by Adam Hartung | Oct 28, 2004 | Leadership
It is ironic that Blockbuster would announce the extension of CEO John Antioco’s contract for 5 years on the same day that they reveal a $1.42 billion loss.
Reuters: The company posted a quarterly operating profit well below analysts’ estimates even before $1.5 billion in one-time charges, as it faced falling movie rental demand and higher costs to counter competition. The company’s shares were down 6.35 percent at $6.64 on the New York Stock Exchange.
Antioco has been credited with saving Blockbuster time and again as the company repeatedly fell on hard financial times. And now he’s trying to do it again. The trouble with heroic leadership is you never know when luck will run out and the heroism won’t be enough.
Businesses cannot survive for long depending on heroic leaders and yet the business press constantly celebrates them. At almost any time, you can find a headline asking “Can Joe Blow Save XYZ Company?” The need for heroic leadership points to a deeper problem that gets masked over by the short-term successes won through the efforts of a few individuals. Why did the company need saving in the first place? What has happened to the company’s Success Formula that put it in such dire conditions, and what’s being done about it? These are the questions that should be asked when someone trumpets a heroic turnaround.
What’s the alternative? What companies need to do is develop a culture based on ongoing reinvention—from the top to the bottom. It is only when the organization systemically renews itself before it has to, that it can quit relying on heroic leadership to fly in and save the day. That’s what it means to adopt the Phoenix Principle and make it a foundational element in your company’s success.
by Adam Hartung | Oct 26, 2004 | Quotes
“When society requires to be rebuilt there is no use in attempting to rebuild it on the old plan. No great improvements in the lot of mankind are possible until a great change takes place in the fundamental constitution of their modes of thought.”
— John Stuart Mill 19th century philosopher and economist
by Adam Hartung | Oct 26, 2004 | General
Definition: How a company wins in the marketplace. It includes beliefs about who we are, what we do, how we do it, and why we do the things we do. Early in the lifecycle, it serves as the source of continued growth and prosperity. Later in the lifecycle it becomes locked-in and eventually causes the failure of the organization. For example, the key elements of Tupperware’s Success Formula are the home party sales approach, highest-quality products, and their relationships with their independent sales agents. [Source: The Phoenix Principle] See also: Success Formula Pyramid, lock-in, challenge, river lifecycle model.
by Adam Hartung | Oct 18, 2004 | In the Rapids
Haircuts. Now there’s a market with nothing new to be added, right? Don’t say that to Sports Clips, which has been identified as one of Entrepreneur magazine’s fastest growing franchises. This company is a great example of looking at the same boring market as everyone else and seeing it differently. The result is a novel store model that has resulted in tremendous growth.
“We are changing what men perceive as a commodity to an experience,” says Gordon Logan, CEO and founder of Sport Clips. “We’ve done what no one else has – targeted 50% of the market.”
What does the company offer that’s so unique? It is designed solely for guys—a market segment that has had to choose between old-style barber shops and full-service hair salons, neither of which do a good job of providing great, affordable haircuts in an environment that is comfortable for guys (try to find a guy-oriented magazine in a hair salon!). That’s the essence of business opportunity, and Sports Clips has filled it admirably. Here’s their approach:
“Targeting men and boys, Sport Clips operators provide high quality haircuts in a fun environment, complete with TVs at every stylist’s station tuned to sports. Every Sport Clips has specially trained stylists who focus on providing the highest level of service to every client.”
Colleen Gaiser, manager of my local franchise store, gave me a tour last week. From the big screen TV broadcasting a college football game in the foyer, to the sports magazines, to the neck and shoulder massage; this place was custom-tailored for men. And it’s succeeding, with $25 million in sales and expectations to continue doubling in size. Companies in the Swamp, take notes: this is a case study in how to recognize a need and develop a custom designed solution.
by Adam Hartung | Oct 18, 2004 | Defend & Extend, In the Whirlpool
Blockbuster’s competitors are making it difficult for the company to make strides toward profitable growth. Netflix, the leading online DVD rental business, just announced a price cut in an attempt to double the size of its business (a bad move, but that’s another story…). And Blockbuster, in order to not be under-cut, dropped its own prices in response.
This is the problem with Defend and Extend management. While Blockbuster is busy fending off competitors to its current business, it is consuming scarce investment dollars and organizational attention that cannot be applied to meeting the real threat, which is video on demand.
