by Adam Hartung | Jan 30, 2010 | Current Affairs, Defend & Extend, General, Innovation, Leadership, Lock-in, Web/Tech
One of the biggest business news items this week was the launch of Apple's iPad for $499. Although perhaps overlooked by many big companies, and several IT departments. To some businesspeople, the iPad seems another consumer toy, thus not terribly noteworthy. Some see it as a small-market share sort of oversized iPhone for mobile telephony/data use. One executive commented to me this week "I don't understand why anyone cares, I don't own an iPhone and cannot imagine why I would ever want to download an app," He has a huge investment in Microsoft technology, has never used an iPhone or Palm Treo or even a Blackberry. Hes' never seen an iPhone app, and was amazed when I told him 1 billion had been downloaded. He's comfortable in his traditional IT solution, and doesn't see the importance of iPad.
But the iPad is another step demonstrating a big market shift is happening. With Apple's announcement, Amazon announced that it's sales of Kindle are about twice what most analysts had expected – see "During Apple Week Google and Amazon try to Remind You They Exist" at Fast Company. Further, it appears now that for every 10 books Amazon sells, it sells 6 Kindle books — a substantial number and indications of serious market change. The iPad is half the price most people expected, and now rumors are Kindle's will drop to $100 as competition heats up. It rapidly appears that while there is an emerging battle between Amazon and Apple, the biggest insight is that the market for BOTH is growing a whole lot faster than anyone expected. As are iPhone sales. These devices, and the technology solution embedded within them, are grabbing a lot of buyers, and quickly. The sales, in units and dollars, are growing much faster than anticipated. And new users are flocking toward this technology platform.
Thus, the iPad is likely to be a big winner for Amazon and Kindle – as well as Google. It is expanding the application base, and use patterns, for mobile devices. It is expanding the product breadth and price points. Quite simply, it is helping people do new things they couldn't do before – especially when mobile – that they could not do before. As a result, apps will grow and sales of both hardware and software will grow. And early adopters will gain an advantage as they use this new technology to create advantages for their customers. Apple and Amazon are both "winners" who are driving revenue and profit growth.
And Microsoft loses. Microsoft has never changed its Success Formula. Its Identity, Strategy and Tactics remain as they've been for three decades – to provide a one-stop near monopolistic, integrated (mainframe style – and certainly monolithic) solution. As the market has been shifting, however, this has been less and less successful.
Source: Silicon Alley Insider
As the chart shows, Microsoft's product strategies, product introductions, acquisitions and management changes have done nothing for growth – or valuation. Microsoft keeps trying to do what made it great in the late 80s and early 90s. But since then, the market has shifted dramatically and the sustaining innovations Microsoft has offered, while meeting customer requests for improvement, haven't really helped growth.
The cost of this Lock-in has been horrific.
Source: Silican Alley Insider
Microsoft has poured billions of dollars into a failed approach intended to Defend & Extend its Success Formula – but to no avail. The market is going a different direction – toward cloud computing with its distributed data, extremely small apps at very low (disposable) prices, easy to use interfaces and greatly lower device cost.
Even as large and cash rich as Microsoft was in 2000, it cannot stop a market shift. And even though this shift has been predictable, with competitors from the fringe like Google, Amazon and Apple bringing to market new products, Microsoft has chosen to try Defending & Extending its Success Formula rather than Disrupt and use White Space to develop new solutions. What can we expect from Microsoft in the future? Unfortunately, more of the same and most likely a dramatically deteriorating value. When the market's shift to these thin devices with a different architecture becomes clear, the inability of System 7 and Bing to make any difference in Microsoft results will be clear. And investors are likely to run for the proverbial hills – letting the stock price drop along with new users. Microsoft will increasingly be dependent upon legacy applications and maintenance – markets with little/no growth. Microsoft could soon be the next Unisys (remember that company?)
So, what is your company doing? Are you moving forward with new apps which will grow your revenues and profits? Are you looking for ways to use these devices, and the underlying mobile computing architectures, to offer your customers better solutions? Are you bringing out new approaches that are potential game changers, bringing new customers to you and accelerating growth? Or are you trying to Defend & Extend your old processes, approaches and products? Are you planning a future that will be PC/laptop centric, and delivering traditional web pages? Are you following the laggard, Microsoft, or are you Disrupting your business, and market, with White Space projects that will change market behaviors using these new technologies and positioning you as the market leader? In 2015, will you look like Microsoft – frozen in place as the market shifts – or will you look more like Google, Amazon and Apple with new solutions that create excitement and new sales?
