by Adam Hartung | Mar 26, 2007 | General, In the Rapids, Leadership, Lifecycle, Openness
You probably never heard of Glunz. Profiled recently in The Chicago Tribune (see article here), Glunz is a beer distributor. What makes the company interesting is how this 120 year old family owned-and-operated business has succeeded despite severe market Challenges. And it’s due to keeping White Space alive continuously, not just looking for solutions when problems develop.
Founded in 1888, Glunz has overcome a series of market Challenges. Just imagine facing these:
– in 1930 their business was outlawed by the passage of prohibition in the 13th ammendment to the Constitution. Rather than giving up, the company found opportunities in medicinal alcohol, sacramental wine and home brewing kits.
– After building a business as the national distributor of Schlitz, that brand collapsed in the 1970s due to a raft of articles on production errors and bad quality. But the company had already started distributing Stroh’s – a local beer out of Wisconsin – and they expanded Stroh’s in Schlitz place.
– But then Stroh’s was bought out, and disappeared. Yet again, years of effort had already been put in place to develop a relationship with Coors to distribute their beer and Glunz was ready to move when the Challenge came.
– But then Coors, being a big company, decided one day to drop Glunz and predicted the company would be dead within 6 months. Only Louis Glunz had already begun preparing for such a scenario and he had developed a relationship with Rolling Rock, a Pennsylvania beer with east coast cache but no market in the midwest. And so Glunz rolled out Rolling Rock to great success in stores and bars.
– Only to have Rolling Rock acquired by Annheuser-Busch last year – yet another Challenge. But again, Glunz had already started looking at beer imports they could grow as a replacement for Rolling Rock. Now Glunz distributes Stiegl, Stella Artois, Becks and Tecate.
2007 sales are expected to reach $30M, more than double sales of $13M in 1992 when Coors yanked their beer from Glunz distribution.
Any one of these market Challenges could have been a compeny-ending act. But Glunz has thrived because the leadership constantly maintains White Space. Instead of putting all their "focus" on the business at hand, and putting everything at risk on that one business, Glunz constantly maintains openness to new opportunities. Each of these might have grown Glunz into a much bigger business had the setbacks not occurred. But instead, they allowed Glunz to thrive very nicely despite horrific Challenges.
Business of all sizes and ages get Locked-in to their Success Formula. The Lock-in creates blinders have them moving too late when Challenges develop. Glunz is an example that even very old companies with tremendous heritage, and small companies that aren’t sitting on billions in resources, can be open to new opportunities. These small and older companies can, in fact, seek out new opportunites on a constant basis so as to be prepared no matter how the market shifts and turns. By keeping White Space constantly alive your chances for success greatly improve.
by Adam Hartung | Mar 24, 2007 | Defend & Extend, General, In the Rapids, In the Swamp, Leadership, Lock-in, Openness
Readers of this blog know I’ve been a real fan of Motorola. I’ve waxed eloquently about the Disruptions implemented by the new CEO when he came to the company in 2004. And likewise I’ve been an endorser of the multiple White Space projects he implemented (see previous blogs on Motorola for details.) But this week, lots went the wrong direction at Motorola.
Motorola reported that it would have a loss for the first quarter of 2007 (see article here.) That means the clock is now ticking on what might be a growth stall. As previously written here, companies that hit growth stalls have only a 7% chance of really ever growing again. Motorola stalled badly in the late 1990s and early 2000s, and they were rebounding when this loss hit. The risks are great here – and there should be no doubt about it. If the company posts another down quarter next, the odds are getting slim on success.
What went wrong at MOT (see chart here)? Firstly, White Space must be managed toward success. While the company implemented a lot of White Space, and the impact showed in a dramatic turnaround from the situation in 1999, management did not hold White Space accountable for results. White Space is not an excuse to let results falter. Rather, management should have been aware of the precarious predicament in the large mobile phone business and PUSHING White Space to produce rapid results. As recently as this week, the very week that the bad results were reported, Motorola was expected to be announcing plans to buy PALM in yet another expansion of White Space to grow the company. But this looks much less likely now, because leadership opened White Space but did not manage it effectively.
Secondly, Ed Zander failed to Disrupt himself while Disrupting Motorola. When arriving at Motorola he moved fast to Disrupt. Of course, Disruption was "normal" at Sun Micrososystems where he used to work. Chronic Disruptions were part of the Success Formula at Sun, and became part of his Success Formula. But Sun got into big trouble when it became overly committed to a single market in network servers. Unfortunately, Motorola was allowed to be too committed to a dependence on mobile phones. What we now see is that while Mr. Zander was OK with Disrupting and opening White Space, he did not actually Disrupt his personal Success Formula and change the way he believed a business should be managed.
