increase sales of long-sold products that have shown slower growth the last few years. Del Monte may well drive up short-term revenues, but these will not be sustainable when they cut the marketing spend in a year or two. Nor when new products attract customers away from the over-marketed old products. Lacking new products and new solutions such increased spending does not improve Del Monte's competitiveness.
You'd think after the last 10 years business leaders would have learned that investors are less and less enamored with financial shell games. Buying revenues does not improve the business's long term health. A cash hoard, created by cutting costs to the bone, is not well spent purchasing ads to promote existing products – or in buying another business that is already large and mature. Instead, companies that generate above-average rates of return do so by developing and launching new products and services.
You don't see Google or Apple or RIM making a huge acquisition do you? Or dramatically increasing the marketing budget on old products? Compare those companies to Kraft and you see in stark contrast what generates long-term growth, higher investor returns, jobs and a strong supplier base. Disruptions and White Space lead these companies to new innovations that are generating growth. And that's why even the recession hasn't shut them down.
by Adam Hartung | Sep 2, 2009 | Current Affairs, Defend & Extend, General, In the Rapids, In the Whirlpool, Leadership, Openness
"Huffington Says Her Site Is Close To Making Money" is the video headline at Marketwatch.com. For years this blog has chastised traditional news publishers for trying to Defend & Extend their traditional business, when the market has shifted on-line —- both for readers and advertisers. Of course, the newspaper companies counter this argument by saying that they can't make any money on-line. They have to defend their traditional business – even from web competitors.
When shifts happen it's best to get started experimenting and migrating early. You may hate the political bent of HuffingtonPost.com, but that it's near making money shows that the model can work. Just differently than a newspaper or magazine. Unfortunately, most traditional media have been too busy trying to fend off the web to learn anything. For example, Tribune Corporation has long owned equity stakes in CareerBuilder.com and Cars.com as well as FoodChannel.com. But the company refused to learn from these ventures and migrate toward a different Success Formula.
Now it's too late for these traditional companies. You may think that if HuffingtonPost.com is still not quite profitable there's still time to compete. But reality is that Ms. Huffington's organization has been experimenting and learning and creating this Success Formula for 4 years. That kind of learning you can't pick up overnight. You have to participate in the marketplace, then make what you learn (good and bad) available for everyone to see. Then you have to discuss what you've learned openly so the organization can become knowledgable about what works and migrate toward a new Success Formula in which they have confidence. And that's why most companies react to market switches way too late. They think they can jump in at the last minute. But by then the HuffingtonPost.coms and Marketwatch.coms and MediaPost.coms have already learned how to succeed at this business, developed a subscriber base and created a viable ad sales program.
Take for example "Clunkers Program Boosts Ford, But Not GM, Chrysler" as headlined on Marketwatch.com. Now that the results are in from the government stimulated "clunkers" program, we know that the market has shifted away from GM and Chrysler. Year-over-year, Hyundai sales were up 47%, Honda up 9%, Toyota up 6.4%. Ford scored big with sales up 17%. But GM sales were down over 20%, and Chrysler sales fell 15%. We can see from this data that people were ready to buy cars, given a boost. While the overall market was up, we can see that it has shifted to a new batch of competitors. GM and Chrysler simply weren't prepared to compete – and it's doubtful they ever will be. They've missed the market shift, and now they don't have the R&D, products, distribution, marketing, etc. to remain competitive with companies that are seeing volumes and revenues rise.
Of course, every company has the opportunity to shift with markets – or be crushed by changes. The latest economic reports show that too many American businesses, like GM and Chrysler, are waiting to be crushed. "US productivity rises at fastest pace in nearly 6 years, while labor costs plunge in spring" is the ChicagoTribune.com headline. This is bad news for those thinking an economic upturn will save them.
When an economy grows productivity improvements are good. Imagine you sell 100 items. You have 100 employees. Productivity is 1. A growing economy allows you to sell 105, your employment remains the same, and productivity jumped 5%. Lots of winners – between the employees (more pay or bonus), the customers (possibly lower prices down the road based on rising volume), for investors (more profits) and for suppliers (more volume and less pressure on prices.) Let's say the economy slackens – like 2009. Volume drops to 90. But through cost saving measures employment drops to 86. Productivity just went up almost 5%! But nobody won. And that's what's happening today. Labor rates keep dropping because there's more labor supply than product demand – and if businesses keep cutting costs we'll improve our productivity right up while the economy keeps going down.
