by Adam Hartung | Nov 3, 2009 | Current Affairs, Defend & Extend, General, Leadership, Lifecycle
"TribCo Papers Will Try Ditching AP to Cut Costs" is the Crain's Chicago Business headline. Tribune is in bankruptcy because it is losing so much money trying to sell newspaper ads. Subscribers are disappearing as more people get more news from the internet, so advertisers are following them. So what should Tribune Corporation do? You might think the company would focus on other businesses in order to go where customers are headed.
But instead Tribune has decided to stop buying AP content for it's newspapers in a one week test. Not sure what they are testing, as one week rarely changes a subscriber base. What they know is that AP content has a cost, and Tribune is so broke it can't afford that cost. Seems Tribune is redefining its business – to selling papers rather than newspapers. They've dropped much of their content the last 2 years, so now they are going to drop the news as well. This is an example of trying as hard as they can to keep the old business alive, even after it's clear that Success Formula simply won't make money. In this case, we're seeing management ready to throw the baby out with the bathwater trying to keep a hold on the tub.
Interestingly "Vivek Shah Leaving Time Inc. to Go 100% Digital" is the MediaPost.com headline. Mr. Shah headed the digital part of Time, and he's decided to throw in the towel personally, promising that he is going to a 100% digital operation. He's tired of guys who think ink trying to manage bits – and doing it poorly. So another option for dealing with market shifts is to Disrupt your personal Success Formula by going to an employer positioned in growing markets. Not a bad idea if you can arrange it – even though there are lots of risks to changing employers. While the risk of change may seem great, the probability of ending up unemployed because your company fails is a very likely risk if you work for a traditional publisher these days. We often are afraid to go to the next thing because we hope that things will get better where we are. Even when we're standing on a the edge of an active volcano.
"P&G Considers Booting Some Brands" as headlined in the Wall Street Journal is yet another alternative. This one is more like GE used in the past where it sold underperforming businesses in order to invest in new ones. This has a lot of merit, and really makes a lot of sense for P&G. P&G is desperately short of any real innovation, and has been going downmarket to poorer products at lower prices in its effort to maintain revenues. A strategy that cannot withstand the onslaught of time and competitors with new products and better solutions.
I don't know if the new CEO is really serious about changing the P&G Success Formula or not. He hasn't demonstrated that he has any future scenarios for a different sort of P&G. Nor has he talked a lot about competitors and how he hopes to remain in front of companies with new solutions. Nor has he offered to Disrupt P&G's very staid organization or its very old Success Formula – which is suffering from lower returns as ad spending has less impact and younger people show less interest in old brands. So there's a lot of reason to think his buy and sell approach to shifting with markets may not really happen.
What's most important to watch are P&G's business sales. Any big company can make acquisitions to create artificial growth. That's easy. But it doesn't signal any sort of change in the company. What does signal are the kinds of businesses sold. McDonald's sold Chipotle's to invest in more McDonald's stores – that's defend & extend. Kraft sold Altoids and other growth businesses to invest in advertising for Velveeta and "core brands" – that's defend & extend. If P&G sells growth businesses – theres' little to like about P&G. But if the company sells old brands that have big revenues and little growth – like GE has done many times – then you have something to pay attention to. Selling off the "underperformers" that some hedge fund wants (like the guys that bought Chrysler from Daimler) so you get the money to invest in growth businesses can be very exciting.
When markets shift you have to go where the customers are headed. If your employer won't go there, you should consider changing employers. It's not about loyalty, it's about surviving by being where customers are. But what's best is if you can convert your business to one that is oriented on growth. Shake up the old Success Formula by attacking Lock-ins and setting up White Space and you'll remain a company where people want to work – and customers want to buy.
by Adam Hartung | Nov 1, 2009 | Current Affairs, Defend & Extend, Leadership
Jim Collins has decided to start telling people how to manage innovation. In "How Might We Emphasize Cost Effective Evaluation Tools" at the Good.is Blog Collins lays out his prescription for managing innovation. And it's pure Collins, because he's a lot more interested in focus than results. In fact, he is more concerned that before attempting innovation companies put in place a review process to rapidly cut off funds for innovations that go awry than figuring out how to behave differently.
