by Adam Hartung | Apr 7, 2010 | Current Affairs, eBooks, In the Rapids, Innovation, Leadership, Openness, Web/Tech
Nancy Munro of Knowledgeshift.com posted a great blog "Technology was Blago's Enemy Again." Although many people watch The Apprentice, I'm not one. Apparently the former governor of Illinois was a contestant, and when he was challenged to lead a project team his lack of technology skills got in the way of effectively doing the job. Although he's a smart lawyer and politician, his tool set had become outdated. A competitive team leader who was very good at texting and other state-of-the-art technologies was able to best Governor Blagojevich's team, and the ex-governor was "fired" by Donald Trump from the show.
On the surface, this is a funny story. But Nancy points out how it reflects the very real issues of using technology when competing. All businesses compete every day. Those that learn to use new technologies are able to get more done, faster and more effectively. Those who fall into a routine of doing things the same way, and don't advance their tool set, run the risk of being knocked out of the competition. Mr. Blagojevich's inability to use modern technology killed his chances of winning the competition.
Will you, or your business, go to any trade shows or conferences this year? Probably. But you'll limit attendance because you're still worried about financial performance. How will you select where you go? Probably by attending the ones most closely associated with your industry or business. But think about it, are those the ones that will be most valuable? You'll probably mostly hear what you already know, and reinforce your existing beliefs about the business. Is that really an effective spend?
Instead, shouldn't you use the funds to learn about what you don't know? Like how to be a world-class social marketer? This is an amazingly fast growing area where early adopters are gaining new sales. For example, Guy Kawasaki and the world's leaders in social marketing will be talking about how to get sales and profits from Twitter and Facebook at something called "The Smartbrief Social Media Success Summit." I'm not a shill for the conference (I'm not even speaking there), but this kind of event offers the very real opportunity of learning something you don't know – rather than reinforcing old Lock-ins and keeping you doing what you've always done.
Have you purchased a Kindle or iPad yet? If not, how do you know what they can or can't do? At SeekingAlpha.com "Thoughts on the iPad" offers one person's reflection on what the iPad does well, and doesn't, and where it might evolve – as well as how it compares to the Kindle. These devices are selling in the millions – so are you and your business thinking about how to use one to help sell more products or make more money? Yahoo and Google are both launching ad models for iPad (see Mediapost.com "Yahoo Readies Launch of Online Advertising Model"). Are you considering using this media to reach new customers? Have you considered how one of these products embedded in what you sell might offer you a competitive advantage? If you and your colleagues haven't tried one, experimented, how would you know?
Our businesses rarely get into trouble from something we know well. It's what we don't know, what we ignore, that gets us in trouble. Like Craigslist.com wiping out newspaper classified ads. The newspapers didn't even see it coming. On the other hand, if they had investigated and used Craigslist they could have prepared, and maybe even developed a competitive on-line product to grow new revenues!
It's incumbent upon us to constantly expand into new markets. We have to constantly keep White Space alive where we use resources to experiment in areas outside traditional permission. It's easy to keep throwing all our resources into what we know, but in the end, it's what we don't know that will knock us out of the game – like poor Blago.
by Adam Hartung | Mar 29, 2010 | Current Affairs, Leadership, Lock-in, Web/Tech
Apple now has a market cap of $210B. Microsoft has a market cap of about $260B. To traditionalists, this must seem contradictory. Apple has fought its way into new markets, and has domination in none (except maybe the narrowly defined individual music download business). Microsoft has near monopolistic market presence in personal computer operating systems and office software. According to modern business theory from business schools, and the output of books such as Business Strategy by Michael Porter, the monopolist company has entry barriers protecting its return – and thus the ability to almost print unlimited profit. Yet this has not happened.
At SeekingAlpha.com "Apple versus Microsoft: The Value Gap is Closing" the case is made that the value difference is all due to growth. Apple's business for music devices and content is growing – quickly. Its business for mobile devices and mobile device applications is also growing very fast. Those offer substantial positive cash flow today, as well as dramatic cash flow growth in the future. So much so that many analysts wonder what Apple will do with all that money. And that doesn't even count the iPad sales which have exceeded expectations – before even available to ship. And businesses are starting to build applications for the iPad, as explained in the BusinessWeek article "Businesses want Apple's iPad, too."
