by Adam Hartung | Mar 31, 2009 | Current Affairs, Defend & Extend, Disruptions, In the Whirlpool, Leadership, Quotes
Readers of this blog know I've been very pessimistic about the future of GM for well over 2 years. And I've long extolled the need to change top management. I'm passing along some quotes from Professor Rosabeth Moss Kanter at the Harvard Business School in "Why Rick Wagoner Had to Go" at Harvard Business School publishing's web site.
"It was only a matter of time before GM's Rick Wagoner would have to go, and the board with him. I am surprised he lasted this long, a fact that also shows weakness on the board side…. In this tough economic environmnet, if you wait too long to envision and implement transformational changes you are out of the game. That holds for every industry under attack because of obsolete business models, including newspapers and big pharma…. New leaders at the top can bring a novel perspective, unburdened by the need to justify strategies of the past, and not stuck in a narrow way of thinking…. Companies finding themselves in a downward spiral need fresh views, not just redoubled efforts to do the same thing while waiting for the recession to end….. Now is the time for every company to do what GM failed to do fast enough and imaginatively enough: rethink everything. What…. takes you into the future, and what is just legacy, continued out of sentiment?"
Thanks Professor Kantor, I agree completely. GM was stuck Defending & Extending its old Success Formula, and as a result performance deteriorated to the point of failure. And it's not just GM. As the good professor points out, media companies that remain tied to newspapes have the same problem. Today the Sun Times Group, publisher of the Chicago Sun Times declared bankruptcy ("Sun Times Files for Bankruptcy" Marketwatch.com). There is no longer a major newspaper in Chicago that is not bankrupt. And this blog has covered how big pharma has stayed too long at the trough of old inventions, missing the move to biologics.
Things are bad. "All 50 states in recession for first time since the 1970s" is one of two Marketwatch.com headlines, "Global Economy to Shrink in 2009, World Bank Says." The downturn is expected to be 1.7% globally, a disaster for small and emerging economies. This is killing global trade (down 6.1%) and whipsawing countries like Russia – moving from growth last year of over 6% to a decline this year of over 4%! This is the stuff that has led to revolutions!
The only way out of this situation is for organizations to listen to the good professor, and not try to do more of the same. Markets have shifted – permanently. Management actions that are designed to weather short-term downturns, mostly by cost-cutting and conserving resources, don't work when markets shift. Instead, businesses have to develop new Success Formulas that get them out of the Whirlpool's spiral and into the Rapids of Growth. To do this requires planning based upon future senarios, not what worked before. Obsessing about competitors globally to develop new solutions. Not fearing, but rather embracing Disruptions that allow for trying new things in White Space where you have permission and resources to really develop new solutions. These 4 steps can turn around any organization – if you don't wait too long.
by Adam Hartung | Mar 30, 2009 | Current Affairs, Defend & Extend, General, In the Rapids, In the Whirlpool, Leadership, Quotes, Television
"This is the future of media. Whether in print, over the air or online — the delivery mechanism isn't as important as the unique, rich nature of the content provided." That's what the Tribune Corporation's COO, Randy Michaels, said in "Tribune Merges Conn. paper, stations" as reported on Crain's ChicagoBusiness.com. After filing bankruptcy, and seeing both newspaper subscribers and advertisers hacked away dramatically, Tribune is merging together all operations – newspaper and 2 TV stations – in Hartford, CT. They are cutting costs again.
We can hope Mr. Michaels means what he says, but excuse me if I'm doubtful. Despite the rapid acceleration of on-line news readership, and the fact that in most major markets Tribune has one or more TV stations as well as a newspaper, Tribune has never consolidated it's news operations or its advertising sales force. This is sort of remarkable. Going back at least 5 years, it made sense when gathering the news, or talking to an advertiser, to discuss how you could maximize his value for ad money spent. That meant a sharp company would have laid out programs showing how they could give advertisers access to eyeballs from all sources. But instead, at Tribune each station had its own salesforce, each newspaper, and each on-line edition of the newspaper. There was little effort to give the customer a good value for his spend – and no effort to discuss how he could transfer dollars between media to be a big winner. Even though Tribune was an early investor in the internet, it has not learned from its investment and migrated to a new Success Formula.