Have you tried a Kindle yet? iPad? iPhone? Do you have any White Space wher
e you are trying these new things? Have you Disrupted any of your organization and challenged them to apply this technology? Exactly what are you waiting on?
by Adam Hartung | Jan 28, 2010 | Current Affairs, General, Leadership, Lock-in
Most businesses have multiple analysts who spend day after day accumulating, analyzing and displaying data. Financial analysts, marketing analysts, IT analysts – they are all over the place. Then businesses will hire consultants who bring their own analysts to further find and review data – then present yet more charts and data summaries. When I worked for The Boston Consulting Group we used to say "the data will set you free!" And we believed that if we dug up more data and did more analysis than anyone else we would offer insight to change businesses everywhere.
Yet, more of our clients didn't take action than did. When I moved on to other firms, the results weren't really different. And when I was in corporate America at huge companies, like PepsiCo and DuPont I found that the army of analysts and mounds of data really had almost no impact on how decisions were made. or what decisions were made..
Once a business is prosperous, its Success Formula drives behavior. Its Identity is set, its strategy is in place and tactics are predetermined. Things don't change just because someone shows the leadership data. No matter how synthesized or analyzed or elegant, the data really makes little (if any) difference. It's easy for leaders to simply ignore data that is troubling, and highlight data which confirms previously held beliefs. And even if insight is created, insight has nothing to do with what people will do next. Insight doesn't change the decision-making processes, or any of the other Lock-ins keeping the Success Formula in place. Even though managers claim that they want to see "the data," in reality the data makes no difference.
Last night the U.S. President Barack Obama referred in his State of the Union address to the data which confirms global warming. This drew significant snarky laughter from some of the joint congressional attendees. And even though there are regular reports, like the recent New York Times article "Past Decade Warmest on Record, NASA Data Shows," there are regular polls showing an enormous amount of the population, at all income levels, who simply don't believe the earth is warming. The data, in the end, is ignored or discounted. It simply doesn't matter. And no one is going to change the opinions of anyone who doesn't think the earth is warming by trying to show more data.
Data leads to debates. Who's answer is right? Who's forecast is more likely? Debates about data can go on forever. An old business joke says if you strong all the econometric modelers together end to end they'd still never reach a conclusion. But you'd get a lot of debate.
Instead of data and debate, realize the limitations and move on. If we spent 1/10th the time digging for and analyzing data, we'd do just fine. Rather, we should spend the other 9/10th of the time building scenarios. Instead of debating a topic like global warming, we could build scenarios that ranged from global cooling by 5, 3, 2 or 1 degree to no change to warming by 1, 2, 3 or 5 degrees. The issues isn't which is most likely – but rather that we think through the implications of ALL, and prepare. What strategies would allow for success given that any of these are possible?
Business analysts, strategists and leaders spend a lot of time trying to guess the future. But their crystal ball is just as foggy as everyone else's. Their guesses are mostly wrong, because a dynamic marketplace is very hard to predict. So they plan to do something, but then shifts make the returns lower because the world/market didn't turn out as planned. Given that we KNOW that we're more likely to be wrong than right, why the fascination with trying to pick the future?
Those who win more than they lose develop a lot of scenarios. They don't try to pick a scenario. They try to think through the many possibilities and prepare for as many as possible. And they develop mechanisms to track the market so they can keep an eye on the multiple scenarios and anticipate things as time passes. It's never the things you expect that really hurt you, it's the one you didn't think about. To be prosperous for a long time you have to build the ability to think very broadly about the scenarios that can happen, and prepare.
So the next time you feel the urge to "get more data" think about global warming. Has all this data changed the debate? Has it helped any country to better prepare? Has anything really happened, as the mountains of data on the topic have been assembled, analyzed and distributed? Does anyone think the data will cause a change in policy, or behavior? If not, then maybe you can start to spend more time creating multiple, wide scenarios that will help you prepare – and possibly help you to develop new behaviors to protect your business from a range of potential outcomes.
by Adam Hartung | Jan 15, 2010 | Disruptions, eBooks, In the Swamp, Innovation, Leadership, Lock-in
Many people think the best way to grow is by setting big goals – even Big Audacious Hairy Goals (BHAGs). But increasingly we're learning that goal setting is not correlated with success. At AmericanPublicRadio.org there's a partial text, and MP3 download, of a recent interview between General Motors leaders and a University of Arizona Professor titled "It's not always good to create goals."
