by Adam Hartung | Sep 16, 2008 | Disruptions, In the Rapids, Innovation, Leadership, Openness
There has been a lot of press recently about the terrible situation for retailers. With house prices plunging, incomes stagnating for 6 years, and credit tight we’ve entered a consumer-led receission in the USA. Analysts are giving plenty of reasons for retail companies to do poorly. About all the big boys are seeing declining revenues – and even the behemoth Wal-Mart is barely growing and it’s doing all the price-chopping it can. Walgreens, the nation’s fastest growing retailer, has slowed its store openings. Jewelers are going bankrupt. A single stumble seems to have led clothier Steve & Barry’s into bankruptcy despite a great reputation with college students. In the middle of this, one company is going into the retail business, opening new stores in hotly contested markets like Chicago. L.L. Bean (read story here).
L.L. Bean has been around a long time, selling product via catalogs. Of course as the internet blossomed and web pages replaced catalogs, their sales on–line grew as well. They’ve long made money as a catalog-based retailer. Their distinctive product line of outdoor-oriented gear, coupled with their catalog distribution, has been the L.L. Bean Success Formula. Yet, now in one of the worst retail markets in recent history the company is moving into traditional brick-and-mortar retail. To traditional analysts, this seems nuts. But L.L. Bean is showing all the strengths of a Phoenix Principle organization. Like Virgin, that launched a profitable airline when everyone said airlines were impossible to make money, L.L. Bean is moving now when the traditional retailer’s Success Formulas are most at risk.
- Traditional retailers are suffering. This shows that the industry Success Formula is producing diminishing returns. The industry is primed for change, because Locked-in existing players are trying to "hunker down" and do "more of the same." This provides a great opportunity for a new player with game-changing ideas to enter the market.
- L.L. Bean’s stores are not targeted at existing retailers. They are targeted at what will make retail stores successful in future years. The plan is all around what people will want in the future to shop at retail, not what has worked in the past.
- L.L. Bean is focused on competitors, and how it can beat them. This move is not about trying to Defend & Extend the old L.L. Bean business, it is about taking advantage of weakened competitors at a time of market shift. L.L. Bean isn’t opening these stores in Chicago (and other places far removed from its traditional market of Maine and the Northeastern U.S.) because customers told them to – they are doing it as a way to be more competitive. For a long time the midwest was a difficult competitive market because of Lands End based in Dodgeville, WI. But since being acquired by Sears Lands End has grown considerably weaker, creating an opportunity for L.L. Bean.
- L.L. Bean is disrupting it’s old Success Formula. These stores have nothing to do with the old centralized catalogue sales and distribution tactics. And the stores are industry Disruptive environments that are as different from a Sears, Wal-Mart, Eddie Bauer or Aeropostale as they can be. L.L. Bean isn’t just trying to sell more stuff in new markets, it is creating an entirely new approach to how it sells.
- L.L. Bean is not trying to extend its old Success Formula. It is using White Space to develop a new Success Formula that will allow the company to be far more successful in 2015 than it was in 2005 or 1995 or 1985. By using White Space since launching its first stores, L.L. Bean is experimenting – trying new things – and learning how to be more successful in a shifting retail marketplace.
When markets shift the existing leaders often stumble. By trying to Defend & Extend their old Lock-ins they hope to regain past results. But shifting markets make old approaches create declining returns. The result is an opening for new competitors, with new Success Formulas, to take advantage of the shift. These new competitors, whether brand new, or a company willing to retool like L.L. Bean, use White Space to figure out what works in the new marketplace. So even when you hear how bad things are in any market, and the existing players are talking about cutting back, there’s always room for a winner. If they are willing to undertake Disruptions, and use White Space to learn what creates the new Success Formula.
by Adam Hartung | Sep 8, 2008 | General, In the Rapids, Leadership, Openness
Google (see chart here) is 10 years old. That’s right, it was just 1998 that $100,000 was invested to start up Google (read article here). Today the company is worth almost $150billion, and its two 35 year old founders have stakes valued at approximately $19billion each.
Now that Google is so successful, it’s easy to say "of course." But think about it. In 1998 the leaders in internet search were Microsoft, Lycos and Yahoo! At that time would you have taken the bet that this start-up company would succeed against the much larger and enormously better financed competitors? What’s more, would you have bet that the start-up could build a fortune by placing ads on the internet?