On the other hand, the demand for PCs is sluggish – at best. People increasingly leave their laptop at home for extended time while the use their mobile device instead. But Microsoft is stuck in a loop of upgrade development and launch. But because of the market shift, these investments are yielding less and less return. Complexity cost is going up, and profits are going down, and growth is dropping precipitously. Products in music, mobile phones and advertising have all lost significant share to Apple, Google and others as attention has remained on the "core" business. So even though current cash flow is strong, value has gone absolutely nowhere for several years, and there's precious reason to think it will go up.
When you lose growth, even if you prop up profits with draconian cost cutting and inventory sales, you lose value. Just look at Sears/KMart. Investors were really excited when Mr. Lampert used his takeover of KMart to acquire Sears. Predictions flew that he would get Sears growing again, while simultaneously monetizing the huge real estate portfolio. But as detailed in Chicago Tribune "Sears and KMart Still Standing, but Market Share Dwindles," value has declined. Mr. Lampert has proven very good at whacking cost. But when it comes to growing revenue – something that will drive ongoing growth in cash flow for a decade or more, he's shown nothing. You can't cost cut your way to long term success.
by Adam Hartung | Mar 24, 2010 | Current Affairs, Defend & Extend, Disruptions, Film, In the Whirlpool, Leadership, Lock-in
Blockbuster Video is in big trouble. Most analysts think the company is going to file bankruptcy – unlikely to survive – with a mere $.30 stock price today. Most of us remember when the weekly (or more frequent) trip to Blockbuster was part of every day life. Like too many companies, Blockbuster was in the Rapids of growth when people wanted VHS tapes, then DVDs, to rent – and CDs to purchase. We happily paid up several dollars for rentals and purchases. Blockbuster grew quickly, and developed a powerful Success Formula that aided its growth.
As it is failing, I was startled by a Forbes.com article "What Blockbuster Video Can Teach Us About Economics." The author contends that this failure is a good thing, because it will release poorly used resources to new application. Like most economists, his idea has good theory. But I doubt the employees (who lose pay and benefits), shareholders, debt holders, bankers, landlords and suppliers – as well as the remaining customers, appreciate his point of view. Theory won't help them deal with lost cash flow and expensive transition costs.
As the market shifted to mail order and on-line downloads, Blockbuster could have changed its Success Formula. But instead the company remained Locked-in to doing what it has always done. It will fail not because some force of nature willed its demise. Rather, management made the bad decision to try Defending & Extending an out of date business model – rather than exploring market shifts, studying the competition intensely then using Disruptions and White Space to attack both Netflix and the on-line players. Blockbuster's demise was not a given. Rather, it was a result of following out of date management practices that now have serious costs to the businesses and people who are part of the Blockbuster eco-system. I struggle to see how that is a good thing.
Fortunately, ManagementExcellence.com has a great article about ideas for attacking a threatened Success Formula in order to avoid becoming a Blockbuster entitled "Leadership Caffeine: 7 Odd Ideas to Help You Get Unstuck." The author specifically takes aim at the comfort of Lock-in, and describes how managers can start to make Disruption part of everyday life:
- Fight the tyranny of Recurring Meetings
- Rotate Leadership
- Break the back of bad-habit brainstorming
- Do something completely off-task with your group
- Introduce your team to thought leaders and innovators
- Play games
- Change up your routine
Described in detail in the article, these are simple things anybody can do that begin to reveal how deeply we Lock-in, and expose the power of how we could behave differently. If Blockbuster management had applied these ideas, the company would have been a lot more likely to return positively to society – rather than become another bankruptcy statistic.
by Adam Hartung | Mar 23, 2010 | Current Affairs, Leadership, Lock-in, Openness, Web/Tech, Weblogs
Let's see, would you rather spend $4million to reach 100 million people once – say via a Super Bowl ad – or spend almost nothing to reach 400million people every day? Seems obvious economics. Yet, how good is your Facebook presence? Because that is the route to all those people who are on-line daily.
Most of today's business leaders grew up in the world of one-way advertising. They watched TV, listened to the radio, read magazines and newspapers. They were taught that to get a message into potential buyer heads, unfiltered by journalists, you had to advertise. And for a long time, that was pretty true. So they Locked-in on advertising and traditional PR as the route to name awareness and brand image. But that was before the market shift which is dampening enthusiasm for traditional media while social media (broadly – including YouTube) is exploding.
Now your customers, and potential customers, are most likely using Twitter, Facebook, Linked-In and other social media every day. And when they search on your products, they get Google responses from social media. If you aren't putting some effort into the media, your image and message could be far removed from your goal!
