About 30 years ago Roberta Flack hit the top of the record charts (remember records anybody?) with "Killing Me Softly" – a love song. Today we have 2 examples of CEO's softly killing their shareholders, employees and investors. Definitely NOT a love song.
Sears has continued its slide, which began the day Chairman Lampert acquired the company and merged it with KMart. I blogged this was a bad idea day of announcement. Although there was much fanfare at the beginning, since day 1 Mr. Lampert has pursued an effort to Defend & Extend the outdated Sears Success Formula. And simultaneously Defend & Extend his outdated personal Success Formula based on leveraged financing and cost cutting. The result has been a dramatic reduction in Sears stores, a huge headcount reduction, lower sales per store, less merchandise available, fewer customers, empty parking lots, acres of unused real estate and horrible profits. Nothing good has happened. Nobody, not customers, suppliers or investors, have benefited from this strategy. Sears is almost irrelevant in the retail scene, a zombie most analysts are waiting to expire.
Today Crain's Chicago Business reported "Sears to Offer Diehard Power Accessories for Sale at Other Retailers." Sears results are so bad that Mr. Lampert has decided to try pushing these batteries, charges, etc. through another channel. At this late stage, all this will do is offer a few incremental initial sales – but reduce the appeal of Sears as a retailer – and eventually diminish the brand as its wide availability makes it compete head-to-head with much stronger auto battery brands like Energizer, Duralast, Optima and the heavily advertised Interstate. Sears has attempted to "milk" the Diehard brand for cash for many years, and placed in retail stores head-to-head with these other products it won't be long before Sears learns that its competitive position is weak as sales decline.
Mr. Lampert needed to "fix" Sears – not try to cut costs and drain it of cash. He needed to rebuild Sears as a viable competitor by rethinking its market position, obsessing about competitors and using Disruptions to figure out how Sears could compete with the likes of WalMart, Target, Kohl's, Home Depot, JC Penneys and other strong retailers. Now, his effort to further "milk" Diehard will quickly kill it – and make Sears an even less viable competitor.
Simultaneously, Chairperson Barnes at Sara Lee has likewise been destroying shareholder value, employee careers and supplier growth goals since taking over. During her tenure Sara Lee has sold buisinesses, cut headcount, killed almost all R&D and new product development, sold real estate and otherwise squandered away the company assets. Sara Lee is now smaller, but nobody – other than perhaps herself – has benefited from her extremely poor leadership.
As this business failure continues advancing, Crain's Chicago Business reports "Sara Lee to Spend $3B on Stock Buyback." In 2009 Sara Lee announced it was continuing the dismantling of the company by selling its body-care business to
Unilever and its air-freshener products and assets to Procter & Gamble Co. for approximately $2.2 billion. As an investor you'd like to hear all that money was being reinvested in a high growth business that would earn a significant rate of return while adding to the top line for another decade. As a supplier you'd like to hear this money would strengthen the financials, and help Sara Lee to invest in new products for growth that you could support. As an employee you'd like this money to go into new projects for revenue growth that could help your personal growth and career advancement.
But, instead, Ms. Barnes will use this money to buy company stock. This does nothing but put a short-term prop under a falling valuation. Like bamboo poles holding up a badly damaged brick wall. As investors flee, because there is no growth, low rates of return and no indication of a viable future, the money will be spent to prop up the price by buying shares from these very intelligent owner escapees. After a couple of years the money will be gone, Sara Lee will be smaller, and the shares will fall to their fair market value – no longer propped up by this corporate subsidy. The only possible winner from this will be Sara Lee executives, like Ms. Barnes, who probably have incentive compensation tied to stock price — rather than something worthwhile like organic revenue growth.
