by Adam Hartung | Aug 7, 2009 | Defend & Extend, Disruptions, Food and Drink, General, Leadership, Lock-in, Music, Openness, Television
"Pepsi Launches Own Music Label in China" is the BusinessWeek headline. Clearly, the Pepsi staff has some new ideas. Recently Pepsi's Chairperson, Ms. Nooyi, made a trip to China for 10 days. Apparently frustrated, she commented to the Wall Street Journal in July that she didn't see enough Disruptive thinking on the part of her folks in China. She indicated the market was robust, but it was different and would take a different approach. It now sounds like her China leadership got the message.
In addition to launching a music label, Pepsi is producing a "Battle of the Bands" show in China. It's almost like a reformatted page from the aggressive growth years of Starbucks. Instead of just expanding into a new geography (China) with the same old playbook (like the floundering WalMart), Pepsi is figuring out how to be a big success. And that may mean producing television, producing music and making people into stars. China's culture is unlike anything in the U.S. or Europe. So doing new and different things will be critical to success. When you see a business developing its own scenarios about the future, taking actions its competitors (Coke) are too hide-bound to try, acting Disruptively to compete and using White Space projects to test new ideas you simply have to be excited!
On the other hand, "Tide Turns 'Basic" for P&G in Slump" is the Wall Street Journal headline about the latest "new" product at P&G. Please remember, the departing P&G CEO was lauded for creating an innovative culture at P&G. But it appears the legacy is a culture of sustaining innovations intended to do nothing more than Defend & Extend the old P&G brands. Now slumping, P&G needs to identify market shifts more than ever, and create new solutions that help it move with market trends. Instead, the company is rushing into reverse! Management not only seem to be driving the bus looking in the rear-view mirror, but actually driving it that way as well!
Tide has been around a long time. Ostensibly a very good product. For reasons explained in the article, managers at P&G felt the best way to sell more product was to make it less good. Really. They removed some of the chemicals that help you get clothes clean, renamed it "Basic" and launched the product at a lower price. It's not "new and improved." It's not even "better." It's literally less good – but cheaper. Sort of like store brands, or private label – only maybe not as good? Doesn't that sort of obviate the whole notion of branding?
People don't ever like to go backward. We like to grow. To learn and get more out of life. When we find a product that works, why would we want a product that works less well? And the folks at P&G missed this. Only by being insanely internally focused, terribly Locked-in, can you think this is a good idea. Looking inside a person could say "well, we want to jam the shelves with more of our branded product. We want to have the word 'Tide' smeared everywhere we can. We think people so identify with 'Tide' that they'll take a worse product just to get the name brand. We're willing to create a less good product thinking that we will get sales simply because it's cheaper than the stuff people really want to buy." Seem a little mixed up to you?
When you want to grow you figure out new ways to Disrupt the marketplace. You develop new solutions, new entry points, new connections with shifting market trends. You figure out how to be the best at the right price. You don't try to give people less, and tell them they are cheap. And Pepsi clearly gets it. They are willing to expand into music recording and TV production. Stuff P&G did when it was really creative and innovative – after all, that's why we call daytime TV "soaps", because P&G produced them just to sell soap. Now we see Pepsi applying that kind of scenario planning and competitive obsession, along with White Space, to develop new market approaches. Unfortunately we can't say the same for P&G — clearly stuck on trying to cram more stuff with the word "Tide" on it through distribution.
by Adam Hartung | Aug 6, 2009 | Current Affairs, Disruptions, In the Rapids, Innovation, Openness, Web/Tech
Today a colleague emailed me an article on Cisco. He used the Wall Street Journal "send this article" function. The email had his name, the article title, the link to the article and then this:
"The Wall Street Journal Mobile Reader for iPhoneTM
delivers the latest global news, financial events, market insights and
information to keep you ahead of the curve. Get the information you depend on
plus entertainment, culture, and sports coverage when, where, and how you want
it from the most credible source for news and information. Click below to
download the WSJ Mobile Reader for free from the iTunes App Store."
Another indicator of the trend – the shift – that is affecting publishers. And increasingly affects everyone. If you want to be "in the know" you'll be using different technology than ink on paper, or a laptop. And if you want to be competitively advantaged today you are thinking about how you can use this to grow your business:
- ads for the WSJ articles delivered to iPhone?
- developing an app for your technical materials to be read on an ereader like iPhone?
- creating a way for your customers to get updates on ereaders?
- using ereaders to update your salesforce? service force?