The story relates how about a decade a go, with market share hovering at 25%, GM set the goal of moving back to 29%. It became a huge, multi-year campaign. Lapel pins with "29" were made and all kinds of motivational programs were put in place. The GM organization had its goal, and it was highly aligned to the goal. But it didn't happen. Despite the goal, and all the energy and talent put into focusing on the goal, GM continued to struggle, lose share – and eventually file bankruptcy. The goal made no difference.
Worse, the interview goes on to discuss how goals often lead to decidedly undesirable, sometimes unethical – even illegal – behavior. Instances are cited where goal obsession led company employees to falsify documents, even ship bricks in place of products to meet sales targets. No executive wants this, but goals and goal obsession – especially when there is a lot of reinforcement socially and monetarily on the goal – can become a serious problem.
Results are exactly that. Results. They are an outcome. They are the way we track our behaviors and activities – our decisions. When we focus on goals – usually some sort of result – we lose track of what is important. We have to focus on what we do. And for most organizations a big goal merely leads people to try working harder, faster,better, cheaper. But when the Success Formula is mis-aligned with the market – even when the whole organization is aligned on maximizing the Success Formula results will still struggle – even falter. Goals don't help you fix a Success Formula returning poor results. Just look at GM.
In fact, it can make matters worse. In "White Bears and Other Unwanted Thoughts" (available on Amazon.com) the authors point out that when you try to turn a negative (a problem) into a positive (a challenge, or goal), you often achieve a rebound effect making people obsess about the problem. Tell somebody not to think about a white bear – and it's all they think about. When your company has a problem and you try to tell employees "hey, don't think about the problem. Go do your job. Work harder, increase your focus, and all will work out. Sure share is down, but don't think about lost share, instead think about the goal of higher market share" frequently the employees will start to become obsessive about the problem. It will reinforce doing more of the same – perhaps manicly. Instead of becoming innovative and doing something new, obsessive devotion to trying to make the old methods produce better results becomes the norm. Goals don't produce innovation – they produce repetition.
So what should you do when facing a problem? Disruptions. GM didn't need a big goal. GM needed to Disrupt its broken Success Formula. GM needed to attack a Lock-in (or two). GM leaders needed to admit the market had shifted, and that competitors were changing the game. GM needed to recognize, admit and encourage employees to engage in attacking old assumptions – and recognize that market share would continue eroding if they didn't do things differently. Setting a big goal reinforced the old Lock-ins and even an aligned organization – working it's metaphorical tail off – couldn't make the outdated Success Formula produce positive results.
Only a Disruption would have helped save GM. After attacking some Lock-ins, like the desire to move all customers to bigger and more expensive cars, or the desire to focus on long production runs, GM should have set up White Space teams to discover new Success Formulas. Instead of putting all its management energy and money into growing volume at Chevrolet, Cadillac, Buick and GM nameplates, General Motors leadership should have revitalized the innovative Saturn and Saab to do new things – to develop new approaches that would be more competitive. Instead of pushing Hummer to have 3 identical cars in 3 sizes, GM leadership should have unleashed Hummer to explore the market for truly unique, limited production vehicles. GM should have allowed Pontiac to really take advantage of the design breakthroughs happening at the Australian design studio – to change the nameplate into a performance car segment leader. By attacking Lock-ins, Disrupting, and using White Space GM really could have turned around. Instead, by creating a BHAG GM reinforced its focus on its Hedgehog concept – and drove the company into bankruptcy.
You can see a 40 second video about the value and importance of Disruptions on YouTube here.
A 75 second video on White Space effectiveness on YouTube here.
Read free ebook on "The Fall of GM: What Went Wrong and How To Avoid Its Mistakes"
by Adam Hartung | Jan 12, 2010 | Defend & Extend, In the Swamp, Innovation, Leadership, Lock-in
Do all good ideas originate outside the organization? Of course not. Motorola understood all the critical technologies for smart phones, and taught Apple how to use them in a joint development project that created the ROKR. That's just one example of a company that had the idea for growth, but didn't move forward effectively. In this case Apple captured the value of new technology and a market shift.