Now let’s put the shoe on the other foot. Imagine you were offered a job in 1998 to work at Google. Would you have been able to project the company could be a $10billion revenue company in 10 years? Would you have been able to look into the future, analyze weaknesses in competitors, and say "this could be the most influential company in technology in 10 years?" Or, would you have been more likely to say "given our humble beginnings, if we can achieve $10million revenue in 5 years we will be extremely successful. After that, if we can grow at 12% per year we will exceed industry average growth and be very pleased"?
There’s an old saying, "it’s not where you start the race, it’s where you finish that counts." Most of us are leary of looking into the future, seeking out competitive weakness and undertaking Disruption to do new things. We are more comfortable doing what we’ve done in the past, setting low expectations we can likely meet and doing all planning based upon our past history. And that approach means that even if you have all the technology, skill, market opportunity and resources of Google you still won’t be Google – because you’ll never achieve that success. You’ll be bounded by your past Success Formula to do no better than you did in the past, and therefore the opportunity will go to someone else.
Now Google is not only selling internet ads, it’s selling TV ads to NBC, CNBC, MSNBC, Oxygen and Dish network (read article here.) Last week Google launched a new internet browser (Chrome) in direct competition with Firefox and Internet Explorer. Just 10 years old, Google isn’t just a search engine company, it’s in several businesses with White Space flourishing in several markets. But this is only possible because
- Google is totally focused on the future. It doesn’t plan from the past. It isn’t focused on its "core" markets, or how to maintain its share in historical businesses. Google plans for a future using scenarios about what is likely to happen – and what "can be."
- Google is obsessed about competitors. It doesn’t just look to defend its old business, but rather stuides all competitors to see what opportunities are created. It doesn’t hesitate to buy companies like DoubleClick and YouTube. And it doesn’t hesitate to take on Locked-in competitors like Microsoft.
- Google is ready to Disrupt itself, and the markets it enters. Google embraces Disruption, rather than avoiding it. Rather than "stick to its knitting" in search it jumps into markets like browsers where it can be Disruptive.
- Google is loaded with White Space. That White Space allows Google to constantly develop new Success Formulas that grow the company at a stratospheric rate.
Every executive in every company has the opportunity to run a Google. The trick is to get out of Lock-in. To move from thinking that the future has to be about old markets, old ways of competing, and about doing more of the same but faster, better and cheaper. To be a Google means getting the business into the Rapids of growth, wherever those Rapids may be. Creating a Google means shedding old notions about "core focus" and using future scenarios to lead you into high growth opportunities – the willingness to Disrupt old patterns to consider new things – and keeping White Space very active to grow into new markets.
After all, that’s what the leaders did at Virgin and Nike – a couple of other companies that have grown beyond everyone’s expectation. So, would you do it if you had the chance? Or would you remain Locked-in to Defending & Extending your past even if it means results are suboptimal?
by Adam Hartung | Sep 3, 2008 | Defend & Extend, General, In the Swamp, Innovation, Leadership, Openness
Today Coca-Cola (see chart here) announced it was planning to acquire the largest juice company in China (read Marketwatch article here.) At a cost of $2.4 billion Coke is hoping to expand its footprint in the most populous country on earth. Are you excited? Most people aren’t – and there’s no reason to be.
What’s the innovation in this move by Coca-Cola? What are they doing that’s new? Nothing, of course. This is a simple extension of the same soft-drink business Coca-Cola has been in for decades. More of the same. Yes it’s good that they would want to do more business in the very large and growing Chinese market – but this is more Defend & Extend behavior trying to support existing Lock-ins. At first it may sound obviously good, but what’s not discussed is how much local competition Coke will face. Nor how much competition from European and other competitors. Without innovation, this kind of extend tactic will face all the traditional market competition and is unlikely to produce exciting (above-average) results. Just look at how little difference offshore acquisitions and expansion have made to Wal-Mart or GM – because as D&E plays they allow competitors to keep banging away at the company’s declining Success Formula. Just because a company announces it is entering a new market does not mean they will sell more stuff, nor make more money.
We can see that Coke is struggling to innovate when the same announcement says that the company is planning to spend $1billion in a stock buyback this year. This is an admission that without anything innovative to invest in the company is going to use its cash to prop up the stock price (which will benefit the bonus of the top execs.) Coke cannot regain its great growth glory if it’s spending all its money to do more of the same and buy its own stock. That’s the cycle of doing only what the company knows, which is why the business has been suffering from declining marginal returns for almost 20 years (Coke is down almost 50% from its highs reached in the mid-90s, see long-term chart here). Even the recently published memoirs of the ex-COO at Coke is a study in how to try avoiding failure – rather than seeking success (The Ten Commandments for Business Failure is currently paired with Create Marketplace Disruption on Amazon – a distinct contrast in approach to business management.)
