Use Disruptions, not Goals, to Succeed – GM

Many people think the best way to grow is by setting big goals – even Big Audacious Hairy Goals (BHAGs).  But increasingly we're learning that goal setting is not correlated with success.  At AmericanPublicRadio.org there's a partial text, and MP3 download, of a recent interview between General Motors leaders and a University of Arizona Professor titled "It's not always good to create goals." 

The story relates how about a decade a go, with market share hovering at 25%, GM set the goal of moving back to 29%.  It became a huge, multi-year campaign.  Lapel pins with "29" were made and all kinds of motivational programs were put in place.  The GM organization had its goal, and it was highly aligned to the goal.  But it didn't happen.  Despite the goal, and all the energy and talent put into focusing on the goal, GM continued to struggle, lose share – and eventually file bankruptcy.  The goal made no difference.

Worse, the interview goes on to discuss how goals often lead to decidedly undesirable, sometimes unethical – even illegal – behavior.  Instances are cited where goal obsession led company employees to falsify documents, even  ship bricks in place of products to meet sales targets.  No executive wants this, but goals and goal obsession – especially when there is a lot of reinforcement socially and monetarily on the goal – can become a serious problem.

Results are exactly that.  Results.  They are an outcome. They are the way we track our behaviors and activities – our decisions.  When we focus on goals – usually some sort of result – we lose track of what is important.  We have to focus on what we do.  And for most organizations a big goal merely leads people to try working harder, faster,better, cheaper.  But when the Success Formula is mis-aligned with the market – even when the whole organization is aligned on maximizing the Success Formula results will still struggle – even falter.  Goals don't help you fix a Success Formula returning poor results.  Just look at GM.

In fact, it can make matters worse.  In "White Bears and Other Unwanted Thoughts" (available on Amazon.com) the authors point out that when you try to turn a negative (a problem) into a positive (a challenge, or goal), you often achieve a rebound effect making people obsess about the problem.  Tell somebody not to think about a white bear – and it's all they think about.  When your company has a problem and you try to tell employees "hey, don't think about the problem.  Go do your job.  Work harder, increase your focus, and all will work out.  Sure share is down, but don't think about lost share, instead think about the goal of higher market share" frequently the employees will start to become obsessive about the problem.  It will reinforce doing more of the same – perhaps manicly Instead of becoming innovative and doing something new, obsessive devotion to trying to make the old methods produce better results becomes the norm.  Goals don't produce innovation – they produce repetition.

So what should you do when facing a problem?  Disruptions.  GM didn't need a big goal.  GM needed to Disrupt its broken Success Formula.  GM needed to attack a Lock-in (or two).  GM leaders needed to admit the market had shifted, and that competitors were changing the game.  GM needed to recognize, admit and encourage employees to engage in attacking old assumptions – and recognize that market share would continue eroding if they didn't do things differently.  Setting a big goal reinforced the old Lock-ins and even an aligned organization – working it's metaphorical tail off – couldn't make the outdated Success Formula produce positive results. 

Only a Disruption would have helped save GM.  After attacking some Lock-ins, like the desire to move all customers to bigger and more expensive cars, or the desire to focus on long production runs, GM should have set up White Space teams to discover new Success Formulas.  Instead of putting all its management energy and money into growing volume at Chevrolet, Cadillac, Buick and GM nameplates, General Motors leadership should have revitalized the innovative Saturn and Saab to do new things – to develop new approaches that would be more competitive.  Instead of pushing Hummer to have 3 identical cars in 3 sizes, GM leadership should have unleashed Hummer to explore the market for truly unique, limited production vehicles. GM should have allowed Pontiac to really take advantage of the design breakthroughs happening at the Australian design studio – to change the nameplate into a performance car segment leader.  By attacking Lock-ins, Disrupting, and using White Space GM really could have turned around.  Instead, by creating a BHAG GM reinforced its focus on its Hedgehog concept – and drove the company into bankruptcy.

You can see a 40 second video about the value and importance of Disruptions on YouTube here.

A 75 second video on White Space effectiveness on YouTube here.

Read free ebook on "The Fall of GM:  What Went Wrong and How To Avoid Its Mistakes"

Overcoming metrics to grow – Motorola, Xerox, Kodak, Six Sigman, TQM, Lean

Do all good ideas originate outside the organization?  Of course not.  Motorola understood all the critical technologies for smart phones, and taught Apple how to use them in a joint development project that created the ROKR.  That's just one example of a company that had the idea for growth, but didn't move forward effectively.  In this case Apple captured the value of new technology and a market shift.

