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 21, 2010 | Current Affairs, Food and Drink, In the Rapids, Innovation, Leadership
“I Failed Fast and Completely Re-invented My Company” is the BNET.com article title. Pixability.com of Cambridge, Mass. started out as a video conversion and editing business for families. Unfortunately, it cost more than most families could afford. Lacking revenue, the entrepreneurs thought up making highlight reals for youth athletes competing for college scholarships. Neat idea, but only 3 sales in 3 months was less than covering costs. Despite the original plan, and a desire to raise more money, it hit the founders that if they “stuck to their core” business plan they weren’t going to survive. More money or not. That’s when they realized that turning down corporate work might not be such a great idea – even though such work wasn’t in the plan. Turning to what the market wanted, editing corporate videos, the company is now growing fast and making a profit.
Same song, different verse, for Blue Buddha Boutiques of Chicago as reported in “Small Businesses Have Flexibility to Make Big Changes” at The Chicago Tribune. The company started out making chain mail jewelry sold on the internet. Not much sales. But when the entrepreneur listened to customers she heard there was more demand for jewelry supplies – so customers could make their own jewelry – than for the finished product. A quick shift in the business, aligning it to market needs, and the company shot up to a half million dollars revenue.
Far too often entrepreneurs hear “find your passion, and go with it.” “Write a business plan, stick with it, persevere, fight for success.” “Do what you’re good at.” Of course, most entrepreneurs fail. Why, because this is such lousy advice. Nobody cares about your passion, nor your plan, or your ability to persevere. Customers care about you selling them what they want. If your products or services don’t align with market needs, all the passion, business planning, fighting and perseverance isn’t worth spit.
Of course, this flies in the face of “Built to Last” author Jim Collins. To him, all winners are those who persevere. Looking backward, he can say entrepreneurs he studied were passionate and hard working. Maybe they wore white shirts, and enjoyed Juicy Fruit gum as well. The point is, that isn’t what made them successful – even if their personality traits were as he described. What’s important is that you find a market with growth, and more customers than suppliers, so you can readily sell something at a profit. Adaptability is the hallmark of great entrepreneurs. They have no product or service religion – no commitment to “excellence” – no predefined notions of how to succeed in business. Rather, they have a keen ear for the marketplace and the mental flexibility to rapidly shift into what customers want!
I beg you to be careful about listening to gurus – and especially Jim Collins. I was appalled by his column “Tuned in to four New Realities” published on Leadership Academy. Still unable to explain why companies he glorified in “Good to Great” such as Circuit City, Freddie Mac and Fannie Mae were such horrible failures – he tenaciously sticks to his guns. To him, all leaders must persevere. His new realities:
- “Define your business according to core values”. Values are great, but if they aren’t somehow intricately linked to delivering a product or service the market wants, and wants in enough demand to produce a profit, it doesn’t matter. Simple. I don’t say give up your soul. But values are not where you start. You must be flexible to align with the market. If your values won’t let you do that you need to do something else.
- “Organize by freedom of choice.” Honestly, how you organize should relate to meeting the market requirements. Whether its hierarchical or matrix or some other form – it must meet the critical market needs. Freedom is great – as long as it supports meeting the market need. You are free in America to do whatever you want, but if you don’t sell enough stuff at a high enough price you don’t eat. And for all its benefits, “freedom of choice” in the workplace is less important than positive cash flow.
- “Lead without using power.” Whether you use carrot or stick, people have to deliver what markets want. And companies have to adapt quickly to shifting wants. Sometimes it happens naturally, and leaders can just guide the process. Sometimes Lock-in to old assumptions get in the way, and then leaders have to get out a 2×4 and redirect attention to where the market wants it. It’s good to be kind and a servant-leader, but employees appreciate a good paying job with some clear guidance (at times dictatorial) to unemployment from “such a nice guy.”
- “Walls are dissolving.” I haven’t even figured out what this one means. But it’s clear that any walls which keep you from seeing the real market need is a bad thing. After that, aligning to market needs is “job #1” as Ford ads once touted quality.
