by Adam Hartung | Mar 23, 2008 | Defend & Extend, General, Innovation, Leadership, Lifecycle, Lock-in
Most management planning processes are designed to perpetuate the past. They are designed to figure out how to do what happened last year, or quarter, only a little bit better. In a high growth environment, no problem. Doing more is a good thing. And if markets were stable, it would be OK in any market. But too few companies compete in high growth markets, and no markets are stable any longer. Simply doing more of the same better, faster or cheaper isn’t enough.
Stuff happens. Just take for example some facts recently published in The Chicago Tribune (read full article here.) VCRs in 1978 were advertised at Sears for $795 ($2,500 in today’s money). A basic 5-cycle washer sold for $320 ($1,000 in today’s money), priced equivalent to a top-of-the-line washer today. Fifty years ago families spent almost 20% of income on food; today that has fallen to about 10%. But insurance premiums have gone up almost 80% in just the last 5 years. Today attendance at many private colleges – like jesuit or other private schools, not merely ivy league – costs more than the average family has as gross income in a year. My favorite — a 2008 Honda Accord produces more horsepower than a 1990 Porsche 911 Carrera.
All right, so we all know this. But we completely forget about it when planning. Yet, they all had really important implications. In 1978 most of us still watched movies in theatres – now many adults haven’t been in a theatre for years (hurting revenues and profits at everything from movie producers to theatre chains) because home entertainment systems and purchases/rented movies are so cheap. Meanwhile "big box" electronic/appliance stores have come on the scene wiping out mom-and-pop TV/appliance stores and probably Sears. In the 1970s laundromats were very popular for new families and people in small homes, but today it is a rare married couple living outside of an apartment that doesn’t have their own washer and dryer, making laundromats practically a concept of the past. I grew up tending to a family vegetable garden, and most families used part of their backyards growing vegetables to save on groceries. Today it’s cheaper to buy corn, green beans, tomatoes, carrots, potatos and broccoli than grow and preserve them at home – good for consumer goods companies and bad for seed vendors like Burpee as well as home canning suppliers like Ball and Kerr. While every working person in the U.S. had health insurance in the 1960s, today more than 40% of working adults have no health insurance. My older sister, like many girls in the 1960s, attended a Christian college paid for by my father who was a school teacher in a rural 5,000 person town and the only breadwinner in our home. Today, that college is long gone as are more than half the private colleges which used to exist in America – or they’ve been converted to satellites of state university programs. And I can well remember when I, working part time as a minimum wage college student, would earn over $2,000 a year and could buy a brand-new American made car (Ford Maverick anyone?) for less than that amount. Now new car sales are stagnant/down, and people are driving cars many more years creating opportunities for auto repair, auto parts and used car sales.
The competitors in all these businesses changed dramatically over just the last 50 years. And in each industry, the early leaders have been displaced. Why, planners kept trying to perpetuate the past rather than focus on the future. Companies failed to keep White Space alive that tracks market changes adapting the Success Formula to meet emerging Challenges.
Today we can look at eggs. I remember when every Easter eggs were on sale, usually at 50 cents/dozen. Not this year. Eggs are up 30% – and now over $2.00. Why? Many factors (read full article here), such as new regulations to improve the health of chickens has increased their personal space by about 10% but has led to taking millions of hens out of production. A new industry council focusing on improving hen welfare has caused most farmers to invest in new technology, siphoning funds for expansion into updating old facilities but without improving production. A national focus on increasing renewable energy has raised corn prices (for ethanol production) to record heights, increasing chicken feed cost 70% (remember when we referred to small amounts as "chicken feed") which accounts for 60% of egg cost. And the current financial crisis is causing lenders to hold back on loans to farmers, making investment dollars for new facilities very scarce and very expensive.
The result, egg prices have doubled in two years. But who planned for that? Practically no one. Is it a big deal? Well yes if you are Denny’s, IHOP or any other restaurant chain that focuses on breakfast. Or how about bakers, who need eggs for cakes, bagels and many breads. Or dairy companies that depend on eggs for a significant portion of their revenues, as demand declines due to price. It may seem trivial, the price of eggs, but it can make a big difference on businesses – and how many of them developed scenarios to prepare for this kind of change? Those that didn’t find their planning, based on Defending & Extending the past, not worth very much as they scramble (excuse the pun) to adjust to changing market conditions.