On the Harvard Business Review blog site one of consulting firm Innosight's leaders, Mark Johnson, covers two stories of companies that had all the technology and capability to lead their markets, but got Locked-in to old practices.  In "Have You Already Killed Your Next Big Thing" Mr. Johnson talks about Xerox and Kodak – two stories profiled in my 2008 book "Create Marketplace Disruption."  Both companies developed the technology that replaced their early products (Xerox developed desktop publishing and Kodak developed the amateur digital camera.)  But Lock-in kept them doing what they did rather than exploiting their own innovation.

One of the causes is a fascination with metrics.  Again on the Harvard Business Review blog site Roger Martin, Dean of the Rotman School of Management at the University of Toronto, tells us in "Why Good Spreadsheets Make Bad Strategies" that you can't measure everything.  And often the most important information about markets and what you must do to succeed is beyond measuring – at least in the short term. 

Measurements are good control tools.  Measurements can help force a focus on short term improvements.  But measurements, and the concomitant focus, reduces an organization's ability to look laterally.  They lose sight of information from lost customers, from small customers, from fringe customers and fringe competitors.  Measurement often leads to obsession, and a deepening of Defend & Extend behavior.  It's not accidental that doctors often find anorexia patients measure everything in (liquids and solids) and everything out (liquids and solids). 

Measurements are created when a business is doing well.  In the Rapids.  Like Kodak during the 1960s and Xerox in the 1970s.  Measurements are structural Lock-ins that help "institutionalize" the behavior which makes the Success Formula operate most effectively.  And they help growth.  But they do nothing for recognizing a market shift, and when new technology comes along, they stand in the way.  That's why a powerful Six Sigma or Total Quality Management (TQM) or Lean Manufacturing project can help reduce costs short term, but become an enormous barrier to innovation over time when markets shift.  These institutionalized efforts keep people doing what they measure, even if it doesn't really add much incremental value any longer.

To overcome measurement Lock-ins we all have to use scenario planning.  Scenarios can help us see that in a future marketplace, a changed marketplace, measuring what we've been doing won't aid success.  And because we don't yet know what the future market will really look like, we can't just swap out existing metrics for something different.  As we proceed to do new things, in White Space, it's about learning what the right metrics are – about getting into the growth Rapids – before we tie ourselves up in metrics.

Note:  To all readers of my Forbes article last week – there has been an update.  The very professional and polite leadership at Tribune Corporation took the time to educate me about the LBO transition.  As a result I learned that what I previously read, and reported in my column as well as on this blog, as being an investment of employee retirement funds into the LBO was inaccurate.  Although Tribune is in hard times right now, the very good news is that the employee retirement funds were NOT wiped out by the bankruptcy.  The Forbes article has been corrected, and I am thankful to the Tribune Corporation for helping me report accurately on that issue.

Listen to Competitors Rather than Customers – Google, IBM, Tribune, Cisco

Leadership

Listen To Competitors–Not Customers

01.06.10, 03:10 PM EST

The accepted wisdom that the customer is king is all wrong.

That's the start to my latest Forbes column (Read here.)  Think about it.  What would Apple be if it had listened to its customers?  An out of business niche PC company by now.  What about Google?  A narrow search engine company – anyone remember Alta Vista or Ask Jeeves or the other early search engine companies?  No customer was telling Apple or Google to get into all the businesses they are in now – and making impressive rates of return while others languish.

But today Google launched Nexus One (read about it on Mobile Marketing Daily here) – a product the company developed by watching its competitors – Apple and Microsoft – rather than asking its customers.  In the last year "smartphones" went to 17% of the market – from only 7% in 2007 according to Forrester Research.  There's nothing any more "natural" about Google – ostensibly a search engine company – making smartphones (or even operating systems for phones like Android) than for GE to get into this business.  But Google did because it's paying attention to competitors, not what customers tell it to do. 

No customers told Google to develop a new browser – or operating system – which is what Chrome is about.  In fact, IT departments wanted Microsoft to develop a better operating system and largely never thought of Google in the space.  And no IT department asked Google to develop Google Wave – a new enterprise application which will connect users to their applications and data across the "cloud" allowing for more capability at a fraction of the cost.  But Google is watching competitors, and letting them tell Google where the market is heading.  Long before customers ask for these products, Google is entering the market with new solutions – the output of White Space that is disrupting existing markets.

