by Adam Hartung | Oct 7, 2009 | Current Affairs, Disruptions, General, In the Rapids, Innovation, Leadership, Web/Tech
"Amazon Cuts Kindle Price to $259" is the USAToday headline. This $40 whack is the second price cut this year. Sony is selling its ePocket for $199. Of course Kindle is pushing that it has more content available and easier wireless access than Sony,- even internationally. Expectations are for 3 million e-Readers to be sold in 2009 (about 1 million around the holidays.) Obviously, if you aren't paying attention this is a big deal. It is changing publishing (books, magazines and newspapers.) But the impact goes far beyond publishing.
Simultaneously, The Wall Street Journal reports "Just a Touch Away, the Elusive Tablet PC." According to this article, new devices are being tested that will allow you to do everything from classic PC applications to web interconnection to watch movies – or read books – on a keyboard-less new tablet. Something that is a cross between an iPhone/iTouch (with a bigger screen) and a PC. As iPhone users are learning (quickly) you don't need a keyboard or mouse to have an interface to your machine and the world.
So what will be the future solution? Will it be one of these, or yet something different? I don't know. Do you have a crystal ball? But the answer to that question really doesn't matter to us today. We don't need to know that sort of specific to begin growing our businesses.
Not being widget nuts, or platform forecasters, should not stop us from planning for a different sort of future and changing our approach today. Scenarios for 2013 (you do have scenario plans for 2013, don't you?) should be planning on practically everybody having one of these devices. And perhaps these devices being so cheap they could be included with sales of every major appliance (like a car, or refrigerator). If that sounds silly, just look at how cheap a flash (or thumb) drive is now. Remember when we thought floppy disks were expensive? Now people exchange flash drives that have more capacity than a 2004 laptop without thinking about cost. These made tapes, floppy drives, zip drives and a lot of other technology obsolete in a hurry.
How can your business take advantage of this shift? Can you replace paper manuals, maybe even user instructions with a tablet? Or a tablet app? Can you use an interactive device that grabs input from your appliance to do diagnostics, recommend maintenance, report on failures? Would this help customers pop for the new frig – say if it helped lower electric bills? Or could it encourage that new washer by helping set the cycles to lower water cost? Could you build it right into the console on a washer or dryer? Or could you encourage someone to buy a new car by telling them to forget about maintenance logs and just track the car's performance on a tablet?
If you provide content – are you planning for this? Recently The Economist sent me an email (I've registered on their web site) telling me they were going to start charging for web content. I've heard News Corp. properties, like the Wall Street Journal, intend to do the same. I guess they haven't noticed the world is moving in a direction that makes such a plan – well, impossible. In a recent Harris poll (reported on Silicon Alley Insider "People Won't Pay for News Online") 74% of web users said they'd simply switch sites before paying. With one of these eReader/Tablets in hand, why would they ever pay for content when another provider is a finger streak away? As access becomes easier and easier, the willingness to pay will go down and down. Publishers had better start figuring out how to get paid a different way than subscriptions!
Now is about when executives like to say "so I want to know which format will win before I start doing this. I only want to do this once." That old cry for efficiency. Unfortunately, while waiting for a winner to emerge, the waiter becomes the laggard. The early adopter, that recognizes the value provided to consumers, gets out there and starts using these innovations to drive better customer value. And to capture more sales. When you are part of making the market – like Apple in music – you gain huge advantages. You don't have to know all the answers to compete. You just have to be willing to Disrupt old notions and use White Space to experiment and learn.
I have drawers filled with obsolete electronics. How many obsolete cell phones do you own? How many big old monitors are you recycling to replace with flat screens? Do you still have a fax machine? I have an old keyboard that used something called "sideband technology" to allow me to interact with people and get news and sports info years before the internet was popular – and before wireless internet was available. Obsolete now, that device taught me how valuable the internet was going to be when Congress made it available for commercial use. Fear of throwing away a few products or software – maybe a betamax machine or copy of visicalc – is no reason not to get into the market and learn!
Markets are marvelous things. As these articles discuss, nobody knows how we will be using technology in the future. Not exactly. It will be some combination of eReader – computer – music player – television – telephone. But we do know the broad theme. And if you want to get out of this recession, you can start playing to this market shift now. You'll never grow if you sit on the sidelines watching and waiting. Get in the market. Participate. Use this technology to create new solutions! There are countless applications (as the expanding iPhone app base is proving.) Want to get into the Rapids of growth? You'll never succeed if you don't become part of the marketplace. Nothing creates learning like doing!
by Adam Hartung | Sep 18, 2009 | Current Affairs, Disruptions, In the Rapids, Innovation, Leadership, Lifecycle, Openness, Web/Tech
This week The Economist reviewed the innovation processes at Google. In "Google's Corporate Culture – Creative Tension" the magazine overviews several recent innovations, and actions senior leaders are taking regarding innovation management.