Good companies build scenarios of the future for planning. Not just "most likely" scenarios, but scenarios that could make a big diffference even if considered unlikely. It’s not what we plan for that hurts our businesses, but rather what we don’t plan for. The things that surprise us. Companies that survive for decades, and make above average returns, are ones that plan for unlikely events – and prepare themselves for conditions that are unlike the past. And they keep White Space alive to rapidly learn from these Challenges providing Success Formula adaptations that can keep the winning company out front and making above average returns. These are Phoenix Principle companies.
by Adam Hartung | Mar 22, 2008 | Defend & Extend, Disruptions, In the Swamp, In the Whirlpool, Innovation, Leadership, Lifecycle
A couple of weeks ago I blogged that the Chief Innovation Officer for Tribune Company – Lee Abrams – was unlikely to make much difference because he wasn’t given any White Space. He didn’t have permission nor resources to develop a new Success Formula – and as a result he would be allowed only to make minor adjustments around the existing Success Formula edges – a program which is way too little, too late for nosediving Tribune.
Recently Mr. Abrams was interviewed (read interview here), and the reported discussion leads me to be no more optimistic than I was before. While I grant Mr. Abrams with a lot of experience, good ideas and desire, he’s still without White Space and that means organizational Lock-in, and the Status Quo Police, will keep his efforts from yielding much improved results.
I was pleased to read that Mr. Abrams recognizes the difference in requirements between his success in radio and his challenges with Tribune. As he indicated, when he applied innovation to radio "what radio needed was discipline. It was all over the place and we disciplined it." That made a lot of sense for 1970s radio. Top 40 had ignited a huge growth wave, and the radio industry was in the Rapids. In the Rapids, businesses need to develop a Success Formula and become good at executing it so they can keep growing fast. Good business practices in the Rapids are all about Locking-In on the Success Formula and replicating faster than anyone else so you can grow the most and build the greatest resource base.
But after growth stalls it’s a whole different game. Once tipped into the Flats or Swamp successful innovation is about finding your way back into the Rapids. And Mr. Abrams seems to know that. When he took his new job at XM Radio a few years ago he had employees bring in memorabilia from traditional radio stations and he burned them! Similar to how he had a Chicago DJ bring disco records to the ball park and blow them up with explosives to mark the shift away from Disco programming! These actions were symbolic Disruptions – making people see that the past needed to be forgotten in search of a more successful future. Disruption is the first step to opening the mind, and organization, for a better future. Then it takes White Space, given Permission to truly develop a new Success Formula and resources to see the efforts through.
But Mr. Abrams isn’t blowing up any artifacts at Tribune. He sounds much more subdued as he looks to use the six smaller Tribune newspapers as "labs" to test things. He even says he "can’t do anything too radical right away." He’s not talking about necessary Disruptions. He’s talking about attempting some sort of evolutionary change within a horribly Locked-in and resource-starved company more focused on making debt payments than anything else.
Those 6 newspapers aren’t labs. The management in them is intent on making budget this year so they don’t have to cut more heads from the traditional business. Those managers are focused on saving their traditional business traditional ways. Mr. Abrams has no White Space there to develop a new Success Formula. Those papers have no spare resources, manpower or money, to spend on White Space projects. They want immediate cost savings or immediate revenue enhancements with no additional investment – and that means working around the edges for minor improvements that don’t run afoul of existing Success Formula Lock-in! If they see Mr. Zell offer resources to Mr. Abrams those newspaper leaders will be screaming bloody murder to Mr. Zell to give them the resources and they can be much more productive with them than any ideas being offered by Mr. Abrams. They won’t reject Mr. Abrams, but they will contend that they can do more short-term with the resources than he can! It will be tough for Mr. Zell to ignore those newspaper heads – after he’s cut their budgets for practically every line item!
Tribune desperately needs Disruption and White Space. I hope Mr. Zell finds it possible to really support his new Chief Innovation Officer by implementing some Disruptions. Things need to change in the newspapers, TV stations and radio stations FAST. The new leaders need to quickly Disrupt, so people realize change is expected. And White Space, with permission to do new things – radical things – as well as resources committed to their success is required. Give Mr. Abrams the tools to develop a new Success Formula and he might. But right now – he’s trying to hook a hose to the kitchen sink while rearranging the furniture in a house on fire.
by Adam Hartung | Mar 19, 2008 | General, In the Rapids, Innovation, Openness
We all are surrounded by so much Lock-in and Defend & Extend Management that sometimes it can be hard to find White Space.