Far too many companies spend too much time asking customers what to do.  In an earlier era, IBM almost went bankrupt by listening to customers tell them to abandon PCs and stay in the mainframe business —– but that's taking the thunder away from the Forbes article.  Give it a read, there's lots of good stuff about how people who listen to customers jam themselves up – and how smarter ones listen to competitors instead.  (Ford, Tribune Corporation, eBay, Cisco, Dell, Salesforce.com, CSC, EDS, PWC, Dell, Sun Microsystems, Silicon Graphics and HP.)

Who to follow in 2010? – Amazon, WalMart

Happy New Year!

As we start 2010 the plan, according to The Financial Times, "WalMart aims to cut supply chain costs."  Imagine that.  Cost cutting has been the biggest Success Formula component for WalMart for its entire career.  And now, the company that is already the low cost retailer – and famous for beating its suppliers down on price to almost no profitability – is planning to focus on purchasing for the next 5 years in order to hopefully take another 5% out of purchased product cost.  How'd you like to hear that if Wal-Mart is one of your big customers?  What do you suppose the discussion will be like when you go to Target or KMart (match WalMart pricing?)

Will this make WalMart more admired, or more successful?  This is the epitome of "more of the same."  Even though WalMart is huge, it has done nothing for shareholders for years.  And employees have been filing lawsuits due to unpaid overtime. And some markets have no WalMart stores because the company refuses to allow any employees to be unionized.  This announcement will not make WalMart a more valuable company, because it simply is an attempt to Defend the Success Formula.

On the other hand according to Newsweek, in "The Customer is Always Right," Amazon intends to keep moving harder into new products and markets in 2010.  Amazon has added enormous value to its shareholders, including gains in 2009, as it has moved from bookselling to general merchandise retailing to link retailing to consumer electronics with the Kindle and revolutionizing publishing with the Kindle store.  Amazon isn't trying to do more of the same, it's using innovation to drive growth

And the CEO, Jeff Bezos freely admits that his success today is due to scenario development and plans laid 4 years ago – as Amazon keeps its planning focused on the future.  With the advent of many new products coming out in 2010 – including the Apple Tablet – Amazon will have to keep up its focus on new products and markets to maintain growth.  Good thing the company is headed that direction.

So which company would you rather work for?  Invest in?  Supply? 

Which will you emulate?

PS – "Create Marketplace Disruption:  How To Stay Ahead of the Competition" was selected last week to be on the list of "Top 25 Books to read in 2010" by PCWorld and InfoWorld.  Don't miss getting your copy soon if you haven't yet read the book.

HBR -The Decade’s top Performing CEOs – Apple, Cisco, Amazon, eBay, Google


I was intrigued when I read on the Harvard Business Review web site “Do we celebrate the wrong CEOs?”  The article quickly pointed out that many of the best known CEOs – and often named as most respected – didn’t come close to making the list of the top 100 best performing CEOs.  Some of those on Barron’s list of top 30 most respected that did not make the cut as best performing include Immelt of GE, Dimon of JPMorganChase, Palmesano of IBM and Tillerson of ExxonMobil.  It did seem striking that often business people admire those who are at the top of organizations, regardless of their performance.

I was delighted when HBR put out the full article “The Best Performing CEOs in the World.”  And it is indeed an academic exercise of great value.  The authors looked at CEOs who came  into their jobs either just before 2000, or during the decade, and the results they obtained for shareholders.  There were 1,999 leaders who fit the timeframe.  As has held true for a long time in the marketplace, the top 100 accounted for the vast majority of wealth creation – meaning if you were invested with them you captured most of the decade’s return – while the bulk of CEOs added little value and a great chunk created negative returns.  (It does beg the question – why do Boards of Directors keep on CEOs who destroy shareholder value – like Barnes of Sara Lee, for example?  It would seem something is demonstrably wrong when CEOs remain in their jobs, usually with multi-million dollar compensation packages, when year after year performance is so bad.)

The list of “Top 50 CEOs” is available on the HBR website.  This group created 32% average gains every year!  They created over $48.2B of value for investors.  Comparatively, the bottom 50 had negative 20% annual returns, and lost over $18.3B.  As an investor, or employee, it is much, much better to be with the top 5% than to be anywhere else on the list.  However, only 5 of the top best performers were on the list of top 50 highest paid — demonstrating again that CEO pay is not really tied to performance (and perhaps at least part of the explanation for why business leaders are less admired now than the previous decade.)

