by Adam Hartung | Aug 11, 2010 | Defend & Extend, Food and Drink, In the Whirlpool, Leadership, Lock-in, Television, Web/Tech
“Playboy’s Circulation drops 34%” is the Chicago Tribune headline. Is anyone surprised? If ever there was a brand, and business, that was out of step with current markets it has to be Playboy. That the business still exists is a wonder. But let’s spend a few minutes to see why Playboy has fallen on hard times, and what the alternative might have been – and could still be.
The Playboy Success Formula is really clear. Since founded by Hugh Hefner, the company has focused on titillating the male libido with a magazine that focused on pictures of naked women, videos of same (physical videos, on-line videos and television), radio talk shows about sex, and alternative lifestyle issues such as recreational drug use. At one time this was unique, and in a male dominated 1960s it was even tolerated. Although never mainstream, the business was very profitable early in its lifecycle. Thus the founder kept doing more of the same, building a small empire and eventually taking the company public.
But the market shifted. Larry Flint and others ushered in a new era of pornography altering the market for prurient, sexually oriented material. Women in the workforce – and I’d like to think a heavy dose of decency – made public toleration of such material unacceptable. You couldn’t read a Playboy at work, or on the airplane, and you wouldn’t have a business lunch at their clubs. Other magazines sprung up to deal with men’s interests in automobiles, clothing, music, sports, etc. in a more acceptable – and for most people more significant and intelligent – manner. Other lifestyle publications were developed that discussed illicit drug use and non-traditional ways of life more directly, explicitly and with greater advocacy. The advent of cable TV and then the internet increasingly made access to the key features of Playboy’s product readily available, very inexpensive (often free) and targeted at niche audiences.
Yet, despite these many market changes, Playboy’s founder and his daughter, the company CEOs for 40+ years, steadfastly stuck to their old Success Formula. They kept thinking that people wanted those “bunny eared” products. They talked a lot about the heritage of Playboy, how it broke ground in so many markets, and opened the door for lots of new competitors. But they kept doing what the company always did – including foisting upon us the ever aging founder as a “role model” for male menopause and the anti-family aged entrepreneur. Playboy today is what it always was – and there simply aren’t a whole lot of people with much interest in those products any more. Nobody mismanaged the brand, the market just walked away from it. Sort of like the demand for Geritol.
Playboy focused on its core. And now its on the edge of bankruptcy. The company keeps outsourcing more and more of the work, as the staff has dropped to nearly nothing, cutting costs everywhere possible. Sales continue to decline, and the brand looks like it will soon join Polaroid and Woolworths on the heap of once famous but floundered companies. Playboy’s fatal mistake wasn’t that it was started as a prurient men’s magazine – but rather that for 40 years its leadership kept Defending & Extending that original Success Formula despite rather dramatic market shifts. Now, today, Playboy is a sour lemon that not many a marketer would want to be stuck promoting.
But – it didn’t have to be that way. Just imagine if you’d been given control of Playboy 30 years ago. What could you have done?
As soon as Hustler hit the newsstands, and the first women’s right protests developed – including the early push for the Equal Rights Amendment – it was clear that the future of the magazine was in jeopardy. Instead of doing “more of the same” could you have considered something else?
The growth of women in the workforce meant a lot of new opportunities. Why not jump onto that bandwagon? If you’re really at the forefront of “lifestyle” issues, as the leadership claimed, then you would have identified that women in the workforce meant something new was brewing – a group of consumers that would have more cash, and more influence. And not only would that be an appealing market, but so would the men who would be adjusting to new lifestyle issues as homes became dominated by 2-worker leadership.
Playboy was well positioned to be Victoria’s Secret. At a time before anybody else was really thinking about a significant market for attractive and comfortable lingerie Playboy certainly had the leading edge. Or, even more likely, the water carrying publication for Dr. Ruth-style discussions about sexuality. There was an emerging market for information targeted at increasingly affluent women about automobiles, stereos, apartments, resume writing, job hunting and even at-work etiquette — all topics that had been the dominant discussion areas for Playboy’s historically male readership. Had the leadership at Playboy opened its eyes, and scanned the horizon for growth markets being developed as a result of the trends which were negatively impacting it, these leaders would have been able to create a bevy of scenarios that were filled with opportunities for growth.