Jim Collins has decided to tell people how to innovate. Only his first recommendations don't sound anything like the road to innovation. His five rules are timely, efficient, focused, sharable and actionable. There's no mention of getting market input, or figuring out how to behave differently. In Collins' world if you are efficient, mindful of the clock, focused and committed to extending your past Success Formula he's sure profits will evolve.
His passion for evaluation is paramount. He loves to talk about being efficient in innovation, prototyping toward some goal that is pre-set. Being "efficient" about the exercise drives his discussion – as if markets are efficient, or understanding how to make money in a shifted future marketplace is an efficient process. And he is obsessed with being vigilant. Collins is fearful that people will waste money on their innovation exercises. Efficiency, ala Taylor and scientific management, is a dogma Collins cannot escape. He wants his followers to be efficient, pre-planned, and obsessed about making sure money is not wasted from this escapade into innovation.
Jim Collins' prescription for success is one of the biggest snake oil
sales in business history. His book sales, and speaker fees,
demonstrate what a big PR budget from an aggressive publisher can
accomplish with content that sounds like "common sense." Jim Collins'
"great" companies are anything but. Just run the list and you'll find
he loved companies like Circuit City, Fannie Mae, Wells Fargo and
Phillip Morris. Companies that failed at innovation and ended up
smaller and less profitable (or gone completely.)
Today's economy has shifted. While Collins and Hamel spent years looking backward to see what worked in the 1970s, 80s and 90s those analyses are of no value today. We aren't in an industrial economy any longer where building economies of scale or entry barriers works. Being good at something is the mantra Collins lives upon, but when the market can shift in months, weeks or days to something entirely different being good at something that's obsolete does not create high rates of return.
Collins is so afraid that companies will over-invest in something new he would rather kill an innovation than possibly spend too much. His obsession with efficiency indicates an approach that is bankrupt intellectually, and has demonstrated it cannot produce better returns. It sounds so good to be very focused, to be fearful of pouring good money after bad. But reality is that businesses regularly accomplish just that – making bad investments – by trying to defend & extend a business that is no longer competitive.
Only participating in changing markets creates high returns. No business, not even huge companies like GM, Chrysler or Sun Microsystems, can "direct" a market. There are no entry barriers in a globally connected digital economy. If companies aren't willing to abandon their BHAGs (Big Hairy Audacious Goals) in favor of creating new solutions they simply are made obsolete. Nobody's "hedgehog concept" will save them when the market shifts and previous sources of value are simply no longer valuable (just ask newspaper publishers, who never imagined that customers would move so fast to the web instead of waiting for their daily paper.)
Almost 100 years ago a little known economist named Schumpeter said that value was created by introducing new solutions. His work demonstrated that pursuing optimization led to lower rates of return, not higher. As a result, he concluded that those who are flexible to market shifts – bringing new solutions to market rapidly – end up the big winners. As we look at companies today, comparing Google, Apple, Cisco and Nike to GM, Kraft, Sara Lee and AT&T we can see that Schumpeter had it right.
The gurus of business management helped us all realize how you could make improvements via optimization. Peters told us to seek out excellence, Hamel and Prahalad encouraged us to understand our core capabilities and leverage them. Collins drummed into us that we should focus. And most recently, a New Yorker editor with no business training or experience at all, Malcolm Gladwell, has admonished us to practice, practice, practice. Yet, when we really look at performance we see that these practices make organizations more brittle, and subject to competitive attacks from those who would change the markets.
