by Adam Hartung | Nov 5, 2009 | Current Affairs, Disruptions, In the Rapids, Innovation, Leadership, Music, Web/Tech
$150billion. That's a lot of money. And that's how much shareholder value has increased at Apple since Steve Jobs returned as CEO. Can you think of any other CEO that has aided shareholder wealth so much? Do any of the cost cutting CEOs in manufacturing companies, financial services firms, or media companies see their share prices rising like Apple's?
Fortune has declared this "The Decade of Steve" in its latest publication at Money.CNN.com. Such over-the-top statements are by nature intended to sell magazines (or draw page hits). But the writer makes the valid point that very few leaders impact their industry like Apple has the computer industry, under Jobs leadership (but not under other leaders.) Yet, under his leadership Apple has also had a dramatic impact on the restructuring of two other industries – music and mobile phones/computing. And a company Mr. Jobs founded, Pixar, had a major impact on restructuring the movie business (Pixar was sold to Disney, and has played a significant role in the value increase of that company.) So with Mr. Jobs as leader, no less than 4 industries have been dramatically changed – and huge value created for shareholders.
No cost-cutting CEO, no "focus on the core" CEO, no "execution" CEO can claim to have made the kind of industry changes that have occurred through businesses led by Steve Jobs. And none of those CEO profiles can say they have created the shareholder value Mr. Jobs has created. Not even Bill Gates or Steve Ballmer can claim to have added any value this decade – as Microsoft's value is now less than it was when the millenia turned. Despite the relative size difference between the market for PCs and Macs (about 10 to 1) today Apple has more cash and marketable securities than the entire value of the historically supply-chain driven Dell Corporation.
Mr. Jobs is constantly pushing his organization to focus on the future, about what the markets will want, rather than the past and what the company has made. It was a decade ago that Apple created its "digital lifestyle" scenario of the future, which opened Apple's organization to being much more than Macs. Jobs obsesses about competitors and forces his employees to do the same, to make sure Apple doesn't grow complacent he pushes all products to have leading edge components. Mr. Jobs embraces Disruption, doesn't fear seeing it in his company, doesn't mind it amongst his people, and works to create it in his markets. And he makes sure Apple constantly keeps White Space projects open and working to see what works with customers – testing and trying new things all the time in the marketplace.
Following these practices, Apple pulled itself away from the Whirlpool and returned to the Rapids of Growth. Almost bankrupt, it wasn't financial re-engineering that saved Apple it was launching new products that met emerging needs. Apple showed any company can turn itself around if it follows the right steps.
As companies are struggling with value, people should look to Apple (and Google). Value is not created by cost cutting and waiting for the recession to end. Value is created by seeking innovations and creating an organization that can implement them. Especially Disruptive ones. Whether he's the CEO of the decade or not I can't answer. But saying he's one heck of a good role model for what leaders should be doing to create value in their companies is undoubtfully true.
by Adam Hartung | Nov 4, 2009 | Current Affairs, Defend & Extend, Disruptions, Food and Drink, General, In the Swamp, Leadership
Walgreens is apparently going through a dramatic change in leadership. Drug Store News reported that the top 2 folks, including the top merchandiser, have left Walgreens in "." The article discusses the "old guard" departure and arrival of younger, new leaders. The magazine clearly paints this as a Disruption.
But I have my doubts. There's no discussion of future scenarios in which Walgreens is going to be a different company – not even a different retailer. There's no discussion about competitors, and how more prescription medications are being purchased on-line from new competiors, or even how Walgreens intends to be very different from historical brick-and-mortar competitors like CVS or Rite-Aid. No discussion about how the company might need to change its real estate strategy (being everywhere.)
There's really no discussion about changing the Walgreens' Success Formula. It's Identity has long been tied to being first and foremost a "drug store" (or pharmacy). A market which has been attacked on multiple fronts, from grocers and discounters like WalMart entering the business to the insurance mandates of buying drugs on-line. To be the biggest, Walgreens' strategy for several years has been tied to opening new stories practically every day. It was shear real estate domination – ala Starbucks. Although it's unclear how profitable many of those stores have been. Tactically Walgreens has moved heavily into cosmetics as a high turn and margin business, then items it an bring in and churn out very quickly – such as holiday material (Halloween, Thanksgiving, Christmas, Valentines Day, St. Patrick's Day, etc.), shirts, sweatshirts, on and on – stuff brought in then sold fast, even if it had to be discounted quickly to get it out the door. Churn the product because the goal is to sell the customer something else when they come in for that prescription.