It’s hard to imagine today Playboy being anything else. But all that stopped stopped Playboy’s evolution was a commitment to its “core” – to its old Success Formula. That the CEO for over 20 years was a well educated woman is testament to the power of “core” philosophy versus a willingness to look at market opportunities. By keeping Playboy’s Success Formula tightly aligned with her father’s founding ideas she quite literally led the company into smaller and smaller sales with less and less profit. The big loser was, of course, investors. Playboy is worth very little today as Mr. Hefner hints at making a bid to take the company private once again.
Singer was once a sewing machine company. But when Japanese products surpassed Singer’s product capabilities and achieved a cost advantage in the 1970s, Singer leadership converted Singer into a defense contractor. And Singer went on to multiply its value before being acquired by General Dynamics.
IBM was an office machine company famous for mechanical typewriters and adding machines. The founder said he would never enter computers. Fortunately for employees and shareholders the founder’s son took the company into computers and the company flourished as competitive typewriter companies such as Smith Corona – stuck on the core business – disappeared.
There’s a time for lemons – in your tea or on a salad. But when markets shift, lemons just turn sour. If you want to succeed long-term you have to shift with markets. And that might well mean making significant change. Adding water and sugar to the lemons is a good start – as lemonade is less about lemons than what you’ve added to it. After you open that lemonade stand, see where the market leads you.
No matter where you start, every day offers the opportunity to head toward new, emerging markets. No matter what your historical “core” you can literally become any business you want to become. Coke was founded by a pharmacist who wanted to boost counter sales in his store – and it was worth a lot more than the pills he was constructing. Those who develop scenarios about the future prepare for market shifts, understand the competitive changes and use them to identify the opportunities for a new future. Then they use White Space teams to move the business into a new Success Formula. Anybody can do it. You could even have remade Playboy. So what’s the plan for the future of your business? More of the same …. or …..
by Adam Hartung | Aug 10, 2010 | Current Affairs, Food and Drink, In the Rapids, In the Swamp, Leadership, Lock-in
Nearly 20 years ago the Clinton campaign inspired itself with the mantra “It’s the Economy, Stupid.” Their goal was to remind everyone that the economy was critical to the health of a nation, and the economy hadn’t been doing so well. Now we could retread that for business leaders “It’s About Growth, Stupid.” For some reason, all too many seem to have gotten caught up in downsizings and cost cutting, forgetting that without growth there’s no way to have a healthy business!
I’ve long been a detractor of Sara Lee. As the company undergoes a change in leadership, the Chicago Tribune headlines “Nobody Doesn’t Like Sara Who?” Under CEO Brenda Barnes, Sara Lee sold off business after business. Now the company is so marginalized that it’s an open question if it will remain independent. For years the leaders said asset sales were to help the company “focus.” Only “focus” made the company smaller, without any growth businesses. Why would an investor want to own this? Why would a manager want to work there?
Had the asset sales been invested in growth, perhaps a positive outcome would have developed. But Sara Lee was like most companies, as that rarely happens. Had the money been paid out to investors perhaps they could have invested those gains in other growth businesses. But instead the money went into the company, where it propped up no-growth businesses. Leaving Sara Lee a smaller, no growth, low profit business. This leadership has not benefited investors, employees, customers or suppliers.
Likewise, draconian cost cutting does more harm than good. The National Public Radio headline reads “Extreme Downsizing May Hurt Companies Later.” Using deep cuts at Alcoa as an example, Wayne Crascia, professor at University of Colorado, points out that it’s unlikely Alcoa has really “prepared itself for future growth.” Instead, cost cutting often eliminates the ability to compete effectively, by cutting into R&D, marketing and sales in ways that are impossible to rebuild quickly or effectively. By trying to save the old Success Formula with cuts, rather than growth initiatives, the leadership hurts the company’s long term viability. Sort of like repeated vomiting by anorexia sufferers leaves them skinnier – but in far worse health. Even though Alcoa still boasts 60,000 employees it’s very likely the company has permanently Locked-in its old Success Formula leaving itself unable to emerge as a stronger company aligned with new market needs.