We know today that innovation leads to higher rates of return than optimization of old strategies. But few recognize that innovation must be tied to market inputs. We build organizations that are designed to execute what we did last year – not move toward what is needed next year. This can be changed. But first, we have to eliminate the innovation killers — and that includes Jim Collins.
by Adam Hartung | Oct 29, 2009 | Current Affairs, Innovation, Leadership, Television
I was intrigued to read about Apple proposing to rebuild a mass transit stop in Chicago in exchange for naming rights to the stop, as well as permission to advertise in the stop (Crain's Chicago Business – "Doors will open on the right at Apple stop.") Most people would ask "why?" And it's because Apple is moving toward a very different advertising future.
Most people think of advertising as the ads in newspapers and magazines, as well as on the radio, or television, or possibly billboards. Only we know that newspapers and magazines are failing because fewer people read them every month. Advertising in print media has limited value if there aren't any readers.
Likewise, people under 30 are watching a LOT less TV than the older generation. Whereas I grew up with my eyes on the "boob tube," increasingly I watch a lot less TV as I spend more time on the web. But my web use is nothing compared to people 17 to 34, who have almost abandoned television. They go to the web for entertainment. And they increasingly only watch TV shows and movies when they can download them – or possibly watch via DVD.
And Apple is at the forefront of killing the radio business. With iPods and digital music now cheap and plentiful, why listen to somebody else's programming? When you can program your own music, radio becomes less interesting. And if you want news there's the iPhone, Blackberry or similar mobile device to access the web – so why listen to talk radio?
Advertising as it was is gone. Coke, Pepsi, Procter & Gamble, Kraft, etc. built huge companies via media advertising. But media usage is declining sharply. So how do you get the message out to people who increasingly get their entertainment without using most of the traditional media?
And that's where Apple's move makes sense. By rebuilding a train station, they help promote their brand. It reminds me of when Hooters offered to fill the potholes in Chicago (a big problem) if they could put their company logo over them. This week I noticed that in the Newark, NJ airport the jetways had big billboards on the outside. And the TSA bins (for shoes, coats, laptops, etc.) had ads printed on the bottom. It's getting harder and harder to reach customers when they don't need traditional media.
So if you have historically been a big user of traditional media advertising, you'd better be rethinking that strategy. What worked in the past isn't going to work in 2015. Staying Locked-in to old ad budgets, and approaches, is going to keep producing declining returns. Traditional advertising won't even maintain current positions – much less work for new product launches. As ad costs go up, they are less effective. To reach customers requires shifting with the market.
If your new business plas is to use advertising as a way to grow your business, think again. While advertising isn't gone – it is a lot less effective than it was when traditional media was widely the source of information and entertainment. If you want to get people to recognize your brand, you have to start being a lot more clever. You have to find new ways to get in front of customers. You have to use your scenarios of the future to help you find the best way to promote your product. Because the old channels, and the ad firms that used to supply them, increasingly are an ineffective answer.
by Adam Hartung | Oct 27, 2009 | Current Affairs, Defend & Extend, General, In the Swamp, Innovation, Leadership, Lock-in, Web/Tech
"IBM authorizes another $5Billion for share buybacks" is the Marketwatch.com headline. This brings the amount available for buying the stock to $9.2billion – or enough to buy about 73.6million shares. But it begs the question, what value will this bring anyone?
"The U.S. Workplace: A Horror Story" is the CIOZone.com headline. A survey by Monster.com and The Human Capital Institute of more than 700 companies (over 5,000 workers) discovered that by and large, employees are mad at their employers. They don't trust business leaders, and think those leaders are exploiting the recession for their own purposes (and gains). 79% of workers would like to find a better employer – to switch – but only 20% of employers have a clue how many workers have become disillusioned.
Simultaneously, "Many vanished jobs might be gone for good" is the Courier-Journal.com headline. Historically, increases in manufacturing (usually led by autos) and construction (primarily housing) caused recessions to diminish. But nobody expects either of those sectors to do well any time soon. Manufacturing is showing no signs of improving, in any sector, as we realize that all the outsourcing and offshoring has permanently reduced demand for American labor. And quite simply, very few investments are being made by business leaders that will create any new jobs.