At a time when advertisers are unclear about how to justify their spending, a sharp media company would be explaining how many eyeballs in are in each format, the demographic profiles and the cost to reach those eyeballs. A company that really is "media independent" would have a big advantage over one trying to sell only the legacy products, because it isn't learning from the marketplace how to offer the best product at the best price and make a profit.
And Tribune had better move quickly. Arianna Huffington has announced the launch of the "Huffington Post Investigative Fund," as announced on the website HuffingtonPost.com. This is her effort to create a pool of investigative journalists for on-line sites who will do the kind of work we historically expected newspapers to do. She is throwing in $1.75million, and asking others to put up additional money. Thus giving this White Space project not only permission to figure out a "new age" model for investigative reporting, but hopefully the resources with which to experiment and learn. Whether this project will succeed or not is unclear, but that it is intended to make on-line news (and her website) more powerful and successful is clear. With each step like this, and this one she took all over the airwaves Monday discussing on multiple television stations, the case against quality of on-line news declines – and increases the on-line competition for eyeballs with television, radio and newspaper formats.
What we'd like to see is an announcement that the Tribune project in Hartford is a White Space project intended to figure out the Success Formula for future media. As we come ever closer to the "Max Headroom" world, depicted in the 1980s of a future where there is 24×7 news around all of us all the time, what no one knows for sure is how the profit model will work. Those who experiment first, and learn the fastest, will be in a strong position to be the leader.
Unfortunately, the Tribune announcement does not look like White Space. The Tribune leadership has still not Disrupted its grip on the old Success Formula. The project in Hartford looks more like a cost-saving effort, trying to defend the old newspaper, than a learning proposition. The project seems to lack the permission to do whatever is necessary to succeed (like perhaps stop printing), and it has no resources coming its way with which to experiment as it keeps trying to maintain all 3 of the legacy business units. Rather than a learning environment, this looks more like an effort to save 3 troubled businesses by cost saving - a Defend practice that doesn't work when markets shift and new competitors are trying all kinds of new things.
by Adam Hartung | Mar 29, 2009 | Current Affairs, Disruptions, General, Innovation, Leadership, Openness, Web/Tech
"Management is not a science, like physics, with immutable laws and testable theories. Instead, management, at its best, is an intelligent response to outside forces, often disruptive ones." So says Steve Lohr in " How Crisis shapes the Corporate Model" in The New York Times Saturday.
For years, many people thought of management as being all about execution. How to build plants, make things, sell those things and finance the operations of building and making stuff. In fact, whole books were written on execution, with the basis that strategy was pretty much unimportant. If you could execute well, what's the need for strategy?
But the last year has shown everyone that the world is a dynamic place. GM missed many changes, and now is barely alive. Despite a focus on execution, the CEO Rick Wagoner has been forced to step down by the administration if GM is to get more bailout money (see "GM's Wagoner Will Step Down" WSJ.com March 29) When you get behind, a "re-invention gap" emerges where the competition keeps going with the market further and further into the future, while you are left behind struggling to sell, grow and make money as you focus on execution. The longer you keep focusing on execution, the bigger the gap gets. Depending on size and competition, eventually you end up completely out of step with the market and unable to compete. Like GM.
The pressure to change with market needs is high everywhere, from banks to manufacturers to newspapers. From General Electric to Sara Lee to Sun Microsystems to The Tribune Corporation, companies that can't adapt to changes have seen their valuation hammered. And the companies we like today are those demonstrating they can adapt to market needs – like Google, Apple, RIM and Virgin. These companies are today investing in launching new products, investing in growth, rather than just trying to cut cost and execute on old business practices while waiting for the return of "better times."
Globalization is now hitting everyone. No industry, and no player in any industry, can ignore the impact of global competition in the way they compete. Today, we can wire together businesses from various service providers, with precious little investment, and reach customers quite profitably while maintaining enormous flexibility. Just ask Nike if you want to know how to "do it."
Focus, hard work, diligence – these have been the mantra for many business leaders. It makes us feel good to think that if we work hard, if we keep our eye on execution, we can succeed. But as readers of this blog have known for 4 years, those admirable qualities do not correlate to success (as academics and journalists have been pointing out when arguing with Jim Collins and his spurrious mathematical exercises). To be successful requires adaptability. You have to constantly scan the horizon for market shifts and emerging competitors that are ready to disrupt markets. And be ready to change everything you do, not just part of it, if you want to compete in the markets as they shift.
