The second step of The Phoenix Principle is "Obsess about Competitors." This doesn't rile people up much. But when I tell them "I want you to dramatically cut the time you talk to and listen to customers – and invest that investigating competitors" then LOTS of people get riled up. When I wrote a Forbes column on the topic ("Listen to Competitors – Not Customers") I was inundated with comments – most of them not too kind. People were upset that I would attack the widely held notion that you can't spend enough time listening to customers.
There are lots of examples of companies led down the primrose path to disaster by listening to customers. One of my favorites is that IBM got out of the PC business by the latter half of the 1980s because their customers – data center managers – told them that they could see no need for PCs and the product was a waste of resources. IBM needed to renew its focus on data center (real computing!) needs and quit playing with that toy!
We have another great example emerging right now in mobile devices. RIM (Research in Motion) has focused on the "enterprise marketplace" by selling hard to corporations that they should have Blackberry servers and Blackberry corporate applications which can be supported well and have the "right kind" of security and features for a typical "enterprise" IT department. Because of this, RIM has really put all of its money into supporting "enterprise" customers, doing what they want. But meanwhile, Apple has been busy changing the game – by giving the market what it wants and targeting the destruction of Palm rather than doing what the "enterprise customers" have asked for.
RIM's focus on its "core customer" the "enterprise customer" has been intended to make sure the Blackberry Defends & Extends its leadership position. But that has not yielded many apps. Even Adroid has 6x the RIM apps (and a likely launch an attack on "enterprise customers" soon.) Meanwhile, by focusing on the marketplace, and discovering unmet and underserved needs in order to wipe out Palm, Apple has developed 34X the number of RIM apps.
As we can see, this difference in applications has let Apple blow right by Palm – and almost catch RIM. And of course, that will now be the next market Apple will attack. Just like the PC attacked the old data center, the iPhone (and iPad) and all its users will drive these products into every day business use. While RIM was "listening to its customer" it missed a major change in the marketplace. The requirement for multiple apps. While RIM was attempting to Defend & Extend its market position – and probably bragging about holding share while Palm was getting creamed – it was letting Apple create the market shift that is soon going to overtake RIM and Blackberry. Don't forget, you can obtain a Blackberry from almost any network provider – so what will happen when the iPhone and iPad become move beyond limited distribution to all network providers?
This customer-centric problem is most pronounced in "enterprise" solutions. Like IBM, which was the #1 "enterprise" vendor for corporate computing. The notion of selling to the "enterprise" connotes big sales, with big revenues to big companies – and it is assumed big profits will result. Yet, what really happens is that often supporting the "enterprise" marketplace ends up being a never ending effort to make small improvements to existing products in order to help the "core customer" do one more small thing – making their life easy. While the "enterprise" vendor is busy with this work, he ends up Defending & Extending his "base" product for his "base" customers – and the customers are trying to Defend & Extend their historical investment. But eventually these "enterprise" customers shift – usually very fast.
Meanwhile Apple is in the marketplace, paying all kinds of attention to the weaknesses of competitors and picking them off – one by one. First Palm, then RIM. We spend too much time listening to customers, letting them convince us to Defend & Extend our products and solutions. We need to spend a LOT MORE time focused on competition – figuring out how to ruin their day while developing fringe opportunities that change the marketplace and drive growth!
Do you read more today, or less than you did 10 years ago? For most of us, the answer is more. Our ever present access to email and texting means we watch less TV, and pick up more from reading. Of course, we read a lot less paper than we used to – books are falling more out of favor every year – and the plight of newspapers and magazines is rocky. For traditional book publishers like Random House, Pearson, et.al. as well as periodical publishers like Tribune Corporation or News Corp. there is a lot of concern about survivability. But it's not because we're reading less. It's because the market has shifted, and people are reading differently.
What should a publisher focus upon? Words. Content. A recent Harvard Business School web discussion "HBS Cases: iPads, Kindles, and the Close of a chapter in Book Publishing" highlights that the role of a publisher is to find really good stuff that people want to read. The author, former CEO of Random House, points out that a publisher's job is to edit content into the format which makes it easiest to understand and digest. A good publisher aids us in our seeking knowledge, or enjoyment. But most publishers have completely lost sight of that goal, instead focusing on printing. Books, magazines and newspapers. Keep the presses busy, and the old supply chain filled.
