by Adam Hartung | Dec 30, 2009 | Defend & Extend, General, Leadership, Openness, Web/Tech, Weblogs
As we enter 2010, is your business expecting a very different future – and have you started planning to implement new approaches based upon a different future? For example, how do you plan to acquire new customers, employees and vendors in 2010 and beyond? Do you still rely on traditional advertising? Do you use a web site? Is most of your on-line IT budget still dedicated to web site development? How much of your plans for 2010 are extensions of what you've been doing on 2009 – or maybe an ongoing trend from much earlier in the decade?
According to the Wall Street Journal in "Linked In Wants Users to Connect More," the number of Linked in users almost doubled in 2009, from 31.5M to 53.6M. And to drive additional user traffic the site is working hard to add applications which can help companies with recruiting, marketing and other business functions. With users jumping, and time on site increasing, is your company blocking access? Or is it figuring out how to leverage this leading web site to find new customers, recruit aggressive new employees and build a stronger business?
But Linked-in is considerably less successful than Facebook. Do you still think of Facebook as a site for college kids to plan drinking parties? If so, you've missed a tsunami in the making. Facebook's user base, at 350 million, is over 6 times Linked-in. According to ReadWriteWeb.com "It was a Facebook Christmas; Site Hits #1 in U.S. for First Time." On 2 days Facebook actually had more site hits than search giant Google! And Facebook was the #1 Google search in 2009. Facebook use is exploding. The average Facebook user spends over 3.5 hours in a session. Many Facebook users log in daily to keep up with their network and what's happening in markets of interest to them.
Increasingly, people don't do web searches to find out about restaurants, movies, products, services – or even jobs. They go to social media sites like Linked-In, Facebook and Twitter. If you depend on people to use your web site to learn about your business – that may be too late. When referred by a friend, what is the first impression a potential customer (or recruit) gets when reaching out to your LInked-in, MySpace or Facebook page? What applications or groups do you support to demonstrate your business and your ability to grow? How are you reaching out through these environments to meet the people who should be a customer, employee or vendor?
Increasingly, people don't even make their first touch with your business via your web site. iPhone users, and the soon-to-explode Android phone users, as well as all the other "smartphone" (or mobile device) users learn about your business from a very small screen that brings in small bits of information that is largely text. They often go to a PC and search a traditional web site only every few days. So how is your information presented? Is it largely graphical, with embedded objects that don't show up well (or at all) on a mobile device? Is it lengthy HTML pages that requires scrolling on a phone?
Increasingly, people looking for you will blow off traditional web pages in favor of easier to access and read information. You may hate the 140 character Twitter limit – but it's becoming a standard (the new "elevator pitch.") So is your on-line impression being driven by web developers, or by mobile device developers? Is your on-line environment all about driving people to your web site – which may never happen – or are you effectively connecting with them via Facebook, et.al. and informing them without asking them to go to your environment? Are you letting users control their access to your information, making it easy for them, or are you trying to control their behavior — and putting off many?
There are many reasons to think that in 2010 how people acquire business information will shift from traditional web sites to social media sites. First impressions, and a lot of the decision making process, will come from Facebook, Linked-in and Twitter. Is your business positioned for this shift?
Pepsi recently made a decision that appears forward-focused rather than following tradition. Pepsi is abandoning Super Bowl ads in favor of spending more on-line. MarketingDaily.com reports in "Compete: Pepsi's On-line Push a Smart Play" that Pepsi is reaching more people at a lower cost by investing in on-line marketing. Despite the historical role Super Bowl ads have played for big consumer products companies, Pepsi's decision is positioning the company to better connect with more users and drive more sales. Coke's decision to remain with traditional advertising looks increasingly expensive – and out of step with how people really make purchase decisions today.
Smart companies are already making changes to reach the tidal wave of people relying on social media. They are building a strong impression, and business applications, that help them grow using environments like Linked-in, MySpace and Facebook. And they employ people to keep their Twitter communications clear and strong.
So is your business taking actions – making implementations – that will support where the market is headed in 2010? Are you putting yourself where the customers and recruiting targets are? Or are you trying to do more of the same better, faster and cheaper?
