by Adam Hartung | Jan 5, 2010 | Current Affairs, Defend & Extend, eBooks, In the Rapids, In the Swamp, Innovation, Leadership, Web/Tech
Happy New Year!
As we start 2010 the plan, according to The Financial Times, "WalMart aims to cut supply chain costs." Imagine that. Cost cutting has been the biggest Success Formula component for WalMart for its entire career. And now, the company that is already the low cost retailer – and famous for beating its suppliers down on price to almost no profitability – is planning to focus on purchasing for the next 5 years in order to hopefully take another 5% out of purchased product cost. How'd you like to hear that if Wal-Mart is one of your big customers? What do you suppose the discussion will be like when you go to Target or KMart (match WalMart pricing?)
Will this make WalMart more admired, or more successful? This is the epitome of "more of the same." Even though WalMart is huge, it has done nothing for shareholders for years. And employees have been filing lawsuits due to unpaid overtime. And some markets have no WalMart stores because the company refuses to allow any employees to be unionized. This announcement will not make WalMart a more valuable company, because it simply is an attempt to Defend the Success Formula.
On the other hand according to Newsweek, in "The Customer is Always Right," Amazon intends to keep moving harder into new products and markets in 2010. Amazon has added enormous value to its shareholders, including gains in 2009, as it has moved from bookselling to general merchandise retailing to link retailing to consumer electronics with the Kindle and revolutionizing publishing with the Kindle store. Amazon isn't trying to do more of the same, it's using innovation to drive growth.
And the CEO, Jeff Bezos freely admits that his success today is due to scenario development and plans laid 4 years ago – as Amazon keeps its planning focused on the future. With the advent of many new products coming out in 2010 – including the Apple Tablet – Amazon will have to keep up its focus on new products and markets to maintain growth. Good thing the company is headed that direction.
So which company would you rather work for? Invest in? Supply?
Which will you emulate?
PS – "Create Marketplace Disruption: How To Stay Ahead of the Competition" was selected last week to be on the list of "Top 25 Books to read in 2010" by PCWorld and InfoWorld. Don't miss getting your copy soon if you haven't yet read the book.
by Adam Hartung | Dec 26, 2009 | Current Affairs, Defend & Extend, In the Swamp, Leadership, Web/Tech
The business media get really excited about acquisitions. And it is clear that many executives still think acquisitions are a good way to grow – especially when wanting to enter new markets. Even though all the academic research says that acquirers inevitably overpay, and that almost all acquisitions don't really have "synergy." In fact, most acquisitions significantly reduce shareholder value. While this doesn't keep execs from going forward, if we understand why acquisitions go badly better performance can be obtained.
As reported at Financial Times in "The Rise and Fall of MySpace" the problem with acquisitions is very tied to the "owner and acquired" thinking that emerges. NewsCorp wanted to get into social media, so it moved early. And the investment looked brilliant when a quick deal with Google appeared to make payback a year from new ad revenues. MySpace was an early social media winner, and it looked to be potentially transformative for NewsCorp.
Until NewsCorp decided that things were too undisciplined at MySpace. NewsCorp thought, like almost all acquirers, that it was more "disciplined" and "structured" and could apply its "better management" to the growth at MySpace. Of course, all of this is code for pushing the NewsCorp Success Formula onto MySpace. What was acquired as White Space was quickly turned into another NewsCorp division – with the decision-making processes and overhead costs that NewsCorp had. Quickly Behavioral and Structural Lock-ins that were prevalent in NewsCorp were applied to MySpace in management's effort to "improve" the acquisition.
But applying the acquirer's Success Formula to an acquisition soon removes it from White Space. Even though NewsCorp felt sure that it's higher caliber IT staff, big budgets and strong management team would "help" MySpace, it was robbing MySpace of its tight link to a rapidly shifting/evolving marketplace and replacing that with "NewsCorp think." Quickly, competitors started to take advantage of market shifts. Facebook took advantage of the now weighted-down MySpace to rapidly bring on more users, while the additional ads on MySpace simply frustrated formerly happy customers more than willing to trade platforms.
Scott Anthony on the Harvard Business Review blog "MySpace's Disruption, Disrupted" points out how in just 4years MySpace went from market leader to almost irrelevant. MySpace lost its position as market disruptor as it increasingly conformed to demands of NewsCorp. As the NewsCorp Success Formula overwhelmed MySpace it stopped being a market sensing project that could lead NewsCorp forward, and instead became a now money-losing division of a newspaper and TV company. NewsCorp started trying to make MySpace into a traditional media company – rather than MySpace turning NewsCorp into the next Amazon, Apple or Google.