Business leaders need to be more like Huffington Post, and less like GM. To improve profits they need to recognize that markets have shifted, and move quickly to develop new Success Formulas which get them growing. Trying to Defend & Extend the old business, like newspaper publishers, simply drives you toward bankruptcy. Instead, it's time to Disrupt the status quo and create some White Space projects to learn what the market wants. It's time to experiment and get the whole company involved in applying the collective brainpower to develop new a new Success Formula which gets you growing, making more money, and improving productivity for real!
by Adam Hartung | Sep 1, 2009 | Current Affairs, Defend & Extend, Food and Drink, General, In the Swamp, Innovation
Innovation comes in many forms, and some are a lot more valuable than others. The most valuable bring in users formerly un-served or under-served thus expanding the market and offering new growth – like mobile phones did. The least valuable are variations of something that exists, which do little more than give variety to existing customers.
"Pizza Hut Intros Stuffed Crust Pan Pizza" from Mediapost.com is without a doubt the latter. The company takes a product introduced in 1980, then adds an enhancement developed in 1995, and in 2009 launches a product that is merely the combination of the two. At first blush you say "why not?" But this launch costs money – quite a bit of money. There's the cost in product formulation, the cost in training tens of thousands of store workers to make it, cost in new menus, cost for in-store marketing materials, and cost for media advertising of the new product. The same costs (only much higher now) as incurred to launch the totally new innovation pan pizza 30 years ago.
Only this won't generate new revenue. These kind of variation innovations largely provide an alternative for existing customers. Restaurants are famous for selling 70% of their product to repeat customers that return week after week. These people often look for new, sometimes strange, variations. Remember Hawaiian pizza with pineapple, or Bar-B-Que pizza with roasted pork and BBQ sauce? These are the kinds of things that don't bring in new customers, they aren't finding an under-served market and bringing those people to the restaurant. They merely offer variations, which might catch the interest of returning customers, but few others. They are very expensive defensive product launches meant to keep the loyal customer from considering the competition. But because these incur cost, with little new revenue, they are negative to the bottom line.
Part of the fallacy comes from the old logic of "ask customers what they want." Unfortunately, customers can only think of cheaper, faster and usually fractionally better. Their ideas about innovation are almost exclusively variations on existing themes. They already are your customer, thus not thinking hard about alternatives. To find new products that can really grow your market, use lost customers to lead you to the new ideas. And scan other industries and markets to see what's happening on the fringe of competition – things that can serve newly developing market needs.
Companies that make high rates of return do not merely try to maintain revenues and cater to existing customers. They use breakthroughs to tap into new markets and new customer segments. Think about the "personal pan pizza" a product innovation Pizza Hut pioneered 35 years ago. That made it possible for customers to buy a pizza for lunch – it was small enough, cheap enough, and could be served fast enough that it expanded the market for lunch pizza buyers in non-urban locations where "a slice" wasn't available. There are new needs emerging in the restaurant business today – but putting cheese in the crust of your old pan pizza isn't the kind of thing that's going to bring new customers into the restaurant any time soon.
by Adam Hartung | Aug 31, 2009 | Current Affairs, General, In the Swamp, Leadership, Openness
Did you know that last night the Japanese turned over their government? For 54 years one party has ruled Japan – a very pro-business, conservative party. Then last night the voters threw out the old guys and in a landslide replaced 3/4 of their elected government officials. The new politicians are considerably left of center by U.S. standards, a dramatic shift. "Calls for Fast Action after Historic Vote" is the Yahoo! News headline.
You may be so tired of American politics that your interest in a Japanese election may be – let's say muted? But this is really a very big deal. Japan is the second largest global economy. A change from the conservative, pro-business leadership to a more free-spending and liberal government is sure to have an impact on businesses everywhere – including the USA. Remember we are Japan's #1 trading partner, they buy (and hold) a substantial portion of U.S. Treasury securities, and Japanese industrialists are often credited with having killed the U.S. steel and auto industries. This is a market shift well worth paying attention to.