Yet, while so many company leaders are trying to “retrench to success” it’s clear that growth still abounds for the companies that understand how to create value. BrandChannel.com headlines “The Elastic Brand: Virgin Expands in Every Direction.” Instead of retrenching to focus on some sort of “core” the article points out how Virgin’s leader, Sir Richard Branson, keeps taking the business into new, far flung operations. Defying conventional wisdom, Virgin is in money lending, mobile phones, gaming, social media, international airlines, domestic airlines and even intercontinental flight! By intentionally avoiding any kind of “core” Virgin keeps growing – even during this recession – adding jobs for employees, higher value for investors, more sales opportunities for suppliers and more chances to buy Virgin for customers!
Conventional wisdom be danged ….. maybe it’s time to look at results! Organizations that whittle themselves down to “core” by asset sales or cutting destroy value. While it may feel self-flaggelatingly good to talk about cuts, it does not create value. Only growth can do that. And there is growth, when we start focusing on market needs. Virgin is finding those opportunities – so what’s stopping you? Is it your “focus on your core” business? If so, maybe you need to read the Forbes article “Stop Focusing on Your Core Business.” It may sound unconventional, but then again – isn’t it those who defy conventional wisdom that make the most money?
Postscript: I offer my personal best wishes to Ms. Barnes on her recovery. It has been reported in the press that Ms. Barnes recently suffered a stroke. I know how difficult a time this can be, as my wife stroked at age 54, and I was her personal caregiver for 3 years of difficult recovery. Stroke recovery is hard work. For the patient as well as the family it is a tough time. While I have been a detractor of Ms. Barnes leadership at Sara Lee, in no way did I ever wish my comments to be personal, and I would never wish anyone suffer such a difficult health concern as a stroke. Again, my best wishes for a full recovery to Ms. Barnes, and for both her and her family to have the strength and tenacity to come through this ordeal stronger and even more tightly knitted.
by Adam Hartung | Aug 5, 2010 | Current Affairs, In the Whirlpool, Lifecycle, Lock-in, Web/Tech
“Blame Piles Up in Tribune Cos. 2007 Buyout” is the Chicago Tribune headline. After months of research the bankruptcy judge has released a court ordered report on the transaction that left Tribune Corporation insolvent. Apparently, lots of people were aware that ad demand was falling like a stone. And that there was little hope it would recover. But selling executives shopped for a valuation company until they found one willing to say that management’s projections were plausible. Of course, they weren’t. The transition from print to digital was well along, and the projections were never going to happen.
What’s more startling is the hubris of Sam Zell to close the deal. Apparently he too had doubts about the forecasts, but he went ahead and borrowed all that money to close. That he would ignore all the market signals, and plenty of opportunities to obtain outsider input on the likely continued demise of newspaper ads, shows he wanted to close. He wanted to control Tribune Corporation. Even if it would cost him $300m.
Success Formulas are very powerful. And successful entrepreneurs often have them so locked-in that there’s no other consideration. Success, and personal fortunes, causes them to ignore external data, and external opinions, when they fly in the face of their historical Success Formula. They want to apply it to a new business, and they are ready to go! So damn the torpedos! Full speed ahead!
It’s too bad that our hero worship of successful entrepreneurs too often leaves them insufficiently challenged. Unfortunately, a lot of people got hurt in the calamity that is now the Tribune Corporation bankruptcy. Employees have lost pay, benefits and jobs. Chicagoans have seen the paper get even smaller, and the amount of local news coverage decline. And the city’s reputation has certainly not benefited.
As much as people despise consultants, it would seem that Mr. Zell would have been a lot smarter to ask some bright strategists what the future was for the newspaper before abetting the close of such an onerous, and destructive, transaction. Outsiders, including consultants, are valuable at pointing out the range of potential outcomes – not just the one that fits your Success Formula. That’s why successful organizations use outsiders to help develop scenarios and study competitors, as well as design Disruptions and establish White Space projects. Outsiders can help overcome Lock-in to historical assumptions, biases, prejudice and viewpoints in order to reduce failures and improve success.
And this is some advice hopefully Leonard Riggio will heed. “Barnes & Noble Considering Sale of Company; Possible Buyers Include Founder Leonard Riggio” is the Chicago Tribune headline. Barnes & Noble as an acquisition looks a lot like Tribune did 3 years ago. Product sales (printed books) are in a free-fall as people choose alternative products – especially digital books and journals. Books themselves are struggling to avoid obsolescence as digital publishing makes shorter format more valuable in many instances. Brick and mortar shops focused on printed material – from bookstores to magazine/news stands – have been failing for 10 years – and in fact overall brick and mortar retail across the board has declined the last 4 years as internet retailing has grown. The leading competitor (Amazon) has led the transition to digital, and is competing with an enormously successful tech company (Apple) for the future of digital publishing. Barnes & Noble may have a fledgling product, but it’s about as competitive as a junior leaguer compared to someone on the Yankees!