If a company wants to acquire a company for new market entry, that acquisition has to be kept in White Space. It has to be given permission to remain outside the acquirer's Lock-ins and separate from the Success Formula. It has to be allowed to use its resources to develop a new Success Formula toward which the acquirer with migrate – not "brought into the fold."
Unfortunately, acquirers tend to think like previous century conquerers. In Gengis Khan fashion they almost always end up moving to change the acquired. Often in the name of "discipline" or "good management practices." And that's too bad, because the result is a loss of shareholder value as the investment premium is dissipated when the acquisition fails to reach objectives. Acquisitions can be good, but they have to be kept in White Space — like we see Google doing with Facebook!
by Adam Hartung | Dec 22, 2009 | Current Affairs, Defend & Extend, General, In the Swamp, Innovation, Leadership, Web/Tech
In "The Year in Innovation" BusinessWeek has offered its review of innovation in 2009. And the report is grim. Most companies cut innovation spending – including R&D. Even the pharmaceutical industry, historically tied to long-term investment cycles, cut 69,000 jobs in 2009, up 60% from 2008. Meanwhile, P&G's dust cloth Swiffer was pronounced a major innovation – indicating both how few innovations made it to market in 2009 – and the degree to which BusinessWeek must depend upon P&G for advertising dollars given this selection (I mean really – BusinessWeek ignores Google Wave and Android entirely in the article but feature a Swiffer dust cloth!)
According to BusinessWeek, the big advances in innovation in 2009 apparently were "open innovation" and "trickle up innovation." The first is asking vendors and others outside the company to contribute to innovation. Adoption of open innovation has spurred one thing – less spending on innovation as companies cut budgets, using "open innovation initiatives" as an explanation for how they intend to maintain themselves while spending less. Open innovation has not spurred improved innovation implementation, just justified spending less with no real plans to achieve growth. With open innovation, of course, failures no longer belong to the company because the "open environment" didn't produce anything – hence innovation simply wasn't possible!
Trickle up innovation is asking people in poor countries, like India, how they do things. Then seeing if you can steal an idea or two. There's nothing wrong with turning over every rock when trying to innovate, but using analysis of third world countries, where costs happen to be very low and new innovations few, to drive your innovation program smacks of looking for ways to put a fig leaf on a naked innovation program. Expectations are low, so explanations are more prevalent than results. C.K. Prahalad wrote an entire book on this approach – which is popular with big company leaders who have abandoned innovation and think it clever to steal ideas from the poor. But it's not how Apple became #2 in smart phonesor created iTunes or how Facebook has taken over social networking.
source: Silicon Alley Insider (with Google picking up 2 new carriers in late 2009, this chart will be very different by summer 2010)
None of the trends identified by BusinessWeek reflect behavior of the real innovation winners. Rather, they reflect the big companies who are mired in Defend & Extend management, and making excuses for their terrible performance since 2007. Not once does the article talk about Google, Apple, Cisco – or leading small company innovators like Tasty Catering in Chicago. There are companies winning at innovation, but they are certainly not following the trends (which have produced marginal results – at best) identified in this article.
Because planning processes look at last year when setting goals for next year, lots of companies now plan even lower innovation spending for 2010. And that's how an economy goes into a tailspin. Everyone from bankers to manufacturers to retailers are saying 2009 was weak, and they don't see much improvement for 2010. That can become a self-fulfilling prophecy. 24/7 Wall Street reported in "Immelt Speaks at West Point: Future Leadership Path" that the CEO of GE, Jeff Immelt, is doing less innovation spending and relying more on government/business partnership. And of course GE is realing from over-reliance on financial services and under-investment in new products during his leadership. While Immelt is patching up holes at GE, the company is sinking without new products manning the oars.
Companies don't just need to spend on R&D. Studies of R&D have shown that the bulk of spending is Defend & Extend. Trying to get more out of the technologies embedded in the Success Formula. P&G and GE can spend easily enough. But when it's on short-term "quick hits" they get declining marginal returns and weaker competitiveness.