Both of these very highly paid CEOs are simply killing their business. Softly and quietly, as if they are doing something intelligent. Just because they are in powerful positions does not make them right. To the contrary, this is an abuse of their positions as they squander assets, and harm the suburban Chicago communities where they are headquartered. That their Boards of Directors are approving these decisions just goes to show how ineffective Boards are at looking out for the interests of shareholders, employees and suppliers – as they ratify the decisions of their friendly Chairperson/CEOs who put them in their Board positions. The Boards of Sears and Sara Lee are demonstrating all the governance skill of the Boards at Circuit City and GM.
It's too bad. Both companies could be viable competitors. But not as long as the leadership tries to Defend & Extend outdated Success Formulas unable to produce satisfactory rates of return. Lacking serious Disruption and White Space, these two publicly traded companies remain on the road to failure.
It's easy to misunderstand White Space. About twenty years ago Apple launched the Newton. The company sold about 375,000 of the first commercial PDAs, but Apple's leadership thought the market wasn't really there – and decided instead to focus on growing Mac sales. Obviously, as Palm and other PDA makers demonstrated, there was a tremendous market for PDAs. Apple misread the feedback from White Space.
Look now at the recent iPad launch. Silicon Alley Insider headlined "Now That They've Seen Apple's iPad, Most People Don't Want One." The headline keys on the fact that after the launch the number of people who said they were not interested to buy doubled (26% to 52%). Wrong fact to grab onto.
Instead, look at the fact that the number who said they would buy one tripled, from 3% to 9%. This is incredible, and should excite Apple's management as well as employees, suppliers and shareholders.
Most people will see a new, innovative product and say "why would I want that? I already have this other thing and it works great." And that is what marketers should expect. Most people are just trying to Defend & Extend what they regularly do, and thus all the want is a product that helps them do their thing a little easier, faster, better and cheaper. They want minor improvements – variations and derivatives of what they already have. Improvements that are immediate, without them doing anything new or different.
All new deeply innovative products start with customers who are under-served or unserved. And this is why it is so important they be launched in White Space. White Space teams aren't intended to develop the big, mass market of known customers looking for something new. White Space is about doing new things that bring in new customers, give new solutions that attract real growth. And White Space teams have to learn how the market is evolving, how they fit into the market shift and how their solution will advance the market in order to sell more.
For the iPad, the 3% to 9% shift in likely buyers is huge because it shows that the iPad is an offering that appeals to people who are not today well served by their existing PC, laptop, netbook, mobile phone, kindle or mix of these solutions. 9% of respondents are saying that they see the iPad and they see a solution for what they want to get done. And if 9% of potential buyers see this option, that is HUGE. By White Space standards, often there are only .5% or 1% or 2% of people who initially see how the new product fulfills their under-served needs.
Set expectations right for White Space. White Space is not for launching variation 4 of an existing product – targeted at existing customers. That's what the marketing and sales department can do fine, thank you very much. White Space is the team that finds the 3% (or in Apple's case 9%) of users that see value in this solution, then works with them to implement the product/solution in order to make sure it fulfills the market need and is priced to sell effectively while providing a profit to the company.
Apple understands this, you can be assured. Look at how successfully the Apple White Space teams found the underserved users that jumped all over the iPod and iTunes, the iTouch and then the iPhone. They got the product positioned and selling in a hurry. And now that Apple has that skill, the company is going to apply it to the iPad. If you understand this chart correctly, you understand that it bodes very, very good things for Apple.
And it tells you the importance of having White Space teams, setting their expectations correctly, and managing them for the kind of results that can turn your organization into the next Apple. It took Apple 10 years to reach this skill level. It did not happen overnight. Or with one product introduction. And it will take your organization a few years to build this skill. So, what are you waiting on?
Lots of new things are happening with technology. Everyone knows that. We see the emergence of new communication vehicles like Facebook, and new ways to exchange data – like Apple's iPhone and RIM's Blackberry. Skype replaces the telephone and in-person meetings. iTunes replaced CDs. The list is pretty long. But how much of these new technologies do you use regularly, how many do you use in your business, and how many do you use in "mission critical" applications of things you do?
