by Adam Hartung | Apr 18, 2005 | Books, Disruptions, General, In the Rapids, Innovation, Leadership, Lifecycle
I wrote recently that IBM looked like an elephant that could continue to dance (taking off on the title of Lou Gerstner’s book about his days at IBM.) Shortly after that, IBM announced quarterly earnings and its stock accelerated a 2005 decline. A fair question might be "would I like to retract my earlier BLOG?"
Definitely not! Yes, IBM missed its earnings projection by $05/share. Right; a nickel. That was about 6% lower than expected but a nickel higher than last year. The stock sold off like you’d think they’d announced a quarterly loss – falling about 10%. From its peak at the beginning of 2005, the stock is down about 25%.
Over the long term, the markets are efficient. But in the short-tem — well it’s anyone’s guess. Not even the famed Peter Lynch could make money timing a market. What makes money long-term is finding companies that can sustain success (read the latest great book on long-term investing by Jeremy Siegel for more info.)
IBM is taking actions to continue sustaining its success. The stock might be volatile, both up and down, along the way. But few make money trading stocks. The way to riches in a creatively destructive world is finding companies that can sustain success. Since its turnaround in the 1990s IBM has regained its ability to disrupt itself and demonstrate the characteistics of a long-tem sustained growth company.
If you want a portfolio of long-term winners I would say that IBM is a company worth considering. Even moreso today.
by Adam Hartung | Apr 18, 2005 | Disruptions, General, In the Rapids, Innovation, Leadership, Lifecycle, Openness
Far too often we see companies merge in an effort to save an old Success Formula. The goal of the acquistion is to Defend & Extend an outdated business model by bringing together two less than stellar competitors. Because this is so common, it’s easy for analysts and pundits to become very jaded regarding acquisitions and mergers.
Today, however, just the opposite happened. Two good, high growth companies decided to merge in order to create new growth opportunities. Rather than merging to find cost synergies, they are merging in order to find new markets, develop new products and further grow.
The two companies are Adobe and Macromedia. According to MarketWatch "Both companies said the long-rumored acquisition was not to consolidate and cut costs but to help Adobe expand into new markets, particularly in the area of providing content to mobile phones and other handheld devices….This is not a consolidation play. This is all about growth," said Bruce Chizen, Adobe’s chief executive."
Because most acquisitions are about D&E, the stock market punished Adobe upon the announcement – sending it’s stock down about 10%. However, acquisitions and mergers can be very effective tools for creating white space and developing new growth opportunities. We should keep our eyes on Adobe, and consider it for a long term investment, since this could be the move that spurs its growth for another decade.
by Adam Hartung | Apr 12, 2005 | General, In the Rapids, Innovation, Leadership, Lifecycle, Openness
Louis Gerstner’s best selling book on IBM was "Who says elephant’s can’t dance." Now his successor looks to be a pretty good elephant trainer himself.
IBM has loaded itself up with more White Space projects. This behemoth is fast moving out of hardware (selling its PC business, for example) and moving into value-added process management. It’s using both divestitures and acquisitions to disrupt itself, and then using White Space to develop new opportunities.
Read the latests article in BusinessWeek for details. Let’s just say here that if IBM keeps spawning these White Space projects it can keep itself in the Rapids for quite a long time. You don’t have to be small to succeed – just willing to be disruptive and use White Space
by Adam Hartung | Nov 1, 2004 | In the Rapids, Innovation, Leadership
Starbuck’s has been breaking the rules ever since it was brewed up in the mind of founder Howard Schultz, and it looks like they are doing so again. Many of Starbuck’s innovations have been product-related breakthroughs such as Frappuccino and adding Music CD’s to the store’s inventory. These have been profitable innovations, but the first time the company really challenged its success formula is when it added wireless internet connectivity. Now the company is opening dozens of “media bar” stores that will enable customers to listen to and burn custom CD’s while they slurp down that Venti no-foam non-fat caramel Latte. This is a dramatic entrée into a new success formula that speaks loudly of Starbuck’s commitment to reinventing itself.
How are they able to do this when other companies struggle with even small innovations? I think there are three key elements. The first is the company’s commitment to ongoing innovation. CEO Schultz has created a climate where innovations are valued and can come from anywhere in the organization. For instance, the idea for Frappuccino came from two store managers who were experimenting with a frozen coffee drink.
A second factor is that the identity of the company is sufficiently large that many different strategic directions are possible. Rather than narrowly define itself as a coffee bar, Starbucks sees itself as a “third place”—a destination where people can escape from the rat race and other troubles, relax and experience a sense of well-being and community. Music is a natural addition to the sense of leisurely self-indulgence.
The third element is passion. I think passion is the secret ingredient in every really great success story. Why? Because business is about people, and people are passionate to their very core. Employees who are passionate about the business will give more energy, more creativity and will be more productive than the norm. Customers can tell when passion is in the air—it’s infectious and they start to catch it too. Passionate customers inspire employees in a positive feedback loop. Passionate customers also breed new customers. Someone who is crazy about your business will tell their friends and very nearly drag them to your store. In practically every early morning meeting I attend, someone is drinking from a Starbucks cup and telling somebody how they “never miss their Starbucks run in the morning.”
How much passion do you have for your business? How much passion do your employees and customers have for your business? In my experience, passion is something that leaders must consciously nurture. And it’s rare. I mostly experience it in growing companies that are still in the Rapids. Most mature organizations feel dead and (gasp!) business-like to me. Yuck! I want to feel a buzz in the air, some excitement, and people who are really happy to be doing their job that day. I get that sense at Starbucks, at CiCi’s Pizza, and at Discount Tire. It’s missing at McDonald’s, Pizza Inn, and Firestone. I’ll pick the first three over the second three at every chance, and I’m betting that most of you do too.
