What Radio Flyer and Harley-Davidson Have in Common

What Radio Flyer and Harley-Davidson Have in Common

The Slow Decline of Two Famous Brands

Demographics have been causing the slow death of 2 very famous brands. Radio Flyer and Harley-Davidson. Now they are reacting, and maybe it won’t be too little too late for them. Here’s the story and a small dose of innovation theory for you to implement in your business.

Radio Flyer for 100 years has been famous for its little red wagons. Since before the Great Depression, children have enjoyed these wagons (and scooters, etc.) for recreation. But family formation has fallen precipitously the last decade, and the birth rate has fallen even faster. Further, lots of competitors have entered the market for small pull wagons and scooters. The net impact is fewer babies, and a big drop in demand for the traditional metal wagons. For a company manufacturing in Chicago, it looked like another slow slide into irrelevancy and failure.

But now, Radio Flyer has announced its new e-bike and e-scooter products. This opens the door to an entirely new market and new customers. People of all ages have started purchasing e-bikes. They ride for pleasure, to run errands and even commuting. In some cities, electric scooter ride sharing rentals have soared faster than bicycle rentals. Sales have skyrocketed. Seeing the underlying trend in demographics, and the changing consumer behavior Radio Flyer is entering the market with new products – priced squarely in the market sweet spot – which just might make the company relevant again.

An even older company is Harley-Davidson. For years, Harley has dominated the market for large engine cruiser style motorcycles. In the 1970s and 1980s, this served the company well as motorcycle sales grew and customers would up-size to Harley bikes from smaller Japanese manufacturers. But the brand image wore old a long time ago. Images of “Hells Angels”, “Easy Rider” and accountants turned HOG (for Harley Owners Group) were not attractive to younger buyers. The average age of Harley buyers kept rising, until now it is almost 60 years old! The reality is that Harley’s market simply started dying off, aging out of buying new motorcycles (or any motorcycle for that matter.) And younger buyers were far less interested in the old-style cruiser in favor of the smaller sized, easier handling and mostly faster sport bikes made in Japan.

For years Harley-Davidson ignored the demographic trends and the impact on its business. Harley made an effort to update its product, and image, introducing the V-Rod with a Porsche manufactured engine. But dealers didn’t like it, and Harley never put in the promotion to bring in the new, younger rider the bike was designed to attract. Now, Harley-Davidson has launched its own e-bike, called the Serial 1. At $5,000 it’s a top-priced e-bike, I guess aligned with the company reputation for premium pricing. But the Serial 1 has garnered good reviews, and like the Radio Flyer e-bike it gives Harley a new technology and a new market with new customers. And most important, a chance to slow its slide into irrelevancy.

 

Will these products turn these companies around?

It’s hard to say. They aren’t creating a new market like Netflix did in streaming, or Apple did with apps on iPhones. They aren’t early to market. One could say they are a late entry into a crowded marketplace. And neither appear to be introducing any new technology, or enhanced functionality not already available. And the brands are outdated, loaded with nostalgia – which might be good, or bad. But at least they are reacting to trends.

Innovation Theory in Practice

Ansoff "L" Innovation stepsBoth Radio Flyer and Harley-Davidson have responded to trends by introducing electric personal transportation products. Both also have loyal core customer segments and strong brand awareness in non-customer segments. The new products allow both companies to launch to existing customers which is the lowest risk choice because the segments are well-known. From there, the brands can expand to new customer segments via word-of-mouth, visibility and ad campaigns. This follows the Ansoff matrix from Current Market/New Product to New Market/New Product.

The second issue is that the market for electric personal transportation is past Early Adopters and into the Growth stage which is when new brands jump in and the market starts to fragment. There is plenty of market share for both Radio Flyer and Harley-Davidson to become established. One key question is- Can these brands offer the products and brand desire to make the jump to segments of new customers?

Are the Brands Structured to Succeed?

To succeed, they must COMMIT resources and focus to these new markets, and create new developments. I wish they would have launched with White Space teams that had permission to develop a new brand image, new distribution, new ad campaigns – an entirely new approach designed to seek out market leadership. Harley-Davidson did create a version of a “skunkworks” with the spinoff of Serial 1, LLC. For now the PR sounds more like they are doing it “on the sly” as something they aren’t really sure will succeed. So it’s really up to senior leadership now. They either commit to a new future allowing product teams to build on the e-bike opportunity to develop new technology, new customers and new markets – or they can slip back into the slide downward. We’ll have to wait and see if they can jump the re-invention gap.


Don’t Miss Adam’s Recent Podcasts!

Did you see the trends, and were you expecting the changes that would happen to your demand? It IS possible to use trends to make good forecasts, and prepare for big market shifts. If you don’t have time to do it, perhaps you should contact us, Spark Partners.  We track hundreds of trends, and are experts at developing scenarios applied to your business to help you make better decisions.

TRENDS MATTER. If you align with trends your business can do GREAT! Are you aligned with trends? What are the threats and opportunities in your strategy and markets? Do you need an outsider to assess what you don’t know you don’t know? You’ll be surprised how valuable an inexpensive assessment can be for your future business.  Click for Assessment info. Or, to keep up on trends, subscribe to our weekly podcasts and posts on trends and how they will affect the world of business at www.SparkPartners.com

Give us a call or send an email.  Adam@sparkpartners.com 847-726-8465.

Corporate Nomadland – the Gig Economy and Digital Nomads

Corporate Nomadland – the Gig Economy and Digital Nomads

Nomadland art … IS Life

The Academy Award winning movie “Nomadland” portrays a woman whose town is decimated when its largest employer leaves. No jobs means homes go valueless, and people are forced to leave. Not only the economy, but lives are wrecked without money, healthcare and any sense of economic future. What follows is a pretty bleak overview of living in one’s vehicle, hustling for jobs of any kind and building networks of other nomads who give encouragement to each other – but not a lot of help. During the movie, the lead character is offered at least two very solid opportunities to move into a more stable situation (one with her family, and one with the family of another nomad.) Yet, she turns down both. Despite living what the filmmakers portray as a very difficult, lonely and economically bleak situation she chooses to continue the nomad lifestyle.Today’s Gig Workers, or Digital Nomads, are often thought of as bleak, lonely people. No permanent job, no permanent employer, no “corporate” home. The view is often of people who are on the stark edges of the economy, struggling to survive in an uncertain future. And that view would largely be wrong.

The Gig Economy, and its self-employed Digital Nomads, represented HALF the U.S. Workforce before the pandemic hit. The World Economic Forum, Ernst & Young and the U.S. Federal Reserve all said that the emergence of the self-employed Gig Economy Digital Nomad represented the largest single economic shift in several generations. All have said this trend for business is as big as the emergence of mobile and internet technologies. It is characterized as a fundamental change in how people work, and a dramatic change in the outdated Industrial Era “contract” between companies and employees.

Digital Nomads are NOT merely a pandemic artifact.

They are members of an enormous mega-Trend: (1)

  • The gig economy is growing so fast its job creation alone can account for all the jobs created in the USA from 2005 through 2016 (corporate hirings/firings were a net no gain)
    • In the last 40 years the employer/employee compact has disintegrated, leading fewer people to trust their employers, so they seek alternative cash flow sources
    • It is estimated half of gig workers maintained full time jobs – but are actively seeking entrepreneurship. Thus the resulting unwillingness to return to low-pay jobs as the pandemic ends.
    • The Gig workforce of Digital Nomads is growing 5x faster than growth in traditional jobs
    • 63% of Gig workers say they started not due to economic requirements, but as a choice
  • In 2017, 53 million Americans participated in gig work (36% of all employees)
    • By 2027, trends project over half of all Americans will be involved in gig work. This pre-pandemic statistic is likely to understate the likely results due to pandemic changes.
    • Prior to the pandemic at least 40% of the American work force made at least 40% of their income from Gig Economy work
    • Digital Nomads cross all age groups? 44% of Boomers, 59% of GenX, 63% of Millennials

Digital Nomads mostly CHOOSE this work approach. In a fast-paced, quickly shifting world the idea that an employer can “protect” its employees is a façade. With the average corporation lifespans now a mere 8 years, no job and no employee can be protected. Neither pay nor benefits are ever a given in markets where companies acquire, merge, are acquired or fail with such regularity.