Most of us watch new markets develop. Many even think the smart thing to do is to wait, let things evolve, see what happens. Be a late adopter when technology is "stabilized" and prices are lower. These are spectators to the world of innovation, doing what they've always done and waiting for some future time when it will seem better to switch.
Then there are participants. The participants are learning. While others watch, they actually learn how to get new customers, how to sell more product, how to apply technology to lower cost while improving the solution, how to be more competitive, how to read market shifts (and prepare) – how to make more money. Like Google.
Google just launched Buzz ("Google Betting on Mo Better Buzz" at Mediapost.com. Buzz is a new product that links up to social media sites for a variety of functions – one of which is its ability to deliver ads (imagine that) while also adding benefits to users like location tagging and enhancing email. It does new things, and some things already available via Facebook or Yelp. That it's market position, or even its functional position in the technology environment, isn't clear is not terribly important to Google management. In "A Buzz and A Shrug: Why Should Google Kill Anything?" MediaPost.com goes on to describe that at the launch meeting management went out of its way refusing to declare a specific position, or competitive plan, for Buzz.Google is in the market, trying something, learning and participating – being part of making Disruptions happen and seeing if it can find a way to create sales and profits.
And that's what White Space, and participation, is all about. While spectators watch and get left behind, participants are in the market. Spectators fall off the S-curve, as their capabilities fall away from market needs they become less relevant, sell less and profits fall. Participants use White Space to jump the curve – to move from an old product/market S curve to a new one. They are in the market learning, and adapting, and moving toward that point where the technologies and solutions collide – thus they are ready and able to move to the next new thing. While spectators are stuck, doing the same old thing, falling farther behind.
Being a participant isn't hard, nor is it all that expensive. It requires the willingness to get in the game. To start. To do less "planning" and instead get in there and do it – like the NIke ad recommends. Instead of devoting all your money to defending and extending what you know, take some and invest in the places where growth is rampant. The learning will pay for itself as it allows your business to move into new markets and generate new revenues. You will have to Disrupt your thinking and processes to do this, but the payoff is it could save your company!
Long ago business education started with a lot of focus on industrial engineering. Improving operations to get more stuff out the door. This was augmented by sales and marketing, to help sell stuff so we could get more out the door. And finance was added as a way to understand cash flow and funding in order to get more stuff out the door. All of that was predicated on endless demand for the stuff. But today, it's not about making lots of your stuff and cramming it down customer throats. Instead, winners have to be adaptable to market needs – to be part of creating new solutions that generate more revenues and higher profit rates.
You don't need all the answers. White Space is about having a plan, and goals, based upon scenarios. But then avoiding analytical paralysis and getting into the market. Google is phenomenal at this. Not everything Google launches is a big hit. Google Wave appears to be struggling. But that's OK. If you don't put all your eggs in one basket, because you get into markets earlier and faster, you can afford to have misses. You still get the benefits of market learning – and move forward to possibly jumping the next S curve. Google's Buzz is another stereotypical White Space entry into the market. A product with a lot of possibilities, looking for how to fit into a quickly shifting market, teaching Google more about the marketplace and aiding the company toward maintaining its torrid growth pace.
I had two more Facebook ignorers this week. First was an old friend who didn't use Facebook, and could not imagine how it would be beneficial to his business. I responded with "that's kind of like the folks who didn't use a telephone saying that they didn't see any value in it for business." When you don't use a tool, it's easy to pretend it isn't valuable. Makes life easy on your competitors who do give it a try.
The second was a business that recruits people under 30. The top marketers at this company are still doing all their efforts with newspapers, radio and typical broadcast forms of media. They said they couldn't use social media to reach their base "because you can't control the message on Facebook." OK, so they don't use social media, and their focus is on message control so they don't intend to use social media. But their target is a population that every month uses less traditional media, and more social media. And these folks are wondering why media costs are up, and their success is way, way down. Uh huh.
