by Adam Hartung | Mar 15, 2005 | Books
C.K. Prahalad is a colleague of Adam’s. His most recent book The Future of Competition is going to be highlighted March 30, 2005 at a University of Michigan symposium on experience co-creation. The university is launching its co-creation center. Good luck to Professor Ramaswamy on his efforts to get more businesses to incorporate customers in the marketing process!!
Ramaswamy and Prahalad use the same facts about business troubles as we use. They then use these facts as a burning platform to say businesses need to change their approach to marketing. They recommend bringing customers into the marketing process – co-creating products, distribution, promotion and pricing with customers. Overall, the act of co-creation is undoubtedly a good thing. I think better competitors already recognize the need for co-creation, and some are beginning to adopt such activity.
My speaking experience confirms that these facts are easily absorbed and agreed to by audiences. Unfortunately too often these facts are not "compelling" to people. The facts do not create a great enough sense of fear to cause people to change. Despite the ominous predicted outcomes (and they are ominous), reciting the facts does not create a Disruption (pattern interrupt) for people. The fact that businesses are in trouble is accepted. People seem willing to live with a disquieted concern while continuing past practices. In order to consider change, audiences want to know what to do about it. And here the co-creation authors say "go undertake experience co-creation."
As good as this idea is, it seems to me the authors have underestimated the organizational challenges faced when implementing a transformation of the magnitude they propose. We would recommend the authors augment their recommendations with more about how companies will change their embedded process, which (after all) was built upon past success. Our fear is that existing organizational Lock-in will keep organizations from embracing the next practice of experience co-creation.
It would seem to us that the only way experience co-creation can be implemented is if people incorporate it into their Success Formulas, and accomplishing that requires starting the effort in White Space and then migrating the organization toward these new processes. Our experiences would indicate that for most companies existing processes will be totally effective roadblocks to any organization actually attempting to implement this powerful new approach.
Overall, what these authors want readers to do is clear, but we would recommend they more powerfully explain the re-invention gap which exists between what companies do (from a traditional firm-centric vantage) and what would be more successful (a robust two-way dialogue with customers) in sufficient detail to drive leaders toward undertaking a disruption (pattern interrupt). Our case work has shown that only after this challenge-based disruption can White Space for these ideas take root. It’s unclear from this book exactly what these authors would have companies do to implement, but we would observe that simply attempting to change existing processes to incorporate co-creation is extremely unlikely to work.
Our work indicates that readers who want to fully capitalize on the promise of experiece co-creation can increase markedly the odds of a big win if they apply co-creation to White Space projects which can operate freed from existing Lock-in and thus develop a new Success Formula built on co-creation. These new Success Formulas forged in White Space can then act as magnets for the existing organization to migrate toward a more customer-centric approach to marketing. The co-creation idea is clever, and combined with our approach using disruption and white space can have tremendously beneficial impact – quickly.
by Adam Hartung | Mar 8, 2005 | Books, Disruptions, Leadership, Lock-in
On February 11, 2005 BusinessWeek printed an article by the President of an ad agency specializing in small-budget clients. The article said that a survey of 400 companies indicated growth stalls were caused by external factors, but that overcoming these stalls was up to internal company dynamics.
Adam wrote to BusinessWeek in an effort to overcome this traditional, but wrong interpretation. The solution to growth stalls is not found in an internal analysis and improvement in operations. Rather, it requires understanding the use of White Space in order to develop new Success Formulas which can overcome the market challenges and simultaneously address existing Lock-In which got the enterprise in trouble in the first place.
Read the letter by clicking here
by Adam Hartung | Nov 27, 2004 | Defend & Extend, Disruptions, In the Whirlpool, Leadership, Lifecycle
Does anyone think KMart + Sears = a better company? It doesn’t look that way. Most experts say the company is worth nothing more than it’s inventory value plus the real estate. Too bad, for both companies started as tremendous innovators in American retailing.
Kmart pioneered the discount store concept. And Sears pioneered the retail catalog, store credit, private label tools and appliances, and lifetime warranties. Both companies saw tremendous growth during their cycles of innovation.
Was it inevitable that they would both be relegated to below average returns? Absolutely not. Both simply stopped innovating. They turned to defending and extending what they already knew, while other competitors attacked them with new innovations.