What ideas can you think of where this really cheap, real-time technology can help you beat the competition? How can you put ereaders (iPhone, Kindle, Sony, etc.) into your scenarios about the future? What are the leading edge competitors (like Pizza Hut's iPhone app) doing? How can you Disrupt your old business model to start using this lower cost information dissemination technology? How can you Disrupt the market to deliver higher value? What White Space do you have for testing the use of ereaders, learning about their benefits and getting closer to emerging market needs?
by Adam Hartung | Aug 5, 2009 | Current Affairs, Disruptions, eBooks, General, Innovation, Leadership, Openness, Web/Tech
"Sony Unveils Pocket Size Electronic Book Reader" is the Los Angeles Times headline. According to Silican Alley Insider the new Apple tablet is a GREAT book reader. Although Steve Jobs thinks book publishers are incredibly screwed up and he's less optimistic about book sales than he was music sales when he launched iTunes. And Amazon has sold out its Kindle e-readers since they started manufacturing them two years ago.
With all these announcements, you'd think everyone knows about e-readers and the market shift happening in publishing – from books to magazines to newspapers. Even I've blogged about this for months – and the positive impact this has had on book sales as well as Amazon's revenues and profits. But:
(Link to chart and Forrester Discussion here)
Half of all people surveyed in 2Q 2009 still haven't seen or heard about e-readers.
This is important. Imagine it's 1983, and you weren't aware about personal computers and their benefits – even though the IBM PC was Time magazine's "Man of the Year" in 1982. We now know that early adopters of PCs developed new solutions for many problems – from analysis to word processing to advertising development to commercial graphics to in-house publishing to communicating via email — on and on and on. Those who understood this technology early, recognized the shift it demonstrated, had early advantages on competitors. You didn't have to compete in technology, or be a technology officianado, to take advantage of this computing shift for your advantage.
Today, ereaders are another serious market shift that early adopters can leverage. Soon newspapers and magazines will be hard to come by, or so thin (due to printing and distribution cost) that their content will be much less than desired. But ereaders allow you to keep up with journals you've come to trust. And advertisers need to be prepared to follow them onto this platform – to reach people they otherwise would miss.
If you've quit reading books because you don't have the money to spend (at $20+ apiece), desire to carry them, or the time to read them, ereaders allow you to buy and carry 350 or more books at a fraction of previous prices. You even can buy pieces of books (chapters for example) that give you what you want. Think of the shift from long-play albums/CDs to iTunes sales of single songs as an analogy. You can get the benefits of books without many of the reasons you may have quit reading them.
Would you like a repository of information you can call upon for your daily work? With e-readers you can carry an entire library, something you'll not do in paper. Or on your laptop.
Speaking of laptops – this will all be on a laptop you say – so forget ereaders. Do you really think we'll all be carrying these 7 pound monsters around in 5 years? Look at college kids today. How many do almost all their work on a phone? They use the computer only when forced to – for typing papers or building spreadsheets. Laptops are increasingly becoming much more than people want – too big, too heavy, too hot, too power hungry, too short battery life, too complicated, too much software, too many bugs, too many viruses, too expensive. Laptops will soon be like mainframes. Look at the trend. Sales of big screen laptops have cratered as netbooks, with tiny screens, have taken off. People are moving away from laptops to smaller and easier to use products – like ereaders.
Why make your salesforce, or customers, or training techs carry a laptop when an ereader will give them everything they need? They cost less, are easier to keep working, and don't get hindered with personal apps like MS Money that you didn't put on the laptop in the first place but couldn't stop. Given ereader prices, you might be able to consider an ereader disposable in 5 years. Literally, you could give a customer an ereader with all the training, specs, history, design elements, etc. of your product the way we now use a brochure. It literally might be cheaper than a 10 page glossy brochure costs to print and distribute – but with everything they need to design in your product, or operate it, or service it. Imagine an ereader in your car glove box rather than the owner's manual you never use – but the info will be catalogued, searchable, and linked to the internet so it's always current with service information.
Market shifts affect us all. Too often we say "oh that shift is obvious, and I'm surprised the current competitors aren't jumping on that." Then we ignore the shift ourselves. Competitors that make higher rates of return, and prolong those rates of return, observe these market shifts and immediately build them into future scenarios. They think about how to use these shifts to improve their competitive position, and create White Space to test the opportunities – even when they represent Disruptive change. These are Phoenix Principle companies – and the kind you want to be – because they grow more, make more money and have longer lives.
Learn how to spot market shifts and leverge them for your advantage. Don't end up like GM – out of touch and into bankruptcy. Read the new, free ebook "The Fall of GM: What Went Wrong and How To Avoid Its Mistakes."
by Adam Hartung | Aug 3, 2009 | Current Affairs, In the Swamp, Innovation, Leadership, Lock-in, Openness
"Honda's New CEO is Also Chief Innovator" is the recent Businessweek headline. Think of the contrast with GM. Both companies have seen their auto sales hurt this year. Although the downdraft at GM is about 130% of that at Honda. But the reactions to the weakness could not be different.
