by Adam Hartung | Oct 4, 2009 | Books, Defend & Extend, In the Rapids, In the Whirlpool, Lifecycle, Web/Tech
Do you remember when AOL dominated the internet? In the early 1990s most people who used the internet actually were AOL clients. They bought their internet access, via dial-up modems, from AOL. Their interface (browser) was from AOL. And most of the sites – and navigation – was driven by AOL. AOL was the "monster" of the web. And it created enormous value for investors from this leadership position. It's value stormed to over $160billion!
Chart from Silicon Alley Insider
But as we can see, once acquired by Time Warner AOL tried to Defend & Extend its position. These actions pushed AOL into the Swamp, an undefendable position in the rapidly growing internet world. Defending its position proved impossible, as people found better and lower cost solutions for accessing and using the web. Now AOL is in the Whirlpool, fast disappearing – an historical anecdote about early internet days.
Apple has only about 2% market share in mobile phones. On the one hand, this could appear nearly immaterial. But if we look at usage, we see a very different story
Chart courtesy Silicon Alley Insider
iPhone application growth, which is clearly becoming logarithmic, demonstrates a change in the marketplace. People are clearly using these devices for more than making calls. Unlike AOL, which tried to hold people into their environment – or even Motorola's RAZR which tried to dominate sales of phones with pricing – Apple isn't trying to Defend & Extend a market position. Apple is creating a market disruption by changing how mobile devices are used. Promulgating applications increases demand for the iPhone (and iTouch) as not just phones but as replacements for laptops and other internet devices. Possibly ereaders like Kindle. This pulls people toward Apple's devices, which will generate strong future growth. By constantly bringing out new uses, Apple disrupts the market for phones, computers and internet access devices. Positioning its own products to be big winners as demand continues growing, and keeping Apple in the Rapids.
PostScript –
I was pleased to see a recent Wall Street Journal article "What Kills Great Companies: Inertia." The message of Lock-in as a source of business problems keeps spreading. This time Gary Hamel talks about some of the sources of Lock-in he sees. Reads like he bought a copy of "Create Marketplace Disruption"!
by Adam Hartung | Aug 5, 2009 | Current Affairs, Disruptions, eBooks, General, Innovation, Leadership, Openness, Web/Tech
"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."
by Adam Hartung | Jul 21, 2009 | Current Affairs, eBooks, General, In the Rapids
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.
by Adam Hartung | Jul 20, 2009 | Current Affairs, Defend & Extend, eBooks, General, In the Whirlpool, Leadership, Lock-in
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!
http://tinyurl.com/mp5lrm
by Adam Hartung | Jun 19, 2009 | Boards of Directors, Books, Defend & Extend, eBooks, In the Whirlpool, Leadership, Lifecycle, Lock-in, Transportation
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
by Adam Hartung | May 18, 2009 | Books, Culture, Economy, Investing, Lifecycle, Phoenix
Twelve years in the making.
As professional business consultant with almost 30 years experience, Adam Hartung is all too familiar with a common malady among today’s businesses. Regardless of how much the leaders and organizations are struggling to grow revenues and profits they cannot seem to break out of below-expectation performance. Even when hiring top advisors, consultants and employees, results do not respond as expected. They seem stuck, and unable to make changes which will lead to superb performance.
Why? This question which sparked a more than 12 year analysis to determine the root of—and the solution to—the problem. Geoffrey Moore encouraged Adam to put his findings into a book, which he now endorses on the cover. The principles now covered in Create Marketplace Disruption have been affirmed as “fresh and much needed” by Tom Peters, and “a revolutionary message” by Malcolm Gladwell. Bill Gates’ co-author, Collins Hemingway, considers Create Marketplace Disruption a must read, as he details in the Foreword.
Business leadership has not yet made the transition from management in the industrial economy to management in the information economy. While much has been written about an information economy it has yet to fundamentally affect how leaders manage their organizations. True, computer technology has unleashed new business models and methods of competition. Yet most leaders are still using management techniques which were taught in the 1970s and developed for the industrial economy.
To a large degree, the current disconnect is to be expected. The Russian economist Kondratiev demonstrated that economies move on a particularly long wave of approximately 75 years. He postulated that this was due to major changes in technology which took a very long time to reach adoption, massive use, decline and eventual replacement by another important new technology. Initially, the technology is used merely to improve existing processes and speed existing competitive models as we have seen with computer technology. Eventually, the full impact of the new technology creates new methods of competition which obviates the old, ushering in new rates of productivity and new methods of growth. We are at this fulcrum today.