The companies, and executives, that will fail as a result of these tumultuous times has not been determined. You can keep from being one of the downtrodden if your focus remains on identifying future market needs and adapting to new competitors through White Space where you can develop new solutions. It's very possible to succeed going forward, if you're adaptive. Or you can end up like Mr. Wagoner and the management team at GM.
PS – The New York Times Company had better start reading its own material and undergo same radical adaptation of its own, or it may not survive to be a media player very soon. To steal from an old saying, it's about time that cobbler started checking his own family's shoes.
by Adam Hartung | Mar 28, 2009 | Current Affairs, In the Whirlpool, Leadership, Lifecycle, Quotes, Web/Tech, Weblogs
"If you don't read the newspaper you are uninformed. If you do read the newspaper you are misinformed." — Mark Twain
"All I know is what I read in the newspaper. That makes me the most ignorant man alive." —- Will Rogers
What both these great writers understood was that when you get most of your news from one source, you get only what that source chooses to tell you, and only a single interpretation of the news. Since newspapers began there has been controversy about bias in news reporting. Many famous newspapers were considered "conservative" or "liberal" based upon the political opinions of the owners. The reality is that when a newspaper reporter tells you a story, what you read – down to the word choices - is affected by the opinions and feelings of the author, as well as those of the editor and perhaps even the publisher.
The great breakthrough of the internet is you aren't restricted to a single (or possibly) two sources. You can find articles about anything from a political speech to an automobile accident published by 5, 10 maybe hundreds or thousands of sources. And for many news items the internet provides you not only multiple opportunities to read how the "facts" are told, but you can find multiple articles that interpret those facts. This plethora of coverage means that internet readers have the opportunity to be as selective, or as broad, as they choose. And it means that the ability of publishers to "control the direction" of a story is dramatically diminished. Readers, by looking across multiple sources, can determine as a group which "facts" they find accurate, and which "interpretation" they find most genuine. Because of the internet, news coverage is "democratized" in a way that has never before been possible.
Newspapers provided a method of informing the public for a very, very long time. But they have an internal weakness they cannot overcome – the printing means that only one version of a story is told and it can only be economically told once per day. The distribution method makes newspapers an "event" that occurs at "deadline", and the cost is high enough that there's only enough advertising to support the printing and distribution of one newspapers in most markets. When you get down to the printing – the "paper" in "newspaper" – it has limits that create a weakness.
The internet is disruptive because it overcomes the limitations of printing. It is available 24×7 not just to read, but to be updated and current with the latest information. A person anywhere can read input from multiple sources. The internet makes up-to-the-minute news coverage of everything available to people in rural, remote locations as quickly as it does those "on the scene", thus opening an interest in world or very local events to everyone on the planet, regardless of location. And this means this "no cost distribution" (not no cost of fact acquistion, or interpretation, or writing – just distribution) allows the internet to do what economist Joseph Schumpeter called "creatively destroy" the old value in newspapers.
Those who bemoan the loss of newspapers need to spend more time on the internet. There are so many sources for so much news that we are today the best informed society in the history of mankind. The financial problems at newspaper publishing have not diminished the quantity or quality of news coverage. Those are higher than ever. And the businesses that jump into this market, by developing networks to access the most/best news and interpretation at the lowest cost – while delivering it in a format that is easy for readers to find and absorb – will be successful. And it will be harder than ever for those trying to create the news (such as politicians and political pundits) to decry "bias" in a world where all opinions are available to everyone.
by Adam Hartung | Mar 27, 2009 | General, Innovation, Openness, Television, Travel, Web/Tech
If you can read this blog and not grin (or maybe even laugh) you're more grisly than me.
MediaPost.com posted "P&G Backs Public Toilet Database Site, App." Proctor & Gamble, supporting Charmin branding, has agreed to financially support the web site www.SitorSquat.com, which was originally developed by a New York homemaker. According to the Charmin brand manager this is considered part of the overall marketing effort which includes providing toilets at public events. His goal is that by helping people find clean places to go, it will help them remember to buy Charmin when they are at the grocery.