In the business lifecycle we start with the Wellspring of ideas. When something catches hold, we enter the Rapids of growth. That's great, because growth is a fun place to be. But when markets start shifting then things go flat. We think slowness is our fault, so we work harder at what we've always done – but the cause is a market shift so the hard work makes little difference. We drift into the Swamp, where we are so overwhelmed with all the problems from no to negative growth that we forget what our original purpose was (we get so busy fighting alligators and killing mosquitoes that we forget the mission was to drain the swamp!) Eventually resources are depleted and we slide into the Whirlpool of failure.
Publishers are now in the Swamp. Cutting costs, focusing on "big deals" (like bidding wars to publish a book by a celebrity like Sarah Palin), and spending all kinds of time dealing with the supply chain. As the HBS article explains, while iPad and Kindle represent an opportunity for incremental growth – and new revenue – by feeding people content when they want it where they want it and how they want it – the publishers are in a pitched battle to slow electronic publishing. The publishers are trying to Defend & Extend their old process of printing, and distributing, paper. They want to defend their old Success Formula. And in doing so, they've completely lost sight of the opportunity digital publishing offers!
Newsroom cuts are the most costly on revenue. More than cutting sales or distribution, cutting content led to the greatest loss. Duh! Of course. Readers are there for content – not for ads or distribution! Talk about forgetting your purpose.
The bigger the cuts, the impact on revenues gets progressively worse! Remember what I said about creating a whirlpool? When you cut what people want, you hasten demise.
Newsroom cuts are most costly on profit. Not only does revenue decline, but of all cost cuts the content cutting not only takes away readers – but quickly advertisers as well. Advertisers depend on content to draw people to their ads. Otherwise all you have is an ad tabloid – remember?
My book publisher is Pearson. Eighteen months ago I proposed that we take Create Marketplace Disruption and turn it into 16 short stand-alone mini-books. People could then buy just part of the book, as it suits their needs. Sell these for $1 or $2 each strictly as electronic downloads. That idea flew about as far as the famed dodo. Financial Times Press sells books I was reminded. No interest in this other wacky idea I proposed.
But I'm confident that for most of you, the idea of nice short readings – like say a blog – is a lot more appealing than digesting a 225 page book. People don't want less words, they just want things differently. That's why I do public speaking and workshops – because many of us don't want all the detail of the book and appreciate receiving the content in another format.
So, do you know what direction your market is headed? Are you moving forward to meet emerging needs and preferences? Or are you trying to defend & extend the way you've historically done business? For most publishers, the current direction spells disaster – failure. Learn from their mistakes, Disrupt your approach and find some White Space to learn how you can make money and grow!
Recently SeekingAlpha.com ran the article "Time for Tivo to say Ta Ta." The author (a professor) took the point of view that Tivo had filled a need, but now there were ample new options – such as on-line downloads – making Tivo obsolete. As a result, the company should fold up its tent and let the employees move on.
I was struck, because the good professor did not seem to think it might be possible for Tivo to change its business model and move into the other growing opportunities while simultaneously maintaining the traditional Tivo set-top business until the market figures out what customers really want. That sort of predicting future markets is dangerous for 2 reasons:
the inherent assumption that Tivo can be in only one market is flawed. There is nothing stopping Tivo from participating in the marketplace robustly with mutliple solution offerings. It can even cannibalize its own "base" revenues if the market shifts into other solutions. Tivo could remain top of the market – regardless of what solution dominates
predicting future markets is a fools game. The good professor may guess some of these futurist positions right, but he's sure to get many wrong. Any business that bets its product development or investments on future predictions is destined to eventually get it wrong – and possibly destroy itself. Good leaders use scenarios to realize there are multiple possibilities, and then participate in several of them in order to be assured of growth.
Fast Company points out in "Avoiding Corporate Death Spirals in a Sea of Change" that all companies hoping to remain long-lived MUST learn to transition with shifting markets. The article parallels this blog in discussing failures at Blockbuster Video, Silicon Graphics, Digital Equipment – and more recently dramatic share declines in Palm. All are attributed to management Lock-in on early wins, then trying to Defend & Extend the early Success Formula too long. Market transitions killed them. The article goes on to point out that Cisco Systems, a company held up as an example of Phoenix Principle Management here, has succeeded and grown principally because it has learned how to adjust to market shifts.