GM kept trying to sell more of its existing cars until it finally declared bankruptcy, dropping half its models and all its obligations. Then the same people that lead GM into bankruptcy remained in place. While the Chairman was forced out of a job in order to obtain government loans to stay alive, he was replaced by his own #2 who is just as Locked-in as the old Chairman was. Even worse, to me, was bringing back a 77 year old industry veteran to head marketing. He may have been one of the more creative of the "old guard" but he was every bit as much "old guard" as anyone — to the point of belittling Tesla and those succeeding today with electric and hybrid vehicles.
Honda reacted by replacing the CEO of Honda Motors. But the person put into the job comes from a background in R&D. Rather than trying to do more of the same, Honda's approach is to get product developers closer to customers — even at the very top job. Honda isn't leaving the same people in charge, nor even people with the same backgrounds. Honda is planning, from the outset, to use product innovation (rather than financial engineering) to get Honda Motors back on track.
And this aligns with Honda's approach to business. Where GM was once a company with multiple businesses (IT in its ownership of EDS and aviation electronics in Hughes) GM leadership sold off those assets, using profits to subsidize the ailing auto business. Comparatively, Honda has thriving businesses in robotics, factory automation, motorcycles, small yard equipment and new ventures in aircraft and elsewhere. GM reacts to market shifts by ignoring them, and trying to do what it's always done better, faster and cheaper. GM behaves as if its returns will do better if it can just do what it has always done – but more. Honda reacts to market shifts by entering new markets, developing new products and getting itself aligned with market requirements. Honda develops new solutions to changing market needs.
There is no doubt which approach is more sensible, and into which you might consider investing. Honda uses its scenarios about the future to help it develop new products and solutions. Honda obsesses about competition, offering new products for almost every niche opportunity and learning how to be profitable across the market spectrum. Honda is very open to Disrupting its old Success Formula, getting into new businesses that will help it grow even when not "core" to the company's history or its current capabilities. And Honda gives its new business leaders the White Space to succeed, with permission to do what the market requires even if different that the past and the resources to develop new solutions through ongoing market tests.
If you have any doubts about who will grow share over the next 5 years, and who will lose share, check out the free new ebook "The Fall of GM: What Went Wrong and How to Avoid Its Mistakes." Pay attention to the results of America's "Cars for Clunkers" program to see who comes out a winner. It will be important to see if this raises sales at the American companies – or elsewhere.
by Adam Hartung | Jul 31, 2009 | Current Affairs, Defend & Extend, General, In the Swamp, Innovation, Lock-in
"Deeper Recession Than We Thought" is the Marketwatch headline. As government data reporters often do, today they revised the economic numbers for 2008. We now know the start to this recession was twice as bad as reported. The 3.9% decline was the worst economic performance since the Great Depression of the 1930s. The consumer spending decline was the worst since 1951 (58 years – a very low percentage of those employed today were even born then.) Business investment dropped a full 20%. Residential investment dropped 27%. Stark numbers.
How did business people react? Exactly as they were trained to react. They cut costs. Layed people off. Dropped new products. Stopped R&D and product development. They quit doing things. What's the impact? The decline slows, but it continues. Just like growth begets growth, cutting begets more decline.
Then really interesting bad things happen.
"ComEd loses customers for first time in 56 years" is the Crain's headline. There are 17,000 fewer locations buying electricity in the greater Chicago area than there were a year ago. That is amazing. When you see new homes being built, and new commercial buildings, the very notion that the number of electricity customers contracted is hard to fathom. People aren't even keeping the lights on any more. They've gone away.
In the old days we said "go west." But that hasn't been the case. Everyone remembers the dot.com bust ending the 1990s. "Silicon Valley Unemployment Skyrockets" is the Silican Alley Insider lead. Today unemployment in silicon valley is the highest on record – even higher than the dot bust days. When even tech jobs are at a nadir, it's clear something is very different this time.
The old approaches to dealing with a recession aren't working. While optimism is always high, what we can see is that things have shifted. The world isn't like it was before. And applying the same approaches won't yield improved results. "For Illinois, recession looking milder – but recovery weaker" is another Crain's headline. Nowhere are there signs of a robust economy.
We can't expect an economic recovery on "Cars for Cash" or "Clunker" programs. By overpaying for outdated and obsolete cars we can bring forward some purchases. But this does not build a healthy market for ongoing purchases. These programs aren't innovation that promotes purchase. They are a subsidy to a lucky few so they pay significantly less for an existing product. To recover we must have real growth. Growth from new products that meet new customer needs in new ways. Growth built on providing solutions that advantage the buyer. Only by introducing innovation, and creating value, will customers (businesses or consumer) open their wallets.