On 3/19 the Chicago Tribune reported the creation of some White Space that could be very valuable (read article here.) Microsoft and Intel each invested $10million to open research centers at the University of Illinois in Champaign, and a like amount at the University of California in Berkeley. These centers have the openness to pursue new approaches to parallel computing which could improve everything from solving complex problems to identifying your most important text messages.
The key attributes of this White Space include: (1) permission to pursue any solution likely to succeed. Located at universitites, these projects are not hide-bound to previous company technology investments. University based research gives the profs and grad students the lattitude to seek out solutions which could well be overlooked in a traditional R&D organization. (2) Resources to actually make a difference. Regularly I hear about small companies trying to raise $200,000 or $500,000 for research. Today, that money goes only a short distance. $10million provides enough funds to really seek out a solution. And, (3) not all the eggs are in one basket. Investors selected 2 different locations to pursue the objectives, allowing failure while not completely jeapardizing results. Investing in 2 universities demonstrates recognition that no one can predict where success will occur, so it’s smart to have multiple approaches.
You could challenge these investments as perhaps lacking sufficient Return on Investment justification. But, recall that Internet Explorer was a product developed as a direct result of Mosaic, developed at the University of Illinois, and eventually licensed to Microsoft through a company called Spyglass. And IE had an extremely favorable ROI for Microsoft. White Space should not be a "throw away your money" pursuit. But it is OK to invest in areas where you cannot fully predict the result – and rather just the direction. If the outcome from this $20million (which was matched by $16million of state funding) is even 1/20th as successful as IE the value will be HUGE.
by Adam Hartung | Mar 13, 2008 | Disruptions, In the Swamp, Innovation, Leadership
Sometimes the headline can sound so good. But then the article gives no reason to believe the headline.
Take the recent case of Tribune Company deciding to hire a new Chief Innovation Officer (read article here). The headline says Tribune is hitching onto a star from the radio industry to help innovate out of its huge media mess. Of course its primary business, newspapers, is declining in readers and revenues. And its television properties have declining viewership as customers shift to more targeted programming. And its radio stations with their all-talk format have been duplicated and specialized to the point that the early Chicago innovator is barely noticable and easily forgetable in the competitive fog. So innovation is badly needed at Tribune, and we all should be glad that the cost-chopping Mr. Zell is finally seeing the light!
Mr. Lee Abrams is very talented person with a lot of historical success. I’ll grant him that he may well be perfect for this job. But he’s going to fail. Why can I say that?
- Firstly, because there have been no internal Disruptions at Tribune since the budget slashing began 6 years ago and accelerated under the change of ownership. The talk is all about finding some way to Defend & Extend the old businesses. Even the article indicates the company is hoping Mr. Abrams will find some golden D&E practice that will keep the newspaper competitive in the face of mounting internet competition.
- Secondly because Mr. Abrams was not given White Space. He has not been given Permission to do whatever he wants to find a new future – even if that means getting out of newspaper production faster, or dropping out of cable TV for more internet plays. And equally important he has not been given the Resources to create anything substantially new. Face it, Tribune is a multi-billion dollar business. For innovation to matter Mr. Abrams will need billions to invest. If the way to make a fortune in the future Media industry is to create or buy the next YouTube or Facebook or Yahoo! where’s he supposed to get the money for that? Tribune is using all its free cash to pay for those hugely expensive junk bonds that financed going public. Unless Tribune sells not only the Cubs but also WGN and some other properties, then stops trying to shore up great, but dated, Chicago Tribune and L.A. Times newspapers, there simply isn’t anywhere near the money needed for innovation to make any marked difference on this company.
- This comes way, way too late as a marginal effort. Almost all the Tribune assets are in no-growth businesses. And Tribune is huge. To make a difference, it will require an enormously big shift. A very dramatic change. Not just a big cost cutting. Not just a change in advertiser strategy. Tribune can’t wait on a bunch of small projects to bear out over the next 4 or 5 years. We’re talking about needing a wholesale restructuring of the business to get out of things that are quickly losing value and making giant bets in new things. And that is very risky. This project comes very, very late in the lifecycle at Tribune. The company can see the Whirlpool on the horizon. By letting the Re-invention Gap get so large between what Tribune does and what the future markets want it has created a very risky transition requirement – and under the best of circumstances we simply have to remain skeptical.