"ALL BUSINESS: Innovation Needed Even in a Recession" is the Washington Post headline. The article points out that almost all recent improvement in profitability – boosting the stock market – has been through cost cutting. But that has done nothing to help companies improve revenues, or improve competitiveness. It's done nothing to bring new solutions to market that will increase demand. Quoting the former Intel CEO Gordon Moore – "you can't save your way out of a recession" – the article cites several consultants who point out that companies which earn superior rates of return use recessions to invest in new technologies and innovations that create new demand. And eventually new jobs. But today's CEOs aren't making those investments. Instead, they are taking short-term actions that dress up the bottom line while doing nothing about the top line.
Which brings me back to IBM. Who benefits from $9.2billion being spent by IBM on its own stock? Only the top managers who have bonuses and options linked to the stock price. The shareholders will benefit more if IBM invests in new products and services that will increase revenues and drive up long-term equity. Employees and vendors will benefit from creating new solutions that generate demand for workers and components. Almost nobody benefits from a stock buyback – except a small percentage of leaders that have most of their compensation tied to short-term stock price.
What new innovations and revenues could be developed if IBM put that $9.2billion to work (a) at its own R&D, product development labs or innovation centers, or (b) at some young companies with new ideas that desperately need capital in this market where no bank will make a loan, or (c) with vendors that have new product ideas that could meet shifting markets?
That's the beauty of an open market system, it supposedly funnels resources to the highest rate of return opportunities. But this doesn't work if managers only cut costs, then use the money to prop up stock prices short term. It's a management admission of failure when it buys its own stock. An admission that there is nothing management can find worth investing in, so it will use the money to artificially manipulate the short-term stock price. For capitalism to work resources need to go to those new business opportunities that generate new sales. Money needs to flow toward new health care products and new technologies – not toward keeping open money-losing auto companies and failed banks that won't make loans.
If we want to get out of this recession, we have to invest in new solutions that will increase demand. We have to seek out innovations and fund them. We cannot simply try to Defend & Extend Success Formulas that are demonstrating their inability to create more revenues and profits. Laid off workers do not buy more stuff. We must put the money to work in White Space projects where we can learn what customers need, and fulfill that need. That in turn will generate jobs. And only by investing in new opportunity development will workers begin to trust employers again. IBM, and most of the other corporate leaders, need to "get it."
by Adam Hartung | Oct 23, 2009 | Current Affairs, Defend & Extend, eBooks, In the Swamp, Leadership, Lock-in, Music
If you try standing in the way of a market shift you are going to get treated like the poor cowboy who stands in front of a cattle stampede. The outcome isn't pretty. Yet, we still have lots of leaders trying to Defend & Extend their business with techniques that are detrimental to customers. And likely to have the same impact on customers as the cowpoke shooting a pistol over the head of the herd.
Book publishers have a lot to worry about. Honestly, when did you last read a book? Every year the demand for books declines as people switch reading habits to shorter formats. And book readership becomes more concentrated in the small percentage of folks that read a LOT of books. And those folks are moving faster and faster to Kindle type digital e-book devices. So the market shift is pretty clear.
Yet according to the Wall Street Journal Scribner (division of Simon & Schuster) is delaying the release of Stephen King's latest book in e-format ("Publisher Delays Stephen King eBook"). They want to sell more printed books, so they hope to force the market to buy more paper copies by delaying the ebook for 6 weeks. They think that people will want to give this book as a gift, so they'll buy the paper copy because the ebook won't be out until 12/24.
So what will happen? Kindle readers I know don't want a paper book. They wait. Giving them a paper copy would create a reaction like "Oh, you shouldn't have. I mean, really, you shouldn't have." So the idea that this gets more printed books to e-reader owners is faulty. That also means that the several thousand copies which would get sold for e-readers don't. So you end up with lots of paper inventory, and unsatisfactory sales of both formats. That's called "lose-lose." And that's the kind of outcome you can expect when trying to Defend & Extend an outdated Success Formula.