This is the flip side of the discussion in yesterday’s blog about Google’s Chrome release (see video about Chrome’s launch on Marketwatch here). Chrome is significant innovation by Google trying to move beyond its traditional markets. Chrome is not about Defending & Extending Google Lock-ins to traditional markets and products. Chrome is using White Space to implement Disruptions taking Google into new markets with much higher growth, which will allow Google to remain in the Rapids. Coke’s planned acquisition is a yawner because it supports historical Lock-ins and keeps the company in the slow-growth, unexciting, non-innovative mode that has made its returns lackluster for several years. No White Space in the Coke move – just more of the same – which makes life much easier for its competitors, whether traditional or new.
by Adam Hartung | Sep 2, 2008 | Disruptions, In the Rapids, Innovation, Leadership, Openness
Today Google (see chart here) announced the launch of its new web browser – called Chrome (see Marketwatch article here). At first blush this may seem quite techie, thus uninteresting to most of us. But it is big news for some very important companies – and well worth watching.
Is Chrome better than Internet Explorer from Microsoft (see chart here)? I don’t know, but I don’t really care right now. There can be a lot of technical debate about what browser is best – but we all know that with IT products being a great product isn’t what’s important. If the market were dominated by great products we sure wouldn’t be using applications from Microsoft – nor databases from Oracle – or software packages from SAP. As Geoffrey Moore has written about extensively in his books (Crossing the Chasm, The Gorilla Game, and Dealing with Darwin to name just 3), success in high tech products – like success in most products – has more to do with your ability to manage the product lifecycle and attract customers than how good the product is.
What we should care about is that Google, a company known for its search engine and its ad placement machine just launched a new product into a very large market against the world’s largest software supplier (based on number of individual users). With a product that’s ostensibly free. This is a clear action by Google demonstrating its ability to follow The Phoenix Principle:
- Google is taking a product to market based upon their scenario of the future – not the market today. They see how a better browser makes getting your work done easier and faster.
- Google is focused on the competition, not currenct customers or their own internal machinations. They see a Locked-in, moribund competitor that is unable to move into new solutions.
- Google is willing to be internally Disruptive by entering entirely new markets, using entirely new metrics and with entirely different requirements for success.
- Google is using White Space to figure out how to grow revenue in the application market that everyone who uses the internet needs – a connection page/application we call a browser.
This is a very big deal. It means Google is not at all willing to rest on its laurels. Yes, it pretty much owns the "search" business and it is hugely in front with on-line ad placement. But it’s not just Locked-in to those markets and focused on Defending & Extending them. It’s ready to go into a very different market with a very different requirement for Success. It’s willing to use White Space to learn how to maintain its extra-ordinary growth rate. This is a very big deal. Google has shown it will give its people permission to do very different things, in very different markets, and authorize the resources to push into those markets aggressively. This is a very, very important step for Google that portends quite good things.
Now to the company with 75% market share – Microsoft. You might laugh and think Microsoft has little to fear. That would be like laughing when Alfred Sloan started selling all those different kinds of cars at General Motors when Ford had 75% share with the Model T. Or laughing at Honda when it first brought the Civic to American and GM + Ford + Chrysler had almost 90% of the U.S. auto market. Microsoft is big, but it’s not invulnerable. Microsoft has sat on its laurels. It’s efforts at "search" were a dismal failure. It completely missed the ad placement market. Microsoft has not offered customers an exciting advance they are willing to buy in desktop applications for years. And its last effort to excite customers with a new operating system was so ignored it had to force distributors to take Vistage by refusing to ship its old product – to howls of complaints. Microsoft is big and has lots of money – but so did Ford, GM, Woolworth’s, Xerox and a long list of other companies that once dominated a market only to fall prey to Disruptive competitors while they practiced Defend & Extend management.
What’s worse is the likely impact on Yahoo! (see chart here). Yahoo! was first to make "search" into a business (not the first search engine, but the first to make it a profitable business). But it’s share has consistently eroded as Yahoo! kept trying to do more of what it always did – while Google went out and used White Space to develop Disruptive solutions. While Yahoo! clung to its ad agency roots, Google developed the world’s largest data center to house servers for those billions of searches we all do. Google developed its own servers, and its own facilities located near rivers to cool them all. And Google kept doing things on the cutting edge of internet use to find out what would create more and better on-line advertising generating new revenue for itself. Yahoo! is trying to find a way to survive – while Google is going into whole new business initiatives with White Space Yahoo! hasn’t even considered.