While Mr. Anthony recently chastised Google for its "immature" innovation management in a Harvard Business School blog post, and somewhat The Economist does as well, for not producing more revenue from its innovations – nobody can refute that the company released yet 3 more very important innovations this week – an updated Chrome web brower, new software that allows viewing on-line newspapers in a more natural way (Fast Flip) and Google Wave for collaborative project development. For most companies any one of these would be vaunted to market on piles of ad and PR sending. Products less significant cause Microsoft to throw their Marketing/PR machine into overdrive. But innovative launches are frequent enough at Google that you can completely miss some of them. Even when they continue to change whole industries – like Google has been doing to newspaper publishers and continues.
The best line in the article says that senior Google leadership is very actively trying to counter "the conservatism that can set in as companies mature." The good news is that even though it has 20,000 employees, Google is not "mature." Thankfully, it remains in the Rapids of growth. Size does not equal "maturity." That word is more applicable to companies that begin truncating ideas and activities to optimize their existing business. This is the direction Scott Anthony recently proposed on his HBS blog. And it gets companies into serious trouble.
Instead, Google is working hard to keep ideas from being truncated by hierarchy or people who are focused on narrow opportunities. Senior leaders are making themselves available to everyone in order to make sure ideas get attention – rather than vetted. Through this they are giving permission for ideas to be developed, even when many in the company aren't supportive. This top-level focus on granting permission to new ideas which are unconventional is a CRITICAL component of innovation success. Second, they aren't relying on a priority process for funding (something Mr. Anthony recommends). Instead they are making ample dollars available for ideas to push them to market quickly – and see if the innovation is accepted by the market or needs more work.
By personally engaging at the top levels in this process, Mr. Schmidt and his team are being Disruptive. They aren't allowing structural impediments like strategy formulation, hiring practices, tight IT systems, large historical investments or internal "experts" to Lock-in Google to its past. This is demonstrably exceptional behavior that pushes Google into new markets and growth. Then, by focusing on granting permission – even for things the "organization" may not initially support – and adding resources from outside normal resource allocation systems they are doing the 2 things necessary to keep White Space alive and thriving at Google.
Google has been growing, even in this very tough economy. More importantly, it has not slowed down its releases of innovation on the marketplace that can generate future growth. Mobile phones using its Android software are just now getting to market, and offer (along with other innovations) potentially very large revenue gains in new areas. With smart phones and Kindle-like e-readers to outsell PCs in late 2010 Google is squarely positioned to be part of the "next wave" of personal digital productivity (along with Apple.) And this can be explained by the company's willingness to remain Disruptive and push White Space projects — even with 20,000 employees.
by Adam Hartung | Sep 16, 2009 | Current Affairs, Defend & Extend, In the Rapids, Innovation, Leadership, Openness
Is Google a company who's growth and innovation worry you? Not me. Which is why I was disturbed by a recent blog at Harvard Business School Publishing's web site "Google Grows Up." In this article Scott Anthony, a consultant and writer for HBS, says that he thinks Google has been immature about its innovation management, and he thinks the company needs to change it's approach to innovation. Unfortunately, his comments replay the core of outdated management approaches which lead companies into lower returns.
No doubt Google's revenues are highly skewed toward on-line ad placement. But with the market growing at more than 2x/year, and Google maintaining (or growing) share it's not surprising that such high revenues would dwarf other projects. Google created, and has remained, in the Rapids of growth by leading the market. From its Disruptive innovation, offering advertising through products like Google AdWords to people who previously couldn't afford it or manage it, allowed Google to lead a market shift for advertising. And ever since Google has implemented sustaining innovations to maintain its leadership position. That's great management. No reason to worry about a lot of revenue in ad placement today, with the market growing. Not as long as Google keeps breeding lots of new, big ideas to help grow in the future.
But Mr. Anthony flogs Google for its "unrestrained" approach to innovation. He recommends the company push hard to implement a process for innovation management – and he uses Proctor & Gamble as his role model – in order to curtail so many innovations and funnel resources to "the right" innovations. Even though he's obviously flogging his consulting, and pushing that all "good management" requires some significant stage gate management of innovation – he couldn't be more wrong.