At MediaPost.com "Avoiding Social Media Malpractice" Chad Cappellman tells the story of a hospital division that gets more people coming for insight through Facebook than come through the highlighted links on the hospital's own web site! People use Facebook today – a lot. We all would prefer a personal referral when we have a question. Often, a referral is better than 10 Google search hits at pointing you to the service provider or product which really fits your needs. And Facebook is a fast way to generate referrals. As is Twitter. So when you want potential customers referred your way, why wouldn't you try to maximize the use of social media? As the story above discusses, people would rather get info about a hospital (an example) from friends than from about any other source.
As for implementation, social media is part of the more sweeping market shift affecting all businesses. Historically, business people thought in terms of "control." The business had communication walls, internally and externally. More time was spent making sure information wasn't passed around than making sure communication was fluid and accurate. But in another MediaPost.com article "Twitter and Facebook Could Get You Fired" we see that approach simply won't work any more. We live in a "connected" and "networked" world today. There are precious few secrets when everyone has a mobile phone, and most of those have cameras, and texting is ubiquitous, and the vast majority of people under 35 have multiple social network locations.
Today, you can't win by limiting communications. That is a failed approach. Nor is it possible to "control" what is said about your business or its products and services. What you can, and increasingly must, do is monitor the chatter and be part of it. Of course some things will be inaccurate, so its now your role to help move the message in the right direction. Don't think about control, think about helping the message move toward accuracy. And leverage all the chatter to help you sell more stuff!
We live in a fast shifting world. That is not going to change. Slow moving traditional media is gradually dying. No competitor can succeed by avoiding the shifts. Those competitors that win will use scenario planning to help anticipate the shifts, and focus on fringe competitors to learn how to do new things which can create advantage. Success isn't going to come from trying to Defend & Extend the "core" – but rather by rapidly adapting to new market needs even if it means changing your "core." And the best way to stay connected to shifting markets today is through social media. It not only gives great, and timely, feedback but offers everyone the chance to enter into a dialogue with potential new customers at remarkably low cost. And in remarkably powerful ways.
"Strategic Plans Lose Favor" is a recent Wall Street Journal headline. Seems like some big companies, and big consulting firms like Accenture, McKinsey and the Boston Consulting Group are rapidly learning what this blog has been pushing for a few years. That flexibility trumps traditional approaches to strategic planning.
When Office Depot's strategic plan was leading to revenue struggles, the company set up a situation room to track key indicators and adjust to market shifts much quicker.
"Strategy as we know it is dead" according to Walt Shill, head of strategic planning at Accenture. "increased flexibility and accelerated decision making are much more
important than simply predicting the future." (Do you think he's been reading this blog and my book?)
"business leaders will start to rely less on static five-year strategic
plans and more on rough "adaptive" strategies that consider multiple
scenarios" according to Martin Reeves, Senior Partner at BCG. (Where'd he read that – on this site?)
""The rate of change and width of volatility is much wider and faster
than what we would have assumed coming into this," Jeff Fettig, CEO at Whirlpool
McKkinsey has opened a "Center for Managing Uncertainty." Really.
As this recession has come on, and lingered, businesses are clearly starting to realize that market shifts happen fast, and businesses cannot be slow to change. Adaptability is one of the most important capabilities to compete in the post-2000 business world.
And the real market leaders are incorporating this kind of thinking into their organizations. While the earlier quotes show how, caught on the defensive, organizations are finding new ways to react, the best performing organizations are taking market leadership by being Disruptive. Like Apple. In a Harvard Business Review blog Roberto Verganti, professor at Politecnico di Milano tells us "Apple's Secret: It tells us what we should love."
The good professor of design and management points out that Apple does not ask customers what they want. Instead the company designs products which take customers to new levels of performance beyond what they imagined. Instead of being reactive, Apple uses scenario planning to understand future market needs and create shifts with its products. This approach leads to breakthrough performance, such as the success of Nintendo and its Wii product line.
To be successful businesses can no longer try to Defend & Extend their old strategies. They have to be market focused, and flexible to manage through market shifts. And to earn superior rates of return they have to be market leaders that use scenario planning and White Space to launch new solutions meeting emerging needs which attract customers and grow sales.