No company needs to give up. But all companies that want to survive HAVE to learn to manage market transitions. There is no other choice. Shift happens.
Apple now has a market cap of $210B. Microsoft has a market cap of about $260B. To traditionalists, this must seem contradictory. Apple has fought its way into new markets, and has domination in none (except maybe the narrowly defined individual music download business). Microsoft has near monopolistic market presence in personal computer operating systems and office software. According to modern business theory from business schools, and the output of books such as Business Strategy by Michael Porter, the monopolist company has entry barriers protecting its return – and thus the ability to almost print unlimited profit. Yet this has not happened.
At SeekingAlpha.com "Apple versus Microsoft: The Value Gap is Closing" the case is made that the value difference is all due to growth. Apple's business for music devices and content is growing – quickly. Its business for mobile devices and mobile device applications is also growing very fast. Those offer substantial positive cash flow today, as well as dramatic cash flow growth in the future. So much so that many analysts wonder what Apple will do with all that money. And that doesn't even count the iPad sales which have exceeded expectations – before even available to ship. And businesses are starting to build applications for the iPad, as explained in the BusinessWeek article "Businesses want Apple's iPad, too."
On the other hand, the demand for PCs is sluggish – at best. People increasingly leave their laptop at home for extended time while the use their mobile device instead. But Microsoft is stuck in a loop of upgrade development and launch. But because of the market shift, these investments are yielding less and less return. Complexity cost is going up, and profits are going down, and growth is dropping precipitously. Products in music, mobile phones and advertising have all lost significant share to Apple, Google and others as attention has remained on the "core" business. So even though current cash flow is strong, value has gone absolutely nowhere for several years, and there's precious reason to think it will go up.
When you lose growth, even if you prop up profits with draconian cost cutting and inventory sales, you lose value. Just look at Sears/KMart. Investors were really excited when Mr. Lampert used his takeover of KMart to acquire Sears. Predictions flew that he would get Sears growing again, while simultaneously monetizing the huge real estate portfolio. But as detailed in Chicago Tribune "Sears and KMart Still Standing, but Market Share Dwindles," value has declined. Mr. Lampert has proven very good at whacking cost. But when it comes to growing revenue – something that will drive ongoing growth in cash flow for a decade or more, he's shown nothing. You can't cost cut your way to long term success.
General Motors and Segway have teamed up to do a new product launch. The new product is described at Freep.com in "GM, Partner to unveil 2-seater" and is called the EN-V. And there's almost no hope it will succeed. Too bad, because both companies desperately need a winner. But the process they used to develop and launch this product was all wrong – and it would be a miracle if the arrow hits a bulls-eye.
Segway is the long-running story of a company with what looks like a great idea, but it never takes off. The original Segway seemed really neat. But people struggled to figure out why they would buy one. There is walking, there are bicycles, there are motorcycles and there are cars. Segway never defined who was under-served, or unserved, and therefore had a real need to use their new product. Segway management did a great job of public relations, because we all saw them on TV, in the news, and learned the name. But the product was developed internally, not in response to a market need. As a result, sales never materialized and Segway slipped into the business history file as another case study.
General Motors has no new product development process to create products for the future. For decades GM has attempted to defend and extend its 1940's approach of designing updated products, and hoping people will keep buying. It's been many years since GM launched a new product that people said "wow, that's just what I needed – and I wasn't even aware I needed that."
Now the two companies have teamed up to launch a 2 passenger Segway. They have identified the use they think this fits, and they think they know a target. But the problem is that this is just another "idea" designed and built without significant market input. Instead of developing a scenario of the future with deep insight to what people will want, and then making that product, they have said "wouldn't this be neat – and can't we imagine who might buy?" Interesting lab work, but unless they are very, very lucky the odds are greatest that people will think it's cute, but won't buy. After all, with the plethora of current solutions across a huge price range from many competitors means nobody is living without transportation. Why should potential customers inherently think this is a good idea.