For decades companies have prospered through “Defend and Extend” (D&E) Management—establishing a Success Formula, then improving and protecting it against competitors. In the Industrial Economy this worked well because size, economies of scale, and entry barriers were important. But today, due primarily to the emergence of information transparency, Success Formulas are being duplicated practically overnight—robbing companies of their competitive advantage. Practicing D&E Management in this environment is a prescription for failure, and yet that is what almost every company, large and small, is doing. And how most leaders are trying to get ahead.
In the three year period ending in 2003, bankruptcies of public companies increased 855% over the three year period ending just five years prior, and for companies with assets over a billion dollars the increase was an astounding 1,750%. To reverse this trend, companies must turn conventional wisdom on its head. Instead of looking to their Success Formulas as the solution to their problems, companies must learn to see their Success Formulas as the source of their problems. Companies must embrace the Phoenix Principle and become both willing and able to reinvent their Success Formulas… over and over again.
In recent years, Adam Hartung met with hundreds of senior executives. Almost every business leader sang the same sad refrain: every quarter of every year is a brutal struggle to make their numbers. Most admit that they don’t really know what to do to make things any better—nothing they have tried has made a sustainable difference. Historical tactics, including mergers and acquisitions, extensive cost-cutting, streamlining processes, outsourcing, and various quality programs have made little or no impact on competitiveness.
Well-meaning but increasingly outdated advice from business gurus such as Jim Collins and Larry Bossidy to focus on execution and optimize the core business are only making matters worse. Create Marketplace Disruption uses The Phoenix Principle to rebut the “optimize and execute” message while providing simple but powerful models that explain why so many companies are struggling to such an extent. The author illustrates with many convincing examples and case studies how the inevitable consequence of D&E Management has been lock-in to outdated Success Formulas leading to worsening performance. This has resulted in a vicious cycle of cost-cutting and profit erosion, eventually leading to failure.
D&E Management causes managers to behave as if their organizations are exempt from market and competitive shifts which can make their Success Formula obsolete. Many managers cling to the myth of business perpetuity as a rationalization for their mature companies to use continuous improvement as a way to create, then maintain, above average returns—even when the evidence overwhelmingly indicates otherwise. The hard truth is that the techniques Michael Porter published for competing in the 1980s no longer generate sustainable competitive advantage. Entry barriers are now exit barriers, supplier and customer leverage are short-lived, and focus on product innovation and cost reduction is far less likely to create success than implementing alternative business models.
Business leaders must embrace a new model for managing based on The Phoenix
Principle. This entails rethinking the traditional approach to organizational lifecycle management in several ways, including making profits in the growth stage, planning on very short periods of competitive advantage, and exiting businesses much quicker than before. The Phoenix Principle emphasizes leaders’ responsibility for disrupting existing Success Formulas in order to experiment with new and innovative profit opportunities. While agreeing with author Clayton Christensen on many points, the author confronts Clayton’s claim that established companies cannot compete against, nor implement, disruptive technologies. Instead, the author demonstrates a process whereby any organization can most definitely enhance innovation, growth and change, including installing a culture of continuous renewal through new processes and changes in the employee mix.
Create Marketplace Disruption provides readers with hope that even the most locked-in organizations can renew themselves. Through a four-phase approach backed up with solid examples, business managers will learn how to reinvent locked-in Success Formulas at the individual, work team, business function, operating unit and company levels. This book provides the vernacular and practical “how to” information to undertake the “Re-Imagining” recommended by Tom Peters. Additionally, the author introduces readers to breakthrough thinking, which is the ability to challenge and change assumptions at the individual level. Readers are given powerful tools for transforming Locked-in behaviors, and developing new solutions for today’s dynamic business competition in the Information Economy.
This book will help beleaguered business managers understand why their organizations are struggling, why their actions not only aren’t helping but are contributing to the problem, and how leaders and individuals can Disrupt and reinvent their Locked-in Success Formulas to generate significant breakthroughs in performance.
by Adam Hartung | May 18, 2009 | Books, Lifecycle, Phoenix, Trends
What Thought Leaders are saying about Create Marketplace Disruption
“Companies that cannot change die. Companies that respond eventually survive but see their profits squeezed, their growth flattened. Long-term winners create their own disruptions and thrive on change. Hartung shows how to become one of the winning companies: how to attack competitors’ lock-ins, make their success formulas obsolete, and create the space needed to invent formulas for success.”