I remember talking to the CEO of Rolex in 1997. Rolex did not have a web site. His point of view was that as a luxury good, the internet was "below" his company's standards for communicating. If there was to be a web site, he thought Tourneau – the world's largest retailer of luxury watches – would build it. In 10 minutes I demonstrated to him how a simple search on "Rolex" turned up gobs of used dealers, unauthorized dealers, unauthorized repair shops, and outright fakes! Several near the top of the list! He was shocked. His brand was rapidly being marginalized via a channel he had never even considered. His worst fears about how the brand would be stolen, manipulated and value minimized were happening – and he was blithely ignorant. Of course, Rolex got involved quickly to protect its brand.
So when was the last time you reviewed your brand, or image, or message across social media channels? Are you possibly, blithely letting someone else manipulate your image?
At MediaPost.com in "Ensuring A Successful Corporate Facebook Presence" the authors outline a 4 step approach for doing a good job. My biggest fear is that Lock-in to old approaches to sales and marketing mean too few companies are paying even a shred of interest in social media. Over and over I hear marketers of large, established companies saying that social media access is blocked at work – and nothing is being done to leverage the channel! In some instances, I've heard of Chief Marketing Officers making a "command decision" to avoid social media, because they can't "control" it.
Secondly, the competition that is going to ruin your day just might do it via social media! An existing company may have an image, advertising and effective PR. So how would a Disruptive new competitor go after you? Why, using the very low cost channel of social media. We've all heard about disgruntled customers that have used songs, videos and other clever tools to spread extremely negative information like wildfire through a customer base. Yet, by ignoring the channel – by ignoring the opportunity to develop a strong and effective presence that ties to customers – we encourage competitors to use this channel to our detriment.
Don't let Lock-in cause you to ignore this powerful, and shockingly low cost, communication tool. Realize that social media is here to stay, and incorporate it into your future scenarios. Additionally, social media is where your competition – especially fringe competitors – are likely to target you. Why not study them, learn from them, and use the tool to grow instead of being a target? And when it's time to implement, Disrupt your old decision-making and spending patterns so you allocate some resources to build out your social media campaign. Then put together a White Space team with Permission to really go for success using the resources you've now dedicated to the project.
Applying the Phoenix Principle can result in a rapid improvement in social media marketing – and it just might save you a huge amount of spending on your traditional marketing communications plans. While bringing in new customers and markets!
by Adam Hartung | Mar 17, 2010 | Defend & Extend, In the Rapids, In the Swamp, Leadership, Lifecycle
You've probably read that 80% of new jobs are created in small business. Even if this is true, it creates a misconception. You'd think that we need to start lots of new companies. As BusinessWeek reported in "Looking for More High Growth Start-ups" 40% of new jobs are created by a mere 1% of start-ups. The really fast growers.
We like to think that all companies contribute job growth to the economy. But that is simply not true. In reality, the vast majority of businesses contribute no new jobs. In fact, they are reducing employment. Almost all of the job growth, in fact almost all of the economic growth, comes from a very small number of companies that account for almost all the real growth. These are the 10% of companies that are in the Rapids. All others are either looking for early growth, or trying to "hang on" to an outdated Success Formula and seeing their business slowly (or not so slowly) erode.
Most small businesses are in the Wellspring. Looking for some kind of growth. Most of these – literally 90% – never really figure out a Success Formula that drives growth, and they simply die off. The other big group of businesses are somewhere in the Flats or Swamp. Growth has left them, as market shifts have taken demand to other competitors. They are facing a Re-Invention Gap between what they do and what most customers really want. As a result, they produce no inflation-adjusted revenue growth, and no new jobs. Eventually, as the re-invention gap grows, they drift into the Swamp of declining returns. Eventually they become obsolete. Think about independent pharmacies, most insurance agents, small banks, bicycle shops – you get the idea.
So where do we get new jobs? From the companies that are in the Rapids. Think about the skkyrocketing employment at places like Boeing and airlines when aviation was a growth industry in the 1960s through the 1980s. And the growth in computer and IT jobs in the 1990s. Those businesses that participatd in the Rapids are participating in market shifts, and they are creating new revenues and jobs.