Simultaneously, as book sales become fewer and more concentrated a higher percent of volume falls onto fewer titles. And that is exactly where WalMart, Target and Amazon compete. High volume, and for 2 of the 3 companies, limited selection. This gives the reseller more negotiating clout against the publisher. So as the big retailers look for ways to get people in the store, they are willing to sell books at below cost – loss leaders.
So now publishers are joining with the American Booksellers Association to seek an anti-trust case against the big retailers according to the Wall Street Journal again in "Are Amazon, WalMart and Target acting like Predators?" . Publishers want to try Defending their old pricing models, and as that crumbles in the face of market shifts they try using lawyers to stop the shift. That will probably work just as well as the lawsuits music publishers tried using to stop the distribution of MP3 tunes. Those lawsuits ended up making no difference at all in the shift to digital music consumption and distribution.
"Movie Fans Might Have to Wait To Rent New DVD Releases" is the Los Angeles Times headline. The studios like 20th Century Fox, Universal and Warner Brothers want individuals to buy more DVDs. So their plan is to refuse to sell DVDs to rental outfits like Netflix, Redbox and Blockbuster. Just like Scribner with its Stephen King book, they are hoping that people won't wait for the rental opportunity and will feel forced to go buy a copy. Like that's the direction the market is heading – right?
If they wanted to make a lot of money, the studios would be working hard to find a way to deliver digital format movies as fast as possible to people's PCs – the equivalent of iTunes for movies – not trying to limit distribution! That the market is shifting away from DVD sales is just like the shift away from music CD sales, and will not be fixed by making it harder to rent movies. Although it might increase the amount of piracy – just like similar actions backfired on the music studios 8 years ago.
Defending & Extending a business only works when it is in the Rapids of market growth. When growth slows, the market is moving on. Trying to somehow stop that shift never works. Only an arrogant internally-focused manager would think that the company can keep markets from shifting in a globally connected digital world. Consumers will move fast to what they want, and if they see a block they just run right over it – or go where you least want them to go (like to pirates out of China or Korea.)
They only way to deal with market shifts is to get on board. "Skate to where the puck will be" is the over-used Wayne Gretzsky quote. Be first to get there, and you can create a new Success Formula that captures value of new growth markets. And that's a lot more fun than getting trampled under a herd of shifting customers that you simply cannot control.
by Adam Hartung | Oct 20, 2009 | Current Affairs, Disruptions, In the Rapids, In the Swamp, Leadership, Openness, Web/Tech
Can you believe a BusinessWeek headline like "Dell's Extreme Makeover"? We read about turnarounds and makeovers all the time. Only most of the time they don't turn, and they don't get made over. Most companies cut a lot of costs, make a lot of promises, but keep on doing the same stuff. They get worse. They get acquired, or they fail. And readers of this blog know that I've long chastised Dell as an example of a Locked-in company with little hope of turning around.
But, I'm changing position today. There's a LOT of the right stuff happening, and the seeds are being sown, doing what really works, for Dell to be a good future story.
Scenario planning for the future:
- Michael Dell admits in the article that he stuck to his original Success Formula of supply chain expertise feeding direct sales too long. He admits that future success requires a new Success Formula. Specific future scenarios aren't disclosed, but it is apparent that the company does not expect future markets to look like the markets of 1995-2005.
Focus on Competition:
- Management says Dell is "not trying to become like the competition"!! That is great, because winners do new and different things. They don't try to copy/catch existing competitors.
- Dell did not chase Apple into opening its own stores. Good move. Dell isn't Apple, and can't win trying to be like Apple.