Firstly, P&G is far from a role model for innovation. As recently discussed in this blog, the company recently said one of its major innovations was cutting prices on Tide while introducing less a less-good formulation. As commenters said loudly, this is not innovation. It's merely price cutting – taking another step on the demand/supply curve of price vs. performance. It doesn't change the shape of the curve – it doesn't help people get a far superior return – nor does it bring in new customers who's needs were not previously met.
In a Wall Street Journal article "P&G Plots Course To Turn Lackluster Tide," the CEO freely admits the company has had insufficient organic growth. Additionally, his big future opportunities are to "reposition Tide," to cut the price of Cheer by another 13% and to use Defend & Extend practices to try pushing the P&G Success Formula into other countries. Like people in China, India and elsewhere are in need of 1.5 gallon containers of laundry detergent sold through enormous stores which have big parking lots for all those cars to lug stuff home. None of these ideas have helped P&G grow, nor helped the company achieve above-average returns, nor demonstrate the company is going to be a leader for the next 10 years in new products, new distribution systems or new business models for the developed or developing world.
This urge to "grow up" is a huge downfall of business thinking. It smacks of arrogance and superiority by those who say it – like they somehow are "in the know" while everyone else is incapable of making smart resource allocation decisions. In "Create Marketplace Disruption" I provide a long discussion about how introducing "professional management' causes companies to enter growth stalls. The very act of saying "gee, we could be more efficient about how we manage innovation" immediately applies braking power well beyond what was imagined. If Mr. Anthony were worried about Google managers leaving to start new companies in the past (like Twitter) he should be apoplectic at the rate they'll now leave – when it's harder to get management attention and funding for new potentially disruptive innovations.
Google is doing a great job of innovating. Largely because it doesn't try to manage innovation. It maintains robust pipelines of both disruptive, and sustaining, innovations. Google allows everybody in the company to work at innovation – providing wide permission to try new things and ample resources to test ideas. Then Google lets the market determine what goes forward. It lets the innovators use supply chain partners, customers, emerging customers, lost customers and anybody who can provide market input guide where the innovation processes go. As a result, the company has developed several new products — such as new network applications that replace over-sized desktop apps, and a new, slimmer mobile operating system that expands the capabilities of mobile devices —- and we can well imagine that it may be coming close to additional revenue breakthroughs.
Unfortunately, Mr. Anthony would like readers, and his clients, to believe they are better at managing innovation than the marketplace. However, all research points in the opposite direction. When managers start guessing at the future their Lock-ins to historical processes, products and market views consistently causes them to guess wrong. They over-invest in things that don't work out well, and investing for really good ideas dries up. All resource allocation approaches use things like technology risk, market risk, cost risk and revenue risk to downplay breakthrough ideas. Management cannot help but "extend the past" and in doing so over-invest in what's known, rather than let ideas get to market so real customers can say what is valuable.
Google is doing great. In a recession that has put several companies out of business (Silicon Graphics and Sun Microsystems are two neighbors) and challenged the returns of several stalwarts (Microsoft and Dell just 2 examples) Google has grown and seen its value rise dramatically. To think that hierarchy and managers can apply better decision-making about innovation is – well – absurd. It's always best to get the idea surfaced, push for permission to do things that might appear crazy at first, and get them to market as fast as possible so the real decision-makers can react, and give input, to innovation.
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 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.
by Adam Hartung | Aug 14, 2009 | Innovation, Investing, Music
This weekend marks the 40th anniversary of Woodstock, the rock concert that everyone remembers – even though almost none of us were there. Amidst all the tributes this weekend, I was taken by how much the music industry has changed during those 40 years – and how this industry can help us realize the need we all have to be adaptable.
When Woodstock occurred most music was listened to an a long-playing vinyl album, sold through a record store. Wow, have things changed. From albums to 8-tracks to cassettes to CDs and now MP-3 players. In just 40 years we went through 4 different technologies, and made at least 2 (8-tracks and cassettes) obsolete. Nobody at Woodstock was thinking about that, but it's made a huge difference in who makes money.
When you bought music in 1969 you went to an independent record store. Or Musicland, a retailer with over 1,000 stores in shopping centers that exclusively sold records – and 8-tracks. Now we buy almost all our music on-line. Either ordering a CD from someplace like Amazon, or downloading the music directly into a player with no physical item being shipped. Mass merchandisers like KMart and WalMart eventually made record shops obsolete, and increasingly the mass merchandisers are of less importance. Musicland went bankrupt.