You have to admit, it's a clever and far from traditional idea. And certainly most of us have been in situations whether for ourselves or for someone with us (including children) we'd like to know the location of a toilet – especially a clean one. That the database can be downloaded, or accessed via the web or iPhone or Blackberry makes it a usable tool. Perhaps as valuable as an on-line restaurant guide. In times of "crisis" it could be the most valuable app on your iPhone.
But, despite the cleverness, P&G is operating in D&E mode rather than really growing toilet paper sales. The app does not discern whether the facility's paper is nice, soft Charmin, or more industrial single ply product. Nor does it even promote Charmin in rating the toilets. The stars seem to be more closely tied to mop and rag use by janitors, and accessibility, than anything else. It's unclear that this will increase demand for Charmin, much less toilet paper, and probably does little more than reinforce the brand name, by merely putting it on the site.
If P&G really wanted to grow the market for toilet paper, it would be more aggressive. For us world travelers, there are many places where toilet paper isn't as common as the USA – such as India. We all know of various health risks in India (mostly due to water issues), and P&G would be well served to promote hygiene in the developing world, including the use of disposable personal cleaning products like toilet paper. Further, P&G could develop products that use less wood pulp thus having less environmental impact, in effect a "green" toilet paper, that would incent additional use by the ecology-oriented. Or P&G could develop product from recycled or other waste material that has an even lower carbon footprint than paper (corn stalks? corn husks? banana leaves? straw?), again promoting use in the developing world (that often lacks enough wood) as well as environmental advocates.
While the database is interesting, and no doubt will get used, its business value will most likely be nill. A funny news column, but of no value to P&G shareholders. It doesn't help P&G address future needs of people regarding toilet paper (ecology, etc.), nor does it address the use of competitive products (which is non-use, or natural fibers [leaves] in the developing world). P&G has taken a clever new generation product like an iPhone app, and turned it into a very traditional, industrial use which is basic brand awareness reinforcement. Really not White Space, because no goals are given the project nor any positive results expected from it.
But, you have to admit, it's definitely "outside the box" thinking – especially for a company as stodgy as P&G. There is no doubt, this is an innovative (if sustaining) innovation in brand marketing – including the building of a web/iPhone app to promote a product. You'd just like to see P&G go a bit further in its efforts to find growth for shareholders. Have a happy weekend!
by Adam Hartung | Mar 26, 2009 | Current Affairs, Defend & Extend, In the Swamp, Innovation, Leadership, Quotes
Clayton Christensen is a Harvard Business School professor who first described in detail how "disruptive" innovations shift markets, allowing upstart competitors to overtake existing companies that appear invulnerable. I just found a 4 minute video clip "Clay Christensen's Advice for Jamie Dimon" at BigThink.com. In this clip the famous professor tells the story about how the big "banks" allowed themselves to be overtaken by "non-banks" – and then he offers advice on what the big banks should do (Jamie Dimon is the Chairman and CEO of J.P.MorganChase, and an HBS alumni.)
Dr. Christensen lays out succinctly how banks relied on loan officers to find good loan candidates, and make good loans. But increasingly, borrowers were classified by a computer program, not by loan officers. Once the qualification process was turned into a computer-based Q&A, anybody with money could get into the lending business – whether for credit cards, or car loans, or mortgages, or small business loans, or commercial loans. Losing control of each of these lower-end markets, the bankers had to bid up their willingness to take on more risk to remain in business while also chasing fewer and fewer high-quality borrowers. The result was greater risk being taken by banks to compete with non-banks (like GMAC, GE Credit, Discover Card, etc.) What should they do? Dr. Christensen says go buy an Indian or Chinese phone company!!!
Hand it to Dr. Christensen to make the quick and cogent case for how Lock-in by the banks got them into so much trouble. By trying to do more of the same in the face of a radically shifting market (people going to non-banks for loans and to make deposits), they found themselves taking on considerably more risk than they originally intended. Rather than finding businesses with good rates of return, they kept taking on slightly more risk in the business they knew. They favored "the devil you know" over the "the devil you don't know." In reality, they were taking on considerably more risk than if they had diversified into other businesses that were on far less shaky ground than unbacked mortgages.