Employees Empower Themselves In Gig Work

Being a Gig Worker actually fulfills the corporate goal, sought for 35 years, of “empowering employees.” Despite what managers said, organizations operate today in the militaristic style of the last 100 years. Unless you’re the CEO (dictating your own pay and terms) someone is your boss. And your #1 job is to please the boss. Success is less about results, and a lot more about politics, corporate behavior and luck. But as a Digital Nomad you are your own boss. You contract to do something, at a rate, on a timeline and then you deliver. You are empowered to do the work you want, when you want it. To lead the lifestyle you choose, making as much as you desire. Doing your own training, building your own skills, selling your services and reaping the rewards.

Corporate Nomadland is much, much bigger than the Nomadland of the movie. And it is largely comprised of people who want to work like Digital Nomads. It’s not bleak. Rather, in many ways it is the future of work. Especially for people who provide services — from accounting to marketing to sales to planning, to education, workshops, security, etc. It is a world built on networking, connectivity, individual accountability, and entrepreneurial behavior as it existed prior to the Industrial Era.

For Full image: JDP Employee Screening
Unfortunately, a lot of old-school employers and government officials still don’t understand this mega-Trend. They keep trying to force Digital Nomads into becoming employees, by altering work rules and regulations and promoting old-school style unions. Efforts attempting to force employers to do what they can’t – operate their business like it’s 1966. Business people today must be adaptable to market shifts, changing competition and fast moving customer needs. They can’t afford full-time employees and incumbent overhead costs on roles that simply are not economically suited to their needs. Trying to force this behavior hurts the Digital Nomads even worse than the employers, because they don’t want these changes. That’s why the effort to change laws making Gig Workers employees failed in California. That’s why employees failed to unionize an Amazon facility in Alabama.  Even President Biden favors unions, “The policy of our government is to encourage union organizing.” (POTUS tweet 4 Feb 21) Those are not the right answers to today’s problems.

We are living a mega-Trend, accelerated by the pandemic

We now know we can work asynchronously and mobile. We know the results of our work are more important than physically attending meetings, or office politics. We know that we can be more efficient, and capable, when empowered to focus on results and not outdated policies, procedures and processes. And this trend will continue to grow. Despite the CEOs and other leaders that want to force everyone back in offices, in large droves people are choosing not to go.

That’s not to say the government couldn’t be a lot more effective if it accepted this mega-Trend and attempted to assist its citizenry with new approaches. There need to be entirely new approaches for implementing and regulating safety nets – like unemployment, health care and retirement programs. There need to be new regulations for contract negotiations and dispute resolutions between large corporate entities and Gig workers. New approaches for Digital Nomads to network in ways to set output standards, work standards, pricing standards for effectively working with their much bigger customers. There need to be new approaches for bringing on and eliminating transition teams for large projects. Basically, new approaches which support the adaptability and flexibility needed by both employees and Gig Digital Nomads. Digital Nomads are here to stay.  Speaking of mega-Trends, have you seen the new AI-controlled, EV camper?

(1) Section reference

(2) Additional references

-MegaTrends by HP “The Future of Work – The Gig Economy
-World Economic Forum – “The MegaTrend that Will Shape Our Working Future” the Gig Economy
-EY MegaTrends – “The Future of Work” the Gig Economy
-Supermoney – “The Growing Importance of the Gig Economy


Don’t Miss Adam’s Recent Podcasts!

Did you see the trends, and were you expecting the changes that would happen to your demand? It IS possible to use trends to make good forecasts, and prepare for big market shifts. If you don’t have time to do it, perhaps you should contact us, Spark Partners.  We track hundreds of trends, and are experts at developing scenarios applied to your business to help you make better decisions.

TRENDS MATTER. If you align with trends your business can do GREAT! Are you aligned with trends? What are the threats and opportunities in your strategy and markets? Do you need an outsider to assess what you don’t know you don’t know? You’ll be surprised how valuable an inexpensive assessment can be for your future business.  Click for Assessment info. Or, to keep up on trends, subscribe to our weekly podcasts and posts on trends and how they will affect the world of business at www.SparkPartners.com

Give us a call or send an email.  Adam@sparkpartners.com 847-726-8465.

How Amazon Used Trends to Buy MGM for Free

How Amazon Used Trends to Buy MGM for Free

Free Trend Money!

Amazon is buying MGM film studios for something less than $9 B. Sounds like a lot of money. But since Amazon can make its own money, effectively this transaction is free. Now you must be wondering, how can Amazon make its own money? By creating “Trend Value.”

Back in 2016, before Amazon started making acquisitions like Whole Foods, its valuation (or market capitalization) was $332 B. But its assets were only worth $30 B. And remember, Amazon was not, and still isn’t, very profitable. Net income was only about $2 B at that time. That extra $300 B of valuation (10x the assets) wasn’t from earnings, but rather because Amazon was a global leader in e-commerce with about 40% market share in the USA. Because e-commerce and cloud computing were growing trends, investors gave Amazon an additional $300 B in value as a Trend Leader.

Because Amazon was riding the big trends to e-commerce it created $300 B of very real value. This very high share price allowed Amazon to keep investing in ways to grow, including making acquisitions.

Compare with Walmart. In 2016 before, Walmart bought Jet, it had almost no e-commerce. Walmart had $232 B of assets (7 times the assets of Amazon,) but it’s valuation was only $216 B (2/3 Amazon’s.) Because Walmart’s assets (and business) were concentrated in the no-growth retail world of brick-and-mortar stores its value was less than its assets! Investors were basically saying that to create value Walmart would have to sell its assets – not grow its revenues. As a result, Walmart’s Trend Value was a NEGATIVE $16 B

Six years (and a pandemic) later, and the world of e-commerce has exploded. WalMart bought Jet, eschewing adding traditional stores and instead investing in e-commerce. As a result its assets grew very little, but its market valuation improved to $399 B, an 85% enhancement. And it’s Trend Value went up to $60 B. A good thing, but still only 1/5 the 2016 Trend Value of Amazon. A $9 B acquisition would be a very notable acquisition for Walmart using up over 50% of its cash. And taking out a 2.5% chunk of its market cap, and a whopping 15% of its enhanced Trend Value.Meanwhile, since 2016 Amazon has purchased an entire grocery chain (Whole Foods) and made enormous investments in distribution centers, trucks, and other supply chain assets. That has increased Amazon’s asset base 10-fold, to about $320B. But now Amazon’s publicly traded shares are worth $1.62 TRILLION. That’s right, with a “T.” By investing in Trends (e-commerce and cloud computing services [AWS]) Amazon’s Trend Value has risen to a whopping $1,300 Billion. Amazon’s Trend Value is 21.5x Walmart’s.

By investing in Trends, Amazon created a cache of value

They used that value to make more acquisitions. Even though it made huge investments in assets – far beyond WalMart’s – its Trend Value grew even more. Now Amazon could purchase MGM for $9 B and use only 10% of its cash. But it won’t. It will use shares. But that $9 B is now only .55% of Amazon’s value – and only .7% of its Trend Value. Negligible on the balance sheet, but opening up tremendous revenue growth for Prime Video.