Ever since the great Japanese stock market melt-down in the early 1990s the U.S. has been pushing Japan to reflate the economy. But the conservative government was opposed. Thus, deflation kept Japanese from buying many goods. But it now appears that several new stimulus programs will begin in Japan, which would raise the prices of Japanese imports (look out U.S. consumers) while increasing demand for offshore goods.
Historically Japan bought loved U.S. goods, but shunned products from China, Taiwan and Korea – a leftover from their significant invasions and horrible treatment of people in those countries in the early 1900s until the end of WWII (Japanese Emporer Hirohito was about as popular in those countries as Hitler is in the USA.) But new liberalism is likely to lead to more apologies from Japan, and a thawing of relations. Which could lead to more trade with China and Korea – which would only exacerbate the U.S. economic problems. We could see prices go up on imports, but no significant increase in exports!
Think we have a growth problem? Since peaking earlier in this century at 126M people, the Japanese population has actually been shrinking. Most demographic experts believe the population will fall to below 100M by mid-century (that's just 40 years folks!) Activities to stimulate the economy, creating more domestic demand and more domestic production could pull money away from buying U.S. Treasury bonds to fund domestic programs, making the interest rates on Treasuries go up, further dampening the U.S. economy due to debt costs (we running a bit of a deficit – in case you missed the news lately.) Higher Treasury cost means higher corporate debt cost means harder to raise money – and dampers profits. Meanwhile, inflation gets worse as we struggle to refund our debt load.
Japan has no domestic petroleum. If you think our energy supply/demand is out of balance you ain't seen nothin' till you look at Japan. They have to buy almost all their energy. Reflate the economy, increase domestic demand for housing and cars (including dropping all road tolls – which can be $60 or $100 on a Japanese roadway) and you get increased energy demand, driving up prices, and putting more dampening on the U.S. economy as we pay more for oil, gas and electricity imports.
If you don't sell in Japan today, why not? The new government promises to reduce the power of heavy handed bureaucrats (like at MITI) who have blocked expansion for decades. For the first time in our lifetimes, we can anticipate a Japanese economy that will accept significantly more imports. Stimulus money, strong currency and pent-up demand all indicate a much more desirable place to make and sell things than, say, America?
Market shifts happen at lots of levels. And when they happen at the level of an economy, (read more about this in Create Marketplace Disruption) everything higher – like industries, companies, functional resources and work teams – have to shift with it. If you don't, you become like the manufacturers being wiped out by today's global industrial shift. The Japanese economy is on the precipice of a really big shift. Intentionally. If you don't prepare, you could see really bad things happen to your business. On the other hand, if you watch closely, learn from the shift, and take action this just might be one of the biggest opportunities ever to grow your business. So you'd better update your scenarios about the future, rethink Asian competition, Disrupt your patterns to consider new ideas and open some White Space to deal with this. Because it could make a huge difference in just a year or two.
by Adam Hartung | Aug 27, 2009 | Current Affairs, Disruptions, General, Leadership, Lifecycle, Openness, Quotes
Brilliant. A word we rarely use in the USA, the British will hear of a good idea and respond "brilliant." When I saw "Motel 6 Offers Free Rooms to 3 Rock Bands" in USAToday I simply thought "brilliant."
Do you remember the old Motel 6 ads? "We'll keep the Light on For You" was how Tom Bodett, a National Public Service radio announcer from Alaska enticed people. Using a very rural, almost corny approach to undersell the rooms, this tied to 1950ish thoughts about visiting distant relatives. It wasn't a bad ad. And it probably worked really well (I still remember the ads) for years after release in 1986. But that tone doesn't have much appeal to the younger generation. 29 years after being launched, the under 35 crowd doesn't remember this ad – nor did they grow up in a rural America – nor do they know the origins of looking for reliable, clean motels on a cross-country trip during the early days of interstate highways. And they simply don't care. That ad program ran its course, to be polite. Motel 6 might be a good product, but it was slipping away into the oblivion of brands you forget – like Howard Johnson's. Or Ovaltine.