I’d like nothing more than to read about a big internal Disruption at the Tribune. Like replacing the CEO with an executive from Google. Or a program to convert 30% of its newspaper advertising customers to the internet over 24 months – thus starting a big transition from paper to digital news media. Compare the Tribune portfolio to News Corp. and you can get a sense of the kind of Disruption needed to get Tribune into a growth mode. Sell off substantial assets NOW. There are many buyers that want to get their hands on the L.A. Times and Chicago Tribune and Cubs. Do it NOW while the greater fools are out there ready to buy. Before readership drops another 15% and ad revenues fall another 25% and the Cubs potentially end up in the cellar (who knows, we’d all love them to win the World Series – but do you build a corporate transition plan on that?). Then give Mr. Abrams that money, and announce he has permission to do whatever it takes to create a new Success Formula. I’d love to read that headline and article. But so far, really….
by Adam Hartung | Mar 4, 2008 | Defend & Extend, Disruptions, General, Innovation, Leadership, Openness
When markets shift it’s better to "get it fast" and make changes than "fight to the death" to protect the past.
The Chicago Tribune recently reported results of music compact disc sales (read article here.) It may not surprise readers to learn that nearly half of all teenagers bought no (not one) CDs last year. I’m 50, and I remember when teenagers were the mass consumers of 45’s and then LPs (remember small records with big center holes and "long playing albums") then later 8-tracks, cassettes and eventually CDs (how’s that for a walk down memory lane folks!). So to learn that the percentage of CD sales to teenages fell to 10% from 15% in 2007 was a bit surprising. When my sisters and I were young, teenagers were the vast majority of the market!
What does this tell us about the future? CD’s have a pretty lousy future. In 10 years I’ll be 60 – and who knows if I’ll be buying any CDs. But we know that these teenagers aren’t going to start. They’ll never buy a CD. If you’re a music company that depends on CD sales (like EMI, Sony, Vivendi/Universal or AOL Time Warner) you had better be pretty worried. Whether these companies will ever Disrupt their Lock-in and get a new approach is far from clear. They have ignored the trend for a long time, and Locked-in businesses are well known to remain Locked-in until they, quite literally, fail (at least in that market).
Do you remember how people bought all those albums or tapes? Does anyone remember Musicland – the retailer that in the 1970’s had 20%+ of music sales? Or that Virgin was begun as a direct mail company selling music through the mail? In 2007 the number of sold CDs fell by 19%! While sales of digital songs grew 45%! Today Apple, the company once known for a niche computer called the Macintosh, is the number 2 retailer of music in the country – without a single music store! Apple displaced Best Buy to take the #2 position (of course, #1 is Wal-Mart, but how long do you think that will remain as trends continue?) Clearly, the company that "gets it" has made a fortune, while the ones locked-in to traditional physical product sales and bricks-and-mortar have fared far more poorly.
Do you remember Wayne Huizenga? He was the megalomaniac who built up a car dealership into a network of dealerships making a fortune. He also bought the Florida Marlins, and they became World Series winners. And he bought Blockbuster Video, converted it to Blockbuster Music. So now you think, "what a dope." Guess again. This guy gets it fast. He sold his car dealerships when folks were willing to pay a lot. And he sold his ball players, capitalizing on the world series to make a big profit before overspending to try a repeat – as most owners have done. And he was fast to shut those Blockbuster music stores and sell the real estate before he got stuck with a bunch of unsellable inventory. He got it fast — which is more than we can say for the traditional companies mentioned above. Markets are constantly shifting. Those businesses (and their leaders) that Get it fast can avoid costly Defend & Extend – and build on early wins (like Apple) to huge success.
by Adam Hartung | Feb 20, 2008 | Defend & Extend, In the Swamp, In the Whirlpool, Innovation, Leadership, Lifecycle, Lock-in
Motorola’s (see chart here) idea to spin off its mobile phone business is probably a very good thing for investors. Because that part of Motorola is a sitting duck. Motorola undertook a number of Disruptions the last 4 years, and many of its businesses have White Space doing the right things – such as launching great new products and keeping customers highly satisfied – in markets from 2-way radios to enterpise networks to digital set-top boxes.
But the mobile handheld business, well it just tried to hand onto its success with Razr for too long (read article about Motorola product competition here). Razr was good, but in today’s economy competitors around the globe see your new product and copy it as fast as possible. Then they start one-upping you, such as Nokia (see chart here) did by making lower cost phones and RIM (chart here) and Apple (chart here) did by bringing out products with even more innovation (such as Blackberry and iPod phones).