- Dell was previously obsessed with its top, big customers. Big corporate accounts. It slavishly built a business trying to please the top 10%. Now Dell is winning by putting considerably more attention on customers it previously ignored: consumers, small business, medium business and government. This not only balances the company, it keeps Dell from chasing Locked-in customers into the same old fox holes.
Disruptions:
- Michael Dell has replaced 7 of his top 10 direct reports. That's a huge step in the right direction. GM should follow that lead!
- Dell has defied its old "direct to customer" mantra by taking consumer products into retail stores! The added cost to do that, and new skills required, must have shaken buildings at the Texas headquarters campus.
- A new head of design developed options customers could specify for their consumer computers. Manufacturing said it would violate the supply chain efficiency so "NO." Michael Dell over-rode the manufacturing group and said "do it." He reinforced that efficiency would not save Dell. Manufacturing would have to adjust to innovations for Dell to succeed.
- The company has reorganized away from products (how almost all tech companies structure – including Apple) and installed a new structure organized around MARKETS!! What a great way to quit being product-push and become market-learn!
White Space:
- A board member said that after eating dinner with Michael Dell he could see that this"journey at Dell is just in its first or second inning." Although not much White Space was discussed, this implies some big things are being discussed and planned for the future.
- The article says Dell is preparing to launch smart phone sales soon. This is critical, because smart phones are part of the market shift away from PCs. Dell has a lot of learning to do in that market to be part of the shift.
This is not a "done deal." I wish I knew more about Dell's scenario planning – to be sure the company has switched to planning for the future and away from planning from the past. And I really wish I knew more about what White Space is being planned. Because we know you can't transition by changing the big organization all at once. The behemoth needs some wins it can use to lead the migration. And seeing White Space projects, with a group shepherding them into the lifecycle, is a really critical step to follow-up the many Disruptions.
So things could still go badly for Dell. But they WON'T go as badly has they went from 2005 to 2007. From this one article, the first interview with Michael Dell since he took the reigns back in 2007, it is clear lots of the right things are happening to move Dell from the Swamp backinto the Rapids. There is improvement happening, and The Phoenix Principle looks to be in early implementation stages. If Michael Dell and his team stick with it, this could be a big winner for your portfolio!
by Adam Hartung | Oct 19, 2009 | Defend & Extend, Disruptions, General, Innovation, Leadership, Web/Tech
The McKinsey Quarterly just published a new report "Where Innovation Creates Value." I think the consultant got paid by the word for this really long article, which boils down to a simple argument. It doesn't matter what kind of innovations are developed, or where innovations are created. What does matter is who implements them. The implementers gain the vast majority of the value from innovation. More than the patent holders or the countries where inventors live.
Historically America has been a hotbed for trying new things. America was advantaged over Europe because it didn't have the regulations and other innovation testing roadblocks. America was advantaged over Africa and much of South America because it didn't have a legacy of dictator governments and corruption that kept things from moving forward – blocking innovation. America was advantaged over China and India because it's per capita GDP has been very high, meaning there were ample resources to invest in trying new innovations. Thus, America has historically been an innovation testing grounds that has paid enormous dividends by keeping its companies on the leading edge of competitiveness.
But there is cause to worry. Recently I blogged about how companies were blocking employee access to social networking sites ("Letting the Bogeyman Hurt Your Business"). Concerned about employee efficiency, managers were blocking these sites so employees kept their fingers on the keyboards performing designated, approved tasks. Sort of Taylor-ish sounding, don't you think? In today's economy the value of smart employees is pretty high, but how do you know if they are smart if you block their access to tools. Is success more about how fast they do the tasks, or if they can figure out a better way that is inherently cheaper? Do you want employees doing the same thing better, faster, cheaper – or do you want them developing new solutions that are more competitive?