One of the biggest business news items this week was the launch of Apple's iPad for $499. Although perhaps overlooked by many big companies, and several IT departments. To some businesspeople, the iPad seems another consumer toy, thus not terribly noteworthy. Some see it as a small-market share sort of oversized iPhone for mobile telephony/data use. One executive commented to me this week "I don't understand why anyone cares, I don't own an iPhone and cannot imagine why I would ever want to download an app," He has a huge investment in Microsoft technology, has never used an iPhone or Palm Treo or even a Blackberry. Hes' never seen an iPhone app, and was amazed when I told him 1 billion had been downloaded. He's comfortable in his traditional IT solution, and doesn't see the importance of iPad.
But the iPad is another step demonstrating a big market shift is happening. With Apple's announcement, Amazon announced that it's sales ofKindle are about twice what most analysts had expected – see "During Apple Week Google and Amazon try to Remind You They Exist" at Fast Company. Further, it appears now that for every 10 books Amazon sells, it sells 6 Kindle books — a substantial number and indications of serious market change. The iPad is half the price most people expected, and now rumors are Kindle's will drop to $100 as competition heats up. It rapidly appears that while there is an emerging battle between Amazon and Apple, the biggest insight is that the market for BOTH is growing a whole lot faster than anyone expected. As are iPhone sales. These devices, and the technology solution embedded within them, are grabbing a lot of buyers, and quickly. The sales, in units and dollars, are growing much faster than anticipated. And new users are flocking toward this technology platform.
Thus, the iPad is likely to be a big winner for Amazon and Kindle – as well as Google. It is expanding the application base, and use patterns, for mobile devices. It is expanding the product breadth and price points. Quite simply, it is helping people do new things they couldn't do before – especially when mobile – that they could not do before. As a result, apps will grow and sales of both hardware and software will grow. And early adopters will gain an advantage as they use this new technology to create advantages for their customers. Apple and Amazon are both "winners" who are driving revenue and profit growth.
And Microsoft loses. Microsoft has never changed its Success Formula. Its Identity, Strategy and Tactics remain as they've been for three decades – to provide a one-stop near monopolistic, integrated (mainframe style – and certainly monolithic) solution. As the market has been shifting, however, this has been less and less successful.
As the chart shows, Microsoft's product strategies, product introductions, acquisitions and management changes have done nothing for growth – or valuation. Microsoft keeps trying to do what made it great in the late 80s and early 90s. But since then, the market has shifted dramatically and the sustaining innovations Microsoft has offered, while meeting customer requests for improvement, haven't really helped growth.
Microsoft has poured billions of dollars into a failed approach intended to Defend & Extend its Success Formula – but to no avail.The market is going a different direction – toward cloud computing with its distributed data, extremely small apps at very low (disposable) prices, easy to use interfaces and greatly lower device cost.
Even as large and cash rich as Microsoft was in 2000, it cannot stop a market shift. And even though this shift has been predictable, with competitors from the fringe like Google, Amazon and Apple bringing to market new products, Microsoft has chosen to try Defending & Extending its Success Formula rather than Disrupt and use White Space to develop new solutions. What can we expect from Microsoft in the future? Unfortunately, more of the same and most likely a dramatically deteriorating value. When the market's shift to these thin devices with a different architecture becomes clear, the inability of System 7 and Bing to make any difference in Microsoft results will be clear. And investors are likely to run for the proverbial hills – letting the stock price drop along with new users. Microsoft will increasingly be dependent upon legacy applications and maintenance – markets with little/no growth. Microsoft could soon be the next Unisys (remember that company?)