The Success Formula of Barnes & Noble, as created by the original founder, is obsolete. And B&N is not in the game for where the marketplace is headed. Just because he knew the business once, years ago, gives the founder no leg-up on resurrecting the company. Contrarily, his background is a decided negative as he’s likely to attempt a “throwback” strategy. Since the world goes forward, never backward, those simply don’t work. We could expect lots of store closings, layoffs and inventory reductions – but the future of publishing has radically changed and will continue doing so, and B&N has little input on that outcome. Amazon, Apple and Google (the largest purveyor of digital words through its search engine) are the giants in this game and B&N will get crushed.
And the city of Milwaukee should consider hiring some consultants, as should Harley Davidson. “In Quest for Lower Cost Harley-Davidson Considers Leaving Milwaukee after 107 years” reports Chicago Tribune. Harley would like subsidies, from its workers (unions) as well as the city and state, to keep from moving its factories. But Harley’s problems are far worse than hourly wages for plant workers, and everyone needs to be careful not to get sucked into a Tribune Corp. deal of trying to save a floundering ship.
Harley Davidson’s product has been largely unchanged for a very long time. Despite all the hoopla about tattooed customers, for 30 years competitors Honda, Suzuki, Kawasaki and Yamaha have been innovating and running circles around Harley. Their businesses have grown. Not only by dramatically expanding their motorcycle products, but adding ATVs, snowmobiles, boat engines, automobiles, electric generators, yard equipment and a raft of other products (Honda even makes a commercial airplane!) They have brought in millions of new customers, while Harley’s customer base is eroding – largely dying off as the average age of buyers has risen to well over 50!!
While competitors have pushed forward with new technology and products, and developed new markets and customers, Harley has tried standing still. So, its now an historical anachronism. Interesting to look at, and with some intriguing niches, but not really important to the industry. Should Harley disappear nobody in the motorcycle business will really notice, because almost every competitor now has a Harley-inspired v-twin motorcycle they can sell. Few people realize that most dealers make more money selling jackets and other Harley-Licensed gear/apparel than motorcycles! Harley’s days have been numbered since they let the v-Rod, a motorcycle with a Porsche engine, languish in dealer showrooms – allowing their “customers” to keep them locked-in to aging technology at ever rising prices (they typical Harley prices for over 2x the price of a comparable Japanese produced motorcycle.) Harley should have paid more attention to competitors a long time ago (instead of deriding them as “rice burners”) and a lot less attention to those very loyal – but diminishing in numbers – dealers and end-use customers.
All 3 of these companies, Tribune, Barnes & Noble and Harley-Davidson have great pasts. But the risk is thinking that means anything about the future. Tribune was fatally harmed by adding debt to a company that needed to refocus on new internet markets, then continuing to try to keep the old Success Formula operating. Barnes & Noble is the last prominent brick and mortar book retailer, but there is little reason to think there will be a need for them in just 5 years. And Harley-Davidson every year appeals to a smaller group of buyers in a niche market with aged technology and a tiring brand. In all cases, caveat emptor! (Let the buyer beware!) Before accepting any management forecasts, it would be a good idea to get some external opinions!
by Adam Hartung | Aug 4, 2010 | Current Affairs, In the Rapids, Innovation, Leadership, Lock-in, Web/Tech
Things are changing pretty fast in the “tech” world. PCs are losing market share to fast growing platforms like smartphones and tablets. New competitors are becoming a lot stronger as data and applications move from corporate servers and laptops/desktops to cloud computing. Erudite journal The Economist has declared “The End of Wintel.” It’s now considered a foregone conclusion by experts globally that how we interact with digital information is moving into a new era that will not be dominated by the old Microsoft Windows + Intel platform that practically monopolized the last 15 years.