On the Harvard Business Review blog site one of consulting firm Innosight's leaders, Mark Johnson, covers two stories of companies that had all the technology and capability to lead their markets, but got Locked-in to old practices. In "Have You Already Killed Your Next Big Thing" Mr. Johnson talks about Xerox and Kodak – two stories profiled in my 2008 book "Create Marketplace Disruption." Both companies developed the technology that replaced their early products (Xerox developed desktop publishing and Kodak developed the amateur digital camera.) But Lock-in kept them doing what they did rather than exploiting their own innovation.
One of the causes is a fascination with metrics. Again on the Harvard Business Review blog site Roger Martin, Dean of the Rotman School of Management at the University of Toronto, tells us in "Why Good Spreadsheets Make Bad Strategies" that you can't measure everything. And often the most important information about markets and what you must do to succeed is beyond measuring – at least in the short term.
Measurements are good control tools. Measurements can help force a focus on short term improvements. But measurements, and the concomitant focus, reduces an organization's ability to look laterally. They lose sight of information from lost customers, from small customers, from fringe customers and fringe competitors. Measurement often leads to obsession, and a deepening of Defend & Extend behavior. It's not accidental that doctors often find anorexia patients measure everything in (liquids and solids) and everything out (liquids and solids).
Measurements are created when a business is doing well. In the Rapids. Like Kodak during the 1960s and Xerox in the 1970s. Measurements are structural Lock-ins that help "institutionalize" the behavior which makes the Success Formula operate most effectively. And they help growth. But they do nothing for recognizing a market shift, and when new technology comes along, they stand in the way. That's why a powerful Six Sigma or Total Quality Management (TQM) or Lean Manufacturing project can help reduce costs short term, but become an enormous barrier to innovation over time when markets shift. These institutionalized efforts keep people doing what they measure, even if it doesn't really add much incremental value any longer.
To overcome measurement Lock-ins we all have to use scenario planning. Scenarios can help us see that in a future marketplace, a changed marketplace, measuring what we've been doing won't aid success. And because we don't yet know what the future market will really look like, we can't just swap out existing metrics for something different. As we proceed to do new things, in White Space, it's about learning what the right metrics are – about getting into the growth Rapids – before we tie ourselves up in metrics.
Note: To all readers of my Forbes article last week – there has been an update. The very professional and polite leadership at Tribune Corporation took the time to educate me about the LBO transition. As a result I learned that what I previously read, and reported in my column as well as on this blog, as being an investment of employee retirement funds into the LBO was inaccurate. Although Tribune is in hard times right now, the very good news is that the employee retirement funds were NOT wiped out by the bankruptcy. The Forbes article has been corrected, and I am thankful to the Tribune Corporation for helping me report accurately on that issue.
by Adam Hartung | Jan 8, 2010 | Current Affairs, Disruptions, In the Rapids, Lock-in, Web/Tech
So out of the blue I got called by a reporter asking me what I thought of Google posting an advertisement for the new Nexus One on its homepage. It was an easy question – the Google homepage isn't sacrosanct. Like everything, it needs to be used in a way that's most valuable for customers and suppliers. Times change, and it should change. So I answered that the Google home page wasn't a sacred cow, and it's smart for Google to try things.
So OnlineMediaDaily.com quotes me on Thursday in "Google Runs Multimillion-dollar ad for Nexus One."
- "Has Google changed its stance on using the
home page as a promotional platform? Adam Hartung, an analyst with
Spark Partners, refers to Google's home page as a "sacred cow." The
company has something that almost seems like a religious idol. This ad
demonstrates that Google is willing to change that and "attack a sacred
cow to step the company forward," he says. "And that's a very good sign
for investors."
I didn't record myself, but it sounds like me. Sacred cows get you into trouble. You have to constantly test, try new things.
But the CEO of Burst Media didn't agree with me. Picking up on my quote, in the HuffingtonPost.com "Google Should Not Give Up the Sanctity of Its Homepage" Mr. Coffin takes me to task for violating what he considers a sacred public trust. He fears that anything added to the Google homepage creates cracks in Google's foundation putting the company at risk.