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 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 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 22, 2009 | Defend & Extend, General, Openness
There's no doubt that many more people are looking for jobs than there are those hiring. As a result, organizations offering jobs can find themselves flooded with applicants. Several are complaining about how hard it is to find "the right person." Reality is most companies have been struggling to find "the right person" for a long time. It just wasn't as obvious.
According to The Wall Street Journal "To Find Best Hires, Firms Become Creative." Yet, these creative ideas are largely about finding new ways to restrict the number of people getting into the hiring funnel. Increasingly, asking potential employees to carry more cost of the hiring process. And often putting employees through a longer (sometimes days) battery of interviews. Yet, it is unclear that these new hurdles are helping organizations hire "the right person" any more often.
In today's changing marketplace, "the right" people are often those who can help the organization adapt. They think laterally about what is happening in the market, and how to develop creative solutions. They rely less on their historical experience, and more on their scenarios about the future. They pay a lot of attention to competitors, and push for decisions that leapfrog competitive actions. And they aren't afraid to Disrupt historical ways of behaving and recommend white space projects where new things can be tried. They don't try to Defend & Extend the company's Success Formula. Instead they seek improved results.
But that is not how hiring processes are designed. They focus on developing tight requirements. With so many applicants now, the focus is on making very, very tight requirements so resumes can be sifted efficiently for specific experiences. But this approach means hiring requirements are based on what history has dictated was needed. They reflect what the company used to do, how it used to hire, what previous employees did that supported the old Success Formula. Job requirements rarely look forward, instead they try to find homogeneous individuals who are like people that succeeded in the past. Usually by reinforcing the old Success Formula. They are out to find candidates who want to Defend & Extend the Success Formula, not evolve it to better results.
Most hiring organizations even have an "ideal prototype candidate." This goes down to specifying the type of degree, and the university attended. It may well include specifying a geography where the candidate was raised. Common certifications. A preferred set of previous jobs that are like what others have been through. These approaches are all about yielding candidates that look alike – not different. In most companies, an employee from Google. Amazon or Apple – very successful companies – could not get through the first round.
Then the prolonged interviews. These simply force candidates to be like the people doing the interviews. Rafts of studies have been done on interviewing, and they always return the result that interviewers like people who are like themselves. The interviewer has a sense of what they think made them successful – education, experience and problem solving approach. And they simply look to see if the candidate is like them. If the interviewing goes on for days, they even look to see if the candidate orders food like them, drinks like them, has the same approach to mornings or working late. The long interview approach merely ensures that candidates are more likely to be just like existing employees.
These approaches are about finding candidates that have a good "initial fit." But if the organization is in need of adapting to changing market conditions, is that the employee you really need? All the people at the old AT&T were much alike – but that company still didn't survive deregulation. The people at most airlines are much alike, yet outside of Southwest the airlines don't make any money. GM had an "ideal employee profile" yet the people leading the company could not deal with market shifts that sent the organization into bankruptcy.
Today your organization might well need new employees who are not like previous employees. They may well need different education. Different experiences. Work in different industries. And different approaches to problem solving. With so many available candidates, is your approach to hiring helping you find people who can help your company grow, or is it trying to find the kind of people who reinforced the old Success Formula? Are you hiring for the future, or searching for people like you hired in the past?
by Adam Hartung | Nov 18, 2009 | Current Affairs, Defend & Extend, Leadership, Travel
Most Americans pay no attention at all to the value of the U.S. dollar. As an island nation, and largely an importer of goods, all most Americans care about is how much something costs at the store. Since the vast majority of Americans never set foot on foreign soil in any year, they just don’t think about how many Euros or Yen you get for a dollar.
But they should. We now live in a global economy. People in foreign countries have a direct impact on the lives of Americans every day. And they watch the value of the dollar constantly. Just look at outsourcing – the transfer of jobs offshore. Or the cost of products at Wal-Mart – mostly made in foreign countries (China) in foreign currency values. All scenarios of the future, all planning, has to include scenarios for the value of America’s currency. And that is true for all companies, in all countries, because the U.S. dollar is the primary basis for pricing everything in the world.