Are you flexible to go where the market leads you? Or are you adamant about doing what you want to do? Are values something you use to help align to market needs, or a crutch you use to defend doing what you’ve always done? Are you able to change your management style, and organizational design, to meet market needs – or do you prefer to remain Locked-in to old management ideas and business models? Whether your company is big or small, old or young, does not matter. Lock-in will kill you when markets shift. Whether it’s structural Lock-in to an existing business, or mental Lock-in to a business plan. Adaptability to meet shifting market needs separates the winners – like Apple, Google, Facebook and Twitter – from the market losers – like Microsoft and Dell.
If you have any doubt, just ask the folks at Tasty Catering in Chicago. While others are still complaining about he recession, crying about lower sales, and food service businesses (including restaurants) are half full or closing shop — the folks at Tasty Catering are challenging the monthly revenues they set in peak years of 2007 and 2008. Instead of doing what they always did, the leaders – from the CEO to the 20-something managers talking to customers – are listening to the market and opening new businesses that meet market needs. While most employers are cutting staff, employees at Tasty Catering are working overtime – and in some businesses second shifts are being added. What was once a hot dog stand has been turned by the leaders into the winner of Best Caterer in the USA more than once – and a business that is thriving even in this “Great Recession.” Because they know how to adapt.
PS – Tasty Catering is one of the most value-responsible companies in America. Filled with employees that listen and care, and managers that want their employees to succeed. That’s because the leaders don’t see a trade-off between values and giving the market what it wants. If they keep the business moving forward, through keen connection to the marketplace, everyone wins – and values are not an issue. By being market-savvy, and flexible, Tasty Catering is considered one of the Top 10 employers in Chicago, and in its industry. And if you cater from anybody else in Chicago, or buy your delivered baskets or trays of cookies and muffins from anyone else, you simply don’t know what you’re missing!
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.
by Adam Hartung | Jul 14, 2010 | Current Affairs, Defend & Extend, In the Rapids, Innovation, Leadership, Lock-in, Web/Tech
For good reason, a lot of controversy is swirling around Apple’s iPhone 4 problems. With Consumer Reports saying the product’s antenna is defective, and the company admitting there’s a software glitch regarding signal strength reporting, Apple’s newest smartphone release is looking not so smart. Even CNN television was running reports about Apple’s “debacle” and what the company should do this morning – including product recalls, software upgrades, issuing new cases, etc. Recommendations that could cost billions of dollars!
Beyond the cost to fix outstanding customer problems, shareholders and employees have good reason to be concerned. According to MediaPost.com “Quantcast: Android Keeps Gaining Steam.” For the most recent quarter Google is now #2 in phone shipments, exceeding Apple and trailing only RIM. Google has gained 14 share points this year, while Apple has lost 7.7 share points and RIM 5.7 points. There are now 60 Android models on the market.
And Google’s open development platform seems to be picking up steam compared to the more closed/controlled Apple platform. Share of handhelds is less critical than number, and share, of downloadable (and downloaded) apps. That Google’s app base is growing quickly, as is Apple’s, is really the story to watch. But with the iPhone 4 issues, will app developers look closer at Android?
This story is a microcosm of Lock-in and Defend & Extend management. Apple was the big pioneer in pushing smartphone apps, and with only 3.5% of the phone market garnered huge PR, unit sales and profits with its early generation. It’s closed environment, along with sleek style and commitment to AT&T network, were all part of the Success Formula. Apple Locked-in on that, and through 3 generations kept growing. But now we see the kind of thing that happens when a business unit Locks-in. In an effort to make rev 4 the team starts pushing for more, better, faster, cheaper – optimizing what’s been working – and suddenly a mistake happens. A parallel to BP – only happening in “warp speed.” The team is trying to push hard to maintain, even grow, handset and app share – and using D&E management to do so. The risk, as we see, is that optimization can lead to cutting costs (antenna design and implementation), and then getting defensive when you’re caught making a mistake!