Today a good example is Google. While traditional companies are lamenting "a bad economy" Google is participating in the market shift, and thus creating revenue growth and new jobs. At PoynterOnline.com, in "Google Team Offers Lessons in Innovation, Project Management", we can read how the GMail team discussed at the recent South by Southwest Conference their approach to remaining in the Rapids. While other organizations are frozen in place, trying to Defend what they've always done, and thereby falling into the Swamp, Google keeps pushing forward with new solutions that help customers do new things — and thus create additional growth.
Apple, Amazon and Cisco are additional examples of organizations that are using Disruptions and White Space to keep their companies participating in market shifts. As a result, they've kept growing in 2008, 2009 and into 2010. They don't blame the economy, they keep innovating and taking new solutions to market. Thus they grow. Those companies that are blaming the economy are simply spending too much time trying to Defend & Extend their old Success Formula, and drifting into obsolescence.
Even big, entrenched companies can grow. The Wall Street Journal recently interviewed the CEO of Austalia's phone company, Telstra, in "If You Don't Deliver Numbers You Aren't Doing Your Job." He points out that as CEO his most important role is to keep the company growing. He could easily have gotten stuck thinking of his business as a traditional, land-line telco. But his role is to balance the management of an old Success Formula with implementing White Space which can evolve his company forward into a post-modern communications company with new technologies and new solutions. As a result, what could be thought of as a bureaucratic monopoly is much more successful, growing through its participation in market shifts.
Alternatively, we have AT&T, and its former leader Mr. Whitacre now ensconced at General Motors. The original AT&T almost went bankrupt before being acquired by what was Southwestern Bell – then renamed to AT&T. AT&T kept losing jobs by the tens of thousands – as did the regional Bell Companies. Mr. Whitacre, with his "caretaker" approach to the old Success Formula, simply kept buying up old pieces of the original AT&T and laying off more people. Today AT&T is a shell of what it was in the early 1980s when split apart. It is not an aggressive part of the market shift, nor is it growing like Telstra.
And Mr. Whitacre is now at GM. Another company that is deeply mired in the Swamp – and very unlikely to avoid the Whirlpool. GM is not leading in any market shifts, and as a result its sales are not growing – nor is its employment. Lacking participation in growing markets, GM will continue shedding revenues and jobs as it marches toward obsolescence.
Myths about lifecycles abound. The biggest is that if you stick to your core, you will keep growing. Somehow you will jump from one new product line to the next, and maintain growth. But it just doesn't happen. Focusing on your core causes you to drop out of growth as market shifts make you irrelevant – like Wang, Lanier, Digital Equipment, Silicon Graphics and Sun Microsystems. Growth slows, employment shrinks. To succeed you have to continuously participate in market shifts, to keep yourself in the Growth Rapids. And for our economy, we desperately need more leaders to refocus on creating Disruptions and White Space to grow – like Google – if we are to get the U.S. economy growing again.
by Adam Hartung | Mar 15, 2010 | Current Affairs, Defend & Extend, General, Innovation, Leadership, Openness, Web/Tech
Did you ever notice how often a large company will introduce a new solution (often a new technology), but then retrench from promoting it? Frequently, the market is developed by an alternate company that captures most of the value. We can see that behavior looking at smartphones.
Source: Silicon Alley Insider
In 2008, three early leaders were Microsoft, RIM and Palm. But Microsoft chose to invest in Defending & Extending its PC software business – with updates to the operating system in Vista and OS 7. As the market has shifted toward mobile computing, Microsoft has been clobbered. But largely because it remained stuck trying to protect its "core" while the market shifted away. Palm also tried to Defend & Extend its early position with updates, but because it did not follow the pathway to greater usage with new applications it also has seen dramatic share decline.
Meanwhile, RIM has promoted new uses within the corporate world for mobility, and thus grown its market share. And Apple has made a huge impact by bringing forward dozens of new mobile applications, closely followed by Google. What we see is a classic example of the early entrant fading largely because they decided to Defend the old market, rather than investing in the new one. Really too bad for shareholders in Microsoft (losing 20 share points) and Palm (losing 10 share points), while good for shareholders of RIM, Apple and Google.
And in Apple's case we can see that the company continues using White Space to grow revenues by expanding the new marketplace. The iPad is off to a very strong start, with tens of thousands of units ordered last week. But of greater importance is how Apple is promoting the shift to mobile devices from traditional PC devices. At SeekingAlpha.com, in "How the iPad, Slates Will Evolve the Next Two Years," the reporter projects how demand for all laptop products will decline as more capability and functionality is added to mobile devices like smartphones and these new slate products.