There’s a great chart showing the U.S. dollar value at FXStreet.com. This shows that in 2001 the dollar compared to other currencies was at a value of 120. Since then the value has plummeted to about 75 (there was a rally earlier in 2009, but almost all of that has been given up.) This means if you went to Paris on holiday in 2001 you could buy a Euro for $.75. So taking your own personal “National Lampoon’s European Vacation” was affordable. Now, a Euro costs you almost $1.50. So, it costs twice as much. With all that value loss happening prior to 2009 (during the previous administration and the previous stock market highs.)
So you don’t plan to go to Europe on vacation, you say. That’s a good thing, because you probably can’t afford it. But, as American homes go into foreclosure, who do you suppose is buying them? To foreigners, American houses are extremely cheap. In coastal areas of Florida, as many as half of all home sales are to foreigners – and upwards of 90% of those are cash transactions – no loan! While Americans struggle with mortgages, others are buying American houses as vacation spots.
One way to think about this is how many ounces of gold does it take to buy a house? Gold is a store of value, like a house. Its limited supply and abundant uses to allow it to remain a good measure of value. InvestmentTools.com has a great chart showing the value of U.S. houses. in 1985, as America was crauling out of the horrible 1982 recession it took about 280 ounces. In 2000, the value peaked at about 780 ounces – so by global standards, American houses had tripled in value. But today, the value has declined again to 280! So globally, we’re no more wealthy now than we were at the worst recession since the Great Depression – and value is falling as we’re still in a major recession.
If Americans have trouble paying their child’s college fund, that’s not the problem for students from offshore. Many are so relatively wealthy they now can buy condo’s for $200,000 or $300,000 to live in while attending schools. They relative wealth of their offshore parents means that there are dramatically more offshore students who find an American education affordable – while Americans are finding education increasingly unaffordable for their own citizens.
To someone from outside America, the country is on sale! Because everything in America costs half – or often far less than half because America has no excise or Value Added Taxes. So people from Europe, Asia and the middle east fly to New York to go shopping – and save enough to pay for the plane ticket! Some even fly to America to buy goods from their own country because the products are cheaper priced in dollars and without the taxes!
And actually, America is acting just like a business facing foreclosure. Debts have been mounting. Each year, America sells more assets in order to pay interest on the debt. In this bad economy, as income has declined, even more asset sales happen. States are selling highways to foreigners in order to get cash today in exchange for road tolls the next 100 years. Or in Chicago – the sale of all the parking meters. Those in other countries are buying fire-sale assets to give Americans the money just to pay the interest.
Meanwhile, the debt keeps rising. Each month sales of bonds exceeds redemptions. For those buying the bonds offshore, this is pretty amazing. If a bond yields 3% (or say even 5% of 6%) that value has been overwhelming wiped out by the decline in the principle value. Remember, the dollar value of those bonds has dropped by 50% just in this decade! There’s no way to recover that through interest collection.
So why do these offshore folks buy the American bonds? It’s kind of like townspeople buying bonds to prop up a local business. If the local plant goes bust, then the jobs go away. Then the restaurant has to close shop. Then the bank has to close because the plant can’t repay its loan. So the people keep buying plant bonds to keep it open – to forestall an imminent disaster. And because they hope that the plant will someday start making enough money to repay the bonds. That it will someday see employment rise, not fall. And the restaurateur, and the machine shop owner, and the car dealer all keep buying bonds to keep the plant going. The American central bank calls those folks who buy U.S. bonds the central banks of China and other countries.
How low will the dollar go? If people quit buying bonds, really low. Increasingly, those who produce commodities like oil and gas are asking to price commodities in something other than dollars. They don’t like seeing their prices halved due to currency devaluation. If businesses don’t have to trade in dollars, then they don’t need the dollar value to remain high – and they lose interest in buying bonds to prop it up.
American’s don’t pay attention to other currencies either. So most don’t remember the 1994 Mexican Peso crisis. Mexico had incurred a huge debt, and was selling more debt from the 1970s into the 1990s. The primary source of revenue had been oil and gas sales, but prices collapsed in the 1980s, and production failed to keep up with that from other countries. There was more spending than revenue collection. When the Mexican government stopped propping up the Peso, it dropped more than 50% in a week! Currency devaluations can happen fast, and can be devastating, because suddenly a flood of buyers become sellers – reversing position and cratering the value. To keep the government and economy from collapsing the U.S. central bank stepped in to buy bonds and stop further devaluation.