If you want to create money, invest in trends. Walmart was the renowned leader in retail, and computing for retail, until trends shifted the market. Now it is an also-ran compared to Amazon. And because Amazon is leading in the Trending markets of e-commerce and cloud computing it has created the money to buy MGM. Again, not with profits (which are still only $20 B) but with the Trend Value created by proper market selection and investing.

So are you creating money by investing in trends? You can literally create your own money, usable for all kinds of investments, when you invest in trends. Or are you grinding out the business, like Walmart with all those stores, but creating almost no value in the vast majority of what you do? The choice is really up to you.


Don’t Miss Adam’s Recent Podcasts!

Did you see the trends, and were you expecting the changes that would happen to your demand? It IS possible to use trends to make good forecasts, and prepare for big market shifts. If you don’t have time to do it, perhaps you should contact us, Spark Partners.  We track hundreds of trends, and are experts at developing scenarios applied to your business to help you make better decisions.

TRENDS MATTER. If you align with trends your business can do GREAT! Are you aligned with trends? What are the threats and opportunities in your strategy and markets? Do you need an outsider to assess what you don’t know you don’t know? You’ll be surprised how valuable an inexpensive assessment can be for your future business.  Click for Assessment info. Or, to keep up on trends, subscribe to our weekly podcasts and posts on trends and how they will affect the world of business at www.SparkPartners.com

Give us a call or send an email.  Adam@sparkpartners.com 847-726-8465.

Hallelujah! Microsoft Cancels Windows 10X

Hallelujah! Microsoft Cancels Windows 10X

Stuck on the Core

This week, to almost no fanfare, a Microsoft Vice President issued a statement saying that Windows 10X (planned for 2019) would not ship in 2021. In fact, it would never ship. The technology enhancements would be integrated into existing Windows, and other products. While this gained little press, it is great news for customers and investors.

CEO Satya Nadella has officially changed the course of Microsoft. Under former CEO Ballmer the behemoth kept pouring money into Windows and Office. While the world was moving from PCs and PC servers to mobile devices and the cloud, Ballmer just kept pouring billions into old products. His slavish insistence on trying to defend & extend an old “core product line,” which every year was losing importance as PC sales slowed, was killing Microsoft — leading me to call Mr. Ballmer the worst CEO in America (my Forbes column that was by far the most read of any I ever penned.) After more than a decade as CEO, Ballmer had spent a lot of Microsoft money on new versions of its ancient product and bad acquisitions like Skype and Nokia, but he entirely missed the market shift in his customer base. In my blog post, “Microsoft, What Next?”, I described the challenges ahead to pull Microsoft out of the Growth Stall.

This chart shows just how much Microsoft has changed since Nadella took over. During Ballmer’s 13+ year leadership Microsoft’s valuation barely budged. (From left to small blue box.) But, Nadella rapidly shifted investments from Windows and Office to software as a service and cloud computing. (Graph rapidly increases.) That radical redirection enlivened both sales and earnings – and the company’s future growth prospects. In short, where the company had been locked-in to defending & extending its past, Nadella redirected the company onto trends. By doing so, he improved sales per/share 85%, the price/sales ratio from 3.3x to 9.4x, and the PEG ratio from 1.4 to 2.5. The company’s “trend value” (market cap increase over assets due to aligning with trends) since Nadella took charge has grown from $172 billion to a staggering $1.53 trillion!!! Now that is wealth creation!!!

In the years leading up to Ballmer’s firing I was a very loud critic of Microsoft. In multiple Forbes columns, (republished as blogs on my web site) I pushed for his ouster. But even more importantly I gave the company little hope of long term viability. By over-investing in outdated products it seemed most likely Microsoft would go the way of Hostess Baking, Sears, DEC and Sun Microsystems – irrelevant leading to failure. I rabidly recommended not owning Microsoft.

microsoft stock results table

Microsoft Stock
2014-2021

The Impossible Just Takes a little Longer…

But Nadella achieved the improbable. Much like Jobs when he retook the reigns at Apple, Nadella quit looking (and investing) in the rear view mirror. Like Jobs, he dropped investing in PC’s. Instead he focused on the future, and where Jobs invested in mobility, Nadella has invested in the cloud. Very few companies make this kind of radical shift in resourcing projects, even when it is the obviously right thing to do. And Nadella deserves the credit for making this radical change in Microsoft, saving the company from near-oblivion while creating a very viable, valuable company in a short time. Where once I saw a company heading for infamy, now Microsoft shows all signs of leadership toward the next technology wave and longevity. Quietly saying the company has no plans for a new Windows version, which nobody cares about anyway, is a tremendous demonstration of looking forward rather than backward.

Jump the Re-Invention Gap

Do you have the insight to know when you’re company is over-investing in past solutions as markets shift? Are you like Ballmer, always making the next version of what once made you great, or are you like CEO Nadella – ready to unload your past focus in order to seek future growth? Are you letting market trends guide your investing and solution development, allowing you to de-invest in outdated technologies and products? Like Reed Hastings at Netflix, do you see the need to pivot?  Netflix changed from an outdated business model (shipping DVDs and tapes) to a new model (streaming) in order to keep your company viable, and an industry leader. You must be if you want to thrive in the rapidly changing competitive marketplace of the 2020’s.


Don’t Miss Adam’s Recent Podcasts!

Did you see the trends, and were you expecting the changes that would happen to your demand? It IS possible to use trends to make good forecasts, and prepare for big market shifts. If you don’t have time to do it, perhaps you should contact us, Spark Partners.  We track hundreds of trends, and are experts at developing scenarios applied to your business to help you make better decisions.

TRENDS MATTER. If you align with trends your business can do GREAT! Are you aligned with trends? What are the threats and opportunities in your strategy and markets? Do you need an outsider to assess what you don’t know you don’t know? You’ll be surprised how valuable an inexpensive assessment can be for your future business.  Click for Assessment info. Or, to keep up on trends, subscribe to our weekly podcasts and posts on trends and how they will affect the world of business at www.SparkPartners.com

Give us a call or send an email.  Adam@sparkpartners.com 847-726-8465.

America’s Emerging Demographic Disaster – Are You Planning For It?

America’s Emerging Demographic Disaster – Are You Planning For It?

Demographics is Destiny

Planning is all about the future. And the future is easiest to predict when we look at demographics. Population trends are easy to spot, and long-lived. So the recent U.S. census, which built on previous trends, gives us great insights for planning our investments. Let’s focus here on the two biggest demographic trends.

First, the U.S. population growth rate is terrible. Less than 1%/year. Its the 2nd worst decade since stats started in 1790. And this included the rebounding post Great Recession economy! Simply put, fewer babies and a lot fewer immigrants. So now, there are more people over 80 years old in America than under 2 years old. Partially the result of efforts designed to boost employment and pay, a decade of anti-immigration policies has left us with fewer people to get things done. It didn’t boost employment nor pay, but it has meant there are fewer people around to support the aged and infirm – and to pay taxes.

In 2018, I wrote about the Japanese demographic “trend bomb.”  Low birthrates and anti-immigration meant there were only 2 working people to support each retiree. And the situation was worsening. It’s time America starts considering what it will do if we don’t let immigrants return to spark growth. Growth can hide a multitude of sins,    Source: Avondale Asset Management
because it creates demand for more goods and services – thus creating economic growth. People in China and
India aren’t starving any longer, because they’ve grown their economies out of poverty.