Companies in 2010 must adopt new approaches. They have to quit planning from the past, and plan for the future. More scenario development and understanding how to change competitive position. And they have to quit being so conforming and promote Disruption. Disruptions are needed to open White Space so new Success Formulas can be developed. In the 2000/01 recession Apple looked to the future, Disrupted its total dedication to the Macintosh and unleashed White Space allowing the company to become a leader in digital music as well as the front runner in smart phones within a decade.
Your business can be a leader; and soon. If you start thinking differently about what you must do, quit putting all your energy into Defend & Extend behavior and invest in White Space, innovation will flourish – and with it your revenues and profits.
by Adam Hartung | Dec 21, 2009 | Current Affairs, Defend & Extend, General, In the Swamp, Leadership, Lock-in
Great blog today at MidasNation.com. Rob Slee is a book author and blogger focused on privately held companies. And today he took on "Old White Men" – or OWM – in his blog "Why 60 Year Old White Men are Killing America." Telling the story about how GM management drove the profits out of suppliers while bankrupting the company, he contrasted GM's behavior with the Japanese run firms in America who partnered with suppliers to make a better product customers more highly valued. We know who ended up with the profitable approach.
Similar to Defend & Extend management, Mr. Slee talks about "past as predicate" as he discusses older managers who keep doing what they always did, even though results keep worsening. And how "command and control" hierarchies sucked the value out of the traditional Big 3 automakers. His views about how OWM leaders expect a "return to the norm," creating a recipe for disaster in an ever changing world increasingly producing black swans. His stories are an action call for all leaders to change their behavior.
According to Marketwatch.com today, "GM Hires Microsoft Exec Liddell as CFO." Is this good, or just more OWM? According to BusinessWeek, Mr. Liddell is 50 – which makes him 10 years shy of the minimum 60 Mr. Slee denotes for OWM. More disconcerting was the final paragraph of his bio at Microsoft.com which claims Mr. Liddell "has completed a number of triathlons, including an Ironman and also enjoys rugby, yoga, golf and tennis." Pretty seriously testosterone laden language – and appealing primarily to OWM types. Like his new boss, the retired Southwestern Bell Chairman, now running GM.
Triathlon and rugby often have a way of making people Lock-in on the values of persistence, hard work and sacrifice. Jim Collins is a rather famous triathlete who loves Lock-in. Creativity and innovation are rarely the stuff of winners in those sports. Of course, competing in a global marketplace with fast changing competitors who defy all rules is a far cry from any sport. Sport analogies are usually more harmful than good in today's global marketplace, where adaptability is worth more than repetitive behavior seeking scale.
Mr. Liddell's last boss, Steve Ballmer, is one of the 10 most Locked-in CEOs in corporate America. Not a great mentoring for open-mindedness. And during Mr. Liddell's 4.5 year career at Microsoft the company's big launches were the me-too, and underwhelmingly exciting, Vista and System 7 products. Mr. Liddell didn't seem to push the innovation engine much in Seattle.
From appearances it would seem likely he'll focus on cost reductions pretty hard — something unlikely to make GM a success. GM doesn't need to launch it's own version of Vista. GM doesn't need a tough guy to whack the chicken coop hoping to get more eggs – instead just making the hens all upset. GM needs significant Disruption – attacks on its Success Formula – with a revitalization of new product development and technology application. GM needs an entirely new Success Formula, not just a better Defended and Extended one.
Keep your eyes on Mr. Liddell. Perhaps he'll surprise us. Look for Disruptions and White Space. It doesn't seem to be Mr. Liddell's nature. But watch. Until then, there's no sign yet that GM is taking the right actions to make itself a vital competitor against Hyundai, Kia, Tata Motors, Honda and Toyota.
by Adam Hartung | Dec 15, 2009 | General, In the Swamp, Leadership, Web/Tech
In a tough year like 2009, many business leaders want to jump in a foxhole and focus on survival. The goal becomes maintain, and then try to grow again sometime in the future – when the economy gets better. They cut marketing and sales costs, stop new product development/introduction, and literally plan to do nothing new until "the business" improves. Unfortunately, that sets a business up for failure.
