by Adam Hartung | Sep 11, 2009 | Current Affairs, Defend & Extend, In the Whirlpool, Leadership, Lock-in
Stealing language from FDR, September 11, 2001 is a day that will go down in infamy. Dramatic shifts happened in the world resulting from the horrific attacks on American civilians in New York, Pennsylvania and D.C. . But can we say that most organizations have reacted effectively to those shifts?
Few industries were more affected by the attacks than the airline industry. Shut down for a week, revenues plummeted immediately and were hard to win back from a frightened public. But if ever there was an industry of needing to push the "reset button" on how things worked it was airlines. All the major players (except Southwest) had struggled with profitability, many declaring bankruptcy. Some never emerged (like PanAm, Eastern, Braniff). Mergers had been rampant as companies tried to expand into greater profits – unsuccessfully. Customer satisfaction had been on a straight southeasterly direction, lower and lower, ever since deregulation. Here was a collection of businesses for which nothing was going right, and in dire need of changing their business model.
The shut down and economic downturn provided a tremendous opportunity for the airlines to change their Success Formula. The government allowed unprecedented communication between companies, and unions were ready to make changes, to get the air traffic system working again. A sense of cooperation emerged for finding better solutions, including security. Market shifts which had been happening for a decade were primed for new solutions – perhaps implementing operational methods proven successful at Southwest.
Unfortunately, everybody chose instead to extend Lock-ins to old practices and bring their airline company back on-line with minimal change. Instead of using this opportunity to Disrupt their practices, taking advantage of a dramatic challenge to their business, and use White Space to try new approaches – to a competitor every single airline re-instituted business as usual. To disastrous results. Quickly profits went down further, customer satisfaction dropped further and in short order all the major players (except Southwest) were filing bankruptcies and hoping some sort of merger would somehow change the declining results.
The airlines' problems were not created by the events of 9/11/01. But on that day long-developing market shifts become wildly apparent. The airlines, and other industries like banking, had the opportunity to recognize these market shifts, admit their impact on future results (not good), and begin Disrupting old practices in order to experiment with new solutions that better fit changing market needs. None did. It wasn't long before America was mired in another long and expensive military conflict, and an extended deep recession. For most businesses, things went from bad to worse.
Leaders need to recognize when external events pose the opportunity to Disrupt things as they've been – Disrupt the status quo – and start doing things differently. These prime opportunities don't happen often. Reacting with reassurances, and efforts to get back to the status quo as quickly as possible prove disastrous. This is an emotional reaction, seeking a past sense of stability, but it creates additional complacency worsening the impact of market shifts already jeopardizing the future. Instead, one of the most critical actions leaders can take is to leverage these market challenges into a call for Disruptions and use White Space to implement new solutions which meet market needs.
If only the airlines had done that perhaps they could operate on-time, let customers check luggage without a charge, provide quality meals on long flights and internet access on all flights, and provide a reliable service that customers enjoy. If they had sought to find a better solution, rather than Defending & Extending what they had always done, airline customers would be in a far better shape. And that's a lesson all leaders need to learn from the events of 9/11 – use challenges to move forward, not try reclaiming some antiquated past.
To read how GM ended up bankrupt by refusing to recognize opportunities for changing to meet shifting market needs download the free ebook "The Fall of GM."
by Adam Hartung | Mar 20, 2009 | Current Affairs, General, In the Swamp, In the Whirlpool, Innovation, Leadership, Lock-in, Travel, Web/Tech
"Xerox chops earnings outlook as sales slide" is the headline on Marketwatch.com. Do you remember when Xerox was considered the most powerful sales company on earth? In the 1970s and into the 1980s corporations marveled at the sales processes at Xerox – because those processes brought in quarter after quarter of increasing profitable revenue. Xerox practically wiped out competitors – the small printing press manufacturers – during this period, and "carbon paper" was quickly becoming a museum relic (if you are under 30 you'll have to ask someone older what carbon paper is – because it requires an explanation of something called a typewriter as well [lol]).
But today, do you care about Xerox? If you have a copier, you don't care who made it. It could be from Sharp, or Canon, or anybody. You don't care if it's Xerox unless you work in a "copy store" like Kinko's or run the copy center for the corporation – and possibly not even in those jobs. And because desktop printers have practically made copiers obsolete, you may not care about copiers at all. In short, even though Xerox invented the marketplace for widespread duplicating, because the company stayed in its old market of big copiers it has seen revenue declines and has largely become irrelevant.
"U.S. airline revenue plunges for another month" is another Marketwatch.com headline. And I ask again, do you care? The airlines were deregulated 30 years ago, and since then as a group they've never consistently made money (only 1 airline – Southwest – is the exception to this discussion.) The big players in the early days included TWA, Eastern, Braniff, PanAm – names long gone from the skies. They've been replaced by Delta, American and United – as we've watched the near collapse of US Airways, Northwest and Continental. But we've grown so used to the big airlines losing money, and going bankrupt, and screaming about unions and fuel costs, that we've pretty much quit caring. The only thing frequent travelers care about now is their "frequent flier miles" and how they can use them. The airline itself is irrelevant – just so long as I get those miles and get my status and they let me board early.
When you don't grow, you lose relevance. In the mid-1980s the battle raged between Apple's Macintosh and the PC (generically, from all manufacturers) as to which was going to be the dominant desktop computer. By the 1990s that question had been answered, and as Macintosh sales lagged Apple lost relevance. But then when the iPod, iTunes, iTouch and iPhone came along suddenly Apple gained a LOT of relevance. When companies grow, they demonstrate the ability to serve markets. They are relevant. When they don't grow, like GM and Citibank, they lose relevance. It's not about cash flow or even profitability. When you grow, like Amazon with its Kindle launch, you get attention because you demonstrate you are connected to where markets are headed.
Is your business obsessing about costs to the point it is hurting revenue? If so, you are at risk of losing relevance. Like Sara Lee in consumer goods, or Sears in retailing, even if the companies are able to make a profit – possibly even grow profits after some bad years – if you can't grow the top line you just aren't relevant. And if you aren't relevant, you can't get more customers interested in your products/services, and you can't encourage investors. People want to be part of Google, not Kodak.
To maintain (or regain) relevance today, you have to focus on growth. Cutting costs is not enough. If you lose relevance, you lose your customer base and financing, and you make it a whole lot easier for competitors to grow. While you're looking internally, or managing the bottom line, competitors are figuring out the market direction, and proving it by demonstrating growth. And that's why today, even more than before, it is so critical you focus planning on future markets for growth, obsess about competitors, use Disruptions to change behavior and implement White Space to experiment with new business opportunities. Because if you don't do those things you are far, far too likely to simply become irrelevant.
[note: Thanks for feedback that my spelling and grammar have gotten pretty sloppy lately. I'm going to allocate more time to review, as well as writing. And hopefully pick up some proofreading to see if this can improve. Sorry for the recent problems, and I appreciate your feedback on errors.]