As wrote in 2017, it was America’s population growth – driven by immigration – that made 1800s and 1900s America the jewel of the world. Despite horrors at Ellis Island, those boatloads of immigrants created the agricultural and industrial America with its flourishing economy. Like I observed in 2016, unless we re–invigorate growth through immigration, the woes Trumpers complain about will get much, much worse. Soon Pakistan and Indonesia will have more people than the USA! China and India, with their growing populations, growing economies and growing diaspora are making an ever–bigger imprint on the global economy. Meanwhile, America is on its way to stagnant performance like most European countries.

U.S. Population is Mobile, Despite the Pandemic

Second, the trend south and west continues unabated. In 1970, the South and West accounted for less than half the population. Now they account for 62%. The Northeast is losing people rapidly, with 48 of 62 New York counties losing people. And Illinois has seen the problem in spades.  Chicago and Illinois are already in a world of hurt due to declining population causing a declining economy causing real estate prices to fall and taxes to rise. (Though the pent-up pandemic housing demand is temporarily increasing housing prices, masking the long term trend.) When population trends down, it becomes a whirlpool of problems – just look at what’s happened in Detroit! You must have the people to build a strong economy.

Looking at both these trends, do you see the unabashed irony? We see no problem with cities and states competing for migrants from other cities and states. Local and state governments lure in companies and people with tax breaks, subsidies and other allowances. We think immigration within our country is good – and recognize losing people from our local area is bad. But at a national level, we still have people who object to immigration. They want the borders closed, and no new entries. We have politicians who want to freeze the economy in place. Yet we know from our past that the only solution to getting our economy to grow REQUIRES immigration. It is the #1 reason the economy was so sluggish coming out of the Great Recession – we cut immigration to unprecedented levels under Obama and continued the decline under Trump. We are unlikely to birth our way to growth, given trends in lifestyles and gender equality. But, we can bring in immigrants who can help the economy grow. We need to get over this hypocrisy and move toward greater immigration as a pro-America policy!

What does this mean for your business?

First – are you sure you want to do business only in the USA? The growth markets are elsewhere. Have you considered selling in China, India, Indonesia, Micronesia, Thailand, South America and Africa? These are growing markets where Chinese businesses (in particular) are making big investments. By going where the population is growing they are able to grow their revenues, and their influence. America isn’t the dominant international player it once was, and there’s never been a better time to look outside America for your next growth market.

Second – Take your business where you see the growth in America. Lots of businesses are going to Texas (and Nevada, Utah, Idaho and Arizona) because lots of people are going there! If you open a restaurant in a town losing people, to succeed you have to entice people to drive to your town and restaurant. You better be really good, and you’ll probably have to make price allowances to have repeat business. But if you have a restaurant in a locality where people are immigrating in large numbers you can do well even if your food is mediocre. Growth hides a multitude of sins!! Your food need not be fantastic, and you can price higher, and you can even have shorter hours because you’re where the people are! It’s simply a lot easier to succeed when you are in a growing marketplace. Are you planning to be someplace because that’s where you started, have family, or went to college? Or are you planning to be someplace where the people, and money, are?

Have you taken into account changes in demographics when making your plans? It is undoubtedly the #1 trend you should use for planning (Fleeing Illinois) . It is highly predictable, and has a lot to do with success. Simply going where the people are will help you succeed. There’s nothing more important to your scenario planning than obtaining a copy of the latest census and studying it really, really hard. It’ll jump start you on the road to greater sales and more success!


Don’t Miss Adam’s Recent Podcasts!

Did you see the trends, and were you expecting the changes that would happen to your demand? It IS possible to use trends to make good forecasts, and prepare for big market shifts. If you don’t have time to do it, perhaps you should contact us, Spark Partners.  We track hundreds of trends, and are experts at developing scenarios applied to your business to help you make better decisions.

 

TRENDS MATTER. If you align with trends your business can do GREAT! Are you aligned with trends? What are the threats and opportunities in your strategy and markets? Do you need an outsider to assess what you don’t know you don’t know? You’ll be surprised how valuable an inexpensive assessment can be for your future business.  Click for Assessment info. Or, to keep up on trends, subscribe to our weekly podcasts and posts on trends and how they will affect the world of business at www.SparkPartners.com

Give us a call or send an email.  Adam@sparkpartners.com 847-726-8465

Verizon’s AOL/Yahoo Debacle – Think You Can Fix That?

Verizon’s AOL/Yahoo Debacle – Think You Can Fix That?

Do you have any idea how powerful AOL and Yahoo once were, and how much they were once worth? Do you know how much shareholder value has been destroyed in these 2 companies in just 20 years? $221 Billion of destroyed wealth.

AOL pioneered the web as we know it today. Long before wireless, or broadband, there was “dial up service.” For young readers, that meant using a physical modem to connect your computer to a land-line telephone in order to literally dial up a connection to an internet service provider. AOL pioneered using the internet, and was the #1 connection with almost the entire marketplace. The phrase that made AOL famous back then was when you connected to AOL and it gave us the now iconic “You’ve got mail.” After connecting America, in 2000 AOL merged with Time Warner media in a deal valuing AOL at $111B.

Yahoo pioneered giving internet users news. It accumulated news from around the world on Sports, Economy and many other topics, making the news available to readers for free because it sold ads to pay the bills. In 2000 a publicly traded Yahoo was valued at $125B.

So in 2000, amidst a very extended NASDAQ internet hype, AOL and Yahoo were valued at $226B.

Image Source

This week Verizon agreed to sell the two companies to a private equity firm for $5B. That’s a loss in value of $221B in 21 years.

How does a loss of this magnitude happen? A lot of focusing on tactics, ignoring market trends and failing to adapt the company strategy to meet changing competitive dynamics. Broadband and wireless eventually made dial-up irrelevant. And despite buying some media company to try and add new content to AOL, it lost all meaning. Time Warner spun it out to the public at a value of $3.5B in 2009.

Then, Verizon thought it could build a proprietary content company to get more Verizon customers so it bought AOL in 2015 for $4.4B. Only, nobody needed another content provider by then. Google served up general content just fine, Facebook gave us content we looked at frequently, and specialized content sites like Finance (Marketwatch) and Sports (ESPN) made it impossible that late in the game to launch a general purpose content accumulator and reposter. It was a strategy for 2005, not 2015. Meanwhile, Yahoo made one tactical decision after another to shore up its old model that didn’t work. Google became vastly better at search, and vastly better at delivering content. Tactical oriented CEOs Carol Bartz and Marissa Mayer had no strategy to meet emerging needs of the 2010 decade and beyond – leading Yahoo into complete irrelevancy.

Undeterred, the Verizon owned AOL bought Yahoo in 2017 for $4.5B. After all, it seemed cheap compared to its once $125B value – right? The idea was to merge the two companies, create “cost synergies” and “scale” in users to sell more advertising. Only, neither platform had enough original content to stop the user bleed to other sites. Netflix and Google’s YouTube took everyone who wanted new content away, and there was nothing left for AOL/Yahoo to deliver. It became the internal combustion engine repair shop in a world full of EVs

Now, after spending $9.9B on the entities plus much more in acquisitions, Verizon is selling both entities to Apollo Global Management private equity for $5B – a loss of $4.4B. And Apollo thinks this is a good deal because “a high tide raises all boats” and it will win merely because the world is increasingly using the internet. Really? More people are using the web, and more often, but they’ve already shown not via AOL nor Yahoo. Facebook, Instagram, Google, Pinterest, Twitter, and a raft of other sites are gaining the traffic. What was once irrelevant remains irrelevant.