Motorola had higher cost chips, but you don’t have to be low cost to compete. Samsung used its chips to differentiate with multiple variations every month, swamping the market with "new" product even if it just barely was new. Meanwhile, Motorola introduced only 1 new product this year – the Rokr E8 – which wasn’t even new but (as the name implies) an updated Rokr which was introduced almost 3 years ago.
Now the mobile phone business is well into the Swamp (possibly even the Whirlpool some claim), while other parts of Motorola are keeping themselves in the Rapids. As the above referenced article says, previous troubles in mobile phones "stir uncertainlty and depress morale, rather than inspire Motorola’s deep pool of designers and engineers to be more innovative." Employees don’t like working in the Swamp or Whirlpool, where chronic anxiety over cost cuts, and declining investment keep the business in an also-ran status. An analyst wtih Jackson Securities said "I don’t think the people in the lab are idiots. I think creativity hasn’t been incentivized.." Employees like working in the Rapids. They know that’s where success occurs, and that’s where Motorola’s mobile phone business was in 2005 and 2006. But now that competitors have created what Ross Perot called "that great sucking sound" in mobile phones, why would anyone want to work there?
The engineers in Motorola’s mobile phone business are hard working, industrious, and talented. I know several of them, and they are world class. Their business unit’s fall from grace isn’t because of employee weaknesses or insufficient loyalty. Rather, the leaders (including Mr. Zander, CEO) made the horrific decision to try Defending & Extending their business with the Razr rather than maintaining Disruptions and White Space letting loose the talent which made and launched the Razr in the first place. This decision kept the innovation minimal, the opportunity for new products to reach market negligible and turned the business unit into a sitting duck. If this business had maintained the Disruptive behavior that got the Razr out the door, and used White Space to keep innovations flowing to market – instead of chasing market share and trying to lower costs – these engineers would be sitting pretty, rather than sitting ducks.
The competitors have been taking potshots for months. And now that we’re learning White Space disappeared in this unit, the risk is the corporation keeps trying to pump money from the better units into the duck as fast as losses pour out from competitive shots. It will be better for the employees, the investors, suppliers and customers if Motorola puts its energy into growing the businesses it has kept on course the last 4 years, and let bygones be bygones in a market Motorola created – but let get away. When you see a sitting duck, best thing is to walk away.
by Adam Hartung | Dec 9, 2007 | Defend & Extend, General, In the Rapids, Innovation, Leadership, Lifecycle, Lock-in
I’ve had a lot of discussion this week about Motorola. Readers of this blog know I’ve been a big fan of Motorola, yet here we are today with the company’s value barely higher than it was 4 years ago (see chart here) – and the savior CEO is being replaced.
A Chicago analyst put Motorola’s situation well when he headlined "Big Expectations, Harsh Realities Plague Motorola" (see article here.) The Phoenix Priniciple is all about growth. When growth breaks out, you can’t stockpile it to use some future date. You have to keep growing. Motorola Disrupted 4 years ago, and a slew of White Space projects led to rapid growth. One of those projects was a breakout phone called RAZR – but that was just one. Motorola bought Good, Symbol and brought out several new products in DVRs and 2-way mobile radios. But this wasn’t enough (read full article here.)
Never forget Motorola once was the #1 microprocessor manufacturer – as the brains behind the early Macintosh. Motorola also launched Iridium. Not only was Motorola a huge leader in cell phones, but the company designed and deployed a satellite-based system intended to potentially augment or replace cell phones. Motorola uses White Space. But, unfortunately, when things start working the company also has a penchant to start Defending & Extending that success. Motorola’s Lock-in to infrastructure products meant the company didn’t give up on Iridium early enough. And Motorola Locked-in on analog phones, which they led, moving to digital phones way too late.
Trying to Defend & Extend what works has once again gotten Motorola into trouble. RAZR was a great product. But by focusing on growing share through RAZR, innovation declined. Instead of keeping Disruptions happening, and new White Space projects flourishing, Motorola overly focused (once again, unfortunately) on extending what worked (notice past tense) rather than maintaining innovation and keeping its eyes on the long-term future. Now other mobile handsets are more innovative, and the other markets where Motorola invested are growing – but not fast enough to keep over-all company growth rates out of the Stall Zone.