Advertising hasn't disappeared. But it has gone on-line. Today you don't have to spend as much to reach your target. Instead of mass advertising to 1,000 in order to reach the 100 (or 15) you really want, today you can target that buyer through the web and deliver them an advertisement far cheaper. I didn't learn about Cash for Clunkers from a TV ad, I learned about it on the web. As did thousands of people that rushed out to take advantage of the program at its introduction – exceeding expectations. It no longer takes inefficient mass advertising through newspapers or broadcast TV to reach customers – so that market shrinks. But the market for on-line ads will grow. So Google grows – double digit growth – while the old advertising media keeps shrinking. To get the economy growing businesses (like Tribune Corporation) have to shift into these new markets, and provide new products and services that help them grow.
I live in Chicago. Years ago, in the days of The Jungle Chicago grew as an agricultural center. There was a time the West Side of Chicago was known for its smelly stockyards and slaughter houses. But Chicago watched its agricultural companies move away. They moved closer to the farms. They were replaced by steel mills in places like Gary, IN and Chicago's south side. But those too shut down, moved to lower cost locations offshore. These businesses were replaced with assembly plants, like the famous AT&T Hawthorne facility, and manufacturers such as machine tool makers. Now, for the last decade, these too have been moving away. With each wave, the less valuable work, the more menial work, shifted to another location where it could be done as good but cheaper and often faster.
Historically growth continued by replacing those jobs with work tied to the shifting market – jobs that provided more value. So now, for Chicago to grow it MUST create information jobs. The market has moved. Kraft won't regain its glory if it keeps trying to sell more Velveeta. Kraft has not launched a major new product in over 9 years. Sara Lee has been shedding businesses and cutting costs for 6 years – getting smaller and losing value. McDonalds sold its high growth business Chipotles to raise money for defending its hamburger stores by adding new coffee machines. Motorola has let mobile telephony move to competitors as it remained too Locked-in to old technologies and old products while new companies – like Apple and RIM – brought out innovations that attracted new customes and growth.
Growth doesn't come from waiting for the economy to improve. Growth comes from implementing innovation that gives us new solutions. Every market, whether geographic or product based, requires new solutions to maintain growth. If we want our economy to improve, we must change our approach. We can't save our way to prosperity. Instead we must create solutions that fit future scenarios, introduce new solutions that Disrupt old patterns and use White Space to help customers shift to these products.
If we change our approach we can regain growth. Otherwise, we can expect to keep getting what we got in 2008.
by Adam Hartung | Jul 22, 2009 | Current Affairs, Defend & Extend, In the Swamp, Leadership, Lock-in
"Pfizer reports lower profit, revenue" is the Marketwatch headline. Unhappy news has become the norm for Pfizer shareholders. Since peaking in 2000 at just under $50/share, the stock has gone nowhere but down for the entire decade – going below $13.00 in 2009 (see Yahoo Finance chart here). You have to go back to 1997 to find the last time Pfizer was valued this lowly. Despite its ownership of several well known, branded drugs – like Viagra and Lipitor – Viagra cannot regain revenue growth or investor interest.
Leadership has done a lot of things the last 10 years to try and improve the business. In 2000, at the valuation peak, the company bought Warner Lambert. In 2002 Pfizer bought Pharmacia (the merged Upjohn/Searle company). In 2005 they spent massively on legal work to protect the remaining patent life on Lipitor. In 2006 they sold the consumer products business to Johnson & Johnson. Across the last 4 years the company has dramatically cut R&D costs for both human and animal products. And earlier this year they agreed to pay a premium to buy Wyeth. But none of this has increased valuation for the last 8 years. To the contrary, value has continued to step down again, and again, and again – losing about 70%.
The problem at Pfizer is management built a Success Formula many years ago, and keeps trying to defend it. They believe in the model of finding, or buying, blockbuster drugs – meaning a product with wide appeal. And selling this only if it has patent protection in order to generate a huge price premium. This made Pfizer huge and profitable long ago. And the company keeps trying to find a way to replay that tune, hoping to achieve the old results.
But the world has shifted. The science of pharmacology has been mined for nearly 100 years. Today, most new drugs have as many problems as benefits. Increasingly, improvement happens only in narrow population niches where genetics align with the chemical additive. Pharmacology is running out of gas. Medical science has shifted to biologics. Instead of looking for a chemical solution, the focus is on nano-tech to isolate product delivery directly to diseased cells. Or engineering to alter genes through cell modification for superior healing performance. These bio-engineering solutions are now offering far better results at far lower cost – while the costs of pharmacology skyrocket amidst diminishing returns.