Harvard Business School Bulletin, March, 2009
“How do you participate in market disruptions which threaten your current leadership status? In this book Adam Hartung shows the kind of thinking needed to deal with the creative destruction that underlies global capitalism today.” Geoffrey Moore, author Dealing with Darwin” and “Crossing the Chasm,”
Managing Director TCG-Advisors venture capital, September, 2008
“Create Marketplace Disruptions is as thought-provoking as it is entertaining. Adam Hartung offers business managers and leaders new insights to long-term success that apply across markets and industries.”
Steve Burke, President Comcast, August, 2008
“This is a disruptive book. In times of ever accelerating, deep change survival through “ever better management” is an illusion. This is the book for the entrepreneur in us. Unite the entrepreneurial soul with corporate resourcefulness. Adam’s framework should be tried.”
Jost Stollman, Shadow Minister Economy and Technology Federal Republic of Germany, July, 2008
“The Fortune 1000 is a very fluid list. They become successful doing something right, but then keep doing that (because it’s what they know) even when marketplace conditions change. Companies need to reinvent themselves, become flexible, and do something completely different.”
Nick Morgan, CEO Public Words, February, 2009
“In what is possibly one of most stimulating books ever written on business management, Adam Hartung explores various ways for a corporation to achieve adaptive success: such as stop the ‘Defend & Extend’ old habits, generate controlled disruptions of the corporate personality, and create autonomous ‘White Space’ to continuously create revised success formulas.”
Jean-Louis Vullierme, global venture capitalist, January, 2009
“Talking innovation is easier than practicing innovation. Adam offers an excellent approach for corporations to identify how to innovate to gain competitive advantage. A must read. ”
Praveen Gupta, President, Accelper Consulting, author Business Innovation in the 21st Century, The Six Sigma Performance Handbook and Six Sigma Business Scorecard, September, 2008
“Adam Hartung gives a workable guide to overcome business inertia. Create disruption in your own business to keep ahead of the competition. Hartung looks at the reasons why businesses have difficulty changing, and provides help in overcoming those issues. Create Marketplace Disruption is an easy to read, helpful book and recommended.”
Sacramento Book Review, November, 2008
“Adam Hartung has forever changed the paradigm of what constitutes the leadership of change and innovation. He provides answers to why so many good organizations fail. He shows how leaders trained to focus on core competencies and customers may be sowing the seeds for their organization’s destruction in a time of accelerating change.”
Paul Davis, President Scanlon Leadership Network, October, 2008
“Adam Hartung offers courageous leaders a new language system and framework for generating long term profitable growth. Rich with compelling metaphors, stories, and illustrations, Create Marketplace Disruptions explains why even aggressive efforts to reinvent fail. Hartung provides leaders with practical tools for keeping companies ahead of declining results and obsolescence. Every leader needs to understand Hartung’s framework and heed his advice.”
Judi Rosen, Managing Director, CSC Index and President, The Concours Group, August, 2008
“Create Marketplace Disruption provides a model for competing more effectively in our constantly changing markets. Leapfrogging tired concepts which have largely focused on doing more of what you’ve always done, Adam Hartung focuses us on doing what it takes to do better. This is the book that all executives who want to leave a positive legacy must read!”
Ron Kirschner, Chairman Heartland Angels venture capital, December, 2008
“Adam Hartung blends stunning lessons learned from the fallen giants of business with set-you-back-in-your-seat insights that make this a must read for all business leaders of large and small companies alike. Hartung provides an intelligent blueprint for achieving what every business craves — competitive advantage and renewable growth. Smart, sophisticated treatment of a topic that no business executive worth his /her stock options can ignore — how to grow and differentiate your business”
John Popoli, President Lake Forest Graduate School of Management, January, 2009
“Create Marketplace Disruption is an engaging, enlightening, frightening, and occasionally upsetting book. Its contents will repay careful thought and periodic revisiting. It’s a book to keep in mind, and close at hand, whenever an organization faces the need to develop an effective plan for the future.”
Dr. Michael Vitale, Asia-Pacific Centre for Science and Wealth Creation, October, 2008
“The insights provided by Adam Hartung makes this book a must-read for all entrepreneurs. This is a blueprint for generating more wealth and getting to investor returns faster.”