Phoenix companies don't design products from inside the company outward. Instead, they use market input to discover the unmet needs, and they fulfill them. Especially when it's clear that competitors aren't jumping in to fulfill the need. They intend to Disrupt the marketplace not by some splashy introduction and hoping people will switch, but rather by identifying the under-served customers and giving them a solution they didn't have. Then the company learns, adapts and keeps pushing toward an ideal product that meets ever more needs. From this initial small success the market grows.
Segway never understood this. They don't define unmet needs, nor competitor inabilities – and thus they have great ideas but they fail to Disrupt the marketplace and their innovations have gone nowhere. GM works hard to avoid innovations that might be market disruptions, instead offering sustaining innovations hoping to defend their old business model.
This new type of vehicle might have a chance of success. But the only hope is for both companies to ignore the PR. They should set up a White Space team, and give that team a year to really understand the unmet needs in the marketplace. Then go back to the original design and make it very explicitly meaningful to people who have unmet needs. Launch small, make money, learn and grow.
But given the approach this dynamic duo is taking, only luck will keep this from being another missed opportunity for both struggling companies.
Blockbuster Video is in big trouble. Most analysts think the company is going to file bankruptcy – unlikely to survive – with a mere $.30 stock price today. Most of us remember when the weekly (or more frequent) trip to Blockbuster was part of every day life. Like too many companies, Blockbuster was in the Rapids of growth when people wanted VHS tapes, then DVDs, to rent – and CDs to purchase. We happily paid up several dollars for rentals and purchases. Blockbuster grew quickly, and developed a powerful Success Formula that aided its growth.
As it is failing, I was startled by a Forbes.com article "What Blockbuster Video Can Teach Us About Economics." The author contends that this failure is a good thing, because it will release poorly used resources to new application. Like most economists, his idea has good theory. But I doubt the employees (who lose pay and benefits), shareholders, debt holders, bankers, landlords and suppliers – as well as the remaining customers, appreciate his point of view. Theory won't help them deal with lost cash flow and expensive transition costs.
As the market shifted to mail order and on-line downloads, Blockbuster could have changed its Success Formula. But instead the company remained Locked-in to doing what it has always done. It will fail not because some force of nature willed its demise. Rather, management made the bad decision to try Defending & Extending an out of date business model – rather than exploring market shifts, studying the competition intensely then using Disruptions and White Space to attack both Netflix and the on-line players. Blockbuster's demise was not a given. Rather, it was a result of following out of date management practices that now have serious costs to the businesses and people who are part of the Blockbuster eco-system. I struggle to see how that is a good thing.
Fortunately, ManagementExcellence.com has a great article about ideas for attacking a threatened Success Formula in order to avoid becoming a Blockbuster entitled "Leadership Caffeine: 7 Odd Ideas to Help You Get Unstuck." The author specifically takes aim at the comfort of Lock-in, and describes how managers can start to make Disruption part of everyday life:
Fight the tyranny of Recurring Meetings
Rotate Leadership
Break the back of bad-habit brainstorming
Do something completely off-task with your group
Introduce your team to thought leaders and innovators
Play games
Change up your routine
Described in detail in the article, these are simple things anybody can do that begin to reveal how deeply we Lock-in, and expose the power of how we could behave differently. If Blockbuster management had applied these ideas, the company would have been a lot more likely to return positively to society – rather than become another bankruptcy statistic.
Let's see, would you rather spend $4million to reach 100 million people once – say via a Super Bowl ad – or spend almost nothing to reach 400million people every day? Seems obvious economics. Yet, how good is your Facebook presence? Because that is the route to all those people who are on-line daily.
Most of today's business leaders grew up in the world of one-way advertising. They watched TV, listened to the radio, read magazines and newspapers. They were taught that to get a message into potential buyer heads, unfiltered by journalists, you had to advertise. And for a long time, that was pretty true. So they Locked-in on advertising and traditional PR as the route to name awareness and brand image. But that was before the market shift which is dampening enthusiasm for traditional media while social media (broadly – including YouTube) is exploding.
Now your customers, and potential customers, are most likely using Twitter, Facebook, Linked-In and other social media every day. And when they search on your products, they get Google responses from social media. If you aren't putting some effort into the media, your image and message could be far removed from your goal!