Google is still pushing forward in smartphones with largely a White Space team approach. Not yet Locked-in, it is still experimenting with new solutions. New vendors and markets. It is learning how to attack the Lock-ins at both RIM (the enterprise market) as well as Apple. And as a result, it’s share is gaining. This is good for Google – and definitely not good for Apple.
The biggest screaming is for Steve Jobs to quit being defensive and become apologetic, as BusinessInsider.com recommends in “Here’s How Apple Can Recover from the Snowballing iPhone 4 Disaster.” The claim is that Mr. Jobs is so personally magnetic that his mere verbal apologies will keep customers and developers loyal – and keep Apple in the lead.
Not so fast. Mr. Jobs is a good CEO, but if your phone doesn’t work…..
Apple needs to get the iPhone team back into White Space work. Today the iPad is the big White Space project at Apple. The Mac, iPod, iTunes and iPhone have started to lose their edge. As Apple has brought forward new products, in new markets, it has pulled off the big goal of “jumping the curve” – by going from one growth market to the next. It has been able to keep up high growth through new market entries. The iPad is the latest in this series, as it is developing the emerging – and rapidly growing – tablet marketplace.
But as we can see, the risk is that D&E behavior creeping into the other markets becomes risky. Luckily competitors for iPod, iTunes and iTouch have been rather feckless. So locked-in to their old, outdated Success Formulas they have done little to effectively attack Apple. Apple has maintained share rather easily.
But this is not the case with iPhone. Another new entrant, Google, is using new scenarios about the future, a deep understanding of competitors and a willingness to Disrupt itself and the marketplace. In a characteristically Phoenix Principle way, Google is attacking the iPhone by taking advantage of the Lock-in Apple has to its initial Success Formula. If Apple doesn’t change, not only will it continue to make unwise decision errors – such as the antenna problem and the horribly defensive PR reaction to its discovery – but it will rapidly lose its advantage. Apple’s advantage came from understanding the market – not optimizing iPhone capability. And Google looks to be gaining the marketplace understanding advantage now.
Apple has to redesign the iPhone management. The team must push itself back into White Space. Be driven not by its internal goals for iPhone, iPhone apps and capabilities – but driven by future scenarios. The team has to get a LOT, LOT savvier about competitors. RIM and Palm are non-competitors now. It’s about understanding Google and its partners – including Facebook. Apple has to rethink its future scenarios and how competitors will try to do things differently. And Apple has to Disrupt its Lock-in to the original Success Formula in order to develop new innovations that can allow it to not only grow (in a very high growth market) but maintain share!
The iPhone 4 problems should be a wake-up call to Apple. Falling into D&E management thinking is easy. Anybody can become inwardly focused on optimizing historical strengths and capabilities. It’s remarkable how you can lose sight of emerging competitors, hoping your Success Formula will win if you just work at it harder. Apple needs to keep winning with the iPad, as that’s a tremendous opportunity. But it also needs to get the iPhone team back into using White Space to behave like a Phoenix Principle organization for the smartphone business.
by Adam Hartung | Jul 12, 2010 | Current Affairs, Defend & Extend, In the Swamp, In the Whirlpool, Leadership, Lock-in
What do Tony Hayward, Jeff Skilling and Bernard Ebbers possibly have in common? They all might end up convicted felons.
While this may sound ridiculous, and very, very scary to corporate CEOs, nobody expected Skilling, the CEO of Enron, or Ebbers, the CEO of Worldcom, to go to jail. They were hailed as heros, and admired for their leadership of large, high growth companies. Yet, Ebbers is waiting out a 25 year sentence, convicted of acting illegally in the value destruction at Worldcom (CNNMoney.com “Ebbers Gets 25 Years.”) And Skilling is working on a 24 year sentence for the downfall of Enron (CNNMoney.com “Skilling Gets 24 Years.”)