Motorola’s new CEO needs to do exactly what the company did 4 years ago (see article on new CEO here). Disrupt and open White Space. Motorola is full of innovations – across all its businesses. It needs leadership to Disrupt Lock-ins to hierarchy and sacred cows so that innovation can rapidly come to market. If Motorola instills Disruptions and Lock-in it can repeat past breakout success and return to above average growth. If it returns to The Phoenix Principle, and eschews D&E Management, its future looks very rosy indeed. But the threat of failure looms large if management avoids Disruptions and doesn’t invest in White Space – needed now more than ever at Motorola.
by Adam Hartung | Nov 16, 2007 | General, In the Rapids, Innovation, Leadership, Lifecycle
Five newspaper giants are banding together to sell internet ads (see article here). Now that’s creating some White Space to help their businesses grow. Good luck to Tribune, Gannett, Hearst, Media News Group and Cox.
Readers of this blog know I’ve been brutal on Tribune,, in particular for staying Locked-in on newspapers and focusing management on short-term metrics while implementing a leveraged buyout by a real estate developer. That effort looks like a Defend & Extend action trying to salvage a troubled ship called "the newspaper", and shows little hope of success. After all, journalism is about "news", not "paper", and efforts to salvage the oversized document thrown on my doorstep daily can’t be viewed optimistically. When readership is declining as people go elsewhere for news and entertainment, and advertiser spending is dropping at more than 10%/year, it’s not hard to predict the future.
But this new venture is White Space for these companies. Their individual web sites focused on displaying news. Interesting for readers, but what’s the business proposition? These companies have been so Locked-in to old paper-based business practices they didn’t know how to make money from their web sites. But this venture is focusing on the business side of journalism – the ads. And marrying advertisers with the content created and distributed by the journalists. Focusing on the business aspects, and in the extremely high growth internet ad market (just look at Google and Yahoo! to recognize the growth in internet ad sales), this venture has the opportunity to create a new Success Formula these companies can use to turn around their companies – and save their journalistic heritage.
My only disappointment is I see no Disruption to existing Lock-ins. It appears this venture is totally outside the traditional organizations. The risk is that this venture learns how to sell ads, but the 5 investors don’t Disrupt themselves in order to migrate away from old ways and toward the new market. If they don’t migrate, this venture may succeed but the traditional companies most likely won’t. So the White Space is good, but these companies need to go further to Disrupt their existing Lock-ins and create opportunities for rapid adaptation to the marketplace this joint venture develops.
Nonetheless, we have to be encouraged by this venture. Instead of just giving up the market to upstart Google they are finally starting to compete. Let’s hope the venture is given permission to ignore its investors’ old Lock-ins and do whatever the market requires for success — and let’s hope the investors fund this sufficiently so it can grow and succeed. This offers real hope for some very tired Success Formulas in traditional newspapers.
by Adam Hartung | Jul 21, 2007 | In the Swamp, Innovation, Leadership, Lifecycle, Lock-in
The CEO with the hottest seat in corporate America right now is probably Ed Zander of Motorola (see article here, see chart here.) And well it should be hot, as recent negative results now verify Motorola is once again in a Growth Stall (see article here). After a great couple of years, the last two quarters have been back to back negative ones. Fewer than 7% of companies recover from a growth stall to consistently grow a mere 2%.
This isn’t the first stall for Motorola. There were several before, and just 3 – 4 years ago many investors felt that Motorola may not survive. But a new CEO (Zander) came in, implemented a slew of Disruptions, opened up a bevy of White Space projects and Motorola started to really improve. He ignored analyst calls for massive, widespread layoffs and instead rapidly moved new products to market (like RAZR) and started building new businesses in Motorola. Results were stellar, and Zander was widely applauded for the changes including being named CEO of the Year by popular journals.
But these latest earnings announcements demonstrate that a post-stall recovery is very hard to maintain. Motorola was desperately Locked-in to its failing Success Formula when Zander took over. Despite all his Disruptions and White Space projects, Motorola did not fully develop a new Success Formula, nor did it complete a migration to a new Success Formula, before slips started happening in the traditional business. Profits dipped, and then Carl Icahn started a raid on the company.