William A Johnson, Founder and CEO CAER Group, March, 2009
“Creating Marketplace Disruptions is an outstanding approach for creating and maintaining growth and profitability in an increasingly dynamic and uncertain global economy. More importantly, the book moves beyond concepts with a well crafted set of tools and techniques for implementing change that are relevant regardless of industry or company size”
Sumeet Goel, Managing Director, HighPoint Associates, July, 2008
“Adam Hartung presents a fresh perspective and compelling case that demands business leaders pursue new markets – thirst to disrupt the status quo. Every business should apply Mr. Hartung’s principles – only hiring those individuals prepared to question the corporate culture, and vigorously willing to pursue White Space.”
Ken Daubenspeck, Chairman and CEO KDA global management recruiters, October, 2008
by Adam Hartung | Apr 29, 2009 | Books, Current Affairs, Defend & Extend, General, In the Swamp, Leadership, Lock-in, Openness
Today the U.S. Federal Reserve indicated that the worst of America's economic downturn may be over, according to "Fed stands pat, and says worst may be over" at Marketwatch.com. Fed officials seem to think that the rate of decline has slowed. Note, they didn't say the economy is growing. The rate of decline is slowing. They hope this points to a bottoming, and eventually a return to growth.
With interest rates between banks at 0%, and short-term rates for strong companies near that level, there really isn't much more the Fed can do to create growth. It will keep buying Treasury securities and keep pushing banks to loan. But growth requires the private sector. That means businesses – or what reporters call "Main Street."
The government doesn't create growth. It can stimulate growth with low interest rates and money that will stimulate business investment. Growth requires people make products or services, and sell them. Those who are waiting on the government to create a growing economy will never gain anything from their wait, because it's up to them. Only by making and selling things do you get economic growth.
Recent events, closing banks and massive write-offs, are a big Challenge to old ways of doing business. Those who keep applying old practices are struggling to generate profits. The tried-and-true practices of American industrialism just aren't turning out gains like the once did. And they won't. The world has shifted. Entrepreneurs in India, Malaysia and China – places we like to think of as poor and "third world" – are building fortunes in the information economy. American businesses have to shift. If you make posts to install on highway sides, well lots of people can do that and competition is intense. To make money you need to make products that help move more people on the highway faster and safer – some kind of post that perhaps can provide traffic information to web sites and aid people to look for alternate routes. Posts aren't what people want, they want better traffic flow and today that ties to more information about the highway, who's using it, and what's happening on it.
Growth will return when businesspeople move toward supplying the shifted market with what it wants. Like Apple with a solution for digital music that involved players and distribution. Or Amazon with a solution for digitally obtaining books, magazines and newspapers, storing them, presenting them and even reading them to you. These companies, and products, appeal to the changed market – the market that values the music or the words and not the vinyl/tape/CD or the ink-on-paper. The customers that want the information, not necessarily the tangible item we used to use to get the information.
For the economy to grow requires a lot more businesses realize this market shift is permanent, and adjust. During the Great Depression those who refused to shift from agriculture to industrial production found the next 40 years pretty miserable – as rural land prices dropped, commodity prices dropped and the number of people working in agriculture dropped. Agrarianism wasn't bad, it just wasn't profitable. And going forward, industrialism isn't bad – but to grow revenues and profits we have to start thinking about how to deliver what people want – not what we know how to make. You have to deliver what the market wants to grow sales – even if it's different from what you used to make.
Starbucks offered people a lot of different things. And the old CEO tried to capitalize upon that by expanding his brand into liquor, music recording, agency for entertainers, movie production, and a widespread set of products in his stores – including food. But then an even older CEO returned, and he said Starbucks was all about coffee. He launched some new flavors, and he pushed out an instant coffee product. But a year later "Starbucks profit falls 77% on store closure charges" reports Marketwatch.com. His "focus" efforts have cut revenues, and cut profits enormously. He's cut out growth in his effort to "save" the company.
By trying to go backward, Chairman Schultz has seriously damaged the brand and the company. He has closed 570 stores – which were a big part of the brand and perhaps the thing of greatest value. Stores attracted people for a lot more than just coffee. People met at the stores, and buying coffee was just one activity they undertook. So as the stores were shuttered, the brand began to look in serious trouble and people started staying away. The vicious cycle fed on itself, and same store sales are down 8%. No new flavor or packaged frozen coffee bits for take home use is going to turn around this troubled business. It will take a change to giving people what they need – not what Mr. Schultz wants to sell.