Hand it to management of Motel 6 and parent Accor, they Disrupted the old approach by offering free rooms to rock bands. If you've read my previous posts on the music business you know that musicians end up covering their own cost for travel – and as the USAToday article points out, many band members spend most nights sleeping in the van or on the floor of someone's house. It's definitely not free booze and hooliganism in a 5-star property. So these band members are quite pleased to have someone offer them free rooms – clean, tidy and comfortable.
Now those band members can reach out to their followers via Twitter and Facebook with positive comments and thanks for these rooms. A medium where you can't buy ads, but where reputations can be created and expanded. Not only promoting Motel 6, but promoting to an audience the company wasn't even reaching before. And catching one of the most highly prized, and valued, demographics in the ad business – age 24 to 34. Who knows how long these young folks might remain customers, after they discover the wonders of clean, affordable lodging.
Anybody can do what Motel 6 just did to help re-invigorate your business. It would have been very easy for sleepy Motel 6 brand to have remained where it was, doing what it always did. And continue losing mind-share, as well as profitability. But this move, at an amazingly low cost (literally, advertising in exchange for product, is an incredible deal – and a lot cheaper than those old radio ads), will revive the brand among a new group of customers – and a group that is not well served by the hotel industry. It's hard to find anything in this move that doesn't come off like a big win for everybody!
by Adam Hartung | Aug 24, 2009 | Current Affairs, General, In the Rapids, In the Whirlpool, Leadership, Lifecycle, Lock-in, Music, Openness
"Sears Axes Ad Budget As Sales Slide" is the latest Crain's article. Revenues have been falling at Sears ever since Mr. Ed Lampert took control of the venerable Chicago retailer. His initial actions were to cut costs in order to prop up profits. Which worked for about 8 quarters. But then the impact of cost cutting cracked back like a bullwhip, shredding profits. Mr. Lampert reacted by further cutting costs to "bring them in line with sales." And the whirlpool started. Cut costs, revenue falls, cut costs, revenue falls, cut costs…… And now he largely blames the recession for Sears poor performance. As if his Lock-in, and that of the management, to old approaches had nothing to do with the dismal results now at Sears.
There are those who think these actions are smart, to bring costs "in alignment with retail trends" as Morningstar put it. But reality is Sears is now in the Whirlpool of failure. Looking at the lifecycle, they've gone past the point of no return – out of the Swamp of slow growth – and into the last stage - failure. The stores would be closed and sold to other retailers, except there's a dearth of retail buyers out there these days. Thus shareholders are stuck with underperforming real estate, constantly declining revenues and falling cash flow.
Not all retailers are seeing declining revenues. Bloomberg.com reported today "Apple May Be Highest Grossing Fifth Avenue Retailer." While Sears and others are watching sales go down, Apple's retail store revenues rose 2.5% this year – and it's Fifth Avenue store has seen traffic increase 22% this last quarter. In a town where tourists often put an emphasis on shopping, they used to ask locals how to find Bloomingdales or Saks. Now they want to know where to find the Apple store.
Markets shift. When they do, you have to change your Success Formula or your results decline. When customers change their behavior, you have to change as well or your sales and profits go down. But most leaders react to market shifts by trying to do the same thing they've always done, only faster, better and cheaper. Oops. That only leaves you chasing your tail – just like Sears. You keep working harder and harder but results don't improve. Then eventually something happens that throws you into bankruptcy, or an acquisition for your assets, and it's "game over." Meanwhile, all the time you're watching returns shrink shareholders watch value decline, employees grow disgruntled as you whittle away bonuses, benefits, pay and jobs, and vendors grow tired of the impossible negotiations for lower costs while waiting to get paid on strung-out terms. Nobody is having a good time. Just go ask the folks at Sears.
But there are always businesses that catch the market shift and use it to propel their growth. Like Apple. Once a niche and low-profit computer manufacturer, they've turned into a producer of music players, music distributor and mobile phone supplier as well as computer manufacturer. And when everyone would have said that retail is a terrible investment, they've turned into a surprisingly successful retailer as well. Appple keeps throwing itself back into the Rapids of growth, rather than slipping into the Swamp of stagnation and Whirlpool of failure.