Microsoft can keep trying to Defend & Extend PC technology, but it won't be long before their efforts largely won't matter. Don't forget that once Cray computers was a rapidly growing super-computer company. But increasing performance from much alternative products eventually made Cray irrelevant. Same for Silicon Graphics and Sun Microsystems.
Today the market capitalization of Microsoft is about $250B, about 4x sales. Apple's market cap is just over $200B, about 6x sales. Google's market cap is about $180B, about 8x sales. All reflect investor expectations about future growth. The D&E company is simply not expected to grow – and in fact is much more likely to disappoint than the companies growing share in growing markets toward which customers are shifting.
And any company can choose to participate in growth, versus Defend & Extend. While Tribune Corporation is trying to find a way out of bankruptcy, and struggling to figure out how to deal with market shifts away from newspapers, Hearst is taking positive action. The Wall Street Journal reports in "Hearst Jumps Into the Apps Business" how the old-line newspaper company has set up a White Space project, complete with dedicated people and its own funding, to begin developing mobile applications for news!
Even when business leaders see a market shift, far too many choose to Defend & Extend the "core." Unfortunately, that leads to disappointments. Keep in mind Microsoft and its rapid loss of Smartphone share as users move increasingly to mobile devices from PCs. To succeed leaders need to drive their organizations in the direction of market shifts, and growth. Like Apple, Google and even Hearst.
by Adam Hartung | Mar 11, 2010 | Current Affairs, Defend & Extend, In the Swamp, In the Whirlpool, Leadership
I don't know the source of the phrase, but since a young boy I've heard "Nero fiddled while Rome burned." The phrase was used to describe a leader who was so out of touch he was unable to do the necessary things to save his city and the people in it. Lately, it seems like General Motors is ancient Rome.
"General Motors to launch the 'un-Dealership" is the Mediapost.com headline. Trying to leverage auto shows, GM is going to open minimally-branded brick-and-mortar locations in 3 or 4 cities where customers can test drive Chevrolet and other cars. The idea is that with less pressure from salespeople, customers will come use the internet cafe and hang out while occasionally test driving a car. Then they'll be fired up to go buy a GM product.
If that isn't fiddling…… well…… When will leaders admit GM is in seriously dire trouble? The company has lopped off complete product lines (Saturn, Hummer, Saab and Pontiac) and whacked away large numbers of dealers. Their cars are uninteresting, and losing market share to domestic (Ford) and foreign manufacturers. Design cycles are too long, products do not meet customer needs and competitors are zeroing in on GM customers. Product sales, and even dealerships, are being propped up using government subsidies. The best news in the GM business has been all the troubles Toyota is having.
During this malaise, the new GM Board agreed to appoint Ed Whitacre as the permanent CEO (see ABCnews.com article "GM Chairman Ed Whitacre Named Permanent CEO.") Great, just what GM needed. Another 70 year old white male as CEO who developed his business experience in the monopoly of the phone industry. Who's primary claim to fame was that after Judge Green tore AT&T apart to create competition he was able to put it back together – only after the marketplace for land-line phones had begun declining and without growth businesses like mobile data.
As the ABC article notes, Mr. Whitacre sees his role running GM as "a public service… I think this company is good for America. I think America needs this." Just the kind of enthusiasm we all like to hear from a turnaround CEO.
GM needs to get aggressive about change if it is going to survive in a flat auto business with global competitors. The company has no clear view of how it will be part of a different future, nor any keen insight to competitors. It is floundering to manage its historical products and distribution, with no insight as to how it will outmaneuver tough companies like Honda, Kia and Tata. It has not attacked its outdated product line, nor its design cycle, nor its approach to manufacturing. It has very little R&D, and is behind practically all competitors with innovations. A caretaker is NOT what GM needs.
I blogged months ago that GM needed a leader who was ready to change the company. Ready to adopt scenario planning, competitor obsession, Disruptions and White Space to drive industry change and give GM a fighting chance at competing in the future. It's going to take a lot more than 4 test drive centers with internet access and latte machines to make GM competitive. But given what the new Board did, putting Mr. Whitacre in the CEO role, the odds are between slim and none the right things will happen.