In today's fast moving competitive world, it's impossible to stand still. Your business either grows, or it falls behind. Think about Yahoo!. The company hoped to maintain it's search business at it entered a "turnaround." Unfortunately, the competition isn't willing to give Yahoo! any time at all. Microsoft grabs off 10% of the market with its Bing introduction, and Google just keeps taking share. Take a look at Yahoo's performance:
source: Silicon Alley Insider
Or consider AOL. AOL was the undoubted leader in bringing people to the internet. But over the last decade AOL has tried to maintain its customers without offering any new products. It has saved investment dollars, but lost its relevancy. Now Facebook has more unique visitors than AOL – a clear sign AOL (which recently went public) is well on the way to disappearing:
source: Silicon Alley Insider
Blockbuster was the clear market leader for video/movie rentals. The company even had a college football bowl game named after it! The CEO bought a baseball team, and made it into a World Series winner! Blockbuster was THE store for obtaining entertainment for many years. But the company saved its dimes, tried to defend its market position, and didn't develop new solutions. Now it is being overwhelmed by competitor Netflix:
source: Silicon Alley Insider
Too many business leaders believe in "The Myth of the Flats" (from Create Marketplace Disruption.) They think that you can build a business, and then ride a market position. When business is bad they depend upon living on past brand position. They think they can wait for a better market to come along before they use White Space to introduce new solutions that meet emerging needs. And the competitors, who don't slow down, use market downturns to introduce new solutions and overtake the former market leader.
Smart companies don't rest on their laurels. They don't wait for a better market. They keep using White Space to develop new solutions. And even in a bad overall economy, like 2009, they sell more and make more profits. Just look at Amazon, achieving record market valuation in 2009:
source: Silicon Alley Insider
If you want 2010 to be a great year, it starts with recognizing that you can't stand still. You can't wait for "a better market." You have to create that better market by pushing forward with White Space to introduce new solutions that meet emerging market needs.
by Adam Hartung | Dec 11, 2009 | Current Affairs, Defend & Extend, Food and Drink, In the Rapids, In the Swamp, Leadership, Television
If you can't sell products, I guess you sell the business to generate revenue. That seems to be the approach employed by Sara Lee's CEO – who has been destroying shareholder value, jobs, vendor profits and customer expectations for several years. Crain's Chicago Business reports "Sara Lee to sell air care business for $469M" to Proctor & Gamble. This is after accepting a binding offer from Unilever to purchase Sara Lee's European body care and detergent businesses. These sales continue Ms. Barnes long string of asset sales, making Sara Lee smaller and smaller. Stuck in the Swamp, Ms. Barnes is trying to avoid the Whirlpool by selling assets – but what will she do when the assets are gone? For how long will investors, and the Board, accept her claim that "these sales make Sara Lee more focused on its core business" when the business keeps shrinking? The corporate share price has declined from $30/share to about $12 (chart here) And shareholders have received none of the money from these sales. Eventually there will be no more Sara Lee.
Look at Motorola, a darling in the early part of this decade – the company CEO, Ed Zander, was named CEO of the year by Marketwatch as he launched RAZR and slashed prices to drive unit volume:
Chart supplied by Silicon Alley Insider
Motorola lost it's growth in mobile handsets, and now is practically irrelevant. Motorola has less than 5% share, about like Apple, but the company is going south – not north. When growth escapes your business it doesn't take long before the value is gone. Since losing it's growth Motorola share values have dropped from over $30 to around $8 (chart here).
And so now we need to worry about GE, while being excited about Comcast. GE got into trouble under new Chairman & CEO Jeffrey Immelt because he kept investing in the finance unit as it went further out the risk curve extending its business. Now that business has crashed, and to raise cash he is divesting assets (not unlike Brenda Barnes at Sara Lee). Mr. Immelt is selling a high growth business, with rising margins, in order to save a terrible business – his finance unit. This is bad for GE's growth prospects and future value (a company I've longed supported – but turning decidedly more negative given this recent action):
Chart supplied by Silicon Alley Insider
Meanwhile, as the acquirer Comcast is making one heck of a deal. It is buying NBC/Universal which is growing at 16.5% compounded rate with rising margins. That is something which suppliers of programming, employees, customers and investors should really enjoy.
Revenue growth is a really big deal. You can't have profit growth without revenue growth. When a CEO starts selling businesses to raise cash, be very concerned. Instead they should use scenario planning, competitive analysis, disruptions and White Space to grow the business. And those same activities prepare an organization to make an acquisition when a good opportunity comes along.