Now, BusinessWeek.com is asking if the same fate awaits Tony Hayward in “The Oil Spill: Will BP Face Criminal Charges?“ As the spill goes on and on, and the damages increase, the public sentiment against BP is increasing. If the spill goes around Florida to the east coast there will be millions more citizens, and businesses, affected. It is clear that many laws were broken, as the article lays out. So it’s not a mute question that an aggressive prosecutor would go after imprisoning Hayward.
As reprehensible as many may find each of these 3 men, how did they end up facing criminal prosecution? Even The Washington Post has asked “Did Jeff Skilling Do Anything Illegal?“ A Harvard MBA and former McKinsey partner, Mr. Skilling calmly described the practices at Enron completely unapologitically. He was certain he’d done nothing wrong. Mr. Ebbers was a devout Christian and Sunday School teacher who claimed all through the trial and to reporters on the way to jail he’d done nothing wrong. I’m sure Mr. Hayward believes similarly.
What all 3 did was simply push the Success Formula too far. Worldcom, Enron and BP were wildly successful companies. They created Success Formulas that earned billions of dollars. For years they grew. But unfortunately, they kept trying to push the Success Formula to better results when market shifts left that formula earning lower returns. Rather than recognize that lower returns were an indication of a Success Formula needing change, they dug in their heals and “got creative” in Defending & Extending it. They used “best practices” to lower costs, and to seek out financial machinations which would allow the business to look more profitable – even as they undertook more, and more risk.
To them, taking risk rather than change the Success Formula wasn’t thought of as risk. They were out to protect something they felt had to be protected, at all cost. The Success Formula that had made money for years, enriching not only themselves but investors, employees and suppliers. They were blind to the added risk, because it was assumed that doing incrementally more was the “right thing to do” for the company. They were doing what they believed were “best practices” for the “health” of their companies.
Defending a Success Formula can become very risky, as I wrote in Forbes “BP’s Only Hope For Its Future.” Years of doing the same thing, only more, better, faster, cheaper, makes it harder and harder to do something different. The culture and decision-making systems are designed, and modified — Locked-in — to push employees to make the same decision over and over, regardless of risk. In BPs case we now know that cheaper parts and practices were employed to improve profitability – something each employee felt was in the company’s best interest. Only, in the end, it served to layer risk upon risk – and lead to an eventual disaster.
Are you “doubling down” on risk in your business? Are you investing more and more into trying to improve returns in a business that is earning less and less – and growing less and less? If so, you could be setting yourself up for disaster as well. Let’s hope in doing so you don’t run afoul of the law. 25 years in prison is a hefty price to pay for spending too much energy “focused on your core” business at a time when you should be looking for new ways to expand and grow where the risks are less.
by Adam Hartung | Jul 9, 2010 | Current Affairs, In the Rapids, Innovation, Leadership, Lock-in, Openness, Web/Tech
“To Boost Innovation Just Keep the Boss Away” titles the BQF Innovation website. Citing data from The Nielsen Company’s study of 30 large consumer products companies showed that companies with White Space Teams (what they call Blue Sky) teams are far more successful at creating revenue generating innovation than companies trying to innovate through the traditional organization structure. And, as recommended in this blog, these teams are more than twice as effective when they are dedicated off-site teams! And, organizations with minimal senior executive involvement generate 80% more product revenue than those with heavy senior level participation.
Hierarchy is an innovation killer. The higher a manager goes, the more he feels compelled to “weed out” options. Unfortunately, most of this weeding is based upon Defending & Extending the existing Success Formula. Doing more of the same better, faster and cheaper dominates innovation thinking the higher the manager is placed! Rather than championing new innovations that could take the business into new markets with new products, senior people will apply the 20 Innovation Killers from my last blog posting! They will say the idea doesn’t fit, for a variety of reasons, and feel justified they’ve added their managerial “value.”
The Heart of Innovation column from IdeaChampions.com amplifies this in “Breakthrough as an Accident Waiting to Happen.” The author describes how many innovations are the result of ongoing experimentation. Trying new combinations. Learning, and trying again. Managers too often want the innovation to be fully developed “in the lab.” They are unwilling to set up teams that are given the permission, and resources, to try, get market feedback, and keep trying. To learn how to compete in order to eventually win!