This is Strategic Bias. We all like to remain "close to core" when investing resources. So we keep taking on more and more risk to remain in our "core" — and for little reason other than it's the market and business we know. Because we know the business, we convince ourselves it's not as risky as doing something else. In truth, markets determine risk – not us. Because we assess risk from our personal perspective, we keep convincing ourselves to do more of what we've done — even when the marketplace makes the risk of doing what we've done incredibly risky —- like happened to Citbank, Bank of America and a host of other banks.
And in great form, the professor offers a solution almost nobody would consider. His argument is that (1) these banks need to go where demand is great, go to new and growing markets, not old markets, and loan demand cannot be greater than in emerging markets. (2) To succeed in the future (not the past) banks have to learn to compete in emerging markets because of growth and because so many winning competitors are already there, and (3) you want to enter businesses that are growing, not what necessarily your traditional business or what you are used to doing. He points out that the traditional "banking" infrastructure is nascent in emerging markets, and well may not develop as it did in the western world. But everyone in these places has phones, so phones are becoming the tool for transactions and the handling of money. When people start doing everything on their phone (remember the rapidly escalating capabilities of phones – like the iPhone and Pre) it may well be that the "phone company" becomes more of a bank than a bank!!
Who knows if Clayton is right about the Indian phone company? But his point that you have to consider competitors you never thought about before is spot on. When markets shift they don't return to old ways. It's all about the future, and banking has changed, so don't expect it to return to old methods. Secondly, you have to be willing to Disrupt old Lock-ins about your business. If the "loaning" of money is now automated, banking becomes about transaction management – not making loans. You have to consider entirely different ways of competing, and that means Disrupting your Lock-ins so you can consider new ways of competing. Thirdly, you don't just sit and wait to see what happens. Get out there and participate! Open White Space projects in which you experiment and LEARN what works. You can't develop a new Success Formula by thinking about it, you have to DO IT in the marketplace.
Big American banks have tilted on the edge of failure. More will likely fail – although we don't yet know which the regulators will put under or keep afloat. What we can be sure of is that the market conditions that put them on the edge will not revert. To be successful in the future these organizations have to change. Probably radically so. So if they want to use the TARP money effectively, they had better take action quickly to begin experimenting in new markets with new solutions.
Gotta hand it to Professor Clayton Christensen, he's made a huge improvement in the way we think about innovation and strategy the last few years. His ideas on banking are well worth consideration by the CEOs trying to bring their shareholders, employees and customers back from brink.
by Adam Hartung | Mar 25, 2009 | Current Affairs, Disruptions, General, Innovation, Leadership, Web/Tech
Forbes Magazine reviewed the new car from Tata Motors in "Nano Lives Up To The Hype." Although we've known Tata Motors was designing and preparing this low-end car for a couple of years, most people were ignoring it. But now it's here, and according to Forbes the $2,000 car exceeds expectations. It's not a golf cart on wheels, it's "a proper car." And it's about to go on sale in India.
So the world's largest car company, General Motors, is on the edge of bankruptcy – only able to stay out via the largesse of loans from the U.S. government. Their sales are down 40%. And at the same time, from far away in a country well known for poor roads, emerges a new competitor ready to sell cars at 1/5 the price of any car sold in America – or the rest of the western world. Do you suppose the executives at GM or staying awake worrying about the Nano, or do you think they are ignoring this car altogether while trying to figure out how to sell more Chevy's?
Admittedly, the Nano comes from the fringe of competition. People don't think of manufacturing when they think of India, they think of IT. And they sure don't think of cars. Powered rickshaws maybe. And the car itself weighs only about 1,350 pounds – half what any other car weighs. It's really designed for performance up to about 40 miles per hour, and it's not a great performer on the way to reaching the top speed of 65. Although loaded with interior room, it has no back access – not even a fuel hatch. It would be very easy to ignore. It's easy to say this may be the next Yugo. But, this one seems a lot more like the original Honda Civic in 1973. Bare bones vehicle from a foreign country that's cheap, but otherwise "not up to American standards?" Or is it a bare bones car from a new competitor with a strong desire to learn, improve and eat into the share of current competitors?
