Many people think the best way to grow is by setting big goals – even Big Audacious Hairy Goals (BHAGs). But increasingly we're learning that goal setting is not correlated with success. At AmericanPublicRadio.org there's a partial text, and MP3 download, of a recent interview between General Motors leaders and a University of Arizona Professor titled "It's not always good to create goals."
The story relates how about a decade a go, with market share hovering at 25%, GM set the goal of moving back to 29%. It became a huge, multi-year campaign. Lapel pins with "29" were made and all kinds of motivational programs were put in place. The GM organization had its goal, and it was highly aligned to the goal. But it didn't happen. Despite the goal, and all the energy and talent put into focusing on the goal, GM continued to struggle, lose share – and eventually file bankruptcy. The goal made no difference.
Worse, the interview goes on to discuss how goals often lead to decidedly undesirable, sometimes unethical – even illegal – behavior. Instances are cited where goal obsession led company employees to falsify documents, even ship bricks in place of products to meet sales targets. No executive wants this, but goals and goal obsession – especially when there is a lot of reinforcement socially and monetarily on the goal – can become a serious problem.
Results are exactly that. Results. They are an outcome. They are the way we track our behaviors and activities – our decisions. When we focus on goals – usually some sort of result – we lose track of what is important. We have to focus on what we do. And for most organizations a big goal merely leads people to try working harder, faster,better, cheaper. But when the Success Formula is mis-aligned with the market – even when the whole organization is aligned on maximizing the Success Formula results will still struggle – even falter. Goals don't help you fix a Success Formula returning poor results. Just look at GM.
In fact, it can make matters worse. In "White Bears and Other Unwanted Thoughts" (available on Amazon.com) the authors point out that when you try to turn a negative (a problem) into a positive (a challenge, or goal), you often achieve a rebound effect making people obsess about the problem. Tell somebody not to think about a white bear – and it's all they think about. When your company has a problem and you try to tell employees "hey, don't think about the problem. Go do your job. Work harder, increase your focus, and all will work out. Sure share is down, but don't think about lost share, instead think about the goal of higher market share" frequently the employees will start to become obsessive about the problem. It will reinforce doing more of the same – perhaps manicly. Instead of becoming innovative and doing something new, obsessive devotion to trying to make the old methods produce better results becomes the norm. Goals don't produce innovation – they produce repetition.
So what should you do when facing a problem? Disruptions. GM didn't need a big goal. GM needed to Disrupt its broken Success Formula. GM needed to attack a Lock-in (or two). GM leaders needed to admit the market had shifted, and that competitors were changing the game. GM needed to recognize, admit and encourage employees to engage in attacking old assumptions – and recognize that market share would continue eroding if they didn't do things differently. Setting a big goal reinforced the old Lock-ins and even an aligned organization – working it's metaphorical tail off – couldn't make the outdated Success Formula produce positive results.
Only a Disruption would have helped save GM. After attacking some Lock-ins, like the desire to move all customers to bigger and more expensive cars, or the desire to focus on long production runs, GM should have set up White Space teams to discover new Success Formulas. Instead of putting all its management energy and money into growing volume at Chevrolet, Cadillac, Buick and GM nameplates, General Motors leadership should have revitalized the innovative Saturn and Saab to do new things – to develop new approaches that would be more competitive. Instead of pushing Hummer to have 3 identical cars in 3 sizes, GM leadership should have unleashed Hummer to explore the market for truly unique, limited production vehicles. GM should have allowed Pontiac to really take advantage of the design breakthroughs happening at the Australian design studio – to change the nameplate into a performance car segment leader. By attacking Lock-ins, Disrupting, and using White Space GM really could have turned around. Instead, by creating a BHAG GM reinforced its focus on its Hedgehog concept – and drove the company into bankruptcy.
You can see a 40 second video about the value and importance of Disruptions on YouTube here.
A 75 second video on White Space effectiveness on YouTube here.
Read free ebook on "The Fall of GM: What Went Wrong and How To Avoid Its Mistakes"
Happy New Year!
As we start 2010 the plan, according to The Financial Times, "WalMart aims to cut supply chain costs." Imagine that. Cost cutting has been the biggest Success Formula component for WalMart for its entire career. And now, the company that is already the low cost retailer – and famous for beating its suppliers down on price to almost no profitability – is planning to focus on purchasing for the next 5 years in order to hopefully take another 5% out of purchased product cost. How'd you like to hear that if Wal-Mart is one of your big customers? What do you suppose the discussion will be like when you go to Target or KMart (match WalMart pricing?)