Consistent among the top 50 was the ability to adapt.  Especially the top 10.  Steve Jobs of Apple was #1, a leader and company I’ve blogged about several times.  As readers know, Apple went from a niche producer of PCs to a leader in several markets completely unrelated to PCs under Mr. Jobs leadership.  His ability to keep moving his company back into the growth Rapids by rejecting “focus on the core” and instead using White Space to develop new products for growth markets has been a model well worth following.  And in which to be invested.

Similarly, the leaders of Cisco, Amazon, eBay and Google have been listed here largely due to their willingness to keep moving into new marketsCisco was profiled in my book Create Marketplace Disruption for its model of Disruption that keeps the company constantly opening White SpaceAmazon went from an obscure promoter of non-inventoried books to the leader in changing how books are sold, to the premier on-line retailer of all kinds of products, to the leader in digitizing books and periodicals with its Kindle launcheBay has to be given credit for doing much more than creating a garage sale – they are now the leader in independent retailing with eBay stores.  And their growth of PayPal is on the vanguard of changing how we spend money – eliminating checks and making digital transactions commonplace.  Of course Google has moved from a search engine to a leader in advertising (displacing Yahoo!) as well as offering enterprise software (such as Google Wave), cloud applications to displace the desktop applications, and emerging into the mobile data/telephony marketplace with Android.  All of these company leaders were willing to Disrupt their company’s “core” in order to use White Space that kept the company constantly moving into new markets and GROWTH.

We can see the same behavior among other leaders in the top 10 not previously profiled here.  Samsung has moved from a second rate radio/TV manufacturer to a leader in multiple electronics marketplaces and the premier company in rapid product development and innovation implementationGilead Sciences is a biopharmaceutical company that has returned almost 2,000% to investors – while the leaders of Merck and Pfizer have taken their companies the opposite direction.  By taking on market challenges with new approaches Gilead has used flexibility and adaptation to dramatically outperform companies with much greater resources — but an unwillingness to overcome their Lock-ins.

Three names not on the list are worth noting.  Jack Welch was a great Disruptor and advocate of White Space (again, profiled in my book).  But his work was in the 1990s.  His replacement (Mr. Immelt) has fared considerably more poorly – as have investors – as the rate of Disruption and White Space has fallen off a proverbial cliff.  Even though much of what made GE great is still in place, the willingness to Defend & Extend, as happened in financial services, has increased under Mr. Immelt to the detriment of investors.

Bill Gates and Warren Buffett are now good friends, and also not on the list.  Firstly, they created their investor fortunes in previous decades as well.  But in their cases, they remained as leaders who moved into the D&E worldMicrosoft has become totally Locked-in to its Gates-era Success Formula, and under Steve Ballmer the company has done nothing for investors, employees — or even customers.  And Berkshire Hathaway has spent the last decade providing very little return to shareholders, despite all the great press for Mr. Buffett and his success in previous eras.  Each year Mr. Buffett tells investors that what worked for him in previous years doesn’t work any more, and they should not expect previous high rates of return.  And he keeps proving himself right.  Until both Microsoft and Berkshire Hathaway undertake significant Disruptions and implement considerably more White Space we should not expect much for investors.

This has been a tough decade for far too many investors and employees.  As we end the year, the list of television programs bemoaning how badly the decade has gone is long.  Show after show laments the poor performance of the stock market, as well as employers.  We end the year with official unemployment north of 10%, and unofficial unemployment some say near 20%.  But what this HBR report  us is that it is possible to have a good decade.  We need leaders who are willing to look to the future for their planning (not the past), obsess about competitors to discover market shifts, be willing to Disrupt old Success Formulas by attacking Lock-in, and using White Space to keep the company in the growth Rapids.  When businesses overcome old notions of “best practice” that keeps them trying to Defend & Extend then business performs marvelously well.  It’s just too bad so few leaders and companies are willing to follow The Phoenix Principle.

Innovation Budget 2010? BusinessWeek, GE, P&G, Google, Apple

In "The Year in Innovation" BusinessWeek has offered its review of innovation in 2009.  And the report is grimMost companies cut innovation spending – including R&D.  Even the pharmaceutical industry, historically tied to long-term investment cycles, cut 69,000 jobs in 2009, up 60% from 2008.  Meanwhile, P&G's dust cloth Swiffer was pronounced a major innovation – indicating both how few innovations made it to market in 2009 – and the degree to which BusinessWeek must depend upon P&G for advertising dollars given this selection (I mean really – BusinessWeek ignores Google Wave and Android entirely in the article but feature a Swiffer dust cloth!)