Any car executive who's smart is paying a lot of attention to the Nano. Firstly, it demonstrates making a car at an unheard of price. For much of the world, this offers people their first chance at an automobile of any kind. So it brings in new users who would otherwise be left out. It's price, alone, shows that in a global economy, auto production is headed toward lower prices due to lower world-wide cost. If this vehicle is satisfactory to westerners, or can be made satisfactory over the next few years, it may never again be possible to pay American labor rates for producing automobiles. For basic transportation, American labor may be too expensive.
Additionally, the Nano went from idea to car in about 3 years. No 5 or 6 year cycle, like American car companies desire. Tata has demonstrated it can design and manufacture a car in about half the time of the existing auto companies. So the cycle time is shortened even more. And that this car can be profitable at volumes a fraction of the American production runs shows that markets need not be enormous – and old notions about tooling and other fixed costs of production may be things of the past.
Nano demonstrates why we HAVE to obsess about competitors. Including "fringe" competitors. Because these new competitors are figuring out how to do things differently. They are shooting for future markets, not past markets (like India, China, eastern Europe, South America, Africa). They are developing new Success Formulas that have different requirements, possibly obsoleting the old Success Formulas. It's so easy if you're selling books to say "no one will buy books on the web" when you see the early interface and business model for Amazon – rather than think where this new competitor will be in a couple of years. If you're selling land-line phone service it's easy to deride the quality of early cell phones, and project they will never move beyond niche users. But smart competitors know that when a new product is introduced by a fringe competitor, it's best to pay really, really close attention. You may need to be more like that competitor than you realize in a great big hurry.
by Adam Hartung | Mar 24, 2009 | Current Affairs, Defend & Extend, In the Swamp, In the Whirlpool, Leadership, Weblogs
"Senator proposes nonprofit status for newspapers" was the headline at Marketwatch.com today. Senator Benjami Cardin, a democrate from Maryland, has proposed allowing newspapers to convert to 501(c)(3) status so their subscription and advertising revenue woujld be tax exempt, while contributions to run the papers would be tax deductible. This would allow some newspapers to stay afloat.
Let me share with you a response I received from a fellow reader of this blog:
"I watched Chris Mathews and had the same feeling. As they spoke I had visions of chiefs of Bethlehem, U.S. Steel, etc. sitting around a table in the 60s going 'continuous casting, those Japanese, that's not going anywhere.'
How can they say investigative reporting is going to be dead – there are a million reporters out there working for passion and curiosity. As a matter of fact, if I was going to be paid for a year to chase a story, seems to me a strong incentive to create a story when there really wasn't one.
I loved the way they were holding the paper and saying how people will miss the periphery articles. People will be limited to their feeds and be exposed to the rest of what's going on. I look at it as if I read an article in a newspaper that is just one take of the situation. With the internet I can drill down to get additional information and opinions. Plus get immediate commentary from experts."
Lots of people are getting "subsidy happy" these days. Money to banks, money to car companies, money to newspapers. What we must realize is that these short-term subsidies should be targeted at stopping a worse calamity. Nothing more. Sort of trading off company subsidies against even higher costs for unemployment, uninsured health care, and the costs of letting companies fail short-term. The reality is that none of these subsidized companies are sustainable as they are. The market has shifted, and their Success Formulas no longer produce positive results. They will burn up the subsidy money, as we've already seen happen at GM, and soon ask for more.
When markets shift, new competitors emerge to thrive. Provided we don't get in their way by propping up bad competitors too long with subsidies. In banking, we saw the unregulated institutions on a global scale start doing all sorts of financial services. While some of these are reverting back to regulated banks in the U.S. today so they can receive subsidies, globally we have seen the emergence of immense banks that are outside U.S. regulation. These institutions can borrow and lend globally, and are creating a new approach to financial services. We can't prop up an uncompetitive Citigroup against giant global banks making profits offshore. Likewise, globalization of manufacturing now means that good, low cost cars can be produced in Korea, China and India – making rates of return on higher cost labor in the USA, Germany and Japan harder to obtain. Additionally, many of these offshore competitors (in particular Japanese and Korean) have demonstrated they can deliver proifts on far lower volumes, thus requiring faster launch cycles and more niche products to succeed. GM lacks the manufacturing cost structure (in short-term line costs as well as labor) and the new product introduction processes to survive against these competitors. In newspapers consolidating the reporting into a daily made sense when you needed vast and costly infrastructure to print and deliver the news – no longer requirements in a web-enabled news marketplace.