(Note: The President of Comcast, Steven Burke, endorsed Create Marketplace Disruption and that endorsement appears on the jacket cover.)
by Adam Hartung | Dec 6, 2009 | Defend & Extend, In the Swamp, Innovation, Leadership, Web/Tech
My last blog highlighted a new book describing the need for White Space if a business is to implement innovation and grow. But lots of people still have questions about what White Space is, and how to get it working.
Here's the chart from Create Marketplace Disruption (FT Press, available on Amazon.com) that shows how White Space is positioned to move beyond Defend & Extend Management.:
Most companies spend the vast bulk of their energy trying to Defend sales of current products to current customers. After expending 80% of the planning time, and company resource, in that cell, they then will try to see "can we sell other products to our current customers?" Or, "can we sell current products to new customers, such as by moving into a new geography?" As a result, they do almost nothing in White Space.
"Adjacent market" analysis is Extend effort. "Dartboard" approaches which look to grow by moving in concentric circles away from "core" are Extend efforts. These approaches are based on efficiency notions, that the company will get the biggest "bang" by doing very little differently and hoping to grab a big "win" with a small effort added to the Defend behavior. They hope to grow a lot by largely defending their "base" and adding a few, low resource commitment products or customers to the mix.
When you adjust for resources, the planning effort looks like this:
If you want to really grow your business, you have to change the planning effort first. Instead of putting all the resources into multiple rounds of effort about the business you know best, you need to simply do less in this area of planning. Moving from 90% accuracy on the first round to 95% after months of effort is pretty low yield. Instead, business should dramatically reduce the effort on known customers and products – and invest considerably more time developing scenarios about future markets leading them to White Space.
Extend markets almost always are disappointing. While the effort looks simple, that's only a view of "the grass looks greener across the fence." Reality is that competitors exist in those markets, and when the company tries to extend into them with limited resources they run headlong into very stiff competition. The company retreats to Defend the "core" and the Extend opportunities produce very low sales and miss profit projections dramatically. Usually, the leaders start complaining about having taken the venture, feel burned by trying to innovate, and reinforce their desire to focus on maintaining the "base" business.
To get over this, businesses have to start by realizing that entering new businesses takes more planning than the base business – not less. You have to identify the critical Permission needed to allow the White Space team to operate outside the Lock-ins. Be clear about the new approach, and the goals. And identify the resources needed – as well as the source of those resources (people and money.) This doesn't happen automatically, because it isn't part of the existing planning process. It takes a lot of effort to develop market scenarios and plans – then follow-up on the experiences to understand what works and keep evolving toward achieving goals. And that is where the planning effort really needs to focus.
White Space is critical to success. All businesses MUST evolve to new products and new customers. The idea that this can happen with little effort is misguided. Instead of planning the "base" business, success starts by putting more resources into market scenario development, developing insight to know what permissions are needed to succeed and then establishing funding so the White Space project can succeed.
Think about Apple. As long as Apple focused planning on the Macintosh the company moved further toward a small provider to niche PC markets. Only by using market scenarios to understand that growth opportunities were much better in entirely new markets were they able to change resource allocation and move aggressively into the business of iTouch, iPod, iTunes and eventually iPhones. Apple is outperforming almost everyone in this recession – and a lot of that success is due to using scenario planning to identify new market opportunities, rather than spending all the planning resources understanding previously served, traditional markets.
by Adam Hartung | Dec 3, 2009 | Books, Current Affairs, In the Swamp, Innovation, Leadership, Lock-in
Seizing the White Space is a new book being launched by HBS Press (and being pre-sold on Amazon.com.) I'm very glad to read about others who are taking up the message of Create Marketplace Disruption – which first published the critical role of White Space in successfully managing any business (published in 2008 by Financial Times Press and also available on Amazon.com).
The author, Mark Johnson, is Chairman of Innosight, a consulting firm he co-founded with Clayton Christenson who's on the Harvard Business School faculty (and author of The Innovator's Dilemma also on Amazon.com). Innosight primarily focuses on consulting businesses to identify Disruptive innovations. Now the Chairman is starting to realize that implementation is as important as identifying the implementation – and he's linked it to WHITE SPACE. Great!!!
You can read his insights to how IBM and some of his other large clients have used White Space in an Harvard Business Publishinng Blog "Is Your Company Brave Enough For Business Model Innovation?" You'll quickly see that he applies The Disruptive Opportunity Matrix from chapter 10 of Create Marketplace Disruption – which is how companies have been shown to reach new businesses using White Space. It's so gratifying to read somebody else who's applied your research and come to the same conclusions!