Today’s announcement wasn’t just a product release by Google. Chrome shows us that Google is a company doing all the right things to stay in the Rapids of fast growth. Unlike Microsoft and Dell that Locked-in early and built a business on Defend & Extend tactics which eventually left them without innovation – Google is using White Space to get into markets that attack the heart of its biggest —- and most Locked-in —- competitor. We can expect Microsoft will do nothing – nothing but try to argue that it is biggest so best. Meanwhile, Google is taking advantage of Microsoft’s Lock-in to take customers into new solutions. This is very good news for Google investors, and very bad news for Microsoft and Yahoo! investors. Not because Chrome is a great product, but because it shows Google is a Phoenix Principle company while Microsoft and Yahoo! are Locked-in to D&E practices that are sending them to declining returns and marginal performance.
by Adam Hartung | Aug 14, 2008 | Disruptions, General, Leadership, Lock-in, Openness
The Phoenix Principle applies not only to companies, but industries and even whole economies. There is no doubt countries Lock-in on a market approach, and then Defend & Extend it. And these Locked-in countries become victims of market shifts and new competitors who are not afraid to Disrupt and use White Space to change.
Just think historically for a moment. There was a time when the Dutch controlled more land than any other country. As leading explorers, their territories were the most vast. But they were unable to evolve a system of government which would allow them to Defend & Extend their territories, and they fell from the top perch. The Spanish became the next big economic engine, developing extensive colonies for their King, Queen and church. But, a Lock-in to how they would govern became rife with corruption and eventually they lost their leadership as their floating armada was destroyed. The British led the industrial revolution, and took over global economic leadership, but unable to evolve quickly enough from a monarchy to a more participative government they lost leadership to competitive countries who built systems of self-rule (such as the Americans.) This is not intended to be a chronology, but rather examples of economic Lock-in and inability to Disrupt and use White Space to maintain economic leadership.
We are now looking at what appears to be another major transition. In 2009 or 2010 China will become the #1 manufacturing country in the world, pushing America to #2. As the world has witnessed this week, watching the Olympics, the Chinese are making great strides in pushing forward – changing the face of business competition as they grow in almost all parts of the global economy. Today, the price of gasoline globally is being increased largely by exploding Chinese demand for fossil fuels to promote their economy – and current prices are something they are able to pay while still achieving their country goals for growth in jobs and economic prosperity. Meanwhile other economies, like the USA, are plunging into recession partly aided by high energy costs.
We can see that the Chinese have been good implementers of The Phoenix Principle. Let us not forget that within our lifetimes this country was a deep economic backwater under the no-growth leadership of Chairman Mao and his Gang of Four. Despite one of the world’s oldest cultures just 50 years ago China was not an important economic force. But:
- The Chinese demonstrated an ability to visualize a very different future. After Chairman Mao died the leaders developed scenarios for China that were built upon ideas for how they could lead. Remember that China had no foreign exchange, nor available assets (such as oil or timber) to sell. Yet, the leaders were able to create scenarios of China as a world power. Thus, when the Soviet Union failed the Chinese were primed and ready to stop spending money for tanks on their western front and invest in manufacturing and infrastructure for growth.
- The Chinese focused on competitors to learn how to succeed. And they looked not just at the Japanese and Americans – who were the leaders – but at all countries for how to build a strong, high growth economy. By looking at emerging nations they learned what worked, and where the problems layed, and they designed an approach that would allow them to unseat the Americans, Japanese and Europeans. They did not try to compete like Americans, but rather built their own competitive engine which was unique – and we now see almost beyond competition with U.S. manufacturers.
- The Chinese were quick to Disrupt. Old practices, some enforced with death sentences, were overturned to allow people to do new things. When necessary, entire cities were flooded to create better waterways and fresh water for industry. Homes were destroyed, and some historical landmarks, to make way for highways. The Chinese were willing to challenge their internal Lock-ins, and use Disruptions to create opportunites for doing new things.
- And they have been very willing to create and use White Space for developing a new Success Formula. It wasn’t long ago China retook possession of Hong Kong from the British. Thousands of Hong Kong Chinese fled to American, Canada, Australia and elsewhere fearing a loss of freedoms. But the Chinese turned Hong Kong into the White Space from which they could learn how to operate a capitalistic system that would work for China. As they learned, they utilized those learnings to open new industries and new cities which allow intense capitalisitic style competition in a country that still values central planning. White Space has allowed the Chinese to hone a new Success Formula which is now growing much, much faster than anything in the "developed" world.