Economists can make strong arguments for subsidies to help short-term dislocations. Such as helping companies in New Orleans to get back up and running due to a hurricane. That is a short-term problem not related to a market shift. But arguments for subsidies offered during market shifts are strictly "public policy" efforts trading off one policy cost for another. They cannot "save" a business. The company and its employees must use the subsidy to change their Success Formula as fast as possible, so they can compete with some product in some market where they can grow — without need for a subsidy
TARP and its other stimulus products are intended to keep some air in some parts of the boat so it doesn't sink entirely. But they aren't fixing the ship. That requires new competitors emerge that are attuned to current market needs, and have Success Formulas that produce profits based upon future markets. As the economist Schumpeter said 70 years ago, we rely upon these new entrepreneurs to give us the creative new solutions that create growth in the wake of the destruction of old businesses unable to keep up with shifting markets. Let's hope we don't spend all our money trying to keep the old battleship afloat, because we'll need some to help the newer, faster, more agile competitors grow with solutions that meet current and future needs.
by Adam Hartung | Mar 23, 2009 | Current Affairs, General, Leadership, Lock-in, Television
Jon Friedman's Media Web Blog got it right today in it's article "How Fox Business and Bloomberg Can Gain Ground." Business news coverage was in the spotlight when Jon Stewart's The Daily Show on Comedy Central started attacking CNBC for being too business/executive friendly (see the running debate clips in the "on the Tape" section of the Daily Show homepage.) Whether Stewart was right or not, it didn't help CNBC to have some of it's spotlight personnel being trashed daily by a popular comentator, especially using their own tapes.
One would expect that financial news viewership is down, just because the recession has lessened interest in investing. But that doesn't mean CNBC is losing position. For that to happen, it's competitors – which are much smaller in share of market – have to do something to take advantage of the Stewart attacks. If everyone keeps doing what they always did, CNBC probably won't suffer much damage when the investing marketplace recovers.
So Mr. Friedman recommends that Fox Business News and Bloomberg news need to be the "anti-CNBC." I'm not sure what he means by that. But the idea is right. CNBC has been the market leader for several years, and it's Success Formula is Locked-in. It's viewer surveys have been with people who already watched CNBC, so its coverage has remained almost the same. And as more and more corporations and investment firms put CNBC on those flat-screen TVs in their lobbies, CNBC kept touting the market pitch that seemed to win them over as viewers and advertisers. As CNBC became apologists for these big advertisers, they reinforced their Lock-in to the Success Formula, and even as they Defended corporate titans and executive pay they extended their Success Formula onto the web with information that largely copied the television.
Suddenly, CNBC has been Challenged by a market shift. Like most market shifts, it didn't surface where CNBC expected, or how CNBC would have expected. CNBC was blindsided by the appeal of Stewart's attacks to mainstream television viewers, and many reporters who don't cover "the business beat." Like any good Locked-in organization, the CNBC reaction was to Defend itself, and do even more of what it always did claiming to be better and faster than the competition at reporting from Wall Street and the executive suites.
But right now CNBC is vulnerable. If Fox Business News and Bloomberg have been obsessing about the competition, now is the time to take advantage of its weakness. But to do that means attacking the Lock-in on which CNBC is built – it's very pro-Wall Street, pro-big company, pro-deregulation, pro-executive (and often pro-Republican party) positioning on practically every issue. Being a similar CNBC won't help the competition – even when CNBC is under attack. Because the attack is from a market shift, and the competition will win by moving to where the market moved.
So, what outlet reports on business news that isn't pro-Wall Street, pro-big company, pro-deregulation, pro-executive, pro-Republican? See what I mean – you can't really think of one. But are there people who invest in a 401K account, or a Roth IRA, or any IRA, or in their employer, or in their own home, who might be interested in a more "main street" and less "Wall Street" sort of positioning? Or a more balanced coverage of the pros and cons of America's biggest companies? Or those big company (and bank) executives? Or the issues related to debt, getting it and repaying it? Is there a market for business news that's been ignored, but Stewart has tapped into? Maybe call it the Suzie Orman approach to business news rather than the Larry Kudlow or "Fast Money" approach.