Pfizer has not shifted. Pfizer management keeps trying to Defend & Extend its old business. Locked-in to the old Success Formula, leadership looks for new drugs, new therapy programs, new solutions that "fit" its approach to the market. But it simply isn't paying off. And everyone from investors to employees to suppliers is at risk. Desperately, leadership is willing to overpay for Wyeth to avoid falling into oblivion when existing drugs come off patent protection in the next few years. But everyone knows this game is nearly over. This may extend the senior leader's jobs, and their pay, it doesn't provide a return to shareholders. Unless leadrship changes the Success Formula Pfizer will never again be as profitable as it once was, or grow as it once did.
Even though it is located in New Jersey, not Michigan, and is full of phramacology Ph.Ds and medical doctors rather than mechanical engineers, Pfizer is more like GM than it would ever admit. It developed a Success Formula, and it is doing everything possible to keep it alive – rather than shift with the market. As GM has shown, no matter how big you are if you don't shift with the market eventually you go bankrupt. Size is no protection from market shifts. Too bad for investors and employees that size is the only thing leadership is trying to use to protect itself.
Don't forget to download the free ebook "The Fall of GM: What Went Wrong and How To Avoid Its Mistakes."
by Adam Hartung | Jul 21, 2009 | Current Affairs, eBooks, General, In the Rapids
I've blogged before about the decline in book readership. In fact, the number of book stores has dropped some 20% in the last 3 years. It's not that people don't want to be learned. Rather, people no longer prefer to carry around a full length paper book. What was no big deal has become large, cumbersome and heavy. This isn't how we described books until we started reading everything imaginable on electronic devices. The new solutions made the old approach less desirable. The market shifted. And if books weren't available electronically, people would read other things which are available electronically.
Amazon wisened up and launched Kindle to meet this market shift. Good move, it allowed Amazon to keep growing while traditional format product sales declined. Now "Barnes & Noble launches on-line Kindle challenge" is the Financial Times headline. While Amazon keeps pushing new content onto Kindle, including newspapers and magazines, Barnes & Noble is maximizing the platforms it can reach electronically. Their solution, more software than hardware today, allows them to immediately offer 700,000 titles electronically. They now boast the largest on-line book store – somewhat eclipsing Amazon's early success. And their hardware device is yet to come.
Should Amazon be worried. I don't think so. The market for e-reading is growing extremely fast. With each new product generation the traditional market share shrinks as more people convert. At this stage, these companies are merely helping the market grow rather than competing with each other. That's the wonderful part about growth markets, – about being in the Rapids – there's so much new demand that it's less about competing head-to-head than about expanding the market by meeting more and more needs. Instead of slogging it out in trench warfare – which is the traditional book selling market – you can offer more features and ways to differentiate – thus growing the market. For both Amazon and Barnes & Noble this is a very, very good thing. It breathes growth into their businesses by moving into the shifted market space.
Borders was actually first to this market, linking up with the proprietary eReader from Sony. But Borders didn't move hard into the new market. As the weakest of the 3 leading book retailers, Borders should have moved fast to get out of the dying brick-and-mortar stores. Then used those resouces to take an early lead in the new market space. But the leaders at Borders kept trying to Defend & Extend the old business, and moved too slowly on the new business. Instead of getting out of the dying business, and becoming #1 in the growing business, they waited. Oops. Now Borders is again the weak competitor – and at grave risk of extermination.
The market is shifting. Congratulations to Amazon and Barnes & Noble for moving into the shifted market space. Quickly we'll be seeing fewer and fewer book stores on the street, as this business (similar to music) will become largely an on-line business. And better for us all. With cheaper books and other reading materials, maybe we'll continue to be even better read than previous generations.
Soon publishers and authors will have to step up to this shift. We all know that newspapers and magazines have been slow to adjust to this market shift. They should be begging for distribution on the Kindle device – and pushing B&N to get their device out even faster so periodicals can be distributed to them. Or maybe get their issues into the B&N software so people can read them on their laptops, netbooks or iPhones. The publishers, from newspapers to books, have been slow to understand this changed market. They, like recording publishers, are locked-in to the physical product (the CD for music, and paper for publishers). The winners will be those who move fastest to the new market. Sure, some people will always want print. But the market for digital is simply going to be lots, lots bigger. Best to get into that market today and figure out the new business model.
by Adam Hartung | Jul 20, 2009 | Current Affairs, Defend & Extend, eBooks, General, In the Whirlpool, Leadership, Lock-in
Years ago there was a TV ad featuring the actor Pauly Shore. Sitting in front of a haystack there was a sign over his frowning head reading "Find the needle." The voice over said "hard." Then another shot of Mr. Shore sitting in front of the same haystack grinning quite broadly, and the sign said "Find the hay." the voice over said "easy." Have you ever noticed that in business we too often try to do what's hard, rather than what's easy?