It is crucial to understand why these to GIANTS of the internet are now part of history’s dustbin. While they pioneered the market, gaining huge revenues, share and valuation, they did NOT keep their eyes on disruptive innovators who could change the market they pioneered. Broadband killed dial-up, and because AOL moved too late it died. Google overtook search, delivering more content faster and better, and Yahoo simply waited too long to react. Not unlike how Research in Motion (Blackberry) failed to see the “app wave” in mobile coming and lost its enormous lead in mobile phones to Apple and Samsung. All thought their strength in pioneering was enough – and failed to keep their eyes on external trends and new market shifts that would change competition.

I wrote a raft of columns about the mistakes made by these company CEOs from 2009 through 2017 – constantly telling readers not to buy the stocks (just search the blogs my website adamhartung.com for AOL or Yahoo.) It is extremely rare for a corporation locked into its business model and cost cutting to adjust to a rapidly shifting market. When a company does so – like Jobs turned around Apple and Nadella at Microsoft – it is the exception to be well applauded. But that is very, very rare.

And this is NOT what PE companies do. They aren’t visionary investors who put in lots of money to change companies. They cut costs, streamline operations, and add debt to get their investment back. Apollo is no different. It has no vision of the internet future that will slow Facebook, Apple, Netflix, Alphabet/Google or even Amazon. It has purchased two irrelevant brands with outdated business models, no new technology, no new market approaches and no new insight to future unmet needs. There is no doubt Apollo will not turn these around. Apollo will unload this newest Yahoo! over-leveraged to a public debt market dominated by pension funds and it will soon enough file bankruptcy, finishing the coffin.

Do you think you could turn these around? First, are you ready to turn around your own business? Are you focused on how market shifts, happening today, will change your market? Are you seeing trends, and changing your business model and technology to adjust? Are you building a business around future scenarios you’ve created to compete in 2025 and beyond with different competitors offering different solutions? Or are you relying on past strengths to carry you through the future? If you’re planning with your eyes firmly in the rear view mirror I highly recommend you learn the lesson from AOL and Yahoo – that approach will not work.


Do you know your Value Proposition? Can you clearly state that Value Proposition without any linkage to your Value Delivery System? If not, you better get on that pretty fast. Otherwise, you’re very likely to end up like encyclopedias and newspaper companies. Or you’ll develop a neat technology that’s the next Segway. It’s always know your customer and their needs first, then create the solution. Don’t be a solution looking for an application. Hopefully Uber and Aurora will both now start heading in the right directions.

Don’t Miss Adam’s Recent Podcasts!

Did you see the trends, and were you expecting the changes that would happen to your demand? It IS possible to use trends to make good forecasts, and prepare for big market shifts. If you don’t have time to do it, perhaps you should contact us, Spark Partners.  We track hundreds of trends, and are experts at developing scenarios applied to your business to help you make better decisions.

TRENDS MATTER. If you align with trends your business can do GREAT! Are you aligned with trends? What are the threats and opportunities in your strategy and markets? Do you need an outsider to assess what you don’t know you don’t know? You’ll be surprised how valuable an inexpensive assessment can be for your future business.  Click for Assessment info. Or, to keep up on trends, subscribe to our weekly podcasts and posts on trends and how they will affect the world of business at www.SparkPartners.com

Give us a call or send an email.  Adam@sparkpartners.com 847-726-8465.

IBM’s Demise – Why You Can Do MUCH Better

IBM’s Demise – Why You Can Do MUCH Better

On Friday, January 22, 2021 IBM announced sales and earnings results. Revenues had fallen 6.5%. The stock dropped 11%. IBM alone caused an otherwise up Dow Jones Industrial Average to decline. And, as the NASDAQ rose, largely due to tech stock improvement, IBM was the lone loser. The new CEO, in his role only 1 quarter, predictably asked for more time and investor confidence that the future would look better than the past. Investors justifiably lost confidence a long time ago.

Unfortunately, IBM’s recent performance was just a continuation of its long-term trend. Since 2000, IBM stock has gone nowhere – up a mere 5.7% in 21 years – while Apple (for example) is up some 14,000%. IBM was the 7th largest company on the S&P500 in 1976 when Apple was born. Now Apple’s revenues are 3x IBM’s, and its market capitalization is 20x higher!

A lot of blame must be laid on the former CEO, Virginia (Ginny) Rometty. CEO from 2012 to end of 2020, she took home pay of around $35M/year. But during her tenure IBM sales fell in 30 of 34 quarters! Starting shortly after being appointed, IBM suffered 20 consecutive quarters of declining revenues – a remarkably infamous achievement for any CEO!

In 2012, just as Rometty was settling into her new desk, I said Steve Ballmer was the worst CEO in America (link 1). Little did I know he would be replaced with a new CEO that would turn around Microsoft and save the company, while Rometty would replace Ballmer as absolutely the worst CEO in the tech world – and tie herself with Immelt of GE as the worst CEO in all of America.

By 2014, it was clear that Rometty was altogether wrong as CEO, and I told investors to avoid IBM altogether. In 2 years, revenues had begun their declining trend, and she was constantly on the defensive. Instead of investing in cloud computing and other emerging technology solutions, Rometty was selling IBM’s business in China (because we all know that China was not a growth market – except someone forget to tell Apple and Facebook,) and the PC business. Simultaneously Rometty was cutting R&D spending. And she took on more debt. Where was all the money going? Not into growth investments – but rather into stock buybacks where IBM had become the poster child for financial machinations and share manipulation in order to enhance executive bonuses.

Despite IBM bragging about its one-off supercomputers and interesting artificial intelligence uses, there were no new commercial products helping customers build out trends. So IBM partnered with Apple to build “enterprise apps” in iOS in late 2014. This was doomed. IBM brought nothing to this game. IBM was now wholesale saying its development would be on platforms driving revenue growth for Apple – not IBM. IBM was admitting it had a lot of resources (still) and customers, but no idea where the marketplace was headed. So IBM would help Apple grow its user base. This was great for Apple, bad for Microsoft Surface sales, but absolutely horrible for IBM.

So by 2017, IBM was in an irrecoverable Growth Stall. Twenty quarters into the job, and twenty quarters of declining sales meant IBM was in a Growth Stall which predicted a horrible future. But despite the horrific sales and earnings performance, and the resulting horrific stock performance which in no way kept up with the overall market or industry leaders, Rometty was being granted ever more compensation by a ridiculously out of touch Board of Directors. She was being rewarded for manipulating the financials, not running a good business. She clearly needed to be fired. I said so, and told investors not to expect any gains as IBM continued to shrink.

By 2018, even the most long-term of long-term investors, Warren Buffet of Berkshire Hathaway, had given up on Rometty and IBM. As I said then the writing was on the wall by 2014, so why it took him so long was hard to understand. But it was quite clear, falling revenues would lead to lower valuations, regardless how much effort CEO Rometty put into “managing earnings.” The big shock was it took the Board 2 more years to finally get rid of her — one of the 2 worst performing CEOs in American’ capitalism.

Why do I bring up all these old blogs of mine? First, to demonstrate that it IS possible to make accurate business predictions. It is straightforward, once the key trends are identified, to  see what companies are building out trends, and which are not. Those who ignore trends are doomed to do poorly, and you don’t want to own their stock. If you are running your business looking internally, and thinking about how to squeeze out a few more dimes of cost you are NOT doing the right thing. You must look externally and build on trends to GROW YOUR REVENUE!

2nd, I have long preached that the #1 indicator of companies that are likely to succeed or fail lies in charting revenue growth. If revenues aren’t growing at 8-10%/year, then as an investor or company leader you need to worry. The company isn’t keeping up with inflation and general economic activity. Too few CEOs (and investors) pay enough attention to revenues. They are happy with lackluster sales while paying too much attention to expenses and managing earnings. That is never a winning strategy. If you don’t grow revenues you can’t grow cash.