With more and more people working from home the "virtual office" for many small businesspeople can still be a local Starbucks. When you can't afford take a client out for a snazzy lunch you can afford to take them for a coffee. When your wasteline can't take ice cream, you can afford a no-cal hot coffee in a great environment. Starbucks never was about the coffee, it was about meeting customer needs in a shifted market. And when the CEO realizes this he has the chance to save the company by taking into the new markets where customers want to go. Not by bringing out new instant coffee granules.
Starbucks is sort of a model of the recession. When you try to do what you always did, and you blame the lousy economy for your troubles, you'll see results worsen. As businesspeople we must realize that the recession was due to a market shift. We went off the proverbial cliff trying to extend the old business – just like Apple almost did by trying to be the Mac and only the Mac. To get the economy growing we have to look to see what people really want, and supply that. And what they want may be somewhat, or a whole lot, different from what we used to give them. But when we start supplying this changed market what it wants then the economy will quit contracting and start growing.
So be more like Steve Jobs, and less like Charles Schultz. Quit trying to go backward and regain some past glory. Instead, look into the future to figure out what people want and that competitiors aren't giving them. Be willing to Disrupt your business in order to take Disruptive solutons to the market. And get your ideas into White Space where you can develop them into profitable businesses. Don't wait for someone else to turn the economy around – just to find out then it's too late for you to compete.
by Adam Hartung | Apr 26, 2009 | Books, Current Affairs, Food and Drink, Games, General, In the Rapids, Innovation, Leadership, Openness, Sports, Television
I recently listened to a great presentation on innovation by Bill Burnett, partner at Launchpad Partners. I recommend you download the slides to his presentation, "The CEO's Role in Innovation," in order to understand just how important innovation is to profitability as well as the CEOs role in creating the right culture. I also hand it to Bill that he not only lays out the CEO's role, but discusses what it takes organizationally to implement innovation – including getting the right people involved to go beyond just coming up with good ideas.
Markets shift. Sometimes there are long periods in which the market is reasonably the same (like newspapers). And sometimes it seems like new changes are happening rapidly (like computers). How long between shifts is impossible to predict. But it is certain that all markets shift. Some new technology, or a new form of solution, or a new way of pricing, or a new competitor will enter the market and change things such that the profitability of previous solutions declines. And it is the role of CEOs to create an open culture in which the management team feels it must keep its eyes peeled for market shifts, bring them to the company for discussion, and propose innovations which can increase the longevity of company sales and profits by addressing the market shifts.
Take for example the current shift in the sports market. This is important, because a throng of businesses advertise in the sports market. Everything from TV or radio ads during games, to ads inside event brochures, to putting logos on equipment and uniforms, to paying athletes as endorsers. Being aligned with the right sports, the right teams and the right athletes is worth a lot of money. You can legitimately ask, would Nike be Nike if they hadn't been the first company to sign up Michael Jordan – and later Tiger Woods? So the money is very large (billions of dollars) making mistakes very expensive. But getting it right can be worth billions in returns.
So catching a recent MediaPost.com blog "The Allure of Action Sports" is important. While most of us think of basketball, baseball, American football and possibly NASCAR – for GEN Y (young folks) sports is taking on an entirely new meaning. These are sports with almost no rules – just technique. They pack the stands at events such as the Dew Tour and X Games. Active participants include almost 12 million skateboarders, 7 million snowboarders and 3 million BMX riders. Not only do people watch these sports, but the most popular performers have their own cable TV shows – like "Viva La Bam." Just like football and basketball overtook our fathers' love of baseball as America's pastime – young competitors are shifting to watch and practice action sports. For people in consumer goods and many retailers, it becomes critical that the CEO provide an environment where the company can Disrupt its old marketing practices and create White Space to explore how to link with these new markets. The winners will rake in millions of higher profits. The laggards will see the value of their sports market spending decline.
Have you recognized this shift in the sports market? Are you prepared to take advantage of this shift? Are you considering sponsoring a local skateboard competition – for example – to promote a restaurant, quick stop, or T-Shirt store? You can react faster than Wal-Mart, Coke or GM – are you considering the options to grab loyal customers when they are still "McDonald's targets"?