Apple keeps going toward the market shifts. Apple's CEO (and increasingly other executives) Disrupts the company's Success Formula, always challenging the company to do new things. And White Space is constantly created where permission is given to operate outside old Lock-ins and resources are provided for the opportunity to grow. Apple could have done a half-hearted job of retailing, trying to act like Best Buy or Nike with its stores and merchandise, or only funding stores in suburban malls instead of tier 1 retail space on the very best (and most expensive) retail avenues.
The next time you're asking yourself "when will this recession end?" think about Sears and Apple. If your business acts like Sears your recession won't be anytime soon. If you keep doing more of the same, cutting costs and hoping to hold on for a recovery, your doing nothing to end the recession and it's unlikely you'll find much improvement in your business. But if you develop scenarios about the future which allow you to attack competitors, using Disruptions to change your approach and the market, then using White Space to develop new solutions you can bring this recession to an end sooner than you think. People in your business will have chances to grow, and so will your revenues and profits.
For more about how we set ourselves up for failure, and how to avoid the traps download the free ebook The Fall of GM: What Went Wrong and How To Avoid Its Mistakes.
by Adam Hartung | Aug 21, 2009 | Current Affairs, Disruptions, General, Innovation, Leadership, Lock-in, Openness
Smartphones will outsell PC by 2011 according to Silicon Valley Insider:
Your first reaction might be "interesting chart, so what's the big deal?" That's the way a lot of people react to news about market shifts. Like the shift is important maybe for the suppliers, but what difference should it make to me? That's kind of how a lot of people reacted to PCs when they came along – and those businesses ended up with IT costs that were too high and processes that were too slow.
Market shifts affect us all. As the number of smart phone users keeps doubling, the number of new PC buyers doesn't. You may not care today that there will be more smartphones sold in 2011 – but if you think about it, you should.
- Do you deliver information across the internet? If so, are you formatting content for access on a PC screen – or on a smartphone?
- Are you publishing information for long-format page views like a PC, or short-format small views like a smartphone?
- Are you planning to continue sending people information on email, or will texting be more efficient and practical soon?
- Do your on-line ads present well on a smartphone?
- Do you print things you should send immediately via smartphones? Could you stop printing?
- Do you have a PC in your family room – and will you need to have one there when everything you want to know is available on a smartphone?
- If you can access 90%+ of your information on a smartphone, will you still carry around a laptop?
- Will fax machines become obsolete? What will that do for land-line demand? What does this portend for maintaining land-line service to your home or business?
These are just a few thoughts about how things could change as smartphone sales grow. There will be more. The biggest risk in this chart isn't that the lines meet in 2011 – but that as we get into 2010 smartphone sales keep growing on a log (rather than linear) line and PC sales don't recover anywhere close to the projections shown here. Realizing that forecasts tend to be wrong by more than 25% as often as they are correct within 10%, we can realistically expect that in 2011 smartphone sales might be more than 500MM units, and PC sales might be less than 250MM units – or rougly double!!! When that sort of impact happens, we see sales fall off a cliff of old technology. Do you remember when every admin had a typewriter – then suddenly none did – like in a matter of months.
So, are you preparing for this possibility? If you did, could you gain advantage over your competition? If you were the first to aggressively plan for, and implement, smart phone technology use can you lower your cost? Better connect with customers? Find new customers? React faster to customer needs? Offer new services? Promote new products?
If you wait, what can your competitor do to you? How could she clip your customer relationships? Lower her prices? Expand her offerings? If you wait, how could you find yourself doing poorly?
This will be a big deal for the technology companies. This shift is the kind of thing that could expose the great weaknesses in Microsoft's and Dell's horribly Locked-in Success Formulas. It also could catapult Apple, Google — or maybe an outside player like Motorola (largely given up for dead) into a leadership position. Positions could change very fast if the adoption rate turns more aggressive. Is your investment portfolio prepared?