Even if Blockbuster succeeds against Netflix, how will they out duel Wal-Mart on price in this space? And now Amazon.com is rumored to be getting into the market, and Netflix may find a deep-pocketed buyer. Can Blockbuster keep this up indefinitely? Of course not. Instead of chasing around after paper-thin margins in a business that has no future, the company needs to wake up to the reality that it doesn’t have a Success Formula that can win in the long run and act now to reinvent it.
by Adam Hartung | Oct 14, 2004 | Defend & Extend, In the Whirlpool
What do you think; does Blockbuster’s Success Formula have a chance of being saved? The company IS innovating and CEO Anitoco’s recent investor tour was centered around convincing shareholders that the company has a plan to reinvigorate the business… but really, who are they kidding (besides themselves)?
Blockbuster’s innovations are clever and will certainly put some more dollars on the top-line (at least temporarily). These include increasing game rentals (competing with stores such as Gamestop), allowing people to trade-in their old movies, a subscription service to allow people to keep movies indefinitely (to compete with Netflix). Ultimately, the company is saying that it is changing its business from “a place you rent a movie to a brand where you rent buy or trade movies and games, used or new, in-store or online.”
We don’t think its going to be enough. Why? Because there are too many alternatives for renting movies, but the really big show-stopper is a disruptive technology: video on demand. Blockbuster claims that it has certain advantages over video on demand such as a two-month lead on getting new movies. But even this is based on the assumption that movie theaters fear cannibalization of retail sales. And that can change overnight.
Blockbuster’s actions won’t work over the long-term because they aren’t addressing the challenge. In essence they are just extending the old business model which is to have lots of brick and mortar retail outlets providing entertainment-related products for home use. It’s the lock-in to all the real estate that’s killing the company. What will happen when sales drop precipitously due to the rising popularity of streaming video that can be downloaded in the comfort of your home? It’s inevitable.
What else could they do? Stop investing in their dead business model–the current business model is in the Whirlpool and has no future. Instead it can start selling off valuable real estate and use the money to experiment with leading-edge business concepts. What would you do if you were CEO?
by Adam Hartung | Oct 14, 2004 | General
Definition: Mind-sets and practices related to establishing a Success Formula, then improving on it and protecting it against competitors by doing it better, faster, or cheaper. D&E Management sees the historical Success Formula as the solution to the problems that arise from marketplace challenges and seeks to defend or fix it. For example, Tupperware became successful in the 1950’s using the home party model and providing high-quality products. In the 1990’s, struggling to grow revenue and profits, they continued clinging to their original model—asserting that the home party sales model was still viable and developing products so high in quality as to be bullet-proof. As a result, the company continues struggling along in the Swamp. [Source: The Phoenix Principle] See also: Phoenix Principle, challenges, Success Formula, lock-in, Swamp.
by Adam Hartung | Oct 14, 2004 | General
We’ve added a new feature to our website, what we’re calling the “Phoenixionary” (see the links in the left-hand column). This is a dictionary of terms that we’ve used in the Phoenix Principle along with terms other thought leaders have used in describing a new model for management for the 21st century economy. We’ve started populating the Phoenixionary, but eventually want it to become “open-source” so that many people can participate in defining the new world of work. If you have a contribution to suggest, just email us. Periodically, we’ll feature one of the Phoenixionary terms as a blog entry.
Business can be SOOOOO serious, don’t you think? To do our part to lighten things up a bit, you’ll notice a second link below the Phoenixionary which is for a humorous dictionary. This is our way of being playful and letting off steam. We’re creating humorous definitions of terms related to experiences in the workplace. Check it out, and feel free to share your own humorous definitions with us and we’ll add them to the site.
by Adam Hartung | Oct 13, 2004 | Lifecycle
As companies age, they lose their flexibility and their appeal to customers in the marketplace. We have described this aging process with a metaphor and created the River Lifecycle Model. Your organization’s (product, business unit, process, etc.) location on the “river” is indicative of how effective you’re being, and what it’s going to take to reinvent yourself. So that’s pretty useful to know, is it not? Well there are many ways to tell, but a clear indication is the cultural “tone” and general behavior of the employees. Take this test for yourself, which of the qualities below describes your business (department, product line, process, etc.)?
River Lifecycle Model
Qualities in Stages of the Lifecycle
Stage———People are—–Cultural tone
Wellspring —Adventurous– -Hopeful
Rapids——–Cocky———-Enthusiastic
Flats———-Arrogant ——Sarcastic
Swamp——-Defensive——Cynical
Whirlpool—–Desperate——Hopeless
(Thanks to Marsha Clark for the suggesting some of these terms.)
by Adam Hartung | Oct 8, 2004 | Quotes
The dissenter is every human being at those moments of his life when he resigns momentarily from the herd and thinks for himself.
—Archibald MacLeish, 20th century writer, poet