So, what is your company doing? Are you moving forward with new apps which will grow your revenues and profits? Are you looking forways to use these devices, and the underlying mobile computing architectures, to offer your customers better solutions? Are you bringing out new approaches that are potential game changers, bringing new customers to you and accelerating growth? Or are you trying to Defend & Extend your old processes, approaches and products? Are you planning a future that will be PC/laptop centric, and delivering traditional web pages? Are you following the laggard, Microsoft, or are you Disrupting your business, and market, with White Space projects that will change market behaviors using these new technologies and positioning you as the market leader? In 2015, will you look like Microsoft – frozen in place as the market shifts – or will you look more like Google, Amazon and Apple with new solutions that create excitement and new sales?
Have you tried a Kindle yet? iPad? iPhone? Do you have any White Space wher
e you are trying these new things? Have you Disrupted any of your organization and challenged them to apply this technology? Exactly what are you waiting on?
Most businesses have multiple analysts who spend day after day accumulating, analyzing and displaying data. Financial analysts, marketing analysts, IT analysts – they are all over the place. Then businesses will hire consultants who bring their own analysts to further find and review data – then present yet more charts and data summaries. When I worked for The Boston Consulting Group we used to say "the data will set you free!" And we believed that if we dug up more data and did more analysis than anyone else we would offer insight to change businesses everywhere.
Yet, more of our clients didn't take action than did. When I moved on to other firms, the results weren't really different. And when I was in corporate America at huge companies, like PepsiCo and DuPont I found that the army of analysts and mounds of data really had almost no impact on how decisions were made. or what decisions were made..
Once a business is prosperous, its Success Formula drives behavior. Its Identity is set, its strategy is in place and tactics are predetermined. Things don't change just because someone shows the leadership data. No matter how synthesized or analyzed or elegant, the data really makes little (if any) difference. It's easy for leaders to simply ignore data that is troubling, and highlight data which confirms previously held beliefs. And even if insight is created, insight has nothing to do with what people will do next. Insight doesn't change the decision-making processes, or any of the other Lock-ins keeping the Success Formula in place. Even though managers claim that they want to see "the data," in reality the data makes no difference.
Last night the U.S. President Barack Obama referred in his State of the Union address to the data which confirms global warming. This drew significant snarky laughter from some of the joint congressional attendees. And even though there are regular reports, like the recent New York Times article "Past Decade Warmest on Record, NASA Data Shows," there are regular polls showing an enormous amount of the population, at all income levels, who simply don't believe the earth is warming. The data, in the end, is ignored or discounted. It simply doesn't matter. And no one is going to change the opinions of anyone who doesn't think the earth is warming by trying to show more data.
Data leads to debates. Who's answer is right? Who's forecast is more likely? Debates about data can go on forever. An old business joke says if you strong all the econometric modelers together end to end they'd still never reach a conclusion. But you'd get a lot of debate.
Instead of data and debate, realize the limitations and move on. If we spent 1/10th the time digging for and analyzing data, we'd do just fine. Rather, we should spend the other 9/10th of the time building scenarios. Instead of debating a topic like global warming, we could build scenarios that ranged from global cooling by 5, 3, 2 or 1 degree to no change to warming by 1, 2, 3 or 5 degrees. The issues isn't which is most likely – but rather that we think through the implications of ALL, and prepare. What strategies would allow for success given that any of these are possible?
Business analysts, strategists and leaders spend a lot of time trying to guess the future. But their crystal ball is just as foggy as everyone else's. Their guesses are mostly wrong, because a dynamic marketplace is very hard to predict. So they plan to do something, but then shifts make the returns lower because the world/market didn't turn out as planned. Given that we KNOW that we're more likely to be wrong than right, why the fascination with trying to pick the future?
Those who win more than they lose develop a lot of scenarios. They don't try to pick a scenario. They try to think through the many possibilities and prepare for as many as possible. And they develop mechanisms to track the market so they can keep an eye on the multiple scenarios and anticipate things as time passes. It's never the things you expect that really hurt you, it's the one you didn't think about. To be prosperous for a long time you have to build the ability to think very broadly about the scenarios that can happen, and prepare.