A great example of the right kind of CEO has been Jeff Bezos of Amazon. As I reported in this blog back in January, book sales declined about 10% in 2008. You would think this would spell a huge problem for the world's largest bookseller. But SeattlePI.com recently reported "Amazon Profits Jump Despite Recession." CEO Bezos recognized long ago that book readership was jeapardized by changing lifestyles. Fewer people have the willingness to buy printed books, carry them around and take time to read them. So he Disrupted his retail Success Formula and implemented White Space to develop something new. This led to Kindle, a product which is small, light, can hold hundreds of books, can be read "on the go", accepts downloads of journals (magazines and newspapers) and can even read the book to you (Kindle has an audio feature.) And that's just product rev 2 – who knows where this will be in 3 years. By focusing on the future he could see the market for reading shifting – and he created an environment in which new innovation could be developed to keep Amazon growing even when the traditional products (and business) started declining. Kindle is now outselling everyone's expectations.
Innovation is the lifeblood of businesses. Without innovation Defend & Extend management leads to declining returns as competitors create market shifts. So it is crucial leaders, from managers to the CEO, keep their eyes on the future to spot market challenges and obsess about competitor actions that are changing market requirements. Then be willing to Disrupt the old Success Formula by attacking Lock-ins, and use White Space to test and implement new innovations which can lead to a new Success Formula keeping the business evergreen.
by Adam Hartung | Apr 15, 2009 | Books, Current Affairs, Disruptions, General, Leadership, Web/Tech
I was delighted recently to find a weekly blog named www.IsSurvivor.com. Bob Lewis writes in a clear and frank tone about what he often sees as not working correctly – especially in the world of information management. I would recommend this blog to everyone because his advice applies to all aspects of business – not just IT.
And I was delighted to recently read his book "Keep the Joint Running: A Manifesto for 21Century Information Technology." Despite the book's tagline, this is a book for everyone in business – not just IT people. As the author reminds readers over and again, IT is a really important, and integrated, part of the modern business. You can't consider it a stand-alone silo or you'll have really big problems. And I find myself thinking the same is true for all functions. The book is a great read as well. Not pompous (although the author has a mountain of experience to draw upon), very matter-of-fact, and incisive when cutting into multiple myths that detract from performance of functional groups as well as the corporation overall.
One thing all readers should love is the book's focus on getting work out the door. Mr. Lewis points out, with great examples, that if you aren't competent you can't be strategic. I was reminded of so many people I've worked with over the years who lacked prodigiously in competence yet seemed to maintain their positions by taking "the strategic view." Far too often we see in consulting firms the partner that's good at relationships, but couldn't actually do the work if his life depended upon it. In the end, when those without competency are in charge, problems happen. A simple rule – like the many Mr. Lewis gives us – that we so often ignore.
Business, and IT even moreso, are very new fields of academia. Unlike math, English, botany or geology, we've been studying business only a short time. Yet, the die-hard followers of early theories are surprising. Given the lack of any labs to test these theories, and the very visible number of failures these theories incur, the willingness to turn an idea into dogma (in incredibly short time) and then remain tied to that dogma should intrigue all investors and business leaders. Mr. Lewis shows himself a great Disruptor as he wastes no time taking an axe to many dogmas, exposing them as myths, as he works his way through the sea of bad approaches he finds functional heads utilizing. Best practices, process optimization, workforce optimization, applying metrics regardless of experience or ties to goals, development methodologies and documentation practices are just a few of the dogma he successfully analyzes, finds wanting, and discards in favor of better approaches that don't find enough use. (Read the book to get the magic answers.)
I spent my own time in IT working for vendor companies, as a CIO, and for several years as a partner in the giant IT services firm Computer Sciences Corporation. Item by item I found Mr. Lewis spot-on with his assessment of most IT firms, and IT practitioners. Not that folks can't get it right – but that for the most part their assumptions about what would work are so misguided that they have no hope of success. Only by rethinking the approach can the business do better. Which, after all, is the goal of all functional groups – to improve the sales and profits of the company.
But like I said earlier, I recommend Mr. Lewis's blog, and his book, for every CEO, executive, manager or front-line employee who works with IT – so that means everyone. His ideas will help improve the performance of any organization and its functions – not just IT. And for IT folks it offers a world of insight to why things in the past were often so hard, and how they can be much better going forward. You'll gain good insight for doing better planning, using Disruptions effectively instead of following outdated practices that simply don't work, and finding White Space where you can rapidly improve the success of your organization. His recommendations make sense, and you'll find them incredibly practical for improving performance today