According to BusinessWeek, the big advances in innovation in 2009 apparently were "open innovation" and "trickle up innovation."  The first is asking vendors and others outside the company to contribute to innovation.  Adoption of open innovation has spurred one thing – less spending on innovation as companies cut budgets, using "open innovation initiatives" as an explanation for how they intend to maintain themselves while spending less.  Open innovation has not spurred improved innovation implementation, just justified spending less with no real plans to achieve growth.  With open innovation, of course, failures no longer belong to the company because the "open environment" didn't produce anything – hence innovation simply wasn't possible! 

Trickle up innovation is asking people in poor countries, like India, how they do things.  Then seeing if you can steal an idea or two. There's nothing wrong with turning over every rock when trying to innovate, but using analysis of third world countries, where costs happen to be very low and new innovations few, to drive your innovation program smacks of looking for ways to put a fig leaf on a naked innovation program.  Expectations are low, so explanations are more prevalent than results.  C.K. Prahalad wrote an entire book on this approach – which is popular with big company leaders who have abandoned innovation and think it clever to steal ideas from the poor.  But it's not how Apple became #2 in smart phonesor created iTunes or how Facebook has taken over social networking.

Smartphone users 2009
source:  Silicon Alley Insider (with Google picking up 2 new carriers in late 2009, this chart will be very different by summer 2010)

None of the trends identified by BusinessWeek reflect behavior of the real innovation winners.  Rather, they reflect the big companies who are mired in Defend & Extend management, and making excuses for their terrible performance since 2007Not once does the article talk about Google, Apple, Cisco – or leading small company innovators like Tasty Catering in Chicago.  There are companies winning at innovation, but they are certainly not following the trends (which have produced marginal results – at best) identified in this article.

Because planning processes look at last year when setting goals for next year, lots of companies now plan even lower innovation spending for 2010.  And that's how an economy goes into a tailspin.  Everyone from bankers to manufacturers to retailers are saying 2009 was weak, and they don't see much improvement for 2010.  That can become a self-fulfilling prophecy24/7 Wall Street reported in "Immelt Speaks at West Point: Future Leadership Path" that the CEO of GE, Jeff Immelt, is doing less innovation spending and relying more on government/business partnership.  And of course GE is realing from over-reliance on financial services and under-investment in new products during his leadership.  While Immelt is patching up holes at GE, the company is sinking without new products manning the oars.

Companies don't just need to spend on R&D.  Studies of R&D have shown that the bulk of spending is Defend & Extend.  Trying to get more out of the technologies embedded in the Success Formula.  P&G and GE can spend easily enough.  But when it's on short-term "quick hits" they get declining marginal returns and weaker competitiveness.

Companies in 2010 must adopt new approaches.  They have to quit planning from the past, and plan for the future.  More scenario development and understanding how to change competitive position.  And they have to quit being so conforming and promote Disruption.  Disruptions are needed to open White Space so new Success Formulas can be developed.  In the 2000/01 recession Apple looked to the future, Disrupted its total dedication to the Macintosh and unleashed White Space allowing the company to become a leader in digital music as well as the front runner in smart phones within a decade.

Your business can be a leader; and soon.  If you start thinking differently about what you must do, quit putting all your energy into Defend & Extend behavior and invest in White Space, innovation will flourish – and with it your revenues and profits.

Implementing Market Shifts – Google, Android phone, eWallet

"The Google Phone, Unlocked" is a Seeking Alpha article detailing the early release of a Google phone planned for market introduction in 2010.  Will this be successful or not?  Legitimate question – given the success of Apple's iPhone.  And the answer to that really has nothing to do with cell phone technology.  It has everything to do with the downloadable applications.  The market for phones has shifted to where applications are rapidly becoming more important than the phones themselves. 