Consider the smart phone market, led today by the iPhone. And the new publishing media like Kindle and Sony's eReader. Soon we'll have plenty more of these products available that will increase knowledge access and speed of information flow making those who are connected even more competitive. According to SeekingAlpha.com, "Verizon's Droid is the Real Deal." New phones from Motorola with Google's Android operating system (get that, an operating system for your phone. Does that phrase not surprise at least a few people – some of whom might remember when phones had no intelligence – not even a dial tone?) will have an explosion of new applications and uses raising productivity and results.
Yet, how many companies are providing these devices and data access for employees? Most of the early adopters I see are paying for this out of their own pocket. The obvious concern is that American companies will remain focused on efficiency in this downturn. They will block access to parts of the web, and avoid technology investments for employees and customers. Meanwhile competitors in countries growing at 6-8%/year like China, India and Brazil will make these investments. If so, they become the early innovation implementers. And if that happens….. well that could be a very serious game changer. We can't assume the American economy will recharge if we don't apply innovations, and we can't assume competitiveness if companies from other places increase their adoption rates to exceed America's.
I don't see a lot of Disruption or White Space in America right now. Even top economists are bemoaning how businesses keep cutting employees and costs while the overall GDP does better. Business leaders seem stuck trying to Defend & Extend past business practices which aren't producing better results – and won't. They remain focused on cutting costs rather than innovating new solutions. But what we know is that the greatest return comes from a willingness to Disrupt and open up White Space to implement new solutions – in the process of making your own business a market disruptor that can grow and achieve superior rates of return.
by Adam Hartung | Oct 16, 2009 | Current Affairs, Defend & Extend, General, Innovation, Leadership, Openness
"Everyone talks about the need for innovation these days, but they especially talk about why businesses are so bad at it." That's the opening line from my newest column "The Myth of Efficiency" at Forbes.com. Today businesses seem to be struggling with innovation – preferring instead to cut costs and pursue efficiency. But we now know that the foundation for cost cutting as a route to better returns is based on faulty – in fact mythical – claims by Frederick Taylor and his devotees of "scientific management." Read this article if you ever wondered about the value of cost cutting compared to innovation – and learn why so many people "default" to actions that never make things better.
My column cites a great New Yorker article entitled "Not So Fast" on the faulty foundations upon which scientific management – and subsequently much of business education – is based. For an even deeper read into the mythical bases of Taylor and his crew pick up a copy of The Management Myth: Why the Experts Keep Getting it Wrong by Matthew Stewart (2009 W.W. Norton) available via the link at Amazon.com.
This is timely, because "Defining talent needs, managing costs central to workforce planning in 2010" is the headline from Mercer's own website about it's recent survey showing that the #1 factor in planning for human capital next year is managing cost!! How are we to grow out of this recession when people are cost obsessed? Especially now that we know cost cutting has no foundation as a basis for improving or sustaining returns? Certainly we now have good reason to challenge conventional wisdom as espoused in books like Cut Costs + Grow Stronger recently published by HBS Press.
If you are confronted with picking between cost cutting or innovating read this article, because your "gut" just might have been developed on faulty assumptions – leading you to make the wrong decision.
by Adam Hartung | Oct 14, 2009 | Current Affairs, In the Rapids, Innovation, Leadership, Openness, Web/Tech
"Samsung Seeks Some iPhone Magic" is the Wall Street Journal headline. Hand it to the Korean company to demonstrate how to make money out of market shifts. Not only is Samsung looking to add more capability to its mobile handsets – the obvious Defend & Extend action – but the company is developing applications for all its products to get into new, emerging markets. It is now adding internet capability into almost all the devices it designs, makes and sells.
Recognizing the market Challenge, in 2008 Samsung set up a White Space project with permission to explore just how it could coordinate software and content for cell phones. But quickly the team recognized this charter was not sufficient permission. They went back and asked to extend their opportunity development to everything Samsung makes (or considers making.) By making sure it had the right permission to really think broadly about the opportunities, this White Space team made sure it could really accomplish the greatest gains.