So, what are you doing to prepare? Some people will choose to react when they are forced to. Unfortunately, that will allow faster moving competitors to gain an advantage. Those that adopt these new technologies will reach customers faster, and more accurately for their needs, than businesses that delay. It’ll be hard to compete blasting out ads on billboards, or even computer browsers, when your competition reaches out and tells a customer, on their cellphone using technology from a company like Foursquare that if they stop in – just around the corner – the customer can get a free product.
According to The Wall Street Journal this is already happening in “Getting Customers to ‘Check In’ with Foursquare.” All a customer has to do is offer a review on the mobile site, possibly bringing in one of their friends that is a block away. While you’re waiting for customers to read your ad (traditional media or internet), the competition might well have reached 100 new users!
The next option is to begin using the technology. And that would be a great start! Develop some future scenarios, figure out how to beat your competition, Disrupt your old spending and behavior patterns and set up a White Space team charged with figuring out how to update your Success Formula.
But the really big winners go even further. Take for example Amazon.com. This less than 20 year old company started as an on-line book retailer. They’ve gone a lot further, building a $44B revenue stream selling more than books. In fact, selling stuff for other people as well as themselves. But beyond that, Amazon is revolutionizing publishing by developing and selling the Kindle as a digital toolkit. As people go further along the trail of moving to mobile devices and the cloud, Kindle has begun offering a range of web services to host data and applications.
Source: Business Insider
Amazon will achieve $500M revenue this year in web services – after just 4 years of business. And could achieve $1B in a year or two! By participating aggressively in the marketplace, Amazon is creating significant revenue that other retailers – such as WalMart, Target, Home Depot or Sears – isn’t even touching. While this has nothing to do with what others might call Amazon’s “core business,” this will continue to build insight to the marketplace, allowing Amazon to further grow all aspects of its revenue! What could be more important than being knowledgeable about web services?
You may not think of yourself as an electronics firm, so you shy away from implementing computer-like hardware. But you shouldn’t think that way. Today mobile chips from ARM, and soon from Intel, will be so cheap you can include them in any item over $100. Soon any item over $20. How much better could you connect with your customers if the product you sold had the equivalent of a cheap smartphone installed? You could learn how your product is used very quickly, and develop new solutions before customers even think to ask for them!
Too often, as I wrote in my Forbes column (Stop Focusing on Your Core Business), we think about our “core business” in such a way that it keeps us from doing new things. As a result, less constrained competitors figure out how to provide more powerful solutions that are more profitable. Focusing on your “core” can keep you from doing the things that are most important for future growth!
The change in technology is not an “if” proposition. Just like we moved away from mainframes, and then minicomputers, eventually to PCs we are going toward a fully connected world of cheap hardware hooking into the cloud where everyone can access data and applications. How will you participate? You won’t be able to compete if you “opt out.” If you are a spectator you can expect the Amazon-like competitors to build a big leg-up. The winners will be those who really become players. And that means pushing your scenarios to really discuss what the year 2015 could bring, study how you can leapfrog competitors, and see how you can disrupt your approach – then implement with White Space teams – to be a big winner.
by Adam Hartung | Jul 30, 2010 | Current Affairs, Defend & Extend, In the Swamp, Quotes, Web/Tech
This week Microsoft’s CEO Steve Ballmer said the company would get out a tablet soon, and that it would be a big success. Do you believe him? You have good reason to be doubtful. When it comes to new products, Microsoft has been a big dud under his leadership. But I’m not the only one complaining. Mediapost.com ran an article quoting some very well respected sources who are very, very skeptical. Below is part of the article. You can read the whole thing here:
“Of course that’s often the case with Microsoft,” notes Digital Daily.
“The problem is, it doesn’t always manage to do things really right.
Certainly, it didn’t manage it with Windows Vista. Or Windows Mobile. Or
Zune. Or, more recently, Kin. Who’s to say this time will be any
different?”
“As it stands now, Microsoft’s lack of details on
the upcoming Windows tablets is not encouraging, despite Ballmer’s
promises,” concludes PCWorld.
Seemingly overwhelmed by the rapid innovation and successes of rivals like Apple, Google, and even Facebook, Fortune
calls Ballmer “a train wreck,” and “a salesman whose only answer to
technological change seems to be the operating system he inherited from
Bill Gates.”