Which is why "Android to become eWallet" on MediaPost is an important article.  Mpayy is offering an app that supersedes both credit cars and debit cards.  It's Paypal on steroids.  This app allows users who want to buy something to use their phone to instantaneously pay for something.  Users can perform an eBay style transaction with immediate payment.  And they can do this buying products in the Burger King, or Starbucks, or Target

Two things are emerging that represent significant market shifts to which all businesses must react.  Firstly, mobile devices are much more than phones.  They are more than laptops.  They allow people to do a lot more things than they previously could, and these activities can be immediate.  From reading a CAT scan, to finding the closest pizzeria and downloading a coupon, to paying for a Pepsi at the convenience store.  This represents substantially different use of technology.  Those who remain Locked-in to old fashioned credit card/debit card technology – or internet transaction technology – will be left behind as users move quickly to mobile phone payment.

And, secondly, those who rapidly incorporate these opportunities will have advantages.  If you're making your business more internet friendly you are likely fighting the last war.  To be successful in 2012 it will be important you are able to offer real-time transactions buyers can access from their mobile devicePeople will want to find you, find your discounts, and pay you from the device in their hands.  They will want to complete their business seamlessly using their mobile device – without a call, without a browser transaction.  Those who make life easy for customers will increasingly win – and making life easy will mean access via the mobile device

It is increasingly ineffective to build future plans based upon completing projects started last year – or the previous year – or a few  years ago.  Customers don't care about your enterprise system implementation that is X years into implementation.  Customers are running fast – really fast – toward using new, low cost and easily usable technology.  This is a substantial market shift.  And your scenario plans must incorporate these shifts, expect them, and use them to move beyond Locked-in competitors by implementing these shifts fast and effectively.  That allows you to Create Marketplace Disruptions which create superior rates of return.

Planning to Succeed using White Space

My last blog highlighted a new book describing the need for White Space if a business is to implement innovation and grow.  But lots of people still have questions about what White Space is, and how to get it working.

Here's the chart from Create Marketplace Disruption (FT Press, available on Amazon.com) that shows how White Space is positioned to move beyond Defend & Extend Management.:

Disruptive Oppy Matrix
Most companies spend the vast bulk of their energy trying to Defend sales of current products to current customers.  After expending 80% of the planning time, and company resource, in that cell, they then will try to see "can we sell other products to our current customers?"  Or, "can we sell current products to new customers, such as by moving into a new geography?"  As a result, they do almost nothing in White Space. 

"Adjacent market" analysis is Extend effort.  "Dartboard" approaches which look to grow by moving in concentric circles away from "core" are Extend efforts.  These approaches are based on efficiency notions, that the company will get the biggest "bang" by doing very little differently and hoping to grab a big "win" with a small effort added to the Defend behavior.  They hope to grow a lot by largely defending their "base" and adding a few, low resource commitment products or customers to the mix.

When you adjust for resources, the planning effort looks like this:

Planning resource matrix
If you want to really grow your business, you have to change the planning effort first.  Instead of putting all the resources into multiple rounds of effort about the business you know best, you need to simply do less in this area of planning.  Moving from 90% accuracy on the first round to 95% after months of effort is pretty low yield.  Instead, business should dramatically reduce the effort on known customers and products – and invest considerably more time developing scenarios about future markets leading them to White Space.

Extend markets almost always are disappointing.  While the effort looks simple, that's only a view of "the grass looks greener across the fence."  Reality is that competitors exist in those markets, and when the company tries to extend into them with limited resources they run headlong into very stiff competitionThe company retreats to Defend the "core" and the Extend opportunities produce very low sales and miss profit projections dramatically.  Usually, the leaders start complaining about having taken the venture, feel burned by trying to innovate, and reinforce their desire to focus on maintaining the "base" business.

To get over this, businesses have to start by realizing that entering new businesses takes more planning than the base business – not less.  You have to identify the critical Permission needed to allow the White Space team to operate outside the Lock-ins.  Be clear about the new approach, and the goals.  And identify the resources needed – as well as the source of those resources (people and money.)  This doesn't happen automatically, because it isn't part of the existing planning process.  It takes a lot of effort to develop market scenarios and plans – then follow-up on the experiences to understand what works and keep evolving toward achieving goals.  And that is where the planning effort really needs to focus.

White Space is critical to success.  All businesses MUST evolve to new products and new customers.  The idea that this can happen with little effort is misguided.  Instead of planning the "base" business, success starts by putting more resources into market scenario development, developing insight to know what permissions are needed to succeed and then establishing funding so the White Space project can succeed.  