But why not change the game now? The bankruptcy of KMart opened the door to new options – including the acquisition of Sears. If the two chains view this latest action as a chance to simply defend and extend their outmoded businesses, they will both simply die off. But if they view this as a major disruption to their business, and realize success will not come from chasing the two entrenched leaders (Wal*Mart and Target), they have the chance to create substantial value for their investors, employees and customers.
The new company needs to open its organization to innovation. The new CEO, coming from restaurants, should eschew the conventional merchandisers and strike out for something new. With the stock worth no more than the real estate, he has nothing to lose and everything to gain.
We haven’t yet heard the new CEO make any claims about the future. If he heads down the road of putting Craftsman in KMart and Martha Stewart in Sears – with great goals of a turn-around – run for the hills! Investors should sell the stock and employees find new jobs. But if he creates a new company that innovates away from the old business and toward something brand new he has a chance of creating a new company that could produce great returns.
The fate of KMart and Sears is not cast in concrete. But the leadership must act quickly while the cement is still wet! They must use this disruption to create something new — not defend and extend "the best parts" of what’s already not working.
by Adam Hartung | Nov 18, 2004 | Uncategorized
Adam Hartung was quoted in the Chicago Tribune today regarding the announcement of the Sears and K-Mart merger. Here’s what Adam had to say:
Kmart Corp.’s cheeky proposal to
acquire Sears, Roebuck and Co. for $11 billion may be wowing Wall
Street, but it doesn’t do anything to fix the serious problems
afflicting two of the country’s largest retailers, retail and business
strategy experts say.
Kmart’s retail business is shrinking at an alarming double-digit
rate. Sears is only slightly better off, closing in on its fourth
straight year of sales declines. Neither company has articulated a
strategy for attracting shoppers in a retail world increasingly
dominated by discount juggernauts Wal-Mart Stores Inc. and Target Corp.
"If I put Kmart and Sears together, I’m putting together two broken
business models," said Adam Hartung, managing partner in Spark
Partners, a business strategy firm in Long Grove. "You put a bad heart
and a bad liver together, and you don’t get a healthy body."
You can go to the Chicago Trib site to read the entire article: "Will Bigger Be Better: Retail experts not sold on the wisdom of combining 2 ‘broken’ companies".
by Adam Hartung | Nov 12, 2004 | Defend & Extend
This is just too good. I just read on Business 2.0 blog that Blockbuster is trying to buy Hollywood Video, a rival chain of video rental stores. OK, this is CLASSIC Defend & Extend Management. They must be thinking that if they can just get big enough, they will be able to get those elusive scale savings and be able to have more control over their pricing. It won’t happen. They have to understand that storefront video rentals will never get any better as a business, no matter how big they get. (See my previous blogs on this.)
It’s amazing to see companies with broken Success Formulas buy other companies with the SAME Success Formula and expect that to improve the business. Didn’t anybody at Blockbuster ask WHY it would improve the business? Why it would make someone suddenly decide not to order that video on demand and charge down to the video store instead? Sadly, there are many other examples. Here’s one: Tupperware, who thinks its home party concept is still a viable concept in the 21st century, bought Beauty Control a few years ago because the company also sold through home parties. They expected to benefit from the synergies. Want to guess how that turned out?
by Adam Hartung | Nov 11, 2004 | Defend & Extend, Lock-in
I have noticed a common behavior among companies in the Swamp and Whirlpool stages of the lifecycle. They never seem to plan ahead for unexpected things to happen. It is as if they make an annual plan and there are no contingencies for marketplace challenges and disruptions. Maybe they really do believe that the plan will turn out like they lay it out if they simply hold the leaders accountable, which would indicate a terminal case of denial and self-deception.
Consider the major airlines which always seem to be on the verge of bankruptcy. After 9/11, they have all been in survival mode and their actions have been classic Defend & Extend Management: cut costs, layoff employees and reduce their pay, reduce prices, reorganize the business, replace management. They think that if they can do these things, they will become competitive again.
But they didn’t plan on oil prices reaching all time highs, which meant they had to make deeper cuts and go to even harsher extremes. And now, it seems that these troubled airlines didn’t plan on their healthy competitors adding more planes as part of their growth plans. (Well duh!) That’s a problem because more planes means more capacity which means more competition which means lower prices. And that means that the major airlines’ plans to rebound aren’t worth much. The fact is that they never were worth much.