In 1969 the artists made practically nothing from a concert. Concerts existed as promotional events for the records. An artist signed a multi-album deal with a record label – like EMI. The label offered a studio and put together the album. They then packaged it, and shipped it to record stores. For this, the band members got almost nothing. Only if the album sold well did they get any cash. So the record label told the musicians to go on the road and play. The objective was to do concerts so people got turned on to your tunes and went to buy them at the store. The musician didn't make anything until the album sold – in high volume.
In 1969 promoters paid the record label for the musician to pay, and the record label paid the musician. A promoter could not hire a musician, even if the musician wanted to play, unless the label agreed. Any performance fees were deducted from album royalties, so from the label's point of view the event fee was irrelevant. Headliners – a band that was already famous and trying to stay that way – usually took a big fee, but it was just an advance on royalties. There would be lesser known bands, and the label barely gave them enough money for gas because they didn't know if the album would ever sell enough to be profitable. "On the road" was a bad thing as far as musicians were concerned.
Tickets to Woodstock cost $18, and the promoters lost money (of course, about 90% of the attendees didn't pay). That's about $100 in today's money. Most promoters lived a grand life, but in reality made little money. Some events profited, but a lot didn't. The fee to the labels were high, and audiences were often not large enough. Not to mention bands that no-showed or arrived stoned because they didn't care — remember they got paid little to nothing. So eventually a couple of bad concerts in a row sent the promoter to bankruptcy court once too often and he ended up snorting cocaine in trailer-park-city.
Today, going to a 3 day event costs over $250 for tickets – and the promoters expect to profit in the millions. The labels get a lot less, as many musicians negotiate their own contracts. But the prices are high enough that the musician is guaranteed a rate of return, and the promoter is as well. And the promoter usually insures all events just in case the musician no-shows are turns up stoned. Unprofitable events are rare.
Labels no longer run the show. Musicians now can negotiate much better single-album deals because distribution is far easier. Musicians can self-publish if they like, selling their own tunes off their own websites. This has meant that top performers make unbelievable sums – far more than their counterparts in 1969. The Carpenters used to have to beg for money for a new car, while their albums sold millions. Now, because they can guarantee the big audiences, all that money the label used to take, the musicians get. So tens of millions flow their way. If you have any doubt, look at the private jets and helicopters owned and flown by the lead drummer for Pink Floyd. Or about any rapper on late night MTV. It would make a corporate CEO envious.
And the company that makes the most money of all in music is Apple. They have the biggest distribution system, and sell the most music. They don't have any artists on contract, don't produce any music, and don't carry any inventory. They just run a server farm that collects money and sends out digital files.
Of course, it's still tough to be a new musician. But you no longer have to sell your soul to a label. You can produce your own music, using affordable gear in your basement that's better than Joan Baez had in 1969 at the EMI studio. And you can sell the tunes yourself. If you work hard at promotion, including working those promoters to give you a warm-up slot, you can capture all the revenue from your songs from your own web site, and sign up your own distribution groups. It's much more in your own hands. Of course, that also means the labels don't have the money they once did to create an Elvis, or Beatles, or Rare Earth. So it's a lot more up to you to earn that money, rather than hope you get lucky and lots of label backing.
I doubt Jimi Hendrix would recognize anything about the music industry today. Of course, given how stoned he liked to get it's hard to imagine Jimi Hendrix being alive today.
Things change. We sometimes don't see them, because it's like watching the grass grow. You don't notice differences unless you compare two snapshots in time. Then we can see just how much things change. If you want to be a winner, you have to learn to shift with these changes. Only those who make the shifts survive. Just ask Barry Gordy, the one-time founder of Motown who saw his billion dollar business disappear. Now a footnote in history. For all of us to avoid becoming similar footnotes, the moral is to be ever vigilant about identifying and adapting to market shifts.
by Adam Hartung | Aug 13, 2009 | Current Affairs, Defend & Extend, General, In the Whirlpool, Innovation, Leadership
"It's Hard to Like Sara Lee" was the Barrons headline this week. And how could you, after the company reported its third straight quarter with sales and earnings below expectation. Check out this quote "Failed expansion has become a hallmark of Sara Lee in recent years, as
the company entered and exited businesses more frequently than tourists
passing through Grand Central station."