All companies want to grow. All claim to want innovation. But too often, the senior people just want small improvements that don’t affect any Lock-ins. They hope for spectacular results from minimal input. Contrarily, the organization itself frequently contains a large number of people who have great insights for things that could work – if given the opportunity to be applied, tested, reworked and made to fit emerging needs. We need are more managers willing to set up White Space teams and let them do their job – while holding the teams accountable for results! Like the leadership at Apple and Google, let people work and learn, and evaluate them on the outcomes – rather than trying to tell them what they need to do, how they need to do it, and setting up boundaries to keep innovation within the Locked-in Succeess Formula!
by Adam Hartung | Jul 4, 2010 | Current Affairs, Leadership, Web/Tech
Hi Readers, I’m delighted today to send you a guest blog from a colleague of mine, Tom LaPlante. His contact info is below. I hope you enjoy his insights as much as I did!
Recently I attended the Austin Tech Fair, which was hosted and planned by Matt Genovee’s Door 64 and Austin Technology Council. Excellent gathering of central Texas technology companies and individuals. The main topic of the panel discussions centered around Social Media — in terms of hiring, what it means for a company’s policies, the legal issues (many of which are yet to even be identified) and how employees are using various types of social media (Facebook, Twitter, Linked-in, etc.) at and during work hours.
The last panel session of the day was “Today’s Technology Tools and Social Media to Growing Business.” This session was supposed to last 50 minutes, however after almost 2 hours many attendees were still having a “Q & A” with the panel members — highlighting the importance, confusion and multitude of issues facing corporations in how these companies are in many cases NOT dealing with social media in the workplace.
The most alarming piece of information given by one of the panel members was, “fully 40% of companies surveyed do not have and do not yet plan to publish any internal policies or guidelines” on social media usage within their company. It almost seemed that many leaders (including CIO’s) didn’t want to be “bothered” by this latest trend — Social Media — and maybe, just maybe, think this is a fad that will go away.
This attitude and approach reminds me of the early days of the internet explosion and email adoption. Many executives didn’t want to “get in front” and lead the way, but wanted to control or even suppress these “new fangled toys”. Just further examples of the Defend and Extend mentality that company leaders oftentimes take. Some thought that the internet and email would distract employees, lower productivity and weren’t sure how it would help their business. Those that led and “got in front” of these new tools did realize productivity gains and developed new markets and channels because of them. Seems silly looking back now that corporations actually tried to suppress the use of these two examples.
Granted, I’m sure there were cases of misuse by employees and that some individuals did have lower productivity in certain cases. But those companies that created and communicated clear guidelines on proper and effective use of the internet and email were better enterprises than those that did not. Any new technology, tool, or process requires leadership and communication from management of what’s to be expected as appropriate usage/behavior. This is an opportunity for leaders to engage their workforce, see what makes sense, determine policies that are appropriate and create a more streamlined work environment. However, it doesn’t just happen, leaders must actually lead and engage to make the most effective use of this and anything else new.
So what’s going to be YOUR approach in regards to Social Media in the workplace? Are you going to try to limit it, control it or suppress it altogether? Guess what? This approach will not work in today’s marketplace and workplace. Whether you’re a fan of Facebook or not, Facebook appears that it’s here to stay. Even if Facebook were to be displaced by another platform, social media is NOT going away.
Today’s economy and marketplace shifts are happening at an ever faster pace. Technology trends seem to “suddenly” popup out of nowhere. Your employees and customers are going to utilize this “new stuff”. Now the choice is yours. Do you get in front of this and lead your companies policies on appropriate and effective social media usage or do you wait to see the dust clear? We recommend that company leaders start now to publish company guidelines if you don’t have any, review and update the ones you do have, and re-visit these at least semi-annually to gauge the relevancy of your social media Policy. If you don’t then your employees will develop their de-facto policies.