Take for example The New York Times Company, profiled today on Marketwatch.com in "The Gray Lady's Dilemma." The dilemma is apparently what the company will do next. Only, it really doesn't seem like much of a dilemma. The company is rapidly on its way to bankruptcy, with cash flow insufficient to cover operations. The leaders are negotiating with unions to lower costs, but it's unclear these cuts will be sufficient. And they definitely won't be within a year or two. Meanwhile the company is trying to sell The Boston Globe, which is highly unprofitable, and will most likely sell the Red Sox and the landmark Times Building in Manhattan, raising cash to keep the paper alive.
Only there isn't much of a dilemma here. Newspapers as they have historically been a business are no longer feasible. The costs outweigh the advertising and subscription dollars. The market is telling newspaper owners (Tribune Corporation, Gannett, McClatchey, News Corp. and all the others as well as The Times) that it has shifted. Cash flow and profits are a RESULT of the business model. People now are saying that they simply won't pay for newspapers – nor even read them. Thus advertisers have no reason to advertise. The results are terrible because the market has shifted. The easy thing to do is listen to the market. It's saying "stop." This should be easy. Quit, before you run out of money.
Of course, company leadership is Locked-in to doing what it always has done. So it doesn't want to stop. And many employees are Locked-in to their old job descriptions and pay – so they don't want to stop. They want to do what's hard – which is trying to Defend & Extend a money-losing enterprise after its useful life has been exhausted. But if customers have moved on, isn't this featherbedding? How is it different than trying to maintain coal shovelers on electric locomotives? This approach is hard. Very hard. And it won't succeed.
For a full half-decade, maybe longer, it has been crystal clear that print news, radio news and TV news (especially local) is worth a lot less than it used to be. They all suffer from one-way communication limits, poor reach and frequently poor latency. All problems that didn't exist before the internet. This technology and market shift has driven down revenues. People won't pay for what they can get globally, faster and in an interactive environment. As these customers shift, advertisers want to go where they are. After all, advertising is only valuable when it actually reaches someone.
Meanwhile, reporting and commentary increasingly is supplied by bloggers that work for free – or nearly so. Not unlike the "stringers" used by news services back in the "wire" days of Reuters, UPI and AP. Only now the stringers can take their news directly to the public without needing the wire service or publishers. They can blog their information and use Google to sell ads on their sites, thus directly making a market for their product. They even can push the product to consolidators like HuffingtonPost.com in order to maximize reach and revenue. Thus, the costs of acquiring and accumulating news has dropped dramatically. Increasingly, this pits the expensive journalist against the low cost journalist. And the market is shifting to the lower cost resource — regardless of how much people argue about the lack of quality (of course, some [such as politicians] would question the quality in today's "legitimate" media.)
Trying to keep The New York Times and Boston Globe alive as they have historically been is hard. I would contend a suicide effort. Continuing is explained only by recognizing the leaders are more interested in extending Lock-in than results. Because if they want results they would be full-bore putting all their energy into creating mixed-format content with maximum distribution that leads with the internet (including e-distribution like Kindle), and connects to TV, radio and print. Pricing for newspapers and magazines would jump dramatically in order to cover the much higher cost of printing. And the salespeople would be trained to sell cross-format ads which run in all formats. Audience numbers would cross all formats, and revenue would be tied to maximum reach, not the marginal value of each format. That is what advertisers want. Creating that sale, building that company, would be relatively much easier than trying to defend the Lock-in. And it would produce much better results.
The only dilemma at The New York Times Company is between dying as a newspaper company, or surviving as something else. The path it's on now says the management would rather die a newspaper company than do the smart thing and change to meet the market shift. For investors, this poses no dilemma. Investors would be foolhardy to be long the equity or bonds of The New York Times. There will be no GM-style bailout, and the current direction is into the Whirlpool. Employees had better be socking away cash for the inevitable pay cuts and layoffs. Suppliers better tighten up terms and watch the receivables. Because the company is in for a hard ending. And faster than anyone wants to admit.
Don't miss my recent ebook, "The Fall of GM" for a
quick read on how easily any company (even the nation's largest employer) can be
easily upset by market shifts. And learn what GM could have done to avoid
bankruptcy – lessons that can help your business grow!
http://tinyurl.com/mp5lrm
by Adam Hartung | Jul 17, 2009 | Current Affairs, Disruptions, General, Innovation, Leadership
Business leaders too often react to a recession by cutting costs, stopping spending, discontinuing new product launches — and waiting. The theory is that the market is bad, so it's an uphill slog to try doing anything new. Supposedly, a smart leader waits until things improve before spending again.