How does anyone in web marketing get so Locked-in? It just goes to show that you don't have to be old, or a big company, or have a lot of money to be Locked-in to something. Google's homepage isn't even a decade old. Nor is Burst Media, an on-line marketing company, I don't think. But here a reputation leader in on-line marketing is working, working hard actually, to defend a sacred cow. "Sanctity" of a web page??? Give me a break.
Google has excelled, grown and made more money, because it has been willing to Disrupt its Success Formula and use White Space to test new things. That's why it's become a household name – and in the process almost singlehandedly destroyed the newspaper industry. And now is threatening to change how we do personal computing (with Chrome) and enterprise applications (with Google Wave) and even mobile computing (with Android and Nexus One). Google should consider nothing sacred, because that's the kind of Lock-in which kills tech companies. Sun Microsystems was busy protecting its sanctity while the market shifted right out from under it
Lock-in is inevitable. But winners – those who grow and make above average rates of return – learn how to manage Lock-in. They are willing to Disrupt and use White Space. Good for Google. I would have expected nothing less!
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 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 | Nov 20, 2009 | Current Affairs, General, Leadership, Lifecycle, Lock-in, Weblogs
"The Illusion of Brand Control" is a great article at Harvard Business Publishing. Andrew McAfee, who is a research scientist at the MIT Sloan school Center for Digital Business, offers the insight that in today's market it's not possible for a business to "control" its brand. "New media" like the internet and Facebook are bi-directional. People no longer just absorb a crafted message, they are able to push back. Bloggers and internet commenters can have more influence on a brand than traditional advertising and PR. As a result, a business's brand becomes the result of what others say about it – not just what the owner says.
And this mirrors what is happening across business today. As we've moved from the industrial to the information economy, success is no longer about amassing and controlling assets. Scale advantages have disappeared, with scale accessible to anyone who has a browser and a credit card. Where the business leader of 1965 likely felt success required controlling everything from employees and facilities to the brand message, in 2015 success is about adapting to rapidly shifting market requirements.
If you want your brand, and your business, to grow and be profitable, you have to realize the dramatic limits of "command and control." That approach works in very static, clearly defined environments. Like the military. Businesses today no longer operate in slow moving static environments with high levels of regulation and rigid business limits and significant entry barriers. Businesses today operate in complex, highly adaptive systems. Competitors can move fluidly, quickly, globally to offer new solutions and react to changes.
Today's leaders have to recognize that many of the most important impacts on their business (or brand) come from outside their organization. Completely out of management's control. Being Locked-in on what you know how to do has less and less value when you might well have to react very quickly to an external event in an entirely new way in order to maintain product position and growth. Just ask the leaders at Circuity City, who could not adapt quickly enough and saw their company fail. Adaptability to shifting market requirements becomes key to sustaining growth. Competitive advantage is not created by seeking entry barriers. Rather, competitive advantage now comes from understanding market shifts, and moving rapidly to position yourself in the right place – over and over and over.
Executives who feel like they have "control" of their business are under an illusion in 2009. And that has been demonstrated time and time again as this recession has driven home a plethora of market shifts. There are many things managers can control. But many of the most important things to success are completely out of management's hands. Thus, the ones who succeed aren't trying to control their brand, or business. Instead they are building organizations that have great market sensing and are quick to react. Just compare GM to Google and you'll see the gap between what worked in 1965, and what works 45 years later.
by Adam Hartung | Nov 19, 2009 | Current Affairs, General, Innovation, Leadership, Lifecycle, Lock-in
According to Marketing Daily "Electric Cars Set to Tiptoe Into Showrooms." Nissan is supposed to introduce the Leaf. Chevrolet, Toyota and Ford are all supposed to begin offering a plug-in hybrid. None have announced prices, but all indicate they intend to price them at the high end – more costly than a like-sized traditional gasoline powered automobile. One reason for the higher price is that dealers normally expect to make 20% of a traditional vehicle's price in high-margin maintenance and repairs, and because these electrics won't provide that revenue and margin the manufacturers believe the dealer has to make more on the initial auto sale – or they won't sell them.
The manufacturers themselves are not optimistic about sales. They are targeting wealthy early adopter consumers for whom climate change and environment are critical issues. Citing a lack of infrastructure for recharging, and battery technology that takes too long to recharge, the manufacturers are non-committal on how many cars they will make – preferring to wait and see if demand develops.