Thinking of Microsoft as an “innovator,”
however, will leave you disappointed every time, Jefferies analyst
Katherine Egbert wrote in a note Friday morning. “If you stop thinking
of Microsoft as an innovator and start thinking of them as a fast, low
cost, mass market follower, you’ll stop being disappointed in their
inability to divine new markets and realize they are staring at some of
their largest growth opportunities ever.”
Microsoft is too focused on its core business to do new things correctly. Long ago Mr. Ballmer took a Defend & Extend approach to the business. The company doesn’t do much scenario planning to determine how markets can be disrupted – in fact they hope the opposite. They do very little competitor analysis, because they view themselves as market dominant so beyond having to study competitors. They ignore fringe competitors – including upstarts like Apple and Google. Internal disruptions are verboten, and politics abound. And there is no white space where teams can violate old lock-ins to develop a new success formula that will compete better with the likes of Apple, Google and Cisco.
Focusing on your core can get any business in trouble (read Forbes article “Stop Focusing on Your Core Business” here). Even one with a near monopoly. Over time, all markets shift. When they do, the least prepared are the ones who think they “dominate” their industry. Maybe Mr. Ballmer should have lunch with Mr. Wagoner of GM to learn what happens when you take your industry position for granted.
by Adam Hartung | Jul 29, 2010 | Current Affairs, Defend & Extend
Be very, very good at what you do. Once that was the mantra for business success. In Search of Excellence sold millions of copies because it brought forward the idea that companies which excelled at identifying and delivering customer value sold more and made more money. Not bad advice at the time. And from that advice grew all kinds of recommendations to understand “core” customers, capabilities, technologies, costs, etc. – then benchmark your performance against competitors and do more so you remain #1. That thinking has been around for 30 years. Unfortunately, its far from enough to create success in 2010.
Motorola was once #1 in mobile phones. It had developed smartphones, but they were not part of the core product line. So Motorola did everything it could to keep selling Razrs.
Source: Silicon Alley Insider
When Apple introduced the iPhone Motorola was selling 35 miillion units/quarter. Three years later Apple is shipping more iPhones than Motorola is shipping all its phones. By creating a marketplace disruption Apple knocked Motorola out of first place in mobile phones. Motorola stuck to what it new best, and despite its great strengths in its traditional core competencies and markets saw revenues and profits plummet.
Nokia did a much better job of maintaining unit volume in handsets. But unfortunately it has had to drop prices dramatically to maintain volumes. Profits have evaporated, and nobody really cares much about what Nokia is doing any more – despite its huge handset volumes. The excitement, and profitability, is going to the smaller unit volume Apple. As a result, the market value of Nokia had dropped more than 50%, while the market value of Apple has exploded 200%!
Source: Silicon Alley Insider
Both Motorola and Nokia maintained a focus on their “core.” Core markets, products and competencies. Yet, they are now market inert. Motorola is in oblivion. And that’s the message in the Forbes article “Stop Focusing on Your Core Business.” We easily become obsessed with doing what we’ve historically done well better, faster and cheaper. So obsessed we miss market shifts. And that is deadly. Only those companies that can transition to new markets – and new competencies —- that can develop new “cores” by not being too closely tied to the old ones – have any hope of long term success.
PS – I bet you think your words are your greatest communication tool. Think again! In a great Forbes article “How To Win an Argument Without Words” Nick Morgan describes why body language can be more important than what you say! Overcome your lock-in to thinking what works in a meeting or presentation and pay attention to what really may make the difference!!
by Adam Hartung | Jul 26, 2010 | Current Affairs, Defend & Extend, Food and Drink, In the Swamp, In the Whirlpool, Leadership, Web/Tech
“Blackberry’s Era May Be Ending” is the New York Times title on a Reuter’s story about the pioneering leader in smartphones. That RIM is in trouble is undoubtedly true – so much so it will not likely survive as a stand-alone company, if it survives at all! The company is in a growth stall, with U.S. market share in the first quarter dropping to 41% from 55% last year. Selling cheaply priced products outside the U.S. has masked the deep revenue problem developing at RIM – as the company tries to convince investors that it really isn’t falling way behind new competitors.