Great stuff Tom. Connect with Tom via Twitter – find him @ Tomlap. Or connect with him on Facebook Tom Laplante. or look for him on Linked-in Tom LaPlante.
If any readers would like to guest blog, just let me know. I’m always interested in new insights – and enjoy hearing from colleagues who want to help businesses grow!
by Adam Hartung | Jul 2, 2010 | Current Affairs, Defend & Extend, In the Swamp, Innovation, Leadership, Web/Tech
(Note: See more about my globally syndicated radio X Zone Radio interview with Rod McConnell in postscript below)
Today the Harvard Business Review blog got to the topic of my early May Forbes article (Microsoft's Dismal Future) with "Microsoft and the Innovator's Paradox." Unfortunately, painting Microsoft as facing a difficult paradox gives Ballmer and the management team too much credit. It implies that Defend & Extend behavior is a good tradeoff compared to investing in growth markets. This isn't really a trade-off because good companies pursue both courses, growing the existing business as long as possible AND investing in new growth markets simultaneously. Like Google investing in search and ad placement while investing in Android. Positioning Microsoft as facing a dilemma may sound politically attractive, but is inaccurate. Microsoft simply needed to do more in growth markets – a problem shared by too many companies. Instead it spent way too much in sustaining developments – and now is in big trouble.
HBR did not offer much of a solution for Microsoft. Instead, leaving the impression that it's reasonable to expect "mature" organizations to do more sustaining innovation. The truncated S curve displayed HBR article ignores the reality that "mature" companies don't extend forever – but rather simply fall into the Swamp of poor returns and eventually disappear into the Whirlpool as growth slows. And further ignores the horrific cost of sustaining innovation, as we detailed in Microsoft's exorbitant 2009 R&D spending as the company kept pushing Windows 7 and Office 2010 development. Microsoft really hasn't faced a "paradox" for investing for many years – leadership made a bad decision to keep investing in old markets rather than pursue new ones.
Contrarily, Mediapost.com's Marketing Health column ran a description of how pharmaceutical companies could use iPads to improve the performance of their physician customers and simultaneously market their own products in "Tap Into iPad's Marketing Power." Using these low cost devices (including Kindle and Cisco's new Cius [Cnet.com "Cisco Introduces New Cius Android Tablet PC"]) is not a "paradox" in investing for growth. It's additive. As readers of this blog know, for over a year I've promoted marketers and designers become more proactive in using these new mobile devices. Only by viewing the new development as a trade-off from doing more of the old marketing does it slow investment in a high growth opportunity. By looking at the new opportunity as something that takes away from doing more of the old creates an artificial paradox – not a real one. Companies simply aren't doing enough of what will help them grow – too often choosing the low-return route of doing more of what they know in old markets simply because they understand it better.
PS – Check out my radio interview with Rod McConnel of X Zone Radio about BPs management crisis, and how it
applies to all businesses. Recorded by X-Zone in Canada the show is being syndicated
this weekend across the world to various radio stations. You can find the timing of play, or the podcast version, at the
X-Zone web site. Download On Apple iTunes here. Download as Podcast here. Or listen on X Zone jukebox here.
PPS – Thanks to Gary Woodill at Brandon-Hall.com for picking up my comments on his Workplace Learning page – "It's the One You Don't See That'll Kill You." He trumpets replacing traditional strategic planning with more scenario planning to better prepare companies for success. Great article!
To Everyone in America – Happy Independence Day!
by Adam Hartung | Jul 1, 2010 | Current Affairs, Defend & Extend, In the Swamp, Leadership, Lock-in, Web/Tech
"Stay the Course" is a popular phrase. It sounds all macho, and committed to a destiny, to proclaim you must "stay the course." However, as bnet.com pointed out there are times when "Stay the Course is a Recipe for Disaster." The article calls it "Stay The Course-Itis" (or STCI) for leaders that don't know when it's time to change direction. We can now see that BP simply drilled one too many deep-water holes in the Gulf – just as Exxon let one too many tipsy captains steer oil vessels before the Valdez crashed. Staying the course may sound good, but too often the course isn't right. And a bad course can lead you into disaster.