To survive you have to BEAT the competition. Read more about "The 10 ways to Beat the Competition" at BusinessInsider.com
by Adam Hartung | Mar 9, 2010 | Defend & Extend, In the Swamp, Leadership, Lifecycle, Lock-in
One of the worst impacts of Defend & Extend Management is the placement of a bullseye on your business. Take for example Microsoft. When everyone knows what software Microsoft is going to release, they start targeting it for hacking and otherwise spoiling. Likewise, competitors can predict Microsoft's moves and launch products that compete alternatively – such as Firefox and recently Chrome have done in Browsers. And has cloud computing using mobile devices. As leaders take actions to Defend & Extend the Success Formula the business becomes predictable, and much easier to attack.
And that's now a big problem for WalMart. Advertising Age is now discussing this problem at the world's largest retailer in "Stuck-in-middle Walmart Starts to Lose Share." As WalMart kept promoting, over and over and over, its message of "low price" (how many "rollback" ads did you see on television with images of falling price signs?) a single position was drummed home.
But while WalMart did this, smaller and more nimble competitors like Dollar General have actually been able to undercut WalMart on price – sucking away customers. Additionally, changes to improve margins in WalMart stores, and some redesigned stores, have caused prices to go up at WalMart making the company no longer the price leader! In several categories Target has beaten WalMart in professional pricing surveys! What happens when WalMart, with its concrete floors, limited merchandise and lowly paid employees is no longer the price leader?
Unfortunately, not everybody wants low price – especially all the time. And smart competitors like Target have been figuring out how to beat WalMart on specific items, while also offering a better shopping experience. While WalMart keeps trying to cut prices on the backs of vendors, thus not being the favorite customer of most, Target and others have been smarter about making deals which offered more win/win opportunities. They took specific aim at weaknesses in WalMart's strategy, and are now ruining WalMart's day by beating WalMart selectively while simultaneously offering more! WalMart made it possible by signaling its strategy and tactics so clearly. A result of Defend & Extend management.
WalMart would like to move away from being strictly low price. As the article details, the company has implemented a "project impact" intended to upgrade stores and make them more merchandise and experience competitive. However, this has raised prices and confused shoppers. If WalMart isn't "low price" what is it? Again, when management is all about Defend & Extend then customers aren't able to understand behavior that is different from doing more of what was always done.
WalMart's move to upgrade stores is laudable. But the company cannot implement a change through the traditional store operations. Phoenix Principle companies know that good new ideas cannot survive as part of the existing D&E business. Confused customers, unhappy and confused management and conflicts with historical metrics (like pricing and margin metrics) simply makes the new idea "out of step" with the Success Formula. And as Lock-ins (like "we are low price") are violated discomfort leads to resentment and a desire to get back to old ways of doing business. People start asking for a "return to the core of what made us great." For these reasons, "project impact" is not succeeding and has no real chance of succeeding.
WalMart is in trouble. It's growth has slowed as competitors are figuring out other ways to compete. Ways WalMart cannot follow. Competitors are picking apart the WalMart strategy, and siphoning off revenue and profit. Walmart is stuck in the Swamp, with no idea how to regain growth because the old approach has rapidly diminishing returns and the new approach is not viable in the organization.
To succeed, WalMart needs to apply The Phoenix Principle to "project impact." It must first develop its future scenario, and start spreading that message throughout WalMart and analysts. Otherwise, confusion will remain dominant. Secondly, WalMart must be honest with employees, customers, vendors and analysts about changing competition and how WalMart must change to remain competitive. It must talk less about WalMart and more about competitors and market shifts. Thirdly, WalMart has to be willing to Disrupt itself. Instead of all the incessant "rah rah" about the great "WalMart way" of doing things top management has to start saying that it is going to attack some lock-ins. It is going to force some changes. Then, "project impact" needs to be implemented in White Space. It needs to report outside the existing WalMart operations, have its own buyers, merchandisers, employees (maybe even allowing a union!). It needs permission to violate old Lock-ins in order to develop a new Success Formula, and the resources committed to really do the implementation – including testing and changing.
WalMart is Locked-in and its Defend & Extend Management approach is not good news for investors, vendors or employees. We can see that competitors, from on-line to the traditional Target, are taking shots at the bullseye Walmart has so proudly worn. Market shifts are happening. But WalMart is not establishing White Space to develop a new solution, and as a result the leadership is confusing everybody about "What is WalMart"? The company doesn't need to go back to its old ways – instead it really needs to apply The Phoenix Principle. But so far, D&E Management seems to be leading.
by Adam Hartung | Mar 8, 2010 | Defend & Extend, In the Rapids, In the Swamp, Leadership, Web/Tech
Two tech giants are Microsoft and Google. The former has been around for over 30 years. The latter about a decade. Which is the company you should work for, or invest in? The one that has demonstrated a long history and great record of earnings, or the newer one participating in new markets still not well understood with a slew of new – but largely unproven – products? You might think the older one is less risky, and feel more comfortable backing.