Once confronted with the threat posed by Mr. Icahn, Mr. Zander approved a quick $4.5billion stock buyback. And now he’s agreed to an even larger $7.5 billion buyback (see article here) – representing 75% of Motorola’s cash reserves. And he’s put in place a President and COO from inside the company – a sign of creating distance from the Disruptions and White Space he implemented (see article here) .
These are not good signs. I’ve had high hopes for the White Space at Motorola. If we recognize where the company was just 3 years ago, it has traveled a very successful road. The question now will be does leadership have the will to continue its road of Disruption and White Space to create a more successful Motorola? Will it follow through on the acquisition of PALM, given the current Challenges? If it does, and management holds the White Space leaders to business demands for results, Motorola can become again a great company. If it keeps following its recent trends – retrenching to Defending and Extending its mobile phone business and acting to protect management – then recent gains will be quickly unwound.
by Adam Hartung | Mar 4, 2007 | In the Rapids, Innovation, Leadership, Lifecycle, Openness
About 6 months ago I blogged on White Space at Anheuser-Busch (see Surprising Juxtaposition here.) This last American-owned large brewer has had its stock go nowhere for the last few years (see chart here) as it has battled fierce competition in a consolidating and changing marketplace. Anheuser-Busch found it had slipped into a price war for volume. But more recently the compaqny has turned toward White Space to improve performance.
Anheuser-Busch has just taken another stepped up its White Space efforts by deciding to enter the beer market in India (see article here.) An important White Space project for several reasons:
- Moving offshore gives Anheuser-Busch more diversity of competition. The company will learn from new competitors about everything from product options to distribution and pricing alternatives.
- India, in particular is a great markt to learn. Competition is FIERCE. Prices are universally low, the currency is low (giving no break to mistakes), distribution is highly fragmented and much of the demand comes from poor people who have severe limits on what they can spend. Ninety percent of shampoo sales are made in single service sachetes which sell for less than $.01 each at thousands of small retailers. In consumer goods it’s been said "if you can sell at a profit in India you can make a profit anywhere." Now that’s a great place to learn.
- India is the fastest growign middle class in the world. While the American middle class is growing at 2-3%/year, rising economic prosperity in India is creating a growth rate exceeding 10%/year. And this is augmented by the fact that over half the population is under 30 years old, creating an expanding market for Anheuser-Busch products.
- In India beer = Kingfisher. Many of us who travel to India avoid all drinks with ice or from a fountain because of sanitary concerns and poor water quality. So the universal call for fluid refreshment, in a country that is constantly hot, is "give me a Kingfisher." Thus, India provides a great market in need of competition against a dominant product.
I’m sure the path to succes won’t be easy. In addition to the daunting distribution and competitive challenges mentioned earlier, Anheuser-Busch must learn to deal with terrible infrastructure (intermittent electric power, bad water treatment, terrible roadways, poor refrigeration), complex government bureaucracy overseeing business, hierarchical government entities that too often have corruption, strong Communist and Socialist government participants and districts, distrust of American interlopers, a vast array of advertising channels to a highly heterogenous media environment, 30+ languages in a single country, a propensity for unending negotiation as a culture and a completely dysfunctional legal system.
But the important thing is that none of this stopped Anheuser-Busch. And that’s what White Space is all about. Phoenix Principle companies identify a market opportunity and then jump in to learn. Not just for what can happen in that new market, but what it can teach the company overall. Possibly even how to develop a new and better returning Success Formula.
by Adam Hartung | Feb 12, 2007 | Disruptions, General, Innovation, Leadership, Lock-in, Openness
Is a Tattoo art? Can a tattoo style drawing sell a product? These are two questions I really never asked myself before, but now I’m asking them a lot.
Sometimes we can’t see what’s right in front of our faces. We all suffer from BIAS – Beliefs, Interpretations, Assumptions and Strategies – that we carry around in our heads. As we develop our Success Formulas, we Lock them in with our BIAS and we often start missing things. And some of these can be really big trends.
The Chicago Tribune ran an article in the Business Section (yes the Business section) about the use of tattoo art in mainstream ads (see full article here). Now, I have to admit that tattoos are not something I think about at all. But this article pointed out that they are getting to be pretty much everywhere, on everybody. And, as importantly, the artists are downright cheap compared to typical graphic artists used in ad production. That really caught my attention.