Troubled organizations like those late in their lifecycle don’t have
any excess capacity. That’s why they keep getting knocked further and
further down by marketplace changes. No sooner than they recover from
one crisis, another crashes onto the scene. If you need proof, read the
countless annual reports that offer excuse after excuse for unexpected
events that hurt the company’s performance that year. Then read the hollow
promises about how they’ll plan better next year.
It would be valuable for any senior manager of a business or functional unit to assume that unexpected things are going to happen and to plan ahead for them. Scenario planning as a discipline has been around for many years and is a useful practice. In addition, every organization must budget for excess capacity to deal with unexpected challenges. Where will you get the money, people, capital, and management bandwidth to deal with surprises? In order to estimate how much extra capacity is necessary, managers can evaluate prior years and determine how much was consumed by surprises in the past. This, coupled with effective scenario planning, can help companies minimize the consequences of unexpected disruptions.
Oh, and adopting The Phoenix Principle wouldn’t be a bad idea either!
by Adam Hartung | Nov 10, 2004 | Lock-in
The Praying Mantis is a remarkable example of evolutionary adaptation. I saw one today and marveled at how well it had adapted to prey on unsuspecting insects. It was solid brown, looked like a stick and has lethal forearms and claws. It is easy to understand how it can blend into the limb it is standing on and capture its prey as it wanders by.
Trouble is, the Praying Mantis that I saw was on my garage wall, which is solid white. So, it stuck out like, well, a carnivorous bug. This particular specimen wasn’t going to surprise any prey. It may as well have hung up a sign saying " BUGS BEWARE, I"M HERE TO EAT YOU!"
The Preying Mantis has an exceptional Success Formula… for the right habitat (context). However, when the context changed, that Success Formula became a liability. A brown colored Praying Mantis on a white background loses the element of surprise, and will go hungry.
That’s exactly what has happened to countless businesses today. They developed Success Formulas for a different competitive environment and have not adapted adequately to the changing business context. They’re like a brown Praying Mantis on a white wall, and they are struggling and suffering as a result.
by Adam Hartung | Nov 3, 2004 | Quotes
He who joyfully marches in rank and file has already earned my contempt. He has been given a large brain by mistake, since for him the spinal cord would suffice.
—Albert Einstein
by Adam Hartung | Nov 1, 2004 | Openness
While reading Seth Godin’s blog today, I was struck by his point about the power of videotape to shape behavior. He was commenting on the shabby way that he was treated while trying to buy a lobster and he wondered:
So, the two questions are, “Do you think the owner wanted them to act this way?” and “Would they have acted differently if they were on camera?”
What a delightful line of thought! One of the key design principles for being able to build a self-renewing organization is “openness.” Why? Openness prevents abuses. People who are going to do unethical things don’t want anyone to know about it, that’s why they require secrecy. (Why do you think they call them “shady” dealings?) Whether its employees who our mistreating customers, or senior managers who are looting the company for personal gain, they all depend on secrecy.
Behaviors like that are like cockroaches: they like dark places out of peoples’ view. But when you shine a light on them, they scatter. That’s the affect of openness on unethical, illicit, and illegal behavior.
Great organizations of any kind (including countries) only prosper in a climate of openness. I wonder what would happen if everyone in a company behaved as if their every move were being broadcast live to the world. I guarantee that they would change their behavior! How could your organization benefit from more openness? What can you do to increase openness in your organization?
by Adam Hartung | Nov 1, 2004 | Disruptions
Kirsten Osolind, a delightfully witty and thought-provoking marketing whiz, pointed out in a recent blog that women were not nearly as likely to embrace the “built-to-flip” mentality as men. The Phoenix Principle is based on an assumption that the owners/managers of a business are in it for the long-term. Otherwise, why bother investing in creating a business that will renew itself?
According to Marsha Clark, an expert in issues related to women in business, women are dropping out of the big corporate buisness scene in record numbers. Many of these women are starting their own companies where they can, as Kirsten says: “groom them as we would our child’s hair.” I wonder what this trend portends about business in the next 20 years, and about the likelihood that increasing numbers of business entrepreneurs will be building businesses that they expect to last over the long-term?
I suspect that women’s influence on business, which is growing quietly in the background, will one day in the not too distant future burst into prominence and create an unexpected disruption across the economy. Why? Women will have irrevocably put their stamp on managment practice and organizational design… and it promises to be remarkably different from that of industrial management.