3rd, you must consistently invest in innovation and new solutions that build on trends. All solutions become obsolete over time. It is imperative to constantly invest in new products, new offerings, that build on trends in order to keep revenues flowing your way. No company can succeed long unless it invests in innovation to keep itself current, and relevant with customers.

Along with Steve Ballmer and Jeffrey Immelt, Virginia Rometty will go down in history as one of the worst CEOs of this era. Like Immelt’s crushing of GE, Rometty led the demise of the once mighty IBM. You can do better. Keep your eyes on trends, focus on revenues and never stop innovating.


Do you know your Value Proposition? Can you clearly state that Value Proposition without any linkage to your Value Delivery System? If not, you better get on that pretty fast. Otherwise, you’re very likely to end up like encyclopedias and newspaper companies. Or you’ll develop a neat technology that’s the next Segway. It’s always know your customer and their needs first, then create the solution. Don’t be a solution looking for an application. Hopefully Uber and Aurora will both now start heading in the right directions.

Don’t Miss Adam’s Recent Podcasts!

Did you see the trends, and were you expecting the changes that would happen to your demand? It IS possible to use trends to make good forecasts, and prepare for big market shifts. If you don’t have time to do it, perhaps you should contact us, Spark Partners.  We track hundreds of trends, and are experts at developing scenarios applied to your business to help you make better decisions.

TRENDS MATTER. If you align with trends your business can do GREAT! Are you aligned with trends? What are the threats and opportunities in your strategy and markets? Do you need an outsider to assess what you don’t know you don’t know? You’ll be surprised how valuable an inexpensive assessment can be for your future business.  Click for Assessment info. Or, to keep up on trends, subscribe to our weekly podcasts and posts on trends and how they will affect the world of business at www.SparkPartners.com

Give us a call or send an email.  Adam@sparkpartners.com 847-726-8465.

The End of Trumpism

The End of Trumpism

Click for ebook

Business Trends from COVID19 impact hartung

Thrive to the Future – 4 top trends for 2021 and beyond.

Businesses need to plan for the future. And part of planning are the assumptions you make. As Biden takes office, there is a lot of talk about whether the “movement” that Trump led is at its end, or just beginning. The good news is we have the tools to be predictive when answering that question, and those tools tell us that for the most part Trumpism is over.
As I wrote in August when California put to vote its “Gig Economy Law,” not even a state legislature can stop a trend. The Gig Economy is one of the biggest mega-trends out there, so trying to legislate away the trend and return to old methods of employment was simply not going to work. California needed to make changes that aligned with needs of gig workers, not try to outlaw the practice. And the measure failed.

It’s this same logic that makes me confident the policies that applied the last 4 years will go away, and any “movement” to try and return to that course will not succeed.  Like California’s effort, the policies of Trumpism were anti-trend.  While these policies could be enforced for a short time, they simply could not withstand the power of the long-term trends, and thus were doomed from the outset.  Let’s take a look at some of those policies and trends, and review why they were (at best) short-term actions. {Note, this is not predicting an end to the Republican Party, nor Conservative politics.  This discussion is focused on the American policies of the last 4 years during the Trump administration.}

 

    • Anti-globalization is doomed to fail. We have the internet now. Everybody can see what’s happening in the world, and everybody can talk to everybody else. Borders have meaning, but trade across borders cannot be stopped. We all buy and sell products internationally daily. Even the Trump website sold apparel made in China. To try and stop trade is impossible, and tools like tariffs are simply woefully out of date. Those who try to interfere with globalization will have economic suffering, while allowing stronger international traders to grow. { Side note read column on why Brexit is Economic Destruction vs. Creative Destruction  }
    • Anti-immigration is doomed to fail. America, like almost all mature economies, is an aging demography. If you don’t add new people economic activity will suffocate under the weight of caring for the aged. You need demographic growth, and it needs to be younger people who are working. Simultaneously, companies that need skills need access to international markets to recruit people to work under visas. Immigration is good for economic growth, and an inherent part of globalization. Simply put, America needs immigration to keep growing. { Side note read column on why Japan’s aging demographics is an economic “time bomb”.  }
    • Chronic tax cuts without equal (or greater) investment is doomed to fail. The argument for low taxes is to provide more money for investing in business to grow – thus creating jobs that see higher pay due to increased demand for workers. However, recent tax cuts did not have associated policies for re-investment, and thus much of the money was used to repurchase shares of stock, make acquisitions of existing businesses and simply build a cash hoard. Simultaneously, tax cuts led to a reduction in government spending on infrastructure and other jobs creating projects, which further worsened the economic growth opportunity. This led to enormous income inequality – which has quite literally led to people “taking to the streets.” At some point policies have to shift toward investment to generate economic growth. { Side note read column on why share buybacks are not good for the economy nor good for shareholders. }
    • Isolating China only makes them stronger. We have a balance of trade deficit with China, but tariffs and attempts to stop trade only made the balance of trade WORSE. The net is we want Chinese labor, and products, a lot more than they need American products. Retaliation is very real, and the USA is woefully unprepared for economic retaliation. The biggest market hurt by Chinese retaliation is agriculture, as witnessed by the incredible number of farm failures last 4 years. Them not buying from us doesn’t affect them nearly as much as it affects us. Meanwhile, China keep investing in global projects, their economy keeps growing, and now China’s economy is larger than the USA’s. We desperately need to focus on how to compete with China in global markets, not blindly think we can simply walk away. { Side note column on changing economic positions and how China’s growth is impacting global positions including currency valuations. }
    • Sanctions and other policies to try controlling middle-east behavior are doomed. US policy was historically built on petroleum demand. But now these countries must move beyond oil sales to grow, and they desperately know this. The only successful long-term policy is to help these nations grow diversified economies so they can create jobs and keep their citizens happy. {Side note column on how falling petroleum demand is affecting global markets and changing the winners. }

     

  • These are just some of the long-term trends that Trumpism ignored. Short-term shear force of will, lying about the data and ignoring the obvious could allow naysayers to hope they would change the trajectory of history. But long-term, trends always win. Evolution always moves forward, never backward. While Trumpism was a very interesting effort to fight trends, it was doomed to fail. And now that we can see the almost wholly negative economic implications of these policies it is extremely unlikely any such “movement” can re-establish itself. People do not act against their own self interest very long.

  • Winners don’t fear trends and the change they create. Rather they accept the trends on build on them to grow. Looking forward business should not plan for Trumpism to return in any meaningful way. As a set of policies they are as likely to succeed as storming the capital was likely to change the course of an election. Short term a lot of noise, long-term meaningless. So we can move forward building our plans based on trends, and a shift to economic policies much more aligned with long-term trends.

    Key lessons?

    First, the world is growing and leading businesses will grow. If you’re not growing, you’re dying.  Second, never plan from past success, but instead plan for the future. You don’t grow value by being operationally excellent, because the world is forever changing and it will make your past business less valuable even if you do run it well. Third, make sure your plans are all built on trends. Let trends be the wind in your sales, or the current under your boat, or whatever analogy you like – just be sure you’re using TRENDS to drive you business planning, product development and solutions generation. Customers buy trends and help for them to achieve the future.

  • Here at Spark Partners, we are experts at trend analysis, trend planning and effective resource allocation. Don’t let a comfort level on doing more of the same get in the way of your future growth. Embrace trends in the market and let us help you identify critical trends and invest smarter to build on trends and grow.

    Don’t Miss Adam’s Recent Podcasts!