This blog is sure to not be one of the more popular. Because most Americans simply don’t care about the dollar’s value
– and even more don’t understand anything about currency values. Americans are so used to assuming that the dollar will be the world’s currency, and that it will be propped up by foreign debt buyers, that they simply expect the future to be like the past.
I’m not predicting the future value of the dollar. But what’s clear is that the dollar’s value is really important to the future of your business. Whether in America, or not. What kills businesses isn’t the things management knows and plan for, it’s what they don’t plan for. And most American business planners pay very little attention to the value of the dollar. But having a robust scenario around the future value of the dollar could prove to be the difference between many winners and losers in as quick as 12 to 24 months. There are plans that can leverage these shifts in ways to create enormous value.
Is your company, as it prepares budgets for 2010, prepared to deal with a dramatic shift – up or down – in the value of the U.S. dollar? Have you considered the impact, and developed contingency plans? Do you have White Space projects that will leverage currency shifts? If you’re planning from the past, you may well not be prepared for a very different future if the U.S. dollar’s value shifts dramatically. Especially if it continues falling.
by Adam Hartung | Nov 12, 2009 | Current Affairs, Defend & Extend, In the Rapids, In the Swamp, Innovation, Leadership, Openness, Television, Web/Tech
The Myth of Market Share by Richard Minitar is one of those little books, published in 2002 by Crown Business, that you probably never read – or even heard of (available on Amazon though). And that's too bad, because without spending too many words the author does a great job of describing the non-correlation between market share and returns. There are as many, or possibly more, companies with high profitability that don't lead in market share as ones that do. Even though the famous BCG Growth/Share matrix led many leaders to believe share was the key to business success. Another something that worked once (maybe) – but now doesn't.
"Moto Looks to Sell Set-Top Box Unit" is the Crain's Chicago Business headline. Motorola's television connection box business is #1 in market share. But even though Motorola paid $11B for it in 1999, they are hoping to get $4.5B today. That's a $6.5B loss (or 60%) in a decade. For a business that is the market share leader. Only, it's profitability + growth doesn't justify a higher price. Regardless of market share.
Kind of like Motorola's effort to be #1 in mobile handset market share by cutting RAZR prices. That didn't work out too well either. It almost bankrupted the company, and is causing Motorola to sell the set top box business to raise cash in its effort to spin out the unprofitable handset business.
On the other hand, there's Apple. Apple isn't #1 in PCs – by a long shot. It has about a 14% share I think. Nor is it #1 in mobile handhelds, where it has about a 2.5% market share. But Apple is more profitable than the market leaders in both markets. Today, Apple's value is almost as high as Microsoft – historically considered the undisputed king of technology companies.
Chart source Silicon Alley Insider 11/12/09
While Microsoft has been trying to Defend & Extend it's Windows franchise, its value has declined this decade. Quite the contrary for Apple.
Additionally, Apple has piled up a remarkable cash hoard with it's meager market shares in 2 of 3 businesses (Apple is #1 in digital music downloads – although not #1 in portable MP3 players).
Chart Source Silicon Alley Insider 11/11/09
"While Rivals Jockey for Market Share Apple Bathes in Profits" is the SeekingAlpha.com headline. Nokia has 35% share of the mobil handheld market. It earned $1.1B in the third quarter. With its 2.5% share Apple made $1.6B profit on the iPhone. While everyone in the PC business is busy cutting costs, Apple has innovated the Mac and its other products – proving that if you make products that customers want they will buy them and allow you to make money. While competitors behave like they can cost cut themselves to success, Apple proves the opposite is true. Innovation linked to meeting customer needs is worth a lot more money.
Bob Sutton, Stanford management professor, blogs on Work Matters "Leading Innovation: 21 Things that Great Bosses Say and Do." All are about looking to the future, listening to the market, using disruptions to keep your organization open, and giving people permission and resources to open and manage White Space projects.
If your solution to this recession is to cut costs and wait for the market to return – good luck. If you are trying to figure out how you can Defend & Extend your core – good luck. If you think size and/or market share is going to protect you – check out how well that worked for GM, Chrysler, Lehman Brothers and Circuit City. If you want to improve your business follow Apple's lead by developing thorough scenario plans you can use to understand competitors inside out, then Disrupt your old notions and use White Space to launch new products and services that meet emerging needs.