Will this make WalMart more admired, or more successful? This is the epitome of "more of the same." Even though WalMart is huge, it has done nothing for shareholders for years. And employees have been filing lawsuits due to unpaid overtime. And some markets have no WalMart stores because the company refuses to allow any employees to be unionized. This announcement will not make WalMart a more valuable company, because it simply is an attempt to Defend the Success Formula.
On the other hand according to Newsweek, in "The Customer is Always Right," Amazon intends to keep moving harder into new products and markets in 2010. Amazon has added enormous value to its shareholders, including gains in 2009, as it has moved from bookselling to general merchandise retailing to link retailing to consumer electronics with the Kindle and revolutionizing publishing with the Kindle store. Amazon isn't trying to do more of the same, it's using innovation to drive growth.
And the CEO, Jeff Bezos freely admits that his success today is due to scenario development and plans laid 4 years ago – as Amazon keeps its planning focused on the future. With the advent of many new products coming out in 2010 – including the Apple Tablet – Amazon will have to keep up its focus on new products and markets to maintain growth. Good thing the company is headed that direction.
So which company would you rather work for? Invest in? Supply?
Which will you emulate?
PS – "Create Marketplace Disruption: How To Stay Ahead of the Competition" was selected last week to be on the list of "Top 25 Books to read in 2010" by PCWorld and InfoWorld. Don't miss getting your copy soon if you haven't yet read the book.
If you try standing in the way of a market shift you are going to get treated like the poor cowboy who stands in front of a cattle stampede. The outcome isn't pretty. Yet, we still have lots of leaders trying to Defend & Extend their business with techniques that are detrimental to customers. And likely to have the same impact on customers as the cowpoke shooting a pistol over the head of the herd.
Book publishers have a lot to worry about. Honestly, when did you last read a book? Every year the demand for books declines as people switch reading habits to shorter formats. And book readership becomes more concentrated in the small percentage of folks that read a LOT of books. And those folks are moving faster and faster to Kindle type digital e-book devices. So the market shift is pretty clear.
Yet according to the Wall Street Journal Scribner (division of Simon & Schuster) is delaying the release of Stephen King's latest book in e-format ("Publisher Delays Stephen King eBook"). They want to sell more printed books, so they hope to force the market to buy more paper copies by delaying the ebook for 6 weeks. They think that people will want to give this book as a gift, so they'll buy the paper copy because the ebook won't be out until 12/24.
So what will happen? Kindle readers I know don't want a paper book. They wait. Giving them a paper copy would create a reaction like "Oh, you shouldn't have. I mean, really, you shouldn't have." So the idea that this gets more printed books to e-reader owners is faulty. That also means that the several thousand copies which would get sold for e-readers don't. So you end up with lots of paper inventory, and unsatisfactory sales of both formats. That's called "lose-lose." And that's the kind of outcome you can expect when trying to Defend & Extend an outdated Success Formula.
Simultaneously, as book sales become fewer and more concentrated a higher percent of volume falls onto fewer titles. And that is exactly where WalMart, Target and Amazon compete. High volume, and for 2 of the 3 companies, limited selection. This gives the reseller more negotiating clout against the publisher. So as the big retailers look for ways to get people in the store, they are willing to sell books at below cost – loss leaders.
So now publishers are joining with the American Booksellers Association to seek an anti-trust case against the big retailers according to the Wall Street Journal again in "Are Amazon, WalMart and Target acting like Predators?" . Publishers want to try Defending their old pricing models, and as that crumbles in the face of market shifts they try using lawyers to stop the shift. That will probably work just as well as the lawsuits music publishers tried using to stop the distribution of MP3 tunes. Those lawsuits ended up making no difference at all in the shift to digital music consumption and distribution.
"Movie Fans Might Have to Wait To Rent New DVD Releases" is the Los Angeles Times headline. The studios like 20th Century Fox, Universal and Warner Brothers want individuals to buy more DVDs. So their plan is to refuse to sell DVDs to rental outfits like Netflix, Redbox and Blockbuster. Just like Scribner with its Stephen King book, they are hoping that people won't wait for the rental opportunity and will feel forced to go buy a copy. Like that's the direction the market is heading – right?
If they wanted to make a lot of money, the studios would be working hard to find a way to deliver digital format movies as fast as possible to people's PCs – the equivalent of iTunes for movies – not trying to limit distribution! That the market is shifting away from DVD sales is just like the shift away from music CD sales, and will not be fixed by making it harder to rent movies. Although it might increase the amount of piracy – just like similar actions backfired on the music studios 8 years ago.