    Did you see the trends, and were you expecting the changes that would happen to your demand? It IS possible to use trends to make good forecasts, and prepare for big market shifts. If you don’t have time to do it, perhaps you should contact us, Spark Partners.  We track hundreds of trends, and are experts at developing scenarios applied to your business to help you make better decisions.

    TRENDS MATTER. If you align with trends your business can do GREAT! Are you aligned with trends? What are the threats and opportunities in your strategy and markets? Do you need an outsider to assess what you don’t know you don’t know? You’ll be surprised how valuable an inexpensive assessment can be for your future business.  Click for Assessment info. Or, to keep up on trends, subscribe to our weekly podcasts and posts on trends and how they will affect the world of business at www.SparkPartners.com

    Give us a call or send an email.  Adam@sparkpartners.com 847-726-8465.

The Decline and Fall of Chicago and Illinois

The Decline and Fall of Chicago and Illinois

Chicago, and Illinois, are in big economic trouble.

  • 7th straight year of population decline. Losing 235,000 people in 10 years, 3x the amount of any other state. Last year saw a decline of 79,500 people – second only to much larger New York – and the rate of people leaving is accelerating.
  • Illinois has, on average, property taxes 2x the national average. If you owned the “Home Alone” house in suburban Chicago, since the movie was made in 1990 you would have paid $890,000 in property taxes.
  • Chicago is the worst residential real estate market of any large city in America. While values have been rising elsewhere since the Great Recession, in the last decade, property values in Chicago have declined 20%.
  • Sales tax is 9%, and on some products 10%+, one of the highest rates in the USA. On-line purchases are taxed at 10.25%, for example. Illinois is one of only 7 states to charge sales tax on gasoline. And Illinois has the highest cell phone tax in the country.
  • Illinois roadway toll fees are widespread, and among the highest in the USA, with the majority of those funds going NOT to road improvement but rather into the general budget to cover state expenses.
  • Illinois is 46th in private sector job growth – and would be 50th except the #1 source of job growth is government jobs. And 40% of the government workforce makes $100k+/year. The total number of jobs in Illinois December, 2019 was 6.2M – unchanged since 2015 – and up only slightly from 5.9M in 2010 – yielding a pathetically low growth rate for jobs of 1/2 of 1% (.5%) per year
  • 1/3 of the state budget is pension payments, and pension debt is 26% of state GDP – highest in the country. Lots of retirees, very few new jobs to pay their pensions.

Click for ebook

Business Trends from COVID19 impact hartung

Thrive to the Future – 4 top trends for 2021 and beyond.

Gibbon wrote “The Decline and Fall of the Roman Empire” as a treatise to uncover how such a powerful empire could lose its greatness. There is no doubt, Chicago and Illinois were once great. The area was known for great jobs, great infrastructure, great transportation system, great homeownership – and for many decades considered one of the best places to live in America. Back when agriculture and manufacturing dominated the economy. But quite obviously, as the world changed, and the sources of economic value (including jobs) changed, the late, great state of Illinois kept pushing on with “business as usual” instead of changing policies and investments to re-orient for the Information Era.

Things were not destined to become this bleak.  Chicago could be Austin today – but obviously it isn’t.  Where Austin, and Texas, looked at trends and made investments beyond the old “core” of oil and gas, Chicago and Illinois completely failed to look at trends that indicated a clear need to change. Problems, and the path to solve them, have been obvious for years.  It was easy to predict this would happen.  But a chronic focus on the short-term, rather than the long-term, combined with a complete unwillingness to change how investments were made caused state and city leaders to consistently ignore warning signs and make one bad decision after another.

Indicators of Decline

I’m an expert on trend-based planning, so let’s take a look at the telltales this was coming and how those telltale indicators were ignored:
  • In February, 2006 (yes 15 years ago) I wrote that Illinois was the #1 net job loss market in the country. This factoid highlighted an emerging problem in the underlying economy.  The state was still considerably dependent on old-line agriculture/food giants, those businesses were crumbling and unlikely to recover as the economy shifted.  Notably Kraft was in its 5th year of what was to be a turnaround (that never happened) and Sara Lee was under incompetent leadership that kept selling businesses to shore up declining revenues and earnings.  The state, and city, had failed to develop an infrastructure for investment in start-up companies.  There was a total lack of investment money for entrepreneurs from paternalistic large companies such as Motorola and Ameritech. And a lack of money for innovation from banks, venture capital and private equity firms.  Existing businesses were aging, cutting jobs and none were focused on investing in new companies to keep the local economy tied to the emerging Information Economy [ link  ]
  • In February, 2009 Forbes selected Chicago as the 3rd most miserable city in the USA, citing high taxes, no job growth, infrastructure decay, congestion and bad weather.  An uproar ensued – but no change. I then noted my 2006 column, and recommended a very serious Disruption in how Chicago was managing its resources. Clearly the “more of the same” strategy trying to defend its past was not working.  Unless there was a disruption, Chicago would get worse – not remain the same, and certainly not get better.  The signs were clear that from ’06 to ’09 nobody was thinking about the big changes needed [ link  ]
  • In June, 2010 it was reported that Illinois lost 260,000 jobs between 2000 and 2010 – and that was an indicator of why Chicago and the state were having so many economic problems.  I recommended the city and state make significant changes in resource allocation to keep more start-ups local.  The University of Illinois was the #4 engineering school in the US, but the vast majority of graduates left to one or the other coasts. Local businesses were not developing new businesses, thus not hiring these top students.  Start-ups at the universities, and by recent grads, could not obtain funding, so they fled to where the money was.  Economic reliance on stalled companies like Kraft, Sara Lee, Motorola, Lucent, Sears and United had created a Growth Stall that was sure to lead to additional job losses – when the best talent was right there in the state! [link ]
  • I followed up a week later that same June with a column on how Mayor Daley was very popular with voters and local businesses, but he was setting up the city (and state) for failure.  There was a focus on keeping the “old guard” happy, and doing so by completely ignoring opportunities for future growth.  Offering tax breaks and subsidies to recruit corporate headquarters (like Boeing) created very few jobs, and was a poor use of resources that should be diverted to funding start-up tech and bio-tech companies.  And financial machinations, like selling the city’s parking rights, gave a short-term lift to the budget, hiding significant weaknesses, while creating massive long-term problems. Chicago and Illinois politicians were focused on short-term actions to get votes, and ignoring the very real jobs problem that was tanking the economy.  [ link ]
  • By April, 2014 I was able to clearly demonstrate that my predicted economic stagnation spiral had taken hold in Illinois.  Defend & Extend investments to shore up declining companies – like Sears – robbed local governments of funds for job creating programs.  And a decade + of no job creation was forcing taxes up – at a remarkable rate – which kept businesses from moving to Illinois; kept them from opening software labs, coding facilities, research centers, pharma and bio-pharma production plants, etc.  With no growth, but rising costs, the death spiral had begun and needed immediate attention [ link  ]
  • In September, 2016 the outward migration from Chicago and Illinois had become a powerful trend.  Looking at demographics, the market was aging.  Rising costs and no growth had pinched budgets to the limit, while pension costs had become an unsustainable burden on the state’s citizens.  Just like Japan was in an aging crisis, Illinois was in an aging crisis.  And this was destined to create even more problems for the economic death spiral that began before 2006. [ link  ]
  • So by January, 2017 the demographic tailspin was clearly creating a vacuum pulling people out of Chicago and Illinois.  Fully 4 years ago it was obvious that the predicted trends had taken hold, and nothing short of an incredible disruption would save Chicago from becoming the next Detroit. Using the simplest trend planning tools made it clear that unless there was radical change in investments the Chicago empire was at its end. [ link  ]

Lessons for business?