Take for example Dell. As reported by The New York Times, and picked up by CNBC.com, "in Suit Over Computers, Window into Dell's Fall," we learn that Dell went just a bit too far in its effort to be a low cost industry supplier. Hoping desperately to maintain a slight lead in lowering costs, Defending & Extending Dell's long-term Success Formula as industry supply chain leader, Dell simply bought bad parts. It then replaced bad product with more bad product. Refused to admit to itself that it had gone "too cheap" in its effort to be cheap. Things went from bad to worse as the Lock-in to keep costs low led to multiple customer disasters – even at the law firm defending Dell in court! And Michael Dell is being accused of financial irregularities in his effort to make Dell's results possibly look better than they were. Both corporately and personally leadership made some big mistakes – not unlike BP – in the effort for Dell to "Stay the Course."
Microsoft certainly isn't without it's STCI as CEO Steve Ballmer keeps dropping new projects to funnel money and other resources into old desktop/laptop products. The Wall Street Journal reported "Microsoft Kills Kin Mobile Less Than Two Months After Launch." Kin was a product targeted at the hot market for youthful cell phone users. A double-digit growth market. But Microsoft is backing out, despite its ballyhooed launch – including announcements to take the product to China very soon. Microsoft can't seem to do much but "Stay the Course" supporting old products.
Both tech companies have had no improvement in their market value the last decade. And BP has watched its value drop more than 50% since the spill started. Some now actively wonder if BP could disappear as SeekingAlpha.com discussed in "How Likely is a BP Takeover bid?" Staying the course in the Gulf, drilling for more oil in deeper water and taking on more risk, could cost BP its existence if another company buys up the discounted equity. Of course, there is still reason to think BP could get wiped out from the costs of the disaster without a takeover.
Companies can get over SCTI if they follow advice given at ABCNews.com "Reboot Your Small Business by Reinventing." The article applies to all size businesses, however. When you see your business doing poorly, especially relative to competitors, it's time to attack sacred cows and do some things differently. Instead of "doubling down" on the old Success Formula, do new things!
You don't want to end up like BP, Dell or Microsoft today. Once great companies that are floundering now – struggling to find growth as they continue spending so much energy trying to "Stay the Course." When the seas are too calm to sail, leaving you stranded with no growth, or the waves are crashing too heavily, as competition is derailing your efforts, why not set a new course? One that can lead you to better growth? There's no harm, or shame, in heading where the market is going, using Disruptions and White Space to develop new solutions. Don't let your ego, pride, or history/legacy push you to "stay the course" when better results can be found in new markets, new customers and new solutions.
PS – Yesterday SmartBrief on Leadership newsletter ran ""For Real Innovation, Pick Up the Phone" linking to the BloggingInnovation.com repost of "It's the One You Don't See That Kills You." Compliments to Braden Kelley for a great web site, and getting the word out about how important it is to apply innovation! I enjoyed how the newsletter grabbed the conclusion, that businesses need to obtain more outsider input, and ran with it as the title. better than my title, to be honest!
PPS – PRLog.org just picked up my blog on "Journalism in 2020." Great to see the media enjoying my comments about their industry, and passing them along through this communication site!
by Adam Hartung | Jun 29, 2010 | Current Affairs, Defend & Extend, In the Swamp, Leadership, Lock-in, Science
I weighed in late on the Gulf Coast disaster – and my impressions of British Petroleum. I wanted to be thoughtful, as the ramifications of this will be with us for decades. Compared to the hurricane that wrecked New Orleans this situation is far worse. Many more businesses are being shut down, the ecological disaster is far worse, and the clean-up will take much longer – even though New Orleans is far from a full recovery from hurricane Katrina. And there was lots (lots) of finger-pointing going around. It is going to take a lot of money and energy to deal with this mess – and lots of blame-laying (lawsuits) are inevitable
But I'm always the guy looking forward, and that's why my Forbes article, "BP's Only Hope for Its Future," focused on what BP needs to do now to recapture the more than $100B of lost value its investors have suffered – not to mention out-of-pocket cash costs still rolling up.