But we know that Microsoft is losing market share, especially in growing markets. Although its products have been dominant, the market for those products (personal computers used as servers, desktop machines and laptops) has seen substantial slowing. New solutions are emerging that compete directly with Microsoft (new operating systems like Linux and others) and compete indirectly (cloud computing and thin applications on mobile devices.)
Source: Silicon Alley Insider
In just 18 months Microsoft Internet Explorer has lost 13 market share points – dropping from 68% of the market to 55%. Almost all of that has gone to Safari (Macintosh) and Google Chrome. Chrome has risen from nothing to 7% of the market. And since internet usage is growing, while desktop usage is shrinking, this is the "leading edge" of the market.
Also, the Chrome operating system will be launching later in 2010. It also will go directly after the "Windows" franchise which had a very unexciting launch of System 7 in 2009.
Let's look at valuation: First Microsoft – which has gone basically sideways. Huge peak to trough, but overall not much gain for investors despite launching two major upgrades during the period (Vista and System 7 as well as Office 2007). Obviously, upgrade products have produced very little growth for Microsoft, or its valuation.
Now we can look at Google. Google investors have doubled their money, while employment has grown. All those new products have helped Google to grow, and investors have an optimistic view of future growth.
Do you make decisions looking in the rear view mirror, or out the windshield? It can be tempting to be influenced by a great past. But that really isn't relevant. What's important is the future. And we can see that Microsoft, which keeps trying to Defend & Extend what it knows is rapidly falling behind the market changer, Google, which is rapidly moving toward where markets are heading.
D&E Management never creates growth. By trying to recapture the past, new market moves are missed and growth opportunities lost. Companies have to move forward, with new products, into new markets. And if you have any doubt, just compare the results of Defend & Extend Management at Microsoft the last 5 years with Phoenix Principle management using White Space at Google.
by Adam Hartung | Mar 4, 2010 | Current Affairs, Defend & Extend, In the Rapids, Leadership, Web/Tech, Weblogs
Apple's shareholder meeting was last week. In an era where shareholders are most worried about the survivability of the companies where they are invested, the biggest issue at Apple is what to do with all its cash! Reuters.com reported "Apple's Jobs says must think 'big' on cash hoard." In 2009, when most companies saw their market value decline, Apple's value doubled. Yet, it's cash is fully 1/5 (20%) of its current market capitalization! Clearly the company is generating cash faster than it has found investment opportunities. Even after launching the iPad with expectations of selling 2 to 5 million units in 2010!
We all should be so lucky, to have this problem of riches. Apple has enough cash that it could buy all the equity of Dell. Of course, why do that? It just goes to show that the company that built its market cap in the 1990s on Defend & Extend behavior – focusing on execution in a growing PC marketplace – has seen its valuation multiple shredded as buyers have shifted to other solutions. Meanwhile, Apple's value has skyrocketed because it entered new markets and created new solutions. Yet, it's cash flow has skyrocketed even faster!
It is possible for all companies to follow Apple's lead, increasing revenues and valuation. Last week I was interviewed by Zane Safrit for his radio program and highlights are on his blog, and the full interview is available for listening at the BlogTalkRadio site. In the interview Zane brings out how so many business leaders are stuck defending and extending broken Success Formulas that cannot produce better returns, and waiting for a "better economy" to "save" them. What Zane also cleverly brings out is how The Phoenix Principle can be applied to any business, with results that can be as stunning as Apple's. If leaders will start focusing on the future, obsessing about competitors, utillize Disruptions and White Space.
Of course, these are amplified in the "10 Ways to Stay Ahead of the Competition" I posted in yesterday's blog. I've received comments that the links to the deeper discussion on both the Business Insider web site and the IBM Open Forum weren't working, so I'm reproducing them here again.
10 Ways to Stay Ahead of the Competition – Business Insider
How to Stay Ahead of the Competition – IBM Open Forum
All companies can grow like Apple. But it takes a different way of approaching management. I hope you can find time to listen to the interview and explore how your organization can become like a Phoenix, forever growing through constant rebirth.