So the next time you feel the urge to "get more data" think about global warming. Has all this data changed the debate? Has it helped any country to better prepare? Has anything really happened, as the mountains of data on the topic have been assembled, analyzed and distributed? Does anyone think the data will cause a change in policy, or behavior? If not, then maybe you can start to spend more time creating multiple, wide scenarios that will help you prepare – and possibly help you to develop new behaviors to protect your business from a range of potential outcomes.
We all love awards and lists. Who doesn't like being rewarded for their accomplishments. At the same time, we have acquired a strong taste for lists "The best…" Another verification of success. But both can be harbingers of potential problems – and even destruction.
Ben Bernanke became Time magazine's "Man of the Year" and now he's at some risk of losing his job (see 24/7WallStreet.com "In Not Bernanke, Who?" Think about the list of Great Companies that appear in books, like Good to Great, only to end up in big trouble – like Circuit City and Fannie Mae. Why does it seem those who top awards and lists end up shortly struggling?
Too often businesses, and business people, "win" by doing more of the same. They work hard to optimize their Success Formula. They get really committed to practicing what they do (remember Outliers by Malcolm Glaldwell and his recommendation to practice, practice, practice?) They get better and better. And in fields like sports and music, where the rules are well understood and the approach is clear, this often works. And as long as they keep practicing top athletes and musicians often remain near the top of competitors.
But we have to recognize that most of the time those "at the top" in business have emerged within a given market. Then they are knocked off by a shift. Like Ed Zander of Motorola being named #1 CEO in 2004, only to be fired within 2 years as RAZR sales toppled. Like Sun Microsystems perfecting Unix servers for an emerging client/server technology market that became saturated and shifted to PC servers. Like Michael Dell (and Dell Corporation) which emerged when lower cost made supply chain efficiencies critical for PCs, before the PC market became saturated and iPhones plus Blackberries started dominating the landscape. Or WalMart which also used a new supply chain to grow the emerging discount retailing sector, only now it is laying off 10,000 employees as it shuts Sam's stores across the country. These companies created a Success Formula and honed it quarter after quarter to maximize performance in a high growth environment. But the market shifted.
In business the rules are not "set". There is no written music to
perform. Instead, the market is highly dynamic. New competitors
emerge, new ways of competing emerge, new technologies emerge and new
solutions emerge. The market keeps changing. Suddenly, what worked last year isn't successful any more. When the market shifts, the previous winner becomes the new goat. That optimized business starts to look like the world's best wrestler, only to be obsolete when a flood occurs making swimming the new, necessary skill. Being last year's best is impossible to repeat because the market shift makes the old approach less valuable – possibly obsolete.
"Best practices" are usually little more than copying last year's list topper. In the 1990s everyone wanted to copy product development practices at Sun, and supply chain practices at Dell. But both led to horrible returns when demand for servers and PCs diminished. Best practices are almost guaranteed to be a solution developed to late, and applied even later, to solve previous years' problems. They aren't forward looking, and not designed to meet the needs 2 years into the future.
Business success isn't about topping a list. And, to a great degree, the Outlier approach (as is a hedgehog concept) is very risky. If you spend 10,000 hours doing something, only to see the value for that something go away, what good was it? Remember when Cobol writers were in demand? Being the world's best at something in business can cause you to be optimized on the past and inflexible to market change.
Business success requires adaptability. And that requires a focus on future markets. It requires the ability to constantly Disrupt your approach, to build capability in many different areas and markets. It requires skill at establishing and operating White Space projects to learn about new markets and shifts – the ability to know how to test and then understand the results of those tests. In business adaptability trumps optimization, because you can be sure that things will change – markets will shift – and the highly optimized find themselves behind the shift and struggling.
Over the last week everyone has heard stories about how Facebook, and Twitter, became primary communication conduits for people with connections in Haiti. Telephone and slower communication vehicles simply have not been able to connect family and friends in this crisis like Facebook. When shift happens, it accelerates as new uses come to the forefront quickly. For everyone trying to connect with employment candidates, suppliers and customers this shift has immediate and important impact on behavior.