The Chinese have emerged as fierce competitors. The market has shifted. Fiddling with exchange rates may help U.S. manufacturers, but it is just so much short-term financial machination. While America sits in a debt crisis threatening to shatter real estate values and strangle economic growth, the Chinese are rapidly becoming the world’s economic leader through manufacturing. For Americans to think they will ever recapture the manufacturing lead is nothing but fairy tale thinking. That game is over, and they won. Americans can hope for a return to the past, but hope won’t grow the economy.
America, and Europe, must realize the market has shifted. Rather than use tactics trying to Defend & Extend old Lock-ins, leaders must Disrupt. White Space must be used to define a new Success Formula. Here America has strength. One benefit of the American structure is how much White Space is created through entrepreneurship.
Now, more than ever, it is time to funnel resources to those White Space initiatives to develop a new American economy. America went from the #1 agricultural economy to the #1 industrial economy via its ability to look forward rather than backward, to Disrupt and to follow those on the front edge of the economy into new businesses. And that is what must happen today. The focus must be on building upon leadership in advanced electronics and telecommunications, nanotechnology and bio-engineering (3 examples – not exhaustive) to find the next economy – and build a Success Formula capable of regaining economic leadership. Or, it can slip further into the Swamp of slow-to-no-growth like those countries which are the heritage of most American leaders – Britain, France, Germany, Italy and Spain. All wonderful countries with a spectacular past.
by Adam Hartung | Jul 24, 2008 | Defend & Extend, In the Rapids, In the Swamp, Leadership, Lock-in, Openness
Another big loss was announced at Ford (chart here) today (read article here). After announcing a $9billion loss, the CEO said he was looking to convert some truck plants to make hybrid cars. And the company is considering bringing some of its high-mileage European cars to the U.S. Let’s see, after announcing a quarterly loss that was 85% of the company’s entire market value, the CEO thinks maybe it’s time to change the product line-up and manufacturing capacity configuration.
How hard would hit have been over the last 8 years to expect the need for higher mileage autos to increase? Instead of looking at what historically made the most money (which were trucks and SUVs), and trying to milk those products for profit forever, can you think of any future scenario which would not have predicted the need to switch customers to different products? Only by focusing on the past – what used to make money – could a leadership team walk so far out on the gangplank.
Compare this with today’s announcement at Google (chart here) to launch a competitive on-line encyclopedia to Wikipedia (read article here). This would appear to be creating a "me to" product in a market already well served. Why should Google bother? Such a viewpoint would be looking backward, rather than at future scenarios.
How many new users will come to the internet over the next 10 years? How many people may want a different approach than used at Wikipedia? What are the odds that it is possible to have a product that is possibly better than Wikipedia? If you look at the future, and you recognize that (a) internet use is unlikely to slow for many, many years (b) products with lots of acceptance, and no competition, are easy targets because some people have to be underserved, and (c) competition always improves products — doesn’t it suddenly seem logical to offer this new product?
Scenarios should point out not only future risks, but future opportunities. Yes, Google is #1 in search and #1 in on-line ad placement. And growth in both those markets looks very good. But your future scenarios should be looking for additional markets as well. In this case, Google sees potential to use its capabilities in both search and ad placement to better the on-line encyclopedia product market. Thus, its a market opportunity which is very likely to do well given this future view.
We can’t wait on market confirmation to make plans. We have to develop scenarios, and take management action based upon them. If we do, we can identify and test markets early enough to be prepared when customers start to shift. If we don’t, we’ll be caught "flat footed" when they shift – and as Ford is demonstrating this can be an expensive, possibly deadly, position to be in.
by Adam Hartung | Jul 22, 2008 | General, In the Rapids, Innovation, Leadership, Lifecycle, Openness
Apple Computer company (see chart here) has been rather remarkable. After eschewing the Newton and other products it Locked-in on the Macintosh – and almost failed. After years of declining PC market share and no new products Steve Jobs returned – and with a lot of Disruption and White Space he turned the company around. For the last 4 years Apple has been a model Phoenix Principle company.