I'm looking forward to the book. Readers please let me know what you think of the author's blog post – and the book when it comes out.
Post-script to yesterday's blog about the CEO of GM:
"Cat's Owens, Deere's Lane on short list of CEO candidates" is the AP article appearing on Crain's Chicago Business about the search for a new leader at GM. As I predicted yesterday, recruiters seem to think the ideal candidate for the job needs to be from another big industrial company. And preferably, an auto company "to understand the industry complexities." Not only is there no incentive for these highly paid executives to take a similar job, at a lot less pay, in a government funded organization — but investors shouldn't want it! GM needs change. And more change than trying to make GM into John Deere, or CAT.
John Deere has had weak results for decades. The company has been wedged between other equipment manufacturers so badly that most of its profits now come from yard tractors homeowner's buy from Home Depot. Just because the company is big, and one of the few left making equipment for which there is declining demand, is no reason to want the CEO at a turnaround like GM. Likewise, CAT is under intense competition from Komatsu, Volvo and other manufacturers who are squeezing it from all sides – jeapardizing revenues and profits. Only acquistions have kept CAT growing the last 10 years, and margins have plummeted. That leadership is not what's needed at GM either.
When will somebody speak up for the investors and start a search in the right direction? GM needs leadership that thinks entirely differently. Unwilling to accept old-fashioned industrial notions about how to lead a company. Like I recommended, go somewhere entirely different. Maybe recruit somebody from Dell or HP or Cisco that understands rapid design cycles. Or someone from Wal-Mart or Target that understands how to sell things – cheaply. Or someone from Oracle or Mozilla or Google that understands the value of software – and that the product is a lot more than the iron – so you can capture the right value. It's so disappointing to read how the "recruiting industry" is just as Locked-in as GM.
If one of you readers knows somebody on the GM Board, maybe you should send them this blog (and yesterday's) to see if they can consider searching in the right place for new leadership!
Don't miss the 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 | Dec 2, 2009 | Current Affairs, Defend & Extend, In the Swamp, In the Whirlpool, Leadership
"Henderson Never Fit In At GM Helm" is the Detroit Free Press headline. Imagine that – the CEO of GM has been asked to leave. Industry sales are down about 24%, and GM is down 32%. Meanwhile, Mr. Henderson had proposed selling 4 divisions (Saab, Opel, Hummer and Saturn) – which were the most interesting divisions in the company – and none of those deals have closed. In fact, 3 have fallen apart completely. Only the Hummer sale to a Chinese firm is potentially going to happen. In fact, it's hard to find anything good that's happened at GM since Mr. Henderson took over. Including closing Pontiac.
When the government invested in GM this year the existing Chairman/CEO, Rick Waggoner, was forced to resign. Imagine that, after puting several bilion in a company the investor's transition team replaced the CEO who got the company into bankruptcy, almost out of cash, with no plan for recovery. Also, the Board, which had allowed GM to get into such a mess without even raising tough questions, was replaced. All seems remarkably sensible given the sorry state of the company.
The goverment led transition team, which rocketed GM through bankruptcy, cleaned the ceiling, but then selected Mr. Waggoner's hand-picked successor (Mr. Henderson) to replace him. The claim was they'd need 6 months to search for somebody new and didn't want to take the time. And they put in a lifetime monopolist, Mr. Whiteacre of AT&T, as Chairman. And a 40+ year industry veteran was made head of marketing (Mr. Lutz.) And a 40+ year company employee was kept as CFO. And we're supposed to be surprised that things aren't going well?
The Chairman and replacement CEO says of the company says "Whiteacre: GM On the Right Path," also in the Detroit Free Press. But do you believe him? What does he know about competing successfully against intense foreign led competitors who move fast? The AT&T that trained him early in his career failed horribly, never succeeding in any market outside the U.S. and getting cleaned by offshore competitors in hardware and mobile telephony. And as head of Southwestern Bell, all he did was rebuild the old "Bell system" of land-line companies – without effectively taking a leading position in any new telephony business. Or any other business. Broadband, mobile phones, digital television – can you think of any market where today's AT&T is a technology, product development, innovation or other market leader? He may have bought up a bunch of the old spun out businesses, but those are on their last legs as people give up land lines and transition to a different sort of connected future.