For advertisers, the impact is significant. Where should ad dollars be placed? On a traditional home page and search site – like Yahoo! – or on Facebook?
And it's not just the sites themselves, but how long people are on these sites. From an advertising point of view, you can start to think about Facebook – and YouTube – almost like a "channel" from early television days. Where the audience comes back again and again – offering you not only a large audience, but more opportunities to reach them more often. Facebook and YouTube are beginning to dominate the "user views."
Of course, the impact isn't just regarding the web, but how any business would use media to reach a target audience. Most advertising agencies, and ad people, are still focused on traditional media. But, as we can see, that WILL shift — even more than it traditionally has.
Anybody investing in newspapers, expecting a resurgence in value, is pretty foolish. Newspapers are going to lose ad dollars – not gain. Relatively, newspapers already are getting too much of the ad spend. Talk radio has growth. And clearly the web. Since we can expect that newspaper and magazine readership will continue recent downward trends, and television is fragmenting as well as stalling, the big growth is on the internet.
The market shift is really pretty clear. We aren't speculating about the market direction with this data. The question becomes, will you be an early adopter of these new media channels or not? Given that the web and mobile have the lowest ad rates of all media, why wouldn't you? Over the last 2 months Pepsi has decided to NOT advertise on the Super Bowl, instead putting the money into social media. And after introducing the Granite Concept car at the Detroit auto show, even behind-the-times GM is now considering a launch of this vehicle, intended for buyers under 35, using only web advertising.
So what are your plans? Do you have scenarios where Facebook and YouTube are integral to your marketing? Do you have pages, groups and channels on these sites? Do you post content? Are you using them to interact with potential customers, vendors and employees? If not – what are you waiting on? Do you need a Disruption to create some White Space and get started? If so – isn't it time to get going?
So out of the blue I got called by a reporter asking me what I thought of Google posting an advertisement for the new Nexus One on its homepage. It was an easy question – the Google homepage isn't sacrosanct. Like everything, it needs to be used in a way that's most valuable for customers and suppliers. Times change, and it should change. So I answered that the Google home page wasn't a sacred cow, and it's smart for Google to try things.
"Has Google changed its stance on using the
home page as a promotional platform? Adam Hartung, an analyst with
Spark Partners, refers to Google's home page as a "sacred cow." The
company has something that almost seems like a religious idol. This ad
demonstrates that Google is willing to change that and "attack a sacred
cow to step the company forward," he says. "And that's a very good sign
for investors."
I didn't record myself, but it sounds like me. Sacred cows get you into trouble. You have to constantly test, try new things.
But the CEO of Burst Media didn't agree with me. Picking up on my quote, in the HuffingtonPost.com "Google Should Not Give Up the Sanctity of Its Homepage" Mr. Coffin takes me to task for violating what he considers a sacred public trust. He fears that anything added to the Google homepage creates cracks in Google's foundation putting the company at risk.
How does anyone in web marketing get so Locked-in? It just goes to show that you don't have to be old, or a big company, or have a lot of money to be Locked-in to something. Google's homepage isn't even a decade old. Nor is Burst Media, an on-line marketing company, I don't think. But here a reputation leader in on-line marketing is working, working hard actually, to defend a sacred cow. "Sanctity" of a web page??? Give me a break.
Google has excelled, grown and made more money, because it has been willing to Disrupt its Success Formula and use White Space to test new things. That's why it's become a household name – and in the process almost singlehandedly destroyed the newspaper industry. And now is threatening to change how we do personal computing (with Chrome) and enterprise applications (with Google Wave) and even mobile computing (with Android and Nexus One). Google should consider nothing sacred, because that's the kind of Lock-in which kills tech companies. Sun Microsystems was busy protecting its sanctity while the market shifted right out from under it
Lock-in is inevitable. But winners – those who grow and make above average rates of return – learn how to manage Lock-in. They are willing to Disrupt and use White Space. Good for Google. I would have expected nothing less!