We see these kind of charts all the time. But do you do anything about it? Market shifts happen. They obsolete old Success Formulas. They put businesses at risk that aren't paying attention. They create new winners out of companies that aggressively pursue the shifts. We often see the shift coming – but Lock-in keeps us from doing anything about it. Perhaps you need to consider Disrupting your status quo and setting up some White Space to see what you can do to improve your position!
by Adam Hartung | Aug 20, 2009 | Current Affairs, General, In the Swamp, Innovation, Leadership, Lock-in, Openness
I was struck to learn that most people with a growth plan simply think they will sell more to customers in existing markets. About 2/3 of respondents to a Harvard study.
Chart from Harvard Business School Publishing
But we know that not only you, but your competitors are all hoping to sell more to the existing market! This is the fodder for price wars, and declining returns. When we think we can somehow eke more out of existing customers – even if we think we'll take them a new product – we are ignoring competitors. As a result, we rarely get the growth. The results are pre-ordained, when everyone is trying to do the same thing all you get is a war to Defend your existing business!
The encouraging sign is that about 40% of respondents are considering new markets. And that's a good thing. A GREAT Wall Street Journal article "The New, Faster Face of Innovation" tells us that everyone has the opportunity to apply more innovation today. At length this article explains how today's computer deep, networked world allows for testing of almost everything, almost anywhere, pretty nearly continuously, for very small cost. The biggest obstacle to testing more options, trying more innovation, is the self-imposed limits management puts on the tests!
Now, more than ever, businesses need to be oriented on growth. But that doesn't mean entering gladiator style battles to see who can win, usually coming out the bloodiest, battling in existing markets. Quite to the contrary, now is the perfect time for trying new things to connect with shifted markets. People are looking for new solutions to their problems, and willing to evaluate more options than ever. But management Lock-in to traditional notions about the market – set at an earlier time, under different conditions – will often keep a company from trying new things, entering new markets, testing new solutions. Too often management wants to remain "focused" on its "core offerings" and "core strengths" creating the gladiator-style environment!
Use innovation to test! Leaders need to let lower level managers test new options. The most important thing leaders can do today is give PERMISSION to the organization to create new options, and the RESOURCES (now smaller commitments than ever) for testing those options. These become White Space projects where we can forget the conditions which initially created the old Success Formula and find out what works NOW. Those companies that are willing to Disrupt Locked-in notions about how markets should behave will use these market tests to create the most desirable solutions in the future. And these companies will come out the winners.
Just think like these folks:
- Amazon retailer creating the Kindle e-reader
- Apple computer creating iTunes and the iPod
- Google search engine creating AdWords for on-line advertising placement
- Singer Sewing Machines becoming a defense contractor
- Royal Dutch Shell Petroleum building wind farms
[And, like I wrote in my latest Forbes article, this will work for health care as well
http://tinyurl.com/pkupxv]
by Adam Hartung | Aug 19, 2009 | Current Affairs, General, Innovation, Leadership, Openness
"Want to stir up controversy? Bring up health care. Everybody has a
story to tell–something that went wrong, someone left in the cold,
something the government or an insurer failed at. Everybody has an
opinion about all the current proposals too. And everybody has a
solution they'll happily (or angrily) defend all night long."
That's the opening paragraph for my latest article as a columnist for Forbes "Fixing Health Care: It's Time to Experiment". I recommend using White Space projects to let market participants determine a better approach to paying for health care in America. Since businesses pay for most health care, given our largely employer-paid system, the biggest burden is on American business. If we don't develop a better solution that controls cost, America's competitiveness could seriously falter.
Why would we want lawyers to try "designing" a better answer, when we could let all of us participate in solution development if we open up some market tests? What we need from the government is permission to work around existing rules allowing the tests, and some resource commitment to conduct them. America's health delivery system isn't bad – if you have access to it and can afford it. The broken part has to do with access and cost – not the capability of providers to do a decent job. Those are business problems, not health care problems. We aren't talking about "product" problems, we're talking about "distribution" and "pricing" problems. If we use good business practices, especially White Space to foster creativity, we could develop a new and uniquely American solution that is far better than the current accident of history.
Hope you enjoy. And hopefully we'll be able to move from our currently Locked-in, and amazingly expensive, health care payment system to something that meets more people's needs while bringing rationality back to cost.