An example of this thinking is at GM. The retired executive brought back to head marketing, Bob Lutz, supports killing off the Pontiac brand to make GM smaller and leaner. But he realized this week that there was a car in the Pontiac lineup called the G8 which was selling pretty good. Designed in Autralia, this 2 passenger sports car had sales up 56% from last year – something no other GM car could boast. So Lutz said he'd find a way to keep making and selling the car. But now, Lutz has reversed position and in "GM's Lutz Makes another U-Turn" from the Wall Street Journal he says "upon further review and careful study, we simply cannot make a business
case for such a program. Not in today's market, in this economy, and
with fuel regulations what they are and will be." In other words, we can interpret these comments as "we at GM want to save money and try selling the cars we've got – whether you like them or not – rather than move forward with a car you may really want." This kind of thinking is not the way to grow out of a recession.
On the other hand, we have Tesla Motors. The company Mr. Lutz laughed at a few months ago claiming it wasn't a serious car company. Tesla has one car for sale today, a superfast 2 seater sports car that is 100% electric. Today in Marketing Daily we read "Tesla Plugs Dealership into Manhanttan's Chelsea". Tesla is selling 100% of its production, and it is supporting that by opening a new, stylish dealership in Manhattan. While GM is eliminating a hot seller, Tesla continues to promote theirs. While GM closes dealerships, Tesla opens a new one. Tesla is making a car, albeit a low production model, that people want. It is going where the market is shifting. That's how you get out of a recession, you give customers what they want.
I met another great example last week at Morgan Aircraft. You've never heard of this company unless you've been to an air show. While the makers of private aircraft like Cessna and Gulfstream are shutting down production, Morgan has raised millions of dollars while developing a new aircraft slated for market introduction in about 4 years (flying in tests today, still needing FAA approval). But the Morgan isn't a typical plane as you know it – what's called a "fixed wing" aircraft. The Morgan is able to take off vertically, like a helicopter, then fly horizontally like a plane. This dramatically improves the use of a plane by eliminating airport runways, and thus the commuting requirements to/from airports for business flyers. Morgan has identified the early users of their aircraft, which will allow successful introduction as it expands the market for its technology. Morgan brings to market something new, something different, something that gives buyers a reason to buy – better economics and improved ease of use. That's how you raise money and build a business in a recession – by offering something new that creates demand for your product.
Perhaps even Starbucks' new leadership is getting the idea. After months of doing "the wrong stuff" (as reported in this blog), The Seattle Times reports "Starbucks Tests New Name for Stores." Only this is way beyond a name test. The new stores have a different menu, including liquor, a different ambiance, and even different coffee making equipment. This is something new. Will it matter? We don't yet know, because (a) we haven't heard of any Disruptions in Starbucks to make us think this is a really serious initiative that could displace the earlier commitment to "coffee", (b) we don't know how much permission the developers of the new idea have to really do something new – like maybe not sell coffee at all, and (c) we don't know if there are any significant resources committed to the project. So it's too early to know if this is really White Space. But at least it's not another flavor of coffee or repackaging of coffee or more of the same – which was killing Starbucks. If the leadership really starts creating some White Space projects to develop new stores then even the beleagured Starbucks has the opportunity to grow itself out of this recession.
Recessions dramatically bring home market shifts. Those clinging to old Success Formulas are exposed as very weak (like GM) and are targets for failure. Those who reach out to provide solutions to new market demands can not only grow during the recession, but upstage older competitors. They can change market competitiveness to favor themselves, and grow dramatically by overtaking the Locked-in competition. Recessions end when businesses launch new products and services that meet the needs of a shifted market. So if you're waiting on the recession to end – just keep on waiting. When it ends you just might find you are so out of the market you aren't competitive any longer. Instead, get with moving toward the new market needs today so you strengthen your business and become a leader in the near future.
by Adam Hartung | Jul 15, 2009 | Disruptions, In the Rapids, Leadership, Openness
I've had the good fortune recently to meet some companies that are doing an extremely good job of practicing The Phoenix Principle. Although no company story can be told well within the shortness of a blog, some of these stories are so powerful I want share some of the good things I'm seeing. Especially now, when it seems bad news is dominating. That's not true everywhere – and it's worth profiling a few winners (and hoping they'll excuse the brevity of these descriptions.)
Recently I met with Tasty Catering in suburban Chicago. Tasty is by far not the largest caterer in the U.S. (or even Chicago), nor the smallest. Nor is it the oldest, nor youngest. You could easily miss it as "just another company." One of those nearly faceless businesses crowded into the business parks around America. But this company is by no means normal, and as a result
- It's been named "Caterer of the Year" by top food magazines
- It's been The Best Company to Work For in Chicago 3 times
- It's been honored by Winning Workplaces and The Wall Street Journal as a top American business.
- There were a lot of awards, these are just the ones that come to top of mind.