Think about Apple.  As long as Apple focused planning on the Macintosh the company moved further toward a small provider to niche PC markets.  Only by using market scenarios to understand that growth opportunities were much better in entirely new markets were they able to change resource allocation and move aggressively into the business of iTouch, iPod, iTunes and eventually iPhones.  Apple is outperforming almost everyone in this recession – and a lot of that success is due to using scenario planning to identify new market opportunities, rather than spending all the planning resources understanding previously served, traditional markets.

In Good Company – Innosight and IBM

Seizing the White Space is a new book being launched by HBS Press (and being pre-sold on Amazon.com.)  I'm very glad to read about others who are taking up the message of Create Marketplace Disruption – which first published the critical role of White Space in successfully managing any business (published in 2008 by Financial Times Press and also available on Amazon.com). 

The author, Mark Johnson, is Chairman of Innosight, a consulting firm he co-founded with Clayton Christenson who's on the Harvard Business School faculty (and author of The Innovator's Dilemma also on Amazon.com).  Innosight primarily focuses on consulting businesses to identify Disruptive innovations.  Now the Chairman is starting to realize that implementation is as important as identifying the implementation – and he's linked it to WHITE SPACE.  Great!!!

You can read his insights to how IBM and some of his other large clients have used White Space in an Harvard Business Publishinng Blog "Is Your Company Brave Enough For Business Model Innovation?" You'll quickly see that he applies The Disruptive Opportunity Matrix from chapter 10 of Create Marketplace Disruption – which is how companies have been shown to reach new businesses using White Space.  It's so gratifying to read somebody else who's applied your research and come to the same conclusions!

I'm looking forward to the book.  Readers please let me know what you think of the author's blog post – and the book when it comes out.

Post-script to yesterday's blog about the CEO of GM:

"Cat's Owens, Deere's Lane on short list of CEO candidates" is the AP article appearing on Crain's Chicago Business about the search for a new leader at GM.  As I predicted yesterday, recruiters seem to think the ideal candidate for the job needs to be from another big industrial company.  And preferably, an auto company "to understand the industry complexities."  Not only is there no incentive for these highly paid executives to take a similar job, at a lot less pay, in a government funded organization — but investors shouldn't want it!  GM needs change.  And more change than trying to make GM into John Deere, or CAT.

John Deere has had weak results for decades.  The company has been wedged between other equipment manufacturers so badly that most of its profits now come from yard tractors homeowner's buy from Home Depot.  Just because the company is big, and one of the few left making equipment for which there is declining demand, is no reason to want the CEO at a turnaround like GM.  Likewise, CAT is under intense competition from Komatsu, Volvo and other manufacturers who are squeezing it from all sides – jeapardizing revenues and profitsOnly acquistions have kept CAT growing the last 10 years, and margins have plummeted.  That leadership is not what's needed at GM either.

When will somebody speak up for the investors and start a search in the right direction?  GM needs leadership that thinks entirely differently.  Unwilling to accept old-fashioned industrial notions about how to lead a company.  Like I recommended, go somewhere entirely different.  Maybe recruit somebody from Dell or HP or Cisco that understands rapid design cycles.  Or someone from Wal-Mart or Target that understands how to sell things – cheaply.  Or someone from Oracle or Mozilla or Google that understands the value of software – and that the product is a lot more than the iron – so you can capture the right value.  It's so disappointing to read how the "recruiting industry" is just as Locked-in as GM. 

If one of you readers knows somebody on the GM Board, maybe you should send them this blog (and yesterday's) to see if they can consider searching in the right place for new leadership!

Don't miss the recent ebook, "The Fall of GM"  for a
quick read on how easily any company (even the nation's largest employer) can be
easily upset by market shifts.  And learn what GM could have done to avoid
bankruptcy – lessons that can help your business grow! http://tinyurl.com/mp5lrm

White Space for Electric Cars – Nissan, Chevrolet, Ford, Tesla

According to Marketing Daily "Electric Cars Set to Tiptoe Into Showrooms."  Nissan is supposed to introduce the Leaf.  Chevrolet,  Toyota and Ford are all supposed to begin offering a plug-in hybrid.  None have announced prices, but all indicate they intend to price them at the high end – more costly than a like-sized traditional gasoline powered automobile.  One reason for the higher price is that dealers normally expect to make 20% of a traditional vehicle's price in high-margin maintenance and repairs, and because these electrics won't provide that revenue and margin the manufacturers believe the dealer has to make more on the initial auto sale – or they won't sell them.