There is no discussion of these executive changes creating in White Space to develop a new Walgreens. Without powerful scenarios drawing people to a new, different future Walgreens – and without a strong sense of how Walgreens intends to trap competitors in Lock-in while leveraging new fringe ideas to grow – and without White Space being installed to develop a new Success Formula to make Walgreens into something different —– this isn't a Disruption. It's a disturbance. Yes, it's a big deal, but it's unlikely to change the results.
Reinforcing that this is likely a disturbance the article talks about how the company is starting to obsess about store performance – down to targeting every 3 foot section for better turns and profits. The new leaders plan to work harder on supply chain issues, and store plannograms, to increase turns. They intend to put more energy into prioritization and reworking promotions. In other words, they want to execute better – more, better, faster, cheaper. And that's not a Disruption. It's just a disturbance. This may make folks feel better, and sound alluring, but experience has shown that this is not a route to higher growth or higher sustained profitability.
I don't expect these management changes to remake Walgreens. Walgreens has been a pretty good retailer. The Success Formula worked well until competitors changed the face of demand, and market shifts wiped out access to very low cost capital for building new stores. The Success Formula's results have fallen because the market shifted. Refocusing energy on being a better merchandiser won't have a big impact on growth at Walgreens. The company needs to rethink the future, so it can figure out what it needs to become in order to keep growing!
Real Disruptions attack the status quo. They don't focus on better execution. They attack things like "we're a pharmacy" by perhaps licensing out the pharmacy in every store to the pharmacist and changing the store managers. Or by selling a bunch of stores to eliminate the focus on real estate. Or by promoting the Walgreens on-line drug service in every store, while cutting back the on-hand pharmacy products. Those sorts of things are Disruptions, because they signal a change in the Success Formula. Coupled with competitive insight and White Space that has permission to define a new future and resources to develop one, Disruptions can help a stalled company get back to growing again.
But that hasn't happened yet at Walgreens. So expect a small improvement in operating results, and some financial engineering to quickly make new management look better. But little real performance improvement, and sustainable growth, will not occur. Nor will a sustained higher equity value.
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 | 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 21, 2009 | Defend & Extend, In the Swamp, Lifecycle, Lock-in
Boeing is the world's largest aircraft manufacturer. But the Crain's headline "Boeing Loses $1.6B, slashes 2009 profit estimate" should get your attention. Revenues in 2008 dropped some 10% – which the company blamed on a strike. Of course, management always has some bogeyman to blame for poor performance. But revenues have not yet recovered to 2007 levels. Much, much worse is the fact that its newest product launch, the 787 Dreamliner, is some 2 years behind schedule, leaving industry experts skeptical of when it will get out the door.
The reason to really be wary of Boeing isn't just this one plane. Instead, look at the market shift happening in all transportation – including aircraft. It's unclear that the marketplace has much interest in the Dreamliner. Boeing's Success Formula has long been to develop really big projects, billions in investment, and make bigger and bigger aircraft. And the Dreamliner is the latest in Defending & Extending this Success Formula. Even though the product is way over budget, really late and will be a big aircraft when it's unclear that's what people want.
From cars to buses to planes, we're seeing people change to smaller and more efficient products. The last time you flew, were you on a big aircraft? Or did you find yourself on a small plane from Bombardier (of Canada) or Embraer (of Brazil)? Airlines need to keep planes fairly full if they have any hope of making a profit. Couple that with customer desires for convenience – meaning several flights to a city daily, and you can quickly see why smaller airplanes make sense. As a result, the leader (Embraer) in small commercial planes is growing at over 20%/year!
Meanwhile, people are getting less and less excited about flying commercial airlines every year. TSA hassles, flight delays, extra charges for bags, there's a long list of reasons business people are looking for alternatives. And that's where the Jet Taxi business comes in. Whether you buy a fractional interest in an aircraft, or simply rent a plane for a single trip, businesses are figuring out that small aircraft from Beechcraft, Cessna, Lear Jets and even the new Honda jet are providing a very affordable option to commercial flying when even a few people are traveling – and with a lot more convenience. The largest manager of this option is NetJets owned by Berkshire Hathaway – who's lead investor is Warren Buffet.
Add on top of this webinars and video conferencing. Increasingly, people are using digital technologies to communicate without flying at all. Again, with hassles up – and terrorism threats more real than 10 years ago – people are turning to really low cost, and ultra convenient, alternatives to traveling at all.
So are you really optimistic about the future demand for big jet aircraft that take more than a decade to develop and get approved? And built by a company that competes with a government subsidized player supported as a matter of national defense in Europe (Airbus)? It's really hard to be optimistic about the future for Boeing – and the Dreamliner delays seem to just be the early warning signs of a Success Formula very long in the tooth. Boeing is definitely stuck in the Swamp, and it's unclear the company has any effort underway to develop new options.