What's surprising is that GM isn't doing worse. But it's unlikely Mr. Whiteacre, or Mr. Henderson's replacement, will do much better. Several candidates are from inside GM – all with the same Lock-ins that allowed Messrs. Waggoner, Henderson and Lutz to perform so abysmally – despite incredible pay packages for many years. In "Selling GM's CEO Job to be Tough Task" (Detroit Free Press) headhunters claim that the industry is so complex they'll have a hard time finding someone talented who will work for the pay. Balderdash. That's only true because they are so Locked-in to traditional thinking about who should lead GM that they keep trying to recycle already overpaid CEOs who have done little for shareholders. That's not what's needed at GM.
Give us a break. Who would want an industry veteran in the job at all? And why would a recruiter hunt for somebody with a lot of industrial-era Lock-ins. GM's investors (that's the citizens of the USA and Canada,) employees and vendors need somebody who's ready to move beyond the old industry and company Success Formulas and do something very different. Willing to develop entirely new scenarios of the future which alter the competitive playing field and then Disrupt the organization in order to start doing new things. Before Tata Motors and China's Chery auto join the other companies ready to put GM into the grave.
It's amazing how "inside the box" the people who are leading GM, and advising the company, remain. Why not try to recruit somebody from Tesla to take over? The long-delayed electric Chevy Volt might well get to market faster – and in a more desirable form – if that were to happen. Or how about an heir apparent at fast growing Cisco Systems? Those people know how to pay attention to the market and move quickly to give customers what they need – profitably.
Turning around GM requires leadership that will change the Success Formula. Not try to Defend it, or Extend it with slowly evolving variations and minimal change. The whole house needs to be cleaned. The investor representatives who led the transition pulled up short of finishing their job. Only by bringing in new managers who are willing to see a very different future, unbounded by the GM legacy, can GM's competitive position be changed – and if GM tries to keep competing the way it has Toyota, Honda, Hyundai, Kia, Tata Motors, et. all will eat GM's dinner. And only by Disrupting the old Lock-ins, using White Space teams to develop new solutions, can GM regain viability.
by Adam Hartung | Nov 13, 2009 | Current Affairs, In the Swamp, Leadership, Lock-in
"Rupert Murdoch to remove News Corp's content from Google in months" is the London Telegraph headline. Claiming that Google gets a "free ride" on the newspaper content, the News Corp. Chairman claims he can block Google from referring his content – and that the conclusion will be bad for Google because it will hurt the search engine's ability to add value. He also expects that his newspaper and its website will do fine without Google, including doing fine without any Google-placed ads on the newspapers' web sites.
Really.
Ever heard the phrase "cutting off your nose to spite your face?" It means that you get so mad at something, or someone, that you take a stupid action just trying to get even. Given the gruffness of Mr. Murdoch, I mashed that phrase up into my own explanation of his threat – that he's trying to bite off his own nose.
There is no changing the shift to on-line news readership. People will never again return to reading print-format newspapers. Print demand will continue to decline. Simultaneously, nobody will revert to searching for news on their own – such as by browsing around any particular web site. Users now know they can find news with the aid of powerful search engines, like Google, that deliver them directly to the page that tells them what they want to know. And advertisers now know that they must use services like Google to deliver ads to the pages that present their most likely targets. Advertisers are not willing to accept "views" alone, now knowing that ads can be targeted to specific readers associated with specific page content. Those shifts have happened, and are now trends moving forward. No hoping for "the good old days" will change these shifts.
Google doesn't need the News Corp. newspaper output to succeed as a search engine nor News Corp's pages for its ad placement business. There is so much access to news, from press releases (source news) to bloggers to other newspapers that any individual news source is relatively irrelevant. And Google can place all of its advertisers' ads – whether News Corp. makes its pages available to Google or not.
Simply, News Corp. needs Google. Without Google page referrals, visitors will drop. Lower visitors means fewer ad views means lower revenue. No news organization can stand lower revenues. Simultaneously, News Corp. needs as many advertisers competing for its ad space as possible. To turn down any ad placement service will only hurt revenues further.
Mr. Murdoch said in the article "I don’t believe the media industry can continue to exist in this way." He's right. Media companies are going through a major market shift. But trying to walk away from the #1 search engine and #1 ad placement company is —– foolish. And Mr. Murdoch knows this – because News Corp. owns MySpace and other internet properties. Google may not need News Corp., but News Corp. definitely needs Google