When Tasty Catering created its vision – it's BHAG (in Jim Collins venacular) – nowhere does it say "caterer". Their ambition is to be the best. At whatever the company does. The 50-ish founder told me that his employees were insistent about this, because they did not think Tasty would just be a caterer. There are too many possibilities, according to the internal teams. The people at Tasty want to go wherever the market leads them. Their ambition is to GROW.
Everyone in Tasty is challenged to scan the horizons for new business opportunities. . And create business plans. The CEO encourages his people to work with college professors and get school credit – but if the plans are good Tasty funds them. And the business ideas don't have to be in catering, or even food. Whatever has the opportunity for growth. So Tasty now has a finance company, a "green" gift business, a supplier to large-scale retailers of packaged food, and a trucking company. Again, those are just the ones I remember. And at least one of these was created by employees who are first-generation immigrants with little formal education – employees another company might deride as "kitchen workers" – but with a massive desire to grow the business. At Tasty, everyone is considered capable of seeing a market opportunity that can create profitable revenue, and everyone is encouraged to bring those market-based ideas to the table.
Tasty obsesses about competition. Everyone in the company has internet access. And manager after manager told me stories about using the web to track competitors. Press releases, articles, anything that's on the web – they keep track of what competitors are doing. When they see competitors do something, they want to know why – and if it works. Tasty uses competitors as much as test beds for ideas – what works and doesn't – while simultaneously tracking their activities in traditional areas. They track customer reactions to competitive ideas, and use that to bring out their own ideas. As a result, Tasty finds new customers, finds new products to sell and finds new markets to develop.
The CEO told me that when he started he had a bunch of hot
dog/hamburger joints. But it was an intern who told him he'd be
better off to sell those assets and change into catering. This was an
incredible distruption, to change from a fast food operator to a
caterer, but with the growth of franchise fast food staring him in the face he made the
switch. Now the CEO relishes the Disruptions his staff bring. Wouldn't trucks make great rolling billboards – if painted for that purpose? Time to change the trucks. Wouldn't having a menu that's all healthy, and disposable products that are entirely eco-friendly, snare some accounts? Why not try it? If the kitchen isn't busy 24×7, couldn't we make packaged food for sale as retailer brands? If we need financing for a new business line, can't we fund that from internal cash flow? Why not start an internal finance company? If restaurant and store operators want prepared food, why not start pursuing RFPs and see if we can win some retail business (even though it means we'd have to double our equipment overnight)? Disruptions are so common at Tasty they don't even think aboout them as disruptions – they are the norm.
And as the last paragraph indicated, White Space is everywhere. When an employee has an idea they can turn it into a business plan. The people inside Tasty even help work on it. Then the plan is vetted and reviewed. If it looks good, Tasty will set up a separate company to implement the plan, and make the employee the CEO. Now this person has the permission to go make it happen, and the money to do it. There are goals, and report-backs. And discussions about how to make the business grow. And every project is visible for everyone in the company to see. No "skunk works." Everyone knows what's happening, and looking to see what works. Everyone wants to learn and migrate toward a growing future so the business will succeed and they can succeed with it.
2009 started off with a sledge hammer for catering. The recession caused companies to cancel events, big and small, and quit catering in food. It would have been easy for Tasty to falter – because revenues went down for the very first time. But instead, everyone met and put their heads into finding ways to get back on the growth track. Resources were cut in the tradtiional business. Belt tightening went around the board. But resources were expended in new marketing – viral on-line campaigns for example – to find the customers who still have needs. People put more energy into differentiation programs – like the non-plastic clear wrap and non-plastic disposable utensils – to make the business more appealing to those who still have events. And new business opportunities – like the private label manufacturing – took on new urgency and more resources. As a result, while many caterers have failed and others are in dire straits Tasty has returned to growth – and not just in catering.
Meanwhile, the employees at Tasty are some of the most gratified I've seen. Here in this recession, they still are highly motivated and love their work. Even though they could do other jobs, they stay. They don't expect the CEO to find them work, or promise them a job, or guarantee their income. But they do understand that if they keep growing, working at Tasty is great. They tie their success to the success of the business – which they tie to identifying market opportunities and fulfilling them better than competitors. They work at Tasty because they are connected to the market – and it is empowering. It's not paternalism that keeps them satisfied (far from it, peer reviews assure paternalism is not allowed), it is seeing market results from the innovations they develop and implement.
If you have an event of any kind, go to the Tasty Catering web site and/or give them a call. If you have a need for someone to supply you with muffins, cookies, baked goods or other foodstuffs private label – again, to the web site and/or give them a call. This is one great company. Given a little time, they just might give Sysco Foods (the country's largest supplier of food to restaurants) or another mega-company a run for their money. This company is out to WIN – and all eyes are focused on the market, everyone pays attention to competition, Disruptions are the norm and new White Space is created every few months (regardless of the economy.)