The manufacturers themselves are not optimistic about sales.  They are targeting wealthy early adopter consumers for whom climate change and environment are critical issues.  Citing a lack of infrastructure for recharging, and battery technology that takes too long to recharge, the manufacturers are non-committal on how many cars they will make – preferring to wait and see if demand develops.

Sort of sounds like a self-fulfilling prophecy, doesn't it?  This approach is very unlikely to succeed, because they manufacturers are trying to sell electric cars to people who are already well served by existing petroleum powered traditional and hybrid cars.  These people have little or no reason to pay extra for new technology, so will be a hard sell.  And with built-in excuses for the technological limits, the manufacturers aren't being promotional.  Simultaneously, the manufacturers are more worried about the impact on  dealers than the success of the vehicles.

It's not the product that's wrong, its the approach.  These manufacturers are trying to launch a very different product, that really needs to appeal to very different customers.  But they are trying to do it in the totally traditional way.  Same brand names, same distribution, same sales people, same marketing, same financing – same everything.  They are trying to have the existing organization, with all its Lock-ins, do something very different.  And that never works.

Electric cars are ideal for White Space team introduction.  White Space projects are given permission to do what it takes to make a project succeed.  They are given permission to operate outside the Lock-ins.  It's that permission to find the right answer, to find the market-based solution, which allows the innovation to develop a new Success Formula that meets market needs

Electric cars are not a solution for the way automobiles have been used in the past.  To succeed requires appealing to different scenarios about the future.  Electric cars need to appeal to people for whom a traditional auto has limitations they don't like, and instead the electric auto is something they want.  People who are underserved by the current products.  The electric car will succeed with buyers who have reasons to want one.  For whom the electric car is the solution to their problem – not a second-rate, overpriced solution to an old need.

Cell phones didn't succeed because they were purchased by people who already had wired phones with long distance.  Early cell phones, for all their expense and weakness, were bought by people who had a real need for mobile telephony.  For years, mobile phones were used only by a small group of people.  It took years for cell phones to become commonplace.  We all now know younger generation people who have no land line phone – for whom the mobile phone has displaced a traditional phone.  But the cell phone didn't succeed by trying to be a high-priced alternative to the existing solution, it was a product that was desired by people for the advantages it offered – even when it was expensive, big and had limited range.  Only over time did the cell phone evolve to a new Success Formula that is making traditional phones obsolete – and leaving traditional phone companies with a very hard transition.

Electric cars need an entirely "greenfield" start.  Those responsible need to be chartered to "make this work" in an environment where failure is not an option for them.  They need to believe their careers depend on finding the right solution, and developing it.  And they need permission to do what the market requires.  They need to be able to have a stand-alone brand, and its own distribution system, and unique marketing.  They need the White Space with permission to do what it takes, and the resources to accomplish the task.  Free from worrying about dealer reaction, marketing impact on traditional autos in the brand, or requirements to solve "infrastructure issues."

Imagine urbanites who want cars just for short hauls.  Think about the ZipCar business in most major U.S. cities as the target buyer, rather than selling cars to individuals. Or think about other markets – outside the USA.  How about places like Taiwan or Malaysia where distances are short and traffic is bad and much fuel is wasted just sitting.  Towns like Tel Aviv.  Maybe as delivery vehicles in urban areas where traveling is rarely more than 200 miles in a day because most time is spent sitting at lights – or making the delivery.  There are places for which an electric car could be an ideal solution – just as they are today.  Where a head-to-head match-up favors the electric vehicle.

Secondly, who says a traditional dealer is the right way to sell this vehicle to these people?  Maybe it should be sold on-line, with somebody delivering the vehicle to the buyer and offering personalized instruction?  Maybe it should be sold out of a Home Depot, or Staples, or Best Buy like an expensive appliance or computer?  It's not clear to me that people, or companies, have much value for auto dealers – so perhaps this is the time to change the distribution system entirely — and perhaps take a lot of cost out of auto distribution.

There is a market for electric cars.  Today.  Just as the technology exists.  And if White Space teams were allowed to find and develop that market, we could have a robust electric car industry in just a few years.  But it won't happen via traditional approaches, from companies Locked-in to their traditional ways.  Those companies only see obstacles, not opportunity.  Without White Space, this will be just another example of a technology delayed.

But it does leave the door wide open for a company like Tesla.  Tesla is a stand-alone company pioneering the electric car market.  They are operating in White Space.  Easy as Tesla is now to ignore, they may prove to be the upstart like Southwest Airlines that succeeds and makes money while the traditional industry players keep struggling.