Meanwhile, over at Businessweek the headline is "Sara Lee, Why Investors Won't Bite." The company keeps focusing on cost cutting. "Sara Lee Chairman and Chief Executive Brenda Barnes
said on Aug. 12 that she expects annual cost savings of $350 million to
$400 million by 2012." I wonder how far revenues will fall during that same period? Since Ms. Barnes took the helm 5 years ago, Sara Lee's value has shrunk 54% (chart here). Yet, her biggest plan remains more sales of existing businesses – now focused on selling the "houesehold and body care segments." Although after all the sales the last 4 years the takers keep getting thinner and thinner, and the prices lower and lower. Buyers recognize when a business has been stripped of its value and is nothing more than a shell of its previous self – no longer able to grow and produce cash flow.
Meanwhile at Sara Lee there are no real plans to sell any new products or services, so the P/E just keeps falling. Now at 11, it's one of the industry's lowest. But when you expect revenues and profits to keep getting smaller, you can't justify much of a P/E now can you? It takes growth to increase your P/E multiple.
Forbes tried putting lipstick on the pig with its headline "Sara Lee Sees Meaty Growth." The writer tried to focus on hopes the company has for selling more sausage and lunch meat. But there's no innovation. Just a hope that low commodity prices will improve the margins on these products – and the commodities will stay low so the margins don't dip. Sara Lee hasn't launched a new product since Ms. Barnes took the helm. Crain's summarized the situation more bluntly "Investors Find Little Tasty in Sara Lee."
Business is about creating shareholder value, not destroying it. And Ms. Barnes has been going the wrong way her entire tenure leading Sara Lee. As I pointed out in her first year of leadership in this blog, and have repeated often, Ms. Barnes has not developed any new products for the future, she has not identified competitive opportunities for growth, nor has she been willing to Disrupt old patterns and use White Space to develop and launch new revenue opportunities. Instead, she has slowly and painfully sold off one asset after another – and none of that money has come back to shareholders. Today all shareholders have as a result of her leadership is a smaller and less profitable declining company. And no cash to compensate for the shrinkage.
If we want to come out of this recession we have to replace leaders who are so wrong headed. There's no value in quarter after quarter of cost cutting. There's no value in selling off assets for one time gains to cover ongoing losses. There's no value in shrinking a company without distributing proceeds to the owners for investing elsewhere. Thus, there's no value to the leadership at Sara Lee. What's needed is someone at the helm willing to look to the marketplace for new product ideas and then use White Space to innovate those new solutions. Someone who will put energy and resources behind growth.
The employees, shareholders and vendors at Sara Lee have a lot of scars for waiting – and nothing good. Even the suburban Chicago town of Downer's Grove, IL is hurt by the loss of jobs. To get America going again we have to start growing – and there's no better place to start than Sara Lee. Before it disappears into oblivion – like the onetime Chicago retailer Montgomery Wards!
by Adam Hartung | Aug 6, 2009 | Current Affairs, Disruptions, In the Rapids, Innovation, Openness, Web/Tech
Today a colleague emailed me an article on Cisco. He used the Wall Street Journal "send this article" function. The email had his name, the article title, the link to the article and then this:
"The Wall Street Journal Mobile Reader for iPhoneTM
delivers the latest global news, financial events, market insights and
information to keep you ahead of the curve. Get the information you depend on
plus entertainment, culture, and sports coverage when, where, and how you want
it from the most credible source for news and information. Click below to
download the WSJ Mobile Reader for free from the iTunes App Store."
Another indicator of the trend – the shift – that is affecting publishers. And increasingly affects everyone. If you want to be "in the know" you'll be using different technology than ink on paper, or a laptop. And if you want to be competitively advantaged today you are thinking about how you can use this to grow your business:
- ads for the WSJ articles delivered to iPhone?
- developing an app for your technical materials to be read on an ereader like iPhone?
- creating a way for your customers to get updates on ereaders?
- using ereaders to update your salesforce? service force?
What ideas can you think of where this really cheap, real-time technology can help you beat the competition? How can you put ereaders (iPhone, Kindle, Sony, etc.) into your scenarios about the future? What are the leading edge competitors (like Pizza Hut's iPhone app) doing? How can you Disrupt your old business model to start using this lower cost information dissemination technology? How can you Disrupt the market to deliver higher value? What White Space do you have for testing the use of ereaders, learning about their benefits and getting closer to emerging market needs?