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 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 7, 2009 | Current Affairs, Disruptions, General, In the Rapids, Innovation, Leadership, Web/Tech
"Amazon Cuts Kindle Price to $259" is the USAToday headline. This $40 whack is the second price cut this year. Sony is selling its ePocket for $199. Of course Kindle is pushing that it has more content available and easier wireless access than Sony,- even internationally. Expectations are for 3 million e-Readers to be sold in 2009 (about 1 million around the holidays.) Obviously, if you aren't paying attention this is a big deal. It is changing publishing (books, magazines and newspapers.) But the impact goes far beyond publishing.
Simultaneously, The Wall Street Journal reports "Just a Touch Away, the Elusive Tablet PC." According to this article, new devices are being tested that will allow you to do everything from classic PC applications to web interconnection to watch movies – or read books – on a keyboard-less new tablet. Something that is a cross between an iPhone/iTouch (with a bigger screen) and a PC. As iPhone users are learning (quickly) you don't need a keyboard or mouse to have an interface to your machine and the world.
So what will be the future solution? Will it be one of these, or yet something different? I don't know. Do you have a crystal ball? But the answer to that question really doesn't matter to us today. We don't need to know that sort of specific to begin growing our businesses.
Not being widget nuts, or platform forecasters, should not stop us from planning for a different sort of future and changing our approach today. Scenarios for 2013 (you do have scenario plans for 2013, don't you?) should be planning on practically everybody having one of these devices. And perhaps these devices being so cheap they could be included with sales of every major appliance (like a car, or refrigerator). If that sounds silly, just look at how cheap a flash (or thumb) drive is now. Remember when we thought floppy disks were expensive? Now people exchange flash drives that have more capacity than a 2004 laptop without thinking about cost. These made tapes, floppy drives, zip drives and a lot of other technology obsolete in a hurry.
How can your business take advantage of this shift? Can you replace paper manuals, maybe even user instructions with a tablet? Or a tablet app? Can you use an interactive device that grabs input from your appliance to do diagnostics, recommend maintenance, report on failures? Would this help customers pop for the new frig – say if it helped lower electric bills? Or could it encourage that new washer by helping set the cycles to lower water cost? Could you build it right into the console on a washer or dryer? Or could you encourage someone to buy a new car by telling them to forget about maintenance logs and just track the car's performance on a tablet?
If you provide content – are you planning for this? Recently The Economist sent me an email (I've registered on their web site) telling me they were going to start charging for web content. I've heard News Corp. properties, like the Wall Street Journal, intend to do the same. I guess they haven't noticed the world is moving in a direction that makes such a plan – well, impossible. In a recent Harris poll (reported on Silicon Alley Insider "People Won't Pay for News Online") 74% of web users said they'd simply switch sites before paying. With one of these eReader/Tablets in hand, why would they ever pay for content when another provider is a finger streak away? As access becomes easier and easier, the willingness to pay will go down and down. Publishers had better start figuring out how to get paid a different way than subscriptions!
Now is about when executives like to say "so I want to know which format will win before I start doing this. I only want to do this once." That old cry for efficiency. Unfortunately, while waiting for a winner to emerge, the waiter becomes the laggard. The early adopter, that recognizes the value provided to consumers, gets out there and starts using these innovations to drive better customer value. And to capture more sales. When you are part of making the market – like Apple in music – you gain huge advantages. You don't have to know all the answers to compete. You just have to be willing to Disrupt old notions and use White Space to experiment and learn.
I have drawers filled with obsolete electronics. How many obsolete cell phones do you own? How many big old monitors are you recycling to replace with flat screens? Do you still have a fax machine? I have an old keyboard that used something called "sideband technology" to allow me to interact with people and get news and sports info years before the internet was popular – and before wireless internet was available. Obsolete now, that device taught me how valuable the internet was going to be when Congress made it available for commercial use. Fear of throwing away a few products or software – maybe a betamax machine or copy of visicalc – is no reason not to get into the market and learn!