It was just April 8 when I published on this blog “Enterprise Customer Risk” in which I described how Blackberry’s ongoing focus on corporate customers allowed it to fall far behind in the applications development area ( see the 2 critical charts in previous blog showing the application weakness as well as market share problems). Now Apple has 30 TIMES the number of apps available on the Blackberry. On January 10 in “Winners and Losers from Shifts” this blog posted a chart showing how Apple hit 1 billion application downloads in its first 14 months of iPhone sales. Two weeks ago MediaPost.com reported “Android Hits 1 Billion Downloads.” Android now has about 100,000 apps, while Apple has about 225,000 apps. RIM doesn’t even have 10,000 apps.
RIM made a huge mistake. It focused on its core market of enterprise Blackberry customers. It tried to Defend its historical market share by focusing on its historical customers – and ignoring the smartphone non-user markets being developed by Apple (and now Google.) As a result it’s price/earnings multiple has fallen to 10 – amidst clear indications that RIM is unlikely to ever regain much growth as this growth stall continues.
We might like to think this sort of rapid problem creation is limited to technology companies. Unfortunately, not so. Crain’s Chicago Business today reports that “Kraft Foods Sees Slowdown in U.S. Cookie and Cracker Sales, Complicating CEO Rosenfeld’s Growth Agenda.” Kraft has had no measurable organic growth for over a decade, nor successful entries into new markets. The last year Kraft’s CEO demonstrated no commitment to organic growth by putting all her energy into the acquisition of Cadbury in order to expand Kraft’s “core” market position – dominated by Oreo, Chips Ahoy, Ritz Crackers and Wheat Thins. But now sales for the last quarter in the historical business are down 3.8%!
Kraft is another example of what happens when a company hits a growth stall. It may have a few up periods, but overall it is 93% likely to never again consistently grow at a mere 2%! Defend & Extend management uses obfuscation, like acquisitions, to hide underlying problems in the company’s ability to meet changing market needs. Resources are poured into price cutting promotions and advertising, looking only at the marginal cost and the initial sales, which props up the over-spending on worn out products in a worn-out Success Formula – and in Kraft’s case even these aren’t able to keep customers buying brands that are over 50 years aged. Ms. Rosenfeld will try to keep everyone’s attention on the top-line, hoping they forget that “growth” was manufactured by acquisition and that in fact both sales and margins are deteriorating in the “core” brands.
So, are you still trying to find your growth in this “Great Recession” by doing more of what you’ve always done – hoping customers will for some reason flock to your old way of doing business? That, quite frankly, has almost no hope of working. Customers are looking for new solutions every day. If you focus on protecting old markets, maybe by asking old customers what to do, you’ll miss the emergence of new markets where underserved customers are creating all the growth. If you don’t have plans to expand your business by 20% or more in new markets across the next 2 years you have more chance of burning up your resources than growing – and you might well end up like GM, FAO Schwarz or Sharper Image!
by Adam Hartung | Jul 23, 2010 | Current Affairs, Innovation, Leadership, Lock-in, Web/Tech
Are you prepared to implement tablets in your business? More specifically, how have you adjusted your hardware spending plans, your software purchase plans, your IT development plans, your field technology deployment plans and your staffing plans to spend less on servers and PCs while spending more on tablets? Unfortunately, far too many companies are stuck in their Microsoft/PC relationship – effectively waiting on their vendor to bring them a solution – something specifically CIO Magazine warns against in “You are Not Your Vendor.”
We’ve watched the unprecedented explosion in iPad adoption. in just a few months iPad sales have become as large as iPod – the product that turned around Apple’s fortunes.
Source: Silicon Alley Insider
Cisco has launched a tablet according to Channel Insider “Cisco Cius: The iPad Killer.” Hewlett Packard (HP) is launching a tablet using the WebOS operating system from its new acquisition Palm according to Channel Insider in “Microsoft – HP Tablet War.” As new tablets are launched without using Microsoft products the software giant increasingly looks like it’s missed the boat – even as Channel Insider offers up 10 ideas for how Microsoft could try to get in the game in “Windows 7 vs. Cisco Cius.”