Sort of sounds like a self-fulfilling prophecy, doesn't it? This approach is very unlikely to succeed, because they manufacturers are trying to sell electric cars to people who are already well served by existing petroleum powered traditional and hybrid cars. These people have little or no reason to pay extra for new technology, so will be a hard sell. And with built-in excuses for the technological limits, the manufacturers aren't being promotional. Simultaneously, the manufacturers are more worried about the impact on dealers than the success of the vehicles.
It's not the product that's wrong, its the approach. These manufacturers are trying to launch a very different product, that really needs to appeal to very different customers. But they are trying to do it in the totally traditional way. Same brand names, same distribution, same sales people, same marketing, same financing – same everything. They are trying to have the existing organization, with all its Lock-ins, do something very different. And that never works.
Electric cars are ideal for White Space team introduction. White Space projects are given permission to do what it takes to make a project succeed. They are given permission to operate outside the Lock-ins. It's that permission to find the right answer, to find the market-based solution, which allows the innovation to develop a new Success Formula that meets market needs.
Electric cars are not a solution for the way automobiles have been used in the past. To succeed requires appealing to different scenarios about the future. Electric cars need to appeal to people for whom a traditional auto has limitations they don't like, and instead the electric auto is something they want. People who are underserved by the current products. The electric car will succeed with buyers who have reasons to want one. For whom the electric car is the solution to their problem – not a second-rate, overpriced solution to an old need.
Cell phones didn't succeed because they were purchased by people who already had wired phones with long distance. Early cell phones, for all their expense and weakness, were bought by people who had a real need for mobile telephony. For years, mobile phones were used only by a small group of people. It took years for cell phones to become commonplace. We all now know younger generation people who have no land line phone – for whom the mobile phone has displaced a traditional phone. But the cell phone didn't succeed by trying to be a high-priced alternative to the existing solution, it was a product that was desired by people for the advantages it offered – even when it was expensive, big and had limited range. Only over time did the cell phone evolve to a new Success Formula that is making traditional phones obsolete – and leaving traditional phone companies with a very hard transition.
Electric cars need an entirely "greenfield" start. Those responsible need to be chartered to "make this work" in an environment where failure is not an option for them. They need to believe their careers depend on finding the right solution, and developing it. And they need permission to do what the market requires. They need to be able to have a stand-alone brand, and its own distribution system, and unique marketing. They need the White Space with permission to do what it takes, and the resources to accomplish the task. Free from worrying about dealer reaction, marketing impact on traditional autos in the brand, or requirements to solve "infrastructure issues."
Imagine urbanites who want cars just for short hauls. Think about the ZipCar business in most major U.S. cities as the target buyer, rather than selling cars to individuals. Or think about other markets – outside the USA. How about places like Taiwan or Malaysia where distances are short and traffic is bad and much fuel is wasted just sitting. Towns like Tel Aviv. Maybe as delivery vehicles in urban areas where traveling is rarely more than 200 miles in a day because most time is spent sitting at lights – or making the delivery. There are places for which an electric car could be an ideal solution – just as they are today. Where a head-to-head match-up favors the electric vehicle.
Secondly, who says a traditional dealer is the right way to sell this vehicle to these people? Maybe it should be sold on-line, with somebody delivering the vehicle to the buyer and offering personalized instruction? Maybe it should be sold out of a Home Depot, or Staples, or Best Buy like an expensive appliance or computer? It's not clear to me that people, or companies, have much value for auto dealers – so perhaps this is the time to change the distribution system entirely — and perhaps take a lot of cost out of auto distribution.
There is a market for electric cars. Today. Just as the technology exists. And if White Space teams were allowed to find and develop that market, we could have a robust electric car industry in just a few years. But it won't happen via traditional approaches, from companies Locked-in to their traditional ways. Those companies only see obstacles, not opportunity. Without White Space, this will be just another example of a technology delayed.
But it does leave the door wide open for a company like Tesla. Tesla is a stand-alone company pioneering the electric car market. They are operating in White Space. Easy as Tesla is now to ignore, they may prove to be the upstart like Southwest Airlines that succeeds and makes money while the traditional industry players keep struggling.
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