Unfortunately, leadership then hiccuped. Reacting to Icahn, and the cries of stock analysts, instead of doing more Disruptions and creating more White Space to keep its focus on growth, Motorola started trying to Defend & Extend its old strategies – announcing an 11% (7,500 person) layoff would begin. The company shut down an R&D facility at the University of Illinois in Champagne (one of the top engineering schools in the world) to save money. And it began "reorganizing" (see article here) The company even took to financial machinations as it focused on engineering the P&L instead of new products – as can be seen in the latest earnings news.
From his early actions it appears Zander knows the right thing to do. And he has continued following the original path, such as the announcement early this month that Motorola has agreed to acquire Leapstone Systems, further bolstering the network division – where growth rates and profits both exceed the mobile handset business (see article here.) What Motorola needs now is not another change in CEO, but rather more Disruptions and White Space to push Motorola further away from the old behaviors and Lock-ins which got it into so much trouble in the 1990s, then early this decade, and now more recently. It’s not Zander that is the problem, but the truncated effort to use White Space to develop a new Success Formula and then mobilizing Motorola toward that Success Formula.
Motorola was an incredible turnaround story. Disruptions and White Space were allowing this Phoenix Principle company to regain flight. But right now the Phoenix is in the crosshairs of many analysts and Icahn – who are collectively calling for the CEO’s head when they should be screaming for more Disruptions leading to more growth. Motorola will not save its way to prosperity. It must develop a new Success Formula that puts Motorola back in the Rapids – and keeps the company out of the Swamp. If investors and employees aren’t careful they’ll accomplish their goal of unseating Zander, Icahn will swoop in, and then we can expect yet more heads to roll, businesses to be sold, more product development to be shuttered and after Icahn gets his cash back he’ll leave Chicago with a shell where once a great company stood.
Better to let the Phoenix take flight. If the Motorola organization and its leadership have the guts to get out of the broken down old nest and really test its wings.
by Adam Hartung | Apr 4, 2007 | General, In the Swamp, Innovation, Lifecycle, Openness
I’ve lived in Chicago many years. And anyone who’s ever worked in the Loop (that’s the downtown area) is familiar with the guys running around in the brightly colored sport coats. You see them on the street every week day, impervious to hot, cold and rain, usually (it seemed) with a cigarette. These were the floor traders from the Board of Trade. "Heart attack job," most of us would think, and say to our colleagues, as we watched these runners dealing with customers and their orders.
But these folks are disappearing quickly. Computer trading has practically replaced the pits for a preponderence of trading volume. And the rug was pulled out from under people who practiced what was a very skilled, but very limited, occupation. What do you do when you have a highly specialized Success Formula and suddenly there’s no need for it?
You can read about what some of these former traders are now doing here. Market Challenges don’t just affect companies and industries. Technology and new competitors don’t just hit businesses. Individuals, and their personal Success Formulas are impacted by Challenges as well. And when that happens, what’s critical is that we use personal Disruptions to find White Space for our future.
Very few of these old traders have turned into "screen traders." The skills for success are very different trading on a computer versus a pit. And for most of these people, their identity was tied to more than a title – it was tied to the strategies and tactics used in the activity of being a pit trader. Their Success Formula suddenly had a lot less value. For some, this signaled retirement – the personal equivalent of shutting down operations. Others have taken up screen trading, but at far lower volumes and with less satisfaction (monetarily and personally.) They are trying to find a way to Defend & Extend their old Success Formula – but it isn’t going too well (as we might expect). And others have Disrupted themselves and moved on to roles as salespeople and restauranteurs. It’s this latter group that is now finding the most fulfillment in their lives, because they have moved themselves into personal White Space and are developing a new Success Formula.
It’s personally rough when your Success Formula needs changing. But we are no more immune to the impacts of a dynamic world, and the affect it has on labor, than are businesses. Succeeding in this dynamic world increasingly requires that we keep our eyes scanning for Challenges, that we practice Disrupting our lives to make sure we don’t become too "comfortable and cozy," and finding ways to insert White Space in our lives. Places to experiment with new ideas that we can potentially use to keep our careers, and lives, in our control and flourishing – instead of waking up wondering "Where’s the Rug"?
When was the last time you took a college class? The last time you explored how to turn your hobby into a job? Interviewed someone who walked away from a job to something totally different for insights on how she did it? Discussed with your spouse squirreling away significant funds as "walk away money"? Checked on the value of your house not to get more spending money, but to finance a career change? Attended a networking meeting not looking for a job, but just to hear about what other people do? Where’s the White Space in your life?