When companies obsess about competitors, they understand the competitors' Success Formulas and Lock-ins. And they prepare competitive actions that attack those Lock-ins. Entering a gladiator battle where everyone competes the same way just creates a lot of blood for spectators to watch, with no gain for the competitors. Phoenix Principle competitors don't attack where the competition is strong, but rather where the competitor is weak. Attack their Lock-in, so they can't react because they are stuck doing what they always did (and believe in it.). Right now is a good time for someone to attack CNBC and start stealing away viewers. To position themselves as a different kind of financial network that more people want to watch – especially when business news becomes less toxic and more interesting.
by Adam Hartung | Mar 20, 2009 | Current Affairs, General, In the Swamp, In the Whirlpool, Innovation, Leadership, Lock-in, Travel, Web/Tech
"Xerox chops earnings outlook as sales slide" is the headline on Marketwatch.com. Do you remember when Xerox was considered the most powerful sales company on earth? In the 1970s and into the 1980s corporations marveled at the sales processes at Xerox – because those processes brought in quarter after quarter of increasing profitable revenue. Xerox practically wiped out competitors – the small printing press manufacturers – during this period, and "carbon paper" was quickly becoming a museum relic (if you are under 30 you'll have to ask someone older what carbon paper is – because it requires an explanation of something called a typewriter as well [lol]).
But today, do you care about Xerox? If you have a copier, you don't care who made it. It could be from Sharp, or Canon, or anybody. You don't care if it's Xerox unless you work in a "copy store" like Kinko's or run the copy center for the corporation – and possibly not even in those jobs. And because desktop printers have practically made copiers obsolete, you may not care about copiers at all. In short, even though Xerox invented the marketplace for widespread duplicating, because the company stayed in its old market of big copiers it has seen revenue declines and has largely become irrelevant.
"U.S. airline revenue plunges for another month" is another Marketwatch.com headline. And I ask again, do you care? The airlines were deregulated 30 years ago, and since then as a group they've never consistently made money (only 1 airline – Southwest – is the exception to this discussion.) The big players in the early days included TWA, Eastern, Braniff, PanAm – names long gone from the skies. They've been replaced by Delta, American and United – as we've watched the near collapse of US Airways, Northwest and Continental. But we've grown so used to the big airlines losing money, and going bankrupt, and screaming about unions and fuel costs, that we've pretty much quit caring. The only thing frequent travelers care about now is their "frequent flier miles" and how they can use them. The airline itself is irrelevant – just so long as I get those miles and get my status and they let me board early.
When you don't grow, you lose relevance. In the mid-1980s the battle raged between Apple's Macintosh and the PC (generically, from all manufacturers) as to which was going to be the dominant desktop computer. By the 1990s that question had been answered, and as Macintosh sales lagged Apple lost relevance. But then when the iPod, iTunes, iTouch and iPhone came along suddenly Apple gained a LOT of relevance. When companies grow, they demonstrate the ability to serve markets. They are relevant. When they don't grow, like GM and Citibank, they lose relevance. It's not about cash flow or even profitability. When you grow, like Amazon with its Kindle launch, you get attention because you demonstrate you are connected to where markets are headed.
Is your business obsessing about costs to the point it is hurting revenue? If so, you are at risk of losing relevance. Like Sara Lee in consumer goods, or Sears in retailing, even if the companies are able to make a profit – possibly even grow profits after some bad years – if you can't grow the top line you just aren't relevant. And if you aren't relevant, you can't get more customers interested in your products/services, and you can't encourage investors. People want to be part of Google, not Kodak.
To maintain (or regain) relevance today, you have to focus on growth. Cutting costs is not enough. If you lose relevance, you lose your customer base and financing, and you make it a whole lot easier for competitors to grow. While you're looking internally, or managing the bottom line, competitors are figuring out the market direction, and proving it by demonstrating growth. And that's why today, even more than before, it is so critical you focus planning on future markets for growth, obsess about competitors, use Disruptions to change behavior and implement White Space to experiment with new business opportunities. Because if you don't do those things you are far, far too likely to simply become irrelevant.
[note: Thanks for feedback that my spelling and grammar have gotten pretty sloppy lately. I'm going to allocate more time to review, as well as writing. And hopefully pick up some proofreading to see if this can improve. Sorry for the recent problems, and I appreciate your feedback on errors.]