Far too many businesses act like Chicago. “Business as usual” dominates.  Resources are automatically routed to defending old business lines, rather than investing in new products and solutions.  Focusing plans on historical customers, products and markets create blindness to market shifts, and a reluctance to move forward to new technologies and markets.  Very little energy is put into trend analysis, and plans are not built based on trends and likely future outcomes (planning from the past dominates over planning for the future.)  People who point out likely future bad outcomes unless serious change is undertaken are ignored, or shouted down, or removed entirely. Short-term financial machinations (selling assets, or a business, or offering deep discounts to keep customers) create an illusion of security while long-term trends are undermining the business’ foundation.
We are experts at trend analysis, trend planning and effective resource allocation.  It was clear 15 years ago that major resource reallocation was necessary for Chicago to continue growing its economy. Don’t let a fixation on doing more of the same get in the way of your future growth, like Chicago.  Let us help you identify critical trends and invest smarter to build on trends and grow.

Key lessons?

First, the world is growing and leading businesses will grow. If you’re not growing, you’re dying. Just like GE and Exxon. Second, never plan from past success, but instead plan for the future. You don’t grow value by being operationally excellent, because the world is forever changing and it will make your past business less valuable even if you do run it well. Third, make sure your plans are all built on trends. Let trends be the wind in your sales, or the current under your boat, or whatever analogy you like – just be sure you’re using TRENDS to drive you business planning, product development and solutions generation. Customers buy trends and help for them to achieve the future.


Don’t Miss Adam’s Recent Podcasts!

Did you see the trends, and were you expecting the changes that would happen to your demand? It IS possible to use trends to make good forecasts, and prepare for big market shifts. If you don’t have time to do it, perhaps you should contact us, Spark Partners.  We track hundreds of trends, and are experts at developing scenarios applied to your business to help you make better decisions.

TRENDS MATTER. If you align with trends your business can do GREAT! Are you aligned with trends? What are the threats and opportunities in your strategy and markets? Do you need an outsider to assess what you don’t know you don’t know? You’ll be surprised how valuable an inexpensive assessment can be for your future business.  Click for Assessment info. Or, to keep up on trends, subscribe to our weekly podcasts and posts on trends and how they will affect the world of business at www.SparkPartners.com

Give us a call or send an email.  Adam@sparkpartners.com 847-726-8465.

Trends Drive Value- Apple, Amazon, Google, Facebook, Microsoft

Trends Drive Value- Apple, Amazon, Google, Facebook, Microsoft

Click for ebook

Business Trends from COVID19 impact hartung

Thrive to the Future – 4 top trends for 2021 and beyond.

When looking at America’s 8 largest companies, a LOT has changed in 15 years. Back in 2005 the most valuable company was GE. The list was dominated by oil & gas companies; ExxonMobil, BP, Royal Dutch Shell. The biggest bank (Citi) and biggest retailer (Walmart) and 1 pharma company (J&J.) There was only 1 tech company on the list (Microsoft.)Value of top eight tech companies

But the world has changed, and that has impacted these companies dramatically. Most had GREAT pasts, but they did not adapt to a changing world. GE’s market cap has fallen 75% as it failed to keep up with trends. Oil companies failed to move into renewables and other industries (like electric car production) and they’ve lost over HALF their value. Walmart is most noted for missing the e-commerce trend, the big banks were clobbered by the Great Recession and “big pharma” hasn’t produced a blockbuster for many years. All down significantly.

But, the value of the top 8 companies is MUCH higher than 15 years ago – 5X more. These losers were replaced by some very serious winners. From $2.1T in combined value, the top 8 are now worth $10.5T. But notably, only 1 company is still on that list – Microsoft – which is up 620%!

The list is now dominated by 7 technology companies.

And for good reason – they all followed trends. Apple, Amazon, Microsoft, Alphabet (Google,) Facebook, Alibaba and Tencent all built their strategies around developing solutions for people to follow the major trends of being mobile, operating asynchronously, supporting gig work and adding artificial intelligence (AI) to their customers. By refusing to rest on past laurels they have become the mega-giants of today. (Hartung, “Thrive to the Future – The 4 Top Trends for 2021 and Beyond)

 

Value of top eight tech companiesThat these companies would overtake old leaders was not a foregone conclusion – nor an obvious one to most people. Not only were the previous giants big, they had incredible reputations and extremely strong management teams. And these tech companies were not without problems.

  • Apple almost went bankrupt just a few years prior to 2005, trying to be the “Mac” company. But Apple built one innovation after another helping people meet the emerging big trends – until it became the most valuable company on the planet (10 yr value increase 540%)
  • Microsoft was locked in to its Windows/Office domination and seemed unable (or unwilling) to acknowledge the big trends and its value languished under a terribly myopic CEO (Ballmer.) Yet, new leadership was able to see the trends and moved radically to build out cloud services and support for alternative customer solutions that changed the company and its fortunes (10 year value increase 330%)
  • Amazon was a former book seller turned general merchandiser. But Amazon started applying technology to understand its customers and help them be better shoppers, using AI to make them the leader in all things e-commerce. Simultaneously Amazon built the worlds largest and most secure cloud services business (AWS) helping support all major trends (10 year value increase 1,350%)
  • Google was a search engine, with an unclear business model. But Google went to unexpected lengths to make ALL forms of information digital, and accessible, and searchable. And it monetized that digitization in ways far beyond anyone expected leading to the end of newspapers and many other publishers (10 year value increase 370%)
  • Facebook was considered a fad for young people. Most business leaders thought Facebook’s users would disappear, and its young leaders would learn there was no revenue in attracting eyeballs (just as News Corps learned and shut down MySpace.) But Facebook built out the trend for social contact in a mobile, asynchronous smart way creating an entirely new business market called “social media.” Facebook looked at trends in how people connected, making brilliant acquisitions early of Instagram and WhatsApp that allowed Facebook family of products to become the #1 use of the internet (10 year value increase 450%)

Key lessons?

First, the world is growing and leading businesses will grow. If you’re not growing, you’re dying. Just like GE and Exxon. Second, never plan from past success, but instead plan for the future. You don’t grow value by being operationally excellent, because the world is forever changing and it will make your past business less valuable even if you do run it well. Third, make sure your plans are all built on trends. Let trends be the wind in your sales, or the current under your boat, or whatever analogy you like – just be sure you’re using TRENDS to drive you business planning, product development and solutions generation. Customers buy trends and help for them to achieve the future.


Do you know your Value Proposition? Can you clearly state that Value Proposition without any linkage to your Value Delivery System? If not, you better get on that pretty fast. Otherwise, you’re very likely to end up like encyclopedias and newspaper companies. Or you’ll develop a neat technology that’s the next Segway. It’s always know your customer and their needs first, then create the solution. Don’t be a solution looking for an application. Hopefully Uber and Aurora will both now start heading in the right directions.

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Did you see the trends, and were you expecting the changes that would happen to your demand? It IS possible to use trends to make good forecasts, and prepare for big market shifts. If you don’t have time to do it, perhaps you should contact us, Spark Partners.  We track hundreds of trends, and are experts at developing scenarios applied to your business to help you make better decisions.

TRENDS MATTER. If you align with trends your business can do GREAT! Are you aligned with trends? What are the threats and opportunities in your strategy and markets? Do you need an outsider to assess what you don’t know you don’t know? You’ll be surprised how valuable an inexpensive assessment can be for your future business.  Click for Assessment info. Or, to keep up on trends, subscribe to our weekly podcasts and posts on trends and how they will affect the world of business at www.SparkPartners.com

Give us a call or send an email.  Adam@sparkpartners.com  847-331-6384