Today Apple announced earnings (read article here), and again they were up. But analysts were concerned because the company indicated margins could decline in the next quarter to account for costs of launching new products. This is exactly the kind of feedback that ended up driving Motorola (see chart here) into its bad situation. After Ed Zander Disrupted Motorola, installed White Space and had the company acting like a high-tech power again he fell victim to the lure of margin maintenance. Instead of following up the Razr with a new product every quarter – some hitting well and some maybe not – he let disappointing sales of Rokr and other new products push him toward D&E behavior. He started focusing on Razr sales for market domination – and in the end he pushed the Motorola cellular handset division over the brink when competitors eclipsed him. Short-term margins looked great, longer-term Motorola is fighting to survive in cellular handsets (it’s biggest business).
Apple is showing all indications of continuing to do the right things. After entering new markets, it shows the ability to bring out a series of sustaining product technologies to grow revenues. Each Disruptive product opens the door for these new products which help grow revenues with new customers. Now the CFO is telling investors that new products are planned, and since sales are never assured he has to be conservative about the margin estimate! Good!! No one introducing new products can be sure of their early sales and margin. But to be like a Phoenix, and continually keep rejuvenating, you must continue to launch new products in search of new opportunities. And that is exactly what Apple indicates it is going to keep doing. For investors, employees, customers and suppliers this is good!
The worry is Apple’s reliance on the CEO. Marketwatch quotes an analyst who said investors are worried about Steve Jobs’ health after a recent pulbic appearance "Question’s about Steve’s health will weigh on the stock until he, at some point, looks better in a public forum" (read quote here.)
There’s no doubt Jobs is a good manager. His willingness to Disrupt and instill White Space has allowed him to do well for all the constituencies benefitting from Apple’s turnaround and ongoing success. But for Apple to be a truly great, evergreen, Phoenix company it must build into its architecture the ability to renew itself. Rather than rely on its leader, it needs the systems to seek out the low-return businesses to exit, and to create Disruptions that self-develop White Space which can be monitored and guide growth. Otherwise, the company will stumble when Jobs inevitably leaves. And that would be unfortunate. Businesses can become evergreen, but not if their longevity relies on the leader – the hero CEO.
At Cisco Systems (see chart here) the company mission includes obsoleting its own products. This credo promotes Disruption as it keeps managers from becoming too Locked-in and staying with a product too long in an effort to avoid "cannibalization." As a result, Cisco is not too dependent upon its CEO to keep moving it into new markets, using new technologies and launching all new products. Until Apple develops a system for Disrupting itself its reliance on Jobs will be too high – just as was true at Microsoft – and investors have reason to be wary of the long-term results.
by Adam Hartung | Jul 18, 2008 | Disruptions, In the Rapids, Leadership, Lifecycle, Openness
Yesterday IBM (chart here) announced it’s most recent quarterly results (read here). The good news was revenue climbed 13% and income from continuing operations rose 22%. This ability to stay in the Rapids is pretty amazing, given that a 10% growth at IBM means adding more than $10B per year. And despite being in myriad markets, the company produces about $260,000 revenue per employee.
A colleague said to me that he wasn’t surprised IBM had this nice growth. After all, they’re in high-tech. I had to tell him I was surprised at his naivete. IBM’s growth was not automatic, nor in any way assured, because of the general industry in which they compete.
Quite to the contrary, many high-tech companies struggle and fail. Remember Wang? DEC? Silicon Graphics? Compaq? Coopers&Lybrand consulting? "High Tech" is full of cutthroat competitors willing to drive you out of business in a heartbeat with suicide pricing and over-exuberant product claims. Don’t forget that IBM itself was on the brink of failure in 1993.
IBM, which walked away from the PC business after inventing it, became committed to mainframes – and to a lesser extent mini-computers – in the 1980s. This worked great until data centers started downsizing due to new techologies – and the floor fell out of revenues. With a change in it’s leader, and a lot of Disruptions inside IBM, the company lessened its dependence on hardware sales as it grew services sales in the latter 1990s. Since then, IBM has deployed an aggressive innovation program that promotes the development of new products and services across the panoply of high-tech. Now, in the face of terrible economic conditions IBM is demonstrating it can maintain growth, even though it is huge, by reaping the benefits from maintaining Disruptions and White Space in many technology, geographic and product markets.