I remember talking to the CEO of Rolex in 1997. Rolex did not have a web site. His point of view was that as a luxury good, the internet was "below" his company's standards for communicating. If there was to be a web site, he thought Tourneau – the world's largest retailer of luxury watches – would build it. In 10 minutes I demonstrated to him how a simple search on "Rolex" turned up gobs of used dealers, unauthorized dealers, unauthorized repair shops, and outright fakes! Several near the top of the list! He was shocked. His brand was rapidly being marginalized via a channel he had never even considered. His worst fears about how the brand would be stolen, manipulated and value minimized were happening – and he was blithely ignorant. Of course, Rolex got involved quickly to protect its brand.
So when was the last time you reviewed your brand, or image, or message across social media channels? Are you possibly, blithely letting someone else manipulate your image?
At MediaPost.com in "Ensuring A Successful Corporate Facebook Presence" the authors outline a 4 step approach for doing a good job. My biggest fear is that Lock-in to old approaches to sales and marketing mean too few companies are paying even a shred of interest in social media. Over and over I hear marketers of large, established companies saying that social media access is blocked at work – and nothing is being done to leverage the channel! In some instances, I've heard of Chief Marketing Officers making a "command decision" to avoid social media, because they can't "control" it.
Secondly, the competition that is going to ruin your day just might do it via social media! An existing company may have an image, advertising and effective PR. So how would a Disruptive new competitor go after you? Why, using the very low cost channel of social media. We've all heard about disgruntled customers that have used songs, videos and other clever tools to spread extremely negative information like wildfire through a customer base. Yet, by ignoring the channel – by ignoring the opportunity to develop a strong and effective presence that ties to customers – we encourage competitors to use this channel to our detriment.
Don't let Lock-in cause you to ignore this powerful, and shockingly low cost, communication tool. Realize that social media is here to stay, and incorporate it into your future scenarios. Additionally, social media is where your competition – especially fringe competitors – are likely to target you. Why not study them, learn from them, and use the tool to grow instead of being a target? And when it's time to implement, Disrupt your old decision-making and spending patterns so you allocate some resources to build out your social media campaign. Then put together a White Space team with Permission to really go for success using the resources you've now dedicated to the project.
Applying the Phoenix Principle can result in a rapid improvement in social media marketing – and it just might save you a huge amount of spending on your traditional marketing communications plans. While bringing in new customers and markets!
You've probably read that 80% of new jobs are created in small business. Even if this is true, it creates a misconception. You'd think that we need to start lots of new companies. As BusinessWeek reported in "Looking for More High Growth Start-ups" 40% of new jobs are created by a mere 1% of start-ups. The really fast growers.
We like to think that all companies contribute job growth to the economy. But that is simply not true. In reality, the vast majority of businesses contribute no new jobs. In fact, they are reducing employment. Almost all of the job growth, in fact almost all of the economic growth, comes from a very small number of companies that account for almost all the real growth. These are the 10% of companies that are in the Rapids. All others are either looking for early growth, or trying to "hang on" to an outdated Success Formula and seeing their business slowly (or not so slowly) erode.
Most small businesses are in the Wellspring. Looking for some kind of growth. Most of these – literally 90% – never really figure out a Success Formula that drives growth, and they simply die off. The other big group of businesses are somewhere in the Flats or Swamp. Growth has left them, as market shifts have taken demand to other competitors. They are facing a Re-Invention Gap between what they do and what most customers really want. As a result, they produce no inflation-adjusted revenue growth, and no new jobs. Eventually, as the re-invention gap grows, they drift into the Swamp of declining returns. Eventually they become obsolete. Think about independent pharmacies, most insurance agents, small banks, bicycle shops – you get the idea.
So where do we get new jobs? From the companies that are in the Rapids. Think about the skkyrocketing employment at places like Boeing and airlines when aviation was a growth industry in the 1960s through the 1980s. And the growth in computer and IT jobs in the 1990s. Those businesses that participatd in the Rapids are participating in market shifts, and they are creating new revenues and jobs.