So, have you started developing future scenarios – both business and technical – that incorporate using tablets? CIO Magazine recommends “Use Scenario Planning to Get Beyond Legacy Systems.” Have you started testing different tablets to learn how they can improve your business – and what the differences are between vendors? If you aren’t, then your legacy investment (and your legacy vendor) will keep you using old technology. If you’re stuck with PCs while others adopt the next wave you will find yourself wandering around in the Microsoft Lock-in – while the market moves rapidly in a different direction! While this may seem fine today, and cheaper than changing, what you risk is losing business to competitors who move quicker, adopting tablets and their applications to improve performance and lower cost.
by Adam Hartung | Jul 22, 2010 | Current Affairs, Lock-in, Web/Tech
“You are Not Your Vendor” is the title of my most recent column published in CIO magazine and Network World magazine. You’ll read in the article why it is critical you never rely too heavily on a vendor. As much as we’d like to say we’re “partners,” reality is that the vendor/customer relationship is adversarial. It’s up to everyone to constantly try new solutions, because lock-in to a vendor can cost you dearly when a competitor moves to a better solution that might be faster and/or cheaper. Your competitiveness relies not only on your adaptability, but that of those who supply you. This is extremely true in IT, where product lifecycles are often very short. But it’s true in all vendor relationships. It’s important all businesses overcome vendor Lock-in to avoid carrying too much legacy cost, and to continuously explore better solutions that can help you enhance – possibly redefine – your Success Formula.
Along this line, I thought it might be fun to list the top 10 Vendor Lies I’ve heard in my career – often ignored at great cost:
- Of course our application is 100% compatible with that
- That feature was in the demo, and will be available to you in just 3 weeks after purchase
- Our customer service people are some of our best trained engineers
- That problem only exists in the demo – it won’t happen in your installation
- Your installation will be on-time and on-budget
- We never point our finger at another vendor if you have a problem
- Working with an outsourcer is easier than doing the work yourself
- Our prices are firm, we never discount at end of quarter
- We can seamlessly integrate into your business – you’ll never see a glitch
- With our product strength, we’ll never go out of business
by Adam Hartung | Jul 20, 2010 | Current Affairs, Defend & Extend, In the Swamp, In the Whirlpool, Leadership
According to Crain’s Chicago Business “Sara Lee Looks to Sell Bread Business.” Large investors seem to support the sale, hoping this will expedite a take-over by a larger consumer goods company or a privage equity firm. They hope the sale of this laggard company will finally bail them out of a bad investment. Should either takeover happen, Sara Lee would likely cease to exist as a company. Most employees would lose their jobs, more products “streamlined” into the dustbin, and another Chicago headquarters would disappear.
Since taking the helm in 2005 CEO Brenda Barnes has systematically dismantled Sara Lee. Then a $19B company, Sara Lee has shrunk by almost 50% to just over $10B. From 2005 to 2009, as asset sales dominated management attention, value declined by 75%, from $20/share to $5. On the hope of high values for the asset balance as the company is shopping its very existence, value has risen to $15/share – a 25% decline from the starting point. Hard to call that “excellent” CEO performance.
Sara Lee leadership was so focused on trying to Defend & Extend legacy business models that when they didn’t improve the business was sold. Year by year, Sara Lee got smaller. And the end of the road looks to be the end of Sara Lee. Customers lost many products, with almost no new product introductions to replace them. Employees had almost no growth opportunities as the company shrank. Suppliers saw margins shrink as they were beat upon to lower prices. And investors have suffered losses. There is no “winner” at the end of the road for Defend & Extend Management. When the company moves into the Whirlpool little is said as the remnants slip away.
Today we are fascinated by BP’s effort to cap the Deepwater Horizon oil leak in the Gulf of Mexico. Will it work? Everyone certainly hopes so. But what will it mean for BP if the leak is capped? Unfortunately, precious little.
The New York Times reported recently “In BP’s Record: A History of Boldness and Costly Blunders.” In classic Defend & Extend behavior, Tony Hayward early on implemented a “back to basics” campaign to “refocus” BP on its “core strengths.” These are all warning signs. When management looks backward, it is not looking forward. Taking “bold action” to “do what the company has always done best” is simply using euphemisms to ignore added risk in effort to protect a Success Formula with declining value. People feel pushed to improve performance by constant optimization – including a lot of cost cutting. And cost cutting leads to blunders.
BP is far from the Whirlpool. But things don’t look good for BP. As Forbes published in “BP’s Only Hope for Its Future” BP has to change its direction pretty remarkably or it’s employees, investors, suppliers and customers could find out BP has a long way yet to fall. Drilling ever riskier wells, in riskier places, for less reserves is not a long-term viable Success Formula.