Keeping your organization in the Rapids is not the result of where you’re located (like India or China), or your size (small versus big) or your age (young versus old) or the markets you sell to, or the technology you use, or how much you spend on R&D, or how much you outsource, or "general market conditions", etc., etc. Staying in the Rapids is the result of ongoing management attention to scenario planning, keeping your eyes on competitors, maintaining a willingness to Disrupt and keeping White Space alive and viable. And any organization can do those things – allowing you to grow even when competitors and customers feel the pinch of recession.
by Adam Hartung | Jul 10, 2008 | In the Rapids, Leadership, Lifecycle, Openness
I’m a land-bound midwesterner, and know next to nothing about sailing. But someone once explained to me that sailors tie ribbons to their sails and ropes. They call these "telltales". And then good sailors pay attention to the behavior of these ribbons so they can interpret the wind and achieve their destination more quickly. Good sailors learn to read these whisps of cloth to be more successful. As customers, employees, suppliers and investors we need to do the same. It is important we pay attention to small bits of information for the early signs they give of shifts in the business weather so we can be more successful.
Yesterday, buried deeply in my local newspaper was a small article about Google (see chart here) launching a new virtual reality site called Lively (read article here.) It was very small article (only 155 words), barely explaining what the site was, and offering no clue as to its potential impact. An article easily ignored. Ahhh, but this is a telltale.
Google is in the Rapids of growth. It is in a market growing at over 100%/quarter! Even bad operations in the markets of search and online ad placement are growing at over 30%/year and making money (see Yahoo! and MSN search for examples.) Because it’s in the Rapids, Google can make a lot of money and grow very fast while doing nothing more than establishing its Success Formula and continuing historical Lock-ins. There is no reason to expect Google to do poorly any time soon. But the interesting question is — when the growth slows will Google keep growing (like Cisco) or be another Sun Microsystems, Dell, or Microsoft? Will it be Locked in to its old business, and start to shrink, or will it have new businesses to keep it growing as market shifts develop?
We know Google acquired YouTube months back, and has left it independent. That looks like White Space – but we don’t yet know if it will be able to affect the Google Success Formula or if it will just be a content site for Google ad placement. So that’s maybe White Space, and we need to keep watching. We can’t yet determine if it’s White Space that will develop a new Success Formulas to keep Google evergreen.
This article on Lively therefore deserves more investigation. What’s the first step? Why a Google search on Google Lively of course! There we can find an India Times article on Lively (see here). Where better than in the land of information technology domination could you find an article that clearly explains the site and how it works. We also can go view the site (here). A bit more investigation into the IT world (see here) and we learn that these 3D virtual people and rooms are things you can add to a blog or web site (think software to juice up your home page, etc.) and it is a rich medium for gaming technology! On-line gaming is one of the few markets growing even faster than on-line advertising – and this opens new doors for growth beyond search and ads!
Additionally, one attack on Google has been its sparse search pages. Lively starts bringing forward much more robust interactivity with many different elements which could potentially expand how we would interact/use search (think less linearly and more dynamically about how an avatar could search in 3D kinds of ways) and social websites (like Facebook or MySpace). Potentially, we could use these Google Avatars or rooms to even manage our social networks across multiple sites – creating a sort of "layered" set of interactions between multiple "partners" with which we want to talk, play games, or share information in multiple environments simultaneously. Think about a wiki on steroids which can duplicate real-life meeting-style interactions. We could conduct various business sessions with these avatars, such as on-line training applications, simulations (for business negotiations, or planning [think real-time interactive SimCity]), or real negotiations for office leasing or acquiring office supplies or even parts for a factory (read more here about applications). Avatars could behave like interactive bots searching the web for new sources and deals. These environments could be sponsored by a vendor, with ads, or created as user environments (like TypePad on which this blog is created) for businesspeople to use.
What we can determine is Google is definitely setting up White Space here. It may not look like much right now – but then again how excited were you by most web sites when they first popped up? It’s important to note that these White Space projects appear to have permission to do things otherwise not done in traditional Google, and are quite well funded. Both hugely important factors. They also operate with independence to see what sorts of Success Formulas they can develop – and thus be the next generation toward which Google may head. All told, these Telltales indicate very good things for Google to maintain its rapid growth.
Of course, the hard part that lies ahead will be seeing if Google actually uses these projects to change its Success Formula (today built on Search and ad placement). Google’s growth has allowed it to eschew Disrupting itself. Why bother to Disrupt with growth exceeding everyone’s expectations? But for these White Spaces to make a difference, it will be necessary for Google to eventually demonstrate it can Disrupt it’s Lock-ins and transition its Success Formula into new businesses that maintain growth and profits.