Defending & Extending a business only works when it is in the Rapids of market growth. When growth slows, the market is moving on. Trying to somehow stop that shift never works. Only an arrogant internally-focused manager would think that the company can keep markets from shifting in a globally connected digital world. Consumers will move fast to what they want, and if they see a block they just run right over it – or go where you least want them to go (like to pirates out of China or Korea.)
They only way to deal with market shifts is to get on board. "Skate to where the puck will be" is the over-used Wayne Gretzsky quote. Be first to get there, and you can create a new Success Formula that captures value of new growth markets. And that's a lot more fun than getting trampled under a herd of shifting customers that you simply cannot control.
"Sony Unveils Pocket Size Electronic Book Reader" is the Los Angeles Times headline. According to Silican Alley Insider the new Apple tablet is a GREAT book reader. Although Steve Jobs thinks book publishers are incredibly screwed up and he's less optimistic about book sales than he was music sales when he launched iTunes. And Amazon has sold out its Kindle e-readers since they started manufacturing them two years ago.
With all these announcements, you'd think everyone knows about e-readers and the market shift happening in publishing – from books to magazines to newspapers. Even I've blogged about this for months – and the positive impact this has had on book sales as well as Amazon's revenues and profits. But:
(Link to chart and Forrester Discussion here)
Half of all people surveyed in 2Q 2009 still haven't seen or heard about e-readers.
This is important. Imagine it's 1983, and you weren't aware about personal computers and their benefits – even though the IBM PC was Time magazine's "Man of the Year" in 1982. We now know that early adopters of PCs developed new solutions for many problems – from analysis to word processing to advertising development to commercial graphics to in-house publishing to communicating via email — on and on and on. Those who understood this technology early, recognized the shift it demonstrated, had early advantages on competitors. You didn't have to compete in technology, or be a technology officianado, to take advantage of this computing shift for your advantage.
Today, ereaders are another serious market shift that early adopters can leverage. Soon newspapers and magazines will be hard to come by, or so thin (due to printing and distribution cost) that their content will be much less than desired. But ereaders allow you to keep up with journals you've come to trust. And advertisers need to be prepared to follow them onto this platform – to reach people they otherwise would miss.
If you've quit reading books because you don't have the money to spend (at $20+ apiece), desire to carry them, or the time to read them, ereaders allow you to buy and carry 350 or more books at a fraction of previous prices. You even can buy pieces of books (chapters for example) that give you what you want. Think of the shift from long-play albums/CDs to iTunes sales of single songs as an analogy. You can get the benefits of books without many of the reasons you may have quit reading them.
Would you like a repository of information you can call upon for your daily work? With e-readers you can carry an entire library, something you'll not do in paper. Or on your laptop.
Speaking of laptops – this will all be on a laptop you say – so forget ereaders. Do you really think we'll all be carrying these 7 pound monsters around in 5 years? Look at college kids today. How many do almost all their work on a phone? They use the computer only when forced to – for typing papers or building spreadsheets. Laptops are increasingly becoming much more than people want – too big, too heavy, too hot, too power hungry, too short battery life, too complicated, too much software, too many bugs, too many viruses, too expensive. Laptops will soon be like mainframes. Look at the trend. Sales of big screen laptops have cratered as netbooks, with tiny screens, have taken off. People are moving away from laptops to smaller and easier to use products – like ereaders.
Why make your salesforce, or customers, or training techs carry a laptop when an ereader will give them everything they need? They cost less, are easier to keep working, and don't get hindered with personal apps like MS Money that you didn't put on the laptop in the first place but couldn't stop. Given ereader prices, you might be able to consider an ereader disposable in 5 years. Literally, you could give a customer an ereader with all the training, specs, history, design elements, etc. of your product the way we now use a brochure. It literally might be cheaper than a 10 page glossy brochure costs to print and distribute – but with everything they need to design in your product, or operate it, or service it. Imagine an ereader in your car glove box rather than the owner's manual you never use – but the info will be catalogued, searchable, and linked to the internet so it's always current with service information.
Market shifts affect us all. Too often we say "oh that shift is obvious, and I'm surprised the current competitors aren't jumping on that." Then we ignore the shift ourselves. Competitors that make higher rates of return, and prolong those rates of return, observe these market shifts and immediately build them into future scenarios. They think about how to use these shifts to improve their competitive position, and create White Space to test the opportunities – even when they represent Disruptive change. These are Phoenix Principle companies – and the kind you want to be – because they grow more, make more money and have longer lives.