Today a good example is Google. While traditional companies are lamenting "a bad economy" Google is participating in the market shift, and thus creating revenue growth and new jobs. At PoynterOnline.com, in "Google Team Offers Lessons in Innovation, Project Management", we can read how the GMail team discussed at the recent South by Southwest Conference their approach to remaining in the Rapids. While other organizations are frozen in place, trying to Defend what they've always done, and thereby falling into the Swamp, Google keeps pushing forward with new solutions that help customers do new things — and thus create additional growth.
Apple, Amazon and Cisco are additional examples of organizations that are using Disruptions and White Space to keep their companies participating in market shifts. As a result, they've kept growing in 2008, 2009 and into 2010. They don't blame the economy, they keep innovating and taking new solutions to market. Thus they grow. Those companies that are blaming the economy are simply spending too much time trying to Defend & Extend their old Success Formula, and drifting into obsolescence.
Even big, entrenched companies can grow. The Wall Street Journal recently interviewed the CEO of Austalia's phone company, Telstra, in "If You Don't Deliver Numbers You Aren't Doing Your Job." He points out that as CEO his most important role is to keep the company growing. He could easily have gotten stuck thinking of his business as a traditional, land-line telco. But his role is to balance the management of an old Success Formula with implementing White Space which can evolve his company forward into a post-modern communications company with new technologies and new solutions. As a result, what could be thought of as a bureaucratic monopoly is much more successful, growing through its participation in market shifts.
Alternatively, we have AT&T, and its former leader Mr. Whitacre now ensconced at General Motors. The original AT&T almost went bankrupt before being acquired by what was Southwestern Bell – then renamed to AT&T. AT&T kept losing jobs by the tens of thousands – as did the regional Bell Companies. Mr. Whitacre, with his "caretaker" approach to the old Success Formula, simply kept buying up old pieces of the original AT&T and laying off more people. Today AT&T is a shell of what it was in the early 1980s when split apart. It is not an aggressive part of the market shift, nor is it growing like Telstra.
And Mr. Whitacre is now at GM. Another company that is deeply mired in the Swamp – and very unlikely to avoid the Whirlpool. GM is not leading in any market shifts, and as a result its sales are not growing – nor is its employment. Lacking participation in growing markets, GM will continue shedding revenues and jobs as it marches toward obsolescence.
Myths about lifecycles abound. The biggest is that if you stick to your core, you will keep growing. Somehow you will jump from one new product line to the next, and maintain growth. But it just doesn't happen. Focusing on your core causes you to drop out of growth as market shifts make you irrelevant – like Wang, Lanier, Digital Equipment, Silicon Graphics and Sun Microsystems. Growth slows, employment shrinks. To succeed you have to continuously participate in market shifts, to keep yourself in the Growth Rapids. And for our economy, we desperately need more leaders to refocus on creating Disruptions and White Space to grow – like Google – if we are to get the U.S. economy growing again.
Did you ever notice how often a large company will introduce a new solution (often a new technology), but then retrench from promoting it? Frequently, the market is developed by an alternate company that captures most of the value. We can see that behavior looking at smartphones.
In 2008, three early leaders were Microsoft, RIM and Palm. But Microsoft chose to invest in Defending & Extending its PC software business – with updates to the operating system in Vista and OS 7. As the market has shifted toward mobile computing, Microsoft has been clobbered. But largely because it remained stuck trying to protect its "core" while the market shifted away. Palm also tried to Defend & Extend its early position with updates, but because it did not follow the pathway to greater usage with new applications it also has seen dramatic share decline.
Meanwhile, RIM has promoted new uses within the corporate world for mobility, and thus grown its market share. And Apple has made a huge impact by bringing forward dozens of new mobile applications, closely followed by Google. What we see is a classic example of the early entrant fading largely because they decided to Defend the old market, rather than investing in the new one. Really too bad for shareholders in Microsoft (losing 20 share points) and Palm (losing 10 share points), while good for shareholders of RIM, Apple and Google.
And in Apple's case we can see that the company continues using White Space to grow revenues by expanding the new marketplace. The iPad is off to a very strong start, with tens of thousands of units ordered last week. But of greater importance is how Apple is promoting the shift to mobile devices from traditional PC devices. At SeekingAlpha.com, in "How the iPad, Slates Will Evolve the Next Two Years," the reporter projects how demand for all laptop products will decline as more capability and functionality is added to mobile devices like smartphones and these new slate products.