Markets are marvelous things. As these articles discuss, nobody knows how we will be using technology in the future. Not exactly. It will be some combination of eReader – computer – music player – television – telephone. But we do know the broad theme. And if you want to get out of this recession, you can start playing to this market shift now. You'll never grow if you sit on the sidelines watching and waiting. Get in the market. Participate. Use this technology to create new solutions! There are countless applications (as the expanding iPhone app base is proving.) Want to get into the Rapids of growth? You'll never succeed if you don't become part of the marketplace. Nothing creates learning like doing!
by Adam Hartung | Oct 5, 2009 | Current Affairs, Defend & Extend, Disruptions, In the Whirlpool, Leadership, Lifecycle, Lock-in
"Saturn Done in Four Months" is the Autoweek.com headline. The next time somebody brings up the short life cycle of tech products, remember Saturn. GM started the company, grew it, and now is shutting it down on a timeline that roughly corresponds with the life of Sun Microsystems. Clearly manufacturing companies can do just as poorly as techs.
When Penske lost itsmanufacturing deal, the purchase of Saturn fell through. And GM leadership can't wait to clear out inventory. Production has already stopped. Soon, the products and dealers will disappear. Along with the brand name. Another experiment that failed. So it is very important our post-mortem teaches us the right lessons from Saturn.
I was appalled when Harvard Business School Publishing posted "Why Saturn Was Destined to Fail." According to the author, Saturn was an anchor that drug down a hurt GM!!!! Reporting that the successful Saturn launch came at the loss of $3,000 per car sold (a new factoid I've never before heard), he claims that GM should have been more focused on fixing its old business. The implication is that GM wasn't trying to fix its old business, instead being diverted by the very successful operations at Saturn! Pretty illogical. GM was doing everything it could to compete, but improving its old Success Formula simply wasn't enough given the market shifts already in place. To meet changing market requirements GM needed to develop a new Success Formula, and that was the purpose of Saturn!
Saturn was the best chance GM had to succeed! The Success Formula at Chevrolet and the other GM divisions had been created in the 1950s when GM dominated the industry. But by 1980 the market had shifted dramatically. Design cycles had dropped, customer tastes had changed, production methods had moved from long assembly lines to just-in-time, quality requirements were redefined and rising, and impressions of auto dealers had tanked. Saturn was established to teach GM how to compete differently.
The reason Saturn lost money had everything to do with accounting. GM forced all kinds of costs onto GM – which were not representative of a normal start-up. Without those costs, Saturn would have been much leaner and profitable. Further, after Saturn proved it could move faster and outsell expectations, GM quickly moved to force Saturn to act like other GM divisions. Forced sharing of components severely hampered the design cycle and flexibility. Union contract consistency pushed Saturn into old employee agreements which the union had previously agreed to wave. And forcing Saturn to allow traditional GM dealers to sell the Saturn brand tarnished the changed customer relationship Saturn worked hard to create.
When Roger Smith created GM he set it up seperately. His scenario of the future demanded GM figure out a new way to compete. Saturn, was a White Space project with permission and resources to figure out that new way. But Chairman Smith did not Disrupt the old GM auto management. He did not replace the Division presidents with leaders from EDS or Hughes (businesses he had acquired) who were willing to move in a new direction. He did not change the resource allocation system to give Saturn more clout over its own decisions and those at other divisions. Thus, when he left the larger divisions moved fast to change Saturn into their mold – rather than vice-versa. Instead of Chevrolet learning from Saturn, Saturn managers were forced to adopt Chevrolet practices.
Saturn proved that even a stodgy, Locked-in company can use White Space to develop new solutions. And it also proved that if you aren't willing to Disrupt the old Success Formula – if you aren't willing to attack old Lock-ins – White Space (regardless of its success) is unlikely to convert the company into a better competitor. The lesson of Saturn is NOT that it diverted GM's attention, but rather that GM was unwilling to Disrupt its Success Formula to learn from Saturn.
As investors, the question is pretty easy. Would you rather own Saturn, Pontiac and Hummer – the divisions of GM that had loyal customers and some reputation for innovation, quality and customer satisfaction – or Cadillac, Buick and Chevrolet? Would you rather have businesses that are looking forward with early plans for hybrids, and exciting cars like the G8, or a high volume business in cars that most people find ho-hum, at best? Do you want designers that take chances and bring out cars quickly, or that move slowly seeking the "lowest common denominator" in design? If you were an entrepreneur, would you rather be given pemission to lead Saturn, or Chevrolet?
Learning the right lessons from Saturn is important, or else our business leaders are doomed to repeat the GM mistakes. If you don't challenge your Success Formula, White Space project will be met with great resistance by the organization. They will be saddled with unnecessary costs and requirements that strip them of permission to do what the market demands. And they will not achieve the goals which they established to accomplish, including acting as a beacon for migrating a business forward.
For a deeper treatment of this topic please download the free ebook "The Fall of GM: What Went Wrong and How To Avoid Its Mistakes."