Learn how to spot market shifts and leverge them for your advantage. Don't end up like GM – out of touch and into bankruptcy. Read the new, free ebook "The Fall of GM: What Went Wrong and How To Avoid Its Mistakes."
I've blogged before about the decline in book readership. In fact, the number of book stores has dropped some 20% in the last 3 years. It's not that people don't want to be learned. Rather, people no longer prefer to carry around a full length paper book. What was no big deal has become large, cumbersome and heavy. This isn't how we described books until we started reading everything imaginable on electronic devices. The new solutions made the old approach less desirable. The market shifted. And if books weren't available electronically, people would read other things which are available electronically.
Amazon wisened up and launched Kindle to meet this market shift. Good move, it allowed Amazon to keep growing while traditional format product sales declined. Now "Barnes & Noble launches on-line Kindle challenge" is the Financial Times headline. While Amazon keeps pushing new content onto Kindle, including newspapers and magazines, Barnes & Noble is maximizing the platforms it can reach electronically. Their solution, more software than hardware today, allows them to immediately offer 700,000 titles electronically. They now boast the largest on-line book store – somewhat eclipsing Amazon's early success. And their hardware device is yet to come.
Should Amazon be worried. I don't think so. The market for e-reading is growing extremely fast. With each new product generation the traditional market share shrinks as more people convert. At this stage, these companies are merely helping the market grow rather than competing with each other. That's the wonderful part about growth markets, – about being in the Rapids – there's so much new demand that it's less about competing head-to-head than about expanding the market by meeting more and more needs. Instead of slogging it out in trench warfare – which is the traditional book selling market – you can offer more features and ways to differentiate – thus growing the market. For both Amazon and Barnes & Noble this is a very, very good thing. It breathes growth into their businesses by moving into the shifted market space.
Borders was actually first to this market, linking up with the proprietary eReader from Sony. But Borders didn't move hard into the new market. As the weakest of the 3 leading book retailers, Borders should have moved fast to get out of the dying brick-and-mortar stores. Then used those resouces to take an early lead in the new market space. But the leaders at Borders kept trying to Defend & Extend the old business, and moved too slowly on the new business. Instead of getting out of the dying business, and becoming #1 in the growing business, they waited. Oops. Now Borders is again the weak competitor – and at grave risk of extermination.
The market is shifting. Congratulations to Amazon and Barnes & Noble for moving into the shifted market space. Quickly we'll be seeing fewer and fewer book stores on the street, as this business (similar to music) will become largely an on-line business. And better for us all. With cheaper books and other reading materials, maybe we'll continue to be even better read than previous generations.
Soon publishers and authors will have to step up to this shift. We all know that newspapers and magazines have been slow to adjust to this market shift. They should be begging for distribution on the Kindle device – and pushing B&N to get their device out even faster so periodicals can be distributed to them. Or maybe get their issues into the B&N software so people can read them on their laptops, netbooks or iPhones. The publishers, from newspapers to books, have been slow to understand this changed market. They, like recording publishers, are locked-in to the physical product (the CD for music, and paper for publishers). The winners will be those who move fastest to the new market. Sure, some people will always want print. But the market for digital is simply going to be lots, lots bigger. Best to get into that market today and figure out the new business model.
Years ago there was a TV ad featuring the actor Pauly Shore. Sitting in front of a haystack there was a sign over his frowning head reading "Find the needle." The voice over said "hard." Then another shot of Mr. Shore sitting in front of the same haystack grinning quite broadly, and the sign said "Find the hay." the voice over said "easy." Have you ever noticed that in business we too often try to do what's hard, rather than what's easy?
Take for example The New York Times Company, profiled today on Marketwatch.com in "The Gray Lady's Dilemma." The dilemma is apparently what the company will do next. Only, it really doesn't seem like much of a dilemma. The company is rapidly on its way to bankruptcy, with cash flow insufficient to cover operations. The leaders are negotiating with unions to lower costs, but it's unclear these cuts will be sufficient. And they definitely won't be within a year or two. Meanwhile the company is trying to sell The Boston Globe, which is highly unprofitable, and will most likely sell the Red Sox and the landmark Times Building in Manhattan, raising cash to keep the paper alive.