Microsoft can keep trying to Defend & Extend PC technology, but it won't be long before their efforts largely won't matter. Don't forget that once Cray computers was a rapidly growing super-computer company. But increasing performance from much alternative products eventually made Cray irrelevant. Same for Silicon Graphics and Sun Microsystems.
Today the market capitalization of Microsoft is about $250B, about 4x sales. Apple's market cap is just over $200B, about 6x sales. Google's market cap is about $180B, about 8x sales. All reflect investor expectations about future growth. The D&E company is simply not expected to grow – and in fact is much more likely to disappoint than the companies growing share in growing markets toward which customers are shifting.
And any company can choose to participate in growth, versus Defend & Extend. While Tribune Corporation is trying to find a way out of bankruptcy, and struggling to figure out how to deal with market shifts away from newspapers, Hearst is taking positive action. The Wall Street Journal reports in "Hearst Jumps Into the Apps Business" how the old-line newspaper company has set up a White Space project, complete with dedicated people and its own funding, to begin developing mobile applications for news!
Even when business leaders see a market shift, far too many choose to Defend & Extend the "core." Unfortunately, that leads to disappointments. Keep in mind Microsoft and its rapid loss of Smartphone share as users move increasingly to mobile devices from PCs. To succeed leaders need to drive their organizations in the direction of market shifts, and growth. Like Apple, Google and even Hearst.
I don't know the source of the phrase, but since a young boy I've heard "Nero fiddled while Rome burned." The phrase was used to describe a leader who was so out of touch he was unable to do the necessary things to save his city and the people in it. Lately, it seems like General Motors is ancient Rome.
"General Motors to launch the 'un-Dealership" is the Mediapost.com headline. Trying to leverage auto shows, GM is going to open minimally-branded brick-and-mortar locations in 3 or 4 cities where customers can test drive Chevrolet and other cars. The idea is that with less pressure from salespeople, customers will come use the internet cafe and hang out while occasionally test driving a car. Then they'll be fired up to go buy a GM product.
If that isn't fiddling…… well…… When will leaders admit GM is in seriously dire trouble? The company has lopped off complete product lines (Saturn, Hummer, Saab and Pontiac) and whacked away large numbers of dealers. Their cars are uninteresting, and losing market share to domestic (Ford) and foreign manufacturers. Design cycles are too long, products do not meet customer needs and competitors are zeroing in on GM customers. Product sales, and even dealerships, are being propped up using government subsidies. The best news in the GM business has been all the troubles Toyota is having.
During this malaise, the new GM Board agreed to appoint Ed Whitacre as the permanent CEO (see ABCnews.com article "GM Chairman Ed Whitacre Named Permanent CEO.") Great, just what GM needed. Another 70 year old white male as CEO who developed his business experience in the monopoly of the phone industry. Who's primary claim to fame was that after Judge Green tore AT&T apart to create competition he was able to put it back together – only after the marketplace for land-line phones had begun declining and without growth businesses like mobile data.
As the ABC article notes, Mr. Whitacre sees his role running GM as "a public service… I think this company is good for America. I think America needs this." Just the kind of enthusiasm we all like to hear from a turnaround CEO.
GM needs to get aggressive about change if it is going to survive in a flat auto business with global competitors. The company has no clear view of how it will be part of a different future, nor any keen insight to competitors. It is floundering to manage its historical products and distribution, with no insight as to how it will outmaneuver tough companies like Honda, Kia and Tata. It has not attacked its outdated product line, nor its design cycle, nor its approach to manufacturing. It has very little R&D, and is behind practically all competitors with innovations. A caretaker is NOT what GM needs.
I blogged months ago that GM needed a leader who was ready to change the company. Ready to adopt scenario planning, competitor obsession, Disruptions and White Space to drive industry change and give GM a fighting chance at competing in the future. It's going to take a lot more than 4 test drive centers with internet access and latte machines to make GM competitive. But given what the new Board did, putting Mr. Whitacre in the CEO role, the odds are between slim and none the right things will happen.