There is a raging debate about what investors can expect, as typified by the SeekingAlpha.com article "Where is BP Headed: $70 or $0?" Unfortunately, most of these articles focus on 2 factors: (a) what are the estimates of cash out to fix the mess and legal battles compared to historical cash inflows from revenues, and (b) contrarians typically think no situation is ever as bad as it initially looks so surely BP is worth more than it's currently depressed value.
Addressing the latter first, I'd recommend investors look at GM, Chrysler, Lehman Brothers and Circuit City. Things definitely can get worse. Problems created across years of sticking to an outdated Success Formula, remaining Locked-in to following historical best practices, wiped out their investors. Things can definitely get worse for BP. It will not be acceptable for the company to remain focused on "business as usual" hoping to "weather the storm" and allow "things to get back to normal." That scenario is a death sentence. We haven't yet seen what new regulations, taxes and restrictions – nor the eventual cost of 20 years of dead seas charged to BP and its industry brethren – will cost. BP has to make changes if it wants to regain growth – and most likely if it wants to survive.
And this leads to item (a). Nobody knows the long-term costs chargeable to BP. Nor do we know what the future cash inflows will look like. We don't know the brand impact. Nor do we know how changes in regulations or industry practices will hurt cash flowing in the door. It's the inability of the past to predict the future that makes efforts at cash flow planning mute. Lots of number crunching isn't the answer – it's understanding that the assumptions could well be seriously changing. There are more unknown variables than known right now. Which makes it all the more important BP realize it must change it's Success Formula to make sure it not only avoids another disaster, but finds a way to profitably grow in the aftermath of this event and its changes on the industry.
Many are calling for firing the CEO, as 24×7 Wall Street does in "BP Can Deny CEO Departure Story; But Fate Already Set." I call this the hero and goat syndrome. Americans like to think that the CEO should be lionized as a hero when results are good, and blamed as a goat when results are bad. Unfortunately companies rely on lots more than CEOs (despite their pay) for results. The problems at BP are with the Success Formula – now some 100 years old – and the inability of the total management team to attack old Lock-ins in order to develop something new. As my last blog pointed out, even HBR doubted there was any reality in the "Beyond Petroleum" headline.
BP must attack its historical ways of doing business. This isn't just a short-term crisis. The Gulf disaster is the result of pushing an old Success Formula too far. Of going into deeper and deeper water, at greater and greater risk, for less and less yield in order to keep finding oil. Unfortunately BP seems to be viewing this not as an example of what happens when marginal economics keeps you doing the same thing, over and over, even as returns decline. Too bad, because this is the kind of event that highlights a serious change is needed in BP's future direction.
I was impressed with a Harvard Business School Working Knowledge survey result in "How Do You Weigh Strategy, Execution and Culture in An Organization's Success?" Respondents overwhelming voted that success requires managing "culture." And that is largely what BP now needs to do. The Beyond Petroleum strategy was clearly enunciated, but execution remained focused on the old direction because the culture did not change. And that's what attacking Lock-ins and implementing White Space is designed to do – move an organization's culture forward by addressing behaviors, decision-making structures and old cost models.
When I was a boy I'd see a tree show foliage problems and my father would say "we might as well cut it down, that tree is dead." I'd be shocked, the tree looked fine. But my father, a farmer, knew that the roots had been damaged. We were just seeing the slow process of death, that might take a year or two. Fortunately, BP isn't a tree. And although its Success Formula roots are in trouble, unlike a tree they can be changed. Let's hope the Board takes action to make changes quickly so BP's future doesn't remain completely imperiled.
For more on using Disruptions to address problems listen to my radio Interview "Disrupt to Win." Or listen to a short podcast on how to "Drive Innovation by Disrupting the Status Quo." Or read my CIOMagazine column on how to "Use Disruptions to Move Beyond Legacy" in thinking and planning.