Only there isn't much of a dilemma here. Newspapers as they have historically been a business are no longer feasible. The costs outweigh the advertising and subscription dollars. The market is telling newspaper owners (Tribune Corporation, Gannett, McClatchey, News Corp. and all the others as well as The Times) that it has shifted. Cash flow and profits are a RESULT of the business model. People now are saying that they simply won't pay for newspapers – nor even read them. Thus advertisers have no reason to advertise. The results are terrible because the market has shifted. The easy thing to do is listen to the market. It's saying "stop." This should be easy. Quit, before you run out of money.
Of course, company leadership is Locked-in to doing what it always has done. So it doesn't want to stop. And many employees are Locked-in to their old job descriptions and pay – so they don't want to stop. They want to do what's hard – which is trying to Defend & Extend a money-losing enterprise after its useful life has been exhausted. But if customers have moved on, isn't this featherbedding? How is it different than trying to maintain coal shovelers on electric locomotives? This approach is hard. Very hard. And it won't succeed.
For a full half-decade, maybe longer, it has been crystal clear that print news, radio news and TV news (especially local) is worth a lot less than it used to be. They all suffer from one-way communication limits, poor reach and frequently poor latency. All problems that didn't exist before the internet. This technology and market shift has driven down revenues. People won't pay for what they can get globally, faster and in an interactive environment. As these customers shift, advertisers want to go where they are. After all, advertising is only valuable when it actually reaches someone.
Meanwhile, reporting and commentary increasingly is supplied by bloggers that work for free – or nearly so. Not unlike the "stringers" used by news services back in the "wire" days of Reuters, UPI and AP. Only now the stringers can take their news directly to the public without needing the wire service or publishers. They can blog their information and use Google to sell ads on their sites, thus directly making a market for their product. They even can push the product to consolidators like HuffingtonPost.com in order to maximize reach and revenue. Thus, the costs of acquiring and accumulating news has dropped dramatically. Increasingly, this pits the expensive journalist against the low cost journalist. And the market is shifting to the lower cost resource — regardless of how much people argue about the lack of quality (of course, some [such as politicians] would question the quality in today's "legitimate" media.)
Trying to keep The New York Times and Boston Globe alive as they have historically been is hard. I would contend a suicide effort. Continuing is explained only by recognizing the leaders are more interested in extending Lock-in than results. Because if they want results they would be full-bore putting all their energy into creating mixed-format content with maximum distribution that leads with the internet (including e-distribution like Kindle), and connects to TV, radio and print. Pricing for newspapers and magazines would jump dramatically in order to cover the much higher cost of printing. And the salespeople would be trained to sell cross-format ads which run in all formats. Audience numbers would cross all formats, and revenue would be tied to maximum reach, not the marginal value of each format. That is what advertisers want. Creating that sale, building that company, would be relatively much easier than trying to defend the Lock-in. And it would produce much better results.
The only dilemma at The New York Times Company is between dying as a newspaper company, or surviving as something else. The path it's on now says the management would rather die a newspaper company than do the smart thing and change to meet the market shift. For investors, this poses no dilemma. Investors would be foolhardy to be long the equity or bonds of The New York Times. There will be no GM-style bailout, and the current direction is into the Whirlpool. Employees had better be socking away cash for the inevitable pay cuts and layoffs. Suppliers better tighten up terms and watch the receivables. Because the company is in for a hard ending. And faster than anyone wants to admit.
Don't miss my recent ebook, "The Fall of GM" for a
quick read on how easily any company (even the nation's largest employer) can be
easily upset by market shifts. And learn what GM could have done to avoid
bankruptcy – lessons that can help your business grow!
Of all the companies that typified America’s rise as an industrial superpower, none was more successful than General Motors.
What happened? Why has it fallen so far? GM at its biggest boasted some 600,000 well-paid employees. It will be left with something like 60,000 after it emerges from bankruptcy. How did that happen? Why did its stock price tumble from $96 per share at its height to 80 cents recently? Why did its market share shrink from one out of every two cars sold to less than one in five last quarter?
And thus begins the new ebook about the fall of GM. In 1,000 words this ebook covers the source of GM’s success – as well as what led to its failure. And what GM could have done differently – as well as why it didn’t do these things. Read it, and share it. Let folks know about it via Twitter. Post to your Facebook page and groups, as well as your Linked-in groups. As markets are shifting the fate of GM threatens all businesses. Even those that are following the best practices that used to make money. Let’s use the story of GM — and the costs its bankruptcy have had on employees, investors, vendors and the support organizations around the industry as well as government bodies — as a rallying cry to help turn around this recession and get our businesses growing again!
Download Fall of GM