Kudos to the company for resourcing this effectively. Samsung did not reach into the different business lines and ask each one to devote "some" resource onto this project. That approach usually ends up getting almost no attention until year end when people remember this was on the checklist for bonuses. Instead Samsung dedicated resources – money and people. And Samsung made this into a business unit which is intended to make a profit!! This isn't just an experiment – a lab – it's White Space that is intended to figure out new opportunities, as well as the business model which would make these new innovations profitable.
Samsung is a company historically known for manufacturing skills, supply chain management and lower cost. Yet, it is showing that regardless of size (Samsung is one of the largest companies in Korea and one of the world's largest electronics companies) or history any company can establish White Space to connect with market shifts and introduce innovation.
Do you have White Space in your company? Or are you relying on your old Success Formula to return you to previous growth rates and profitability? What are you doing to take advantage of market shifts – like what's happening with iPhones, Kindles, Tablet devices and other innovations? You might want to take a tip from Samsung and set up some White Space with permission and resources to investigate how you could participate in market shifts to make more money!
by Adam Hartung | Oct 11, 2009 | Current Affairs, General, Innovation, Leadership
Saturday I had the good fortune to attend a presentation by President Bill Clinton. He spoke at the Indian Institute of Technology alumni conference – an event I attended as a speaker myself.
President Clinton must have used the word profit 100 times. In today's divided political climate with words like "socialism" bandied about you might be surprised. But his talk focused on the importance of making a profit as businesses meet customer needs.
The 42nd President discussed how new fish farms in Haiti were important to improving the devastated economy – because they allowed everyone involved to make a profit. He discussed how forests devastated for charcoal were being replaced by a new business that converted used paper and sawdust into a charcoal replacement for 75% less cost to the user — and yet created over 100 good paying jobs and produced a profit. His point was simple, you can't fix a down-and-out country's economy unless there is a profit in it. And he was seeing, through his foundations, multiple profit opportunities.
Across the board, the President reminded listeners that they can maintain the profit motive and solve big problems if they think about the business differently. American competitiveness is seriously challenged by rising health care costs. Yet Pennsylvania has shown it can contain costs by reporting cost and outcome statistics – a practice not shared in the other 49 states. Switzerland has a private health care system, and it incorporates wellness programs, but it spends only 11% of GDP on health care. The U.S. spends 17%. The U.S. needs to rethink how health care is sold and administered first – and if it does that private enterprise can continue to lead. But it takes a shift on the part of the health care insurers and providers.
After many years as the country with the highest percentage of college graduates in the 25 to 34 age group, in the last 8 years America has fallen to 10th. America has priced college out of the range of too many students, while other countries have modifed their approach and improved completion rates. To improve competitiveness requires an educated society. It takes different thinking if America is to regain strength as an educated country. Now that American competitiveness is being challenged (the theme of this meeting) the former President challenged whether that competitiveness can be regained if we don't think differently about how we provide education.
Of all his comments, I most enjoyed his discussion about how much . Americans love zero sum games. He and then pointed out that almost all games (football, soccer, etc.) have been modified to allow for overtimes so somebody wins. He brought up an Arkansas football game that went to 7 overtimes! Americans hate non-zero sum situations, where multiple people can win, or where it's possible to win by doing things differently. But he pointed out that in life, almost nothing is a zero sum game. That is limited to the sports field. Even in battles, it's often not clear who the winner is – for both sides will declare victory. He commented "all economic systems carry the seeds of their own destruction." And when it comes to succeeding in business you don't need to create a zero sum game. You can succeed by doing things differently.
Far too many business gurus discuss business like it is zero sum. For example, Jim Collins' BHAG and his love of fighting for a "hedgehog" concept is all about viewing business as a zero-sum game that you have to win. But today most growing, high return businesses intentionally avoid zero-sum games. Those lead to price wars and declining returns. Instead they (like Google) employ innovation, like the folks making charcoal from recycled paper, to develop new solutions that are superior and earn higher returns.