For now, all looks good for Google. They are managing the Rapids well, and we can see the signs of White Space being implemented. We’ll have to keep watching to see if leadership can Disrupt to take advantage of these projects when the weather shifts to less rapid sailing – but for now it’s a very good thing to see this White Space being implemented. Something far too few high growth companies do enough of.
by Adam Hartung | Jun 12, 2008 | Disruptions, General, Innovation, Lifecycle, Openness
Yesterday the news services all reported that America’s National Center for Health Statistics now has determined the average person born this year will live to over 78 years old (read article here.) White women will live to 81, and white men to 76, while black women to 77 and black men to 70. Did you haar about this on the television, radio or see in the newspaper? What are you going to do about it?
We’ve known across our liftetimes that people are living longer. Substantially longer. So, hearing this sort of information becomes like the weather – we see it but we don’t really pay any attention. Unless there is a pending calamity (such as a thunderstorm) we pretty much ignore the information. But this really has some big implications. And for businesspeople, failing to plan for those implications could be deadly.
The most obvious implication is retirement. President Franklin Roosevelt declared the retirement age would be 65 when he established Social Security. Where did 65 come from? It was the life expectancy at the time. In other words, the program wouldn’t be too costly because at least half of Americans weren’t expected to survive to ever get a check. That’s no longer true. So can we continue to expect retirement at 65? If not, what does that mean for your business? When was the last time you hired someone knew who was over 55? If she can work until 75, is a 20 year potential loyalty too short? Maybe the company that seeks out people over 55 to hire will have an advantage? Will these older workers be more dedicated, harder working, less distracted by children at home and school, quicker to complete tasks due to more experience, make fewer mistakes due to better judgement, require fewer benefits (like child care or education subsidies), be more punctual and possibly even work for less pay?
Oh yes, but there’s the cost of health care. We all know health care costs are going up. Of course, 20 years ago people with strokes, heart attacks and cancer died. Now we know not only how to save their lives, but keep them alive for a very long time with medication, rehabilitation services and assisted living. Of course there’s a cost to this. How will we pay for this? Will health care jobs become less valuable? Will we import health care workers? Will we export health care work to foreign countries – asking people to go to India on vacation and replace a hip while there (medical tourism is one of India’s fastest growing businesses)? Will we change our lews and care standards so that health care is more automated and cheaper but with an allowable error rate? Who will benefit from changes in health care?
We used to accept health insurance companies saying that once you had one of these illnesses your insurance forever after would be extremely expensive – if you could obtain coverage at all. But should employers accept this? We now know cancer, heart attack and stroke survivors live decades without recurrences – so does it make sense to charge more for insuring these folks. If we keep adding up more and more people who are survivors of illness will we end up with the government the "insurer of last resort"? If we want to employ these people but we don’t because of heath care costs can we expect governmental intervention? Will we begin charging penalties for smoking, drinking, poor exercise habits? Will we lose our civil liberties as we strive to lower health care costs (no one thinks its a bad thing that we force everyone to wear a seat belt today – a clear loss of the civil liberty to choose whether to wear one)? What insurance practices will be necessary to compete? What insurance practices should employers seek out?
How about immigration? As we live longer the average age is going up as well. Where will the younger people come from to do all the manual work the retirees don’t do? Should we expect an impact on immigration reform that might involve allowing more workers into the country to offset the aging? Will that lead to an increase in demand for education and skills training? Will it change our use of English as the only language? Will it change the foods sold in grocery stores? Demand for housing, and the type of housing desired?
What about television programming? Will it remain totally focused on younger people in the "coveted advertiser age groups" below 54? Will it make sense to run movies at 7:00pm rather than 11:30 or midnight? What about retail stores, should they make changes for an older average population? Do huge shopping malls make sense if people are less interested in spending the day roaming this indoor paladium?
Average life expectancy is just a simple projection, made by the government every year. Easy to ignore while we run our business every day. But it has significant implications on many businesses – implications that could have an impact in as little as 5 years. Add onto that other easy projections – like urgan sprawl is causing water use to increase, and growing economies in China and India means exponential growth in demand for fuel, and increasing education in foreign countries means the standard of living is going up faster outside the U.S. than inside – and what do these mean for your business in 5 years? If you’re a homebuilder, should you be in the USA or India? If you run a college should you be opening a new campus in the U.S. or China? If you’re in health care, should your next hospital be in Chicago, or Thailand? If you’re a recruiter, should you be putting your management through foreign language school? If you make TV programs, should you expand your studio in Burbank, or open one in Bollywood? You don’t need a crystal ball. It’s not about having a highly accurate forecast. It’s just, are you really planning for a future that will most likely be different than the past? If you’re not, you’re sure putting a lot of faith in luck.