Then I started to notice, and think. The images of Anna Nicole Smith all over the TV following her untimely death showed a tattoo on her leg. Many (maybe most?) of the performer’s at this week’s Grammy award seemed to have visible tattoos. Then I realized that I see tattoos increasingly on the young people that associate with my high school and college age sons. I had "seen" these tattoos before. But my mind hadn’t "seen" them. Why, it was startling how popular tattoos are. I noticed last weekend going to run errands that I identified at least a half dozen tattoo parlors within 10 miles of my northwest suburban Chicago home. No matter what I thought, or better said what I didn’t think, about tattoos they are a lot more popular and part of popular culture than I realized.
My Success Formula had never thought about tattoos. I have held the top marketing job in a $3B manufacturing company, and worked at PepsiCo a top marketing company, and I am heavily involved in advertising graphics with clients today — and from that I had developed a Lock-in about commercial graphics. And that Lock-in left me completely BIASed to ignore tattoo art as a commercial graphics product. The Tribune article showed me a market Challenge – a new art form that is growing in popularity and cheap. And as a result I’ve had to Disrupt my Lock-in. Now I’m looking for White Space to explore the possibilities this might open up for advertisers. (As long as it doesn’t include putting ink into my 50 year old white, less than menacing forearms – lol.)
We all have Success Formulas, and we Lock them in. We develop a BIAS around them that can blind us to opportunities. That’s why it is critical that we use external stimuli to help identify market Challenges we otherwise will completely miss. Don’t become BIAS blinded to opportunities.
by Adam Hartung | Feb 8, 2007 | Disruptions, General, Innovation, Leadership, Lifecycle, Lock-in, Openness
It’s easier to recognize a problem than it is to find a solution. I’m sure you’ve noticed this. In practically everything we do we can see the need for improvement, but we often find that nothing happens to make things better. Even when a crisis happens,we often see lots of people discussing the problem – and some talk about potential solutions – but not much progress is made.
Take for example the U.S. health care situation. We now have a country where 20% to 40% of the population has no health care coverage with between 30% and 50% are significantly under-insured (ranges are offered because it depends on what study you read.) Virtually everyone agrees that this is a big problem, because the U.S. health care system is not designed to deal with the uninsured. We hear stories of people waiting for hours in hospitals for basic care that is often poorly administered. We hear about total health care costs rising because the uninsured drive up costs that are then born by insured patients. And the medicare and medicaid system we are told is nearly bankrupt, unable to meet many basic needs and not providing necessary life-sustaining assistance. Increasingly, doctors, clinics and even some hospitals refuse to take uninsured patients.
The problem has been easy to see. In America, the system has been based upon employer-provided health care. But, as employees have changed jobs they have lost insurance due to "pre-existing condition" clauses that deny coverage. And people who lost jobs to downsizings lost all coverage completely. Employment has shifted dramatically from manufacturing to services in the U.S., yet a far higher percentage of service employers offer very limited insurance, or no insurance at all. And the vast army of those who work part-time (under 40 hours per week), have no access to insurance as employers limit their hours and limit access to coverage as a cost saving measure. Employer-provided health insurance worked in the far more stable employment practices of the 1940s to 1970s, but the program simply isn’t sufficient to meet the needs of nearly half of Americans today.
Yesterday, Wal-Mart agreed with the largest service union in the USA (their bitter enemy, the Service Employees International Union) that dramatic changes were needed in health care coverage (see article here.) Obviously, Wal-Mart does not believe it can provide universal coverage to its 1.3 million employees and compete. But interestingly, the unions which have fought hard to get employees health benefits agree that far too many employers cannot be expected to offer health care and compete in a global economy. Democrats have easily joined the ranks of those asking for a different system, but interestingly now noteworthy Republicans agree – including Howard Baker former Chief of Staff to Ronald Reagan.
So, what is to be done? There is no shortage of opinions about the solution (see article here). Many people want universal coverage from the federal government – but that has many detractors as well. Some states say a universal program should be implemented state-by-state, and Massachusetts has taken this direction. The President has offered to push for universal coverage with a series of changes to taxation of health care benefits. Lots of ideas – but most of these have existed for well over a decade. So it hasn’t been a lack of ideas that has stopped progress toward a different solution.
What we have with Wal-Mart’s announcement is a Disruption inside the business community. A Disruption saying "stop, we have to do something different here. The old way won’t work. We’re Locked-in to an outdated health care solution that must change." Having the country’s largest employer, in tandem with one of the largest unions, make this admission serves as a Disruption.
But this will make no difference if we don’t find White Space to actually create, test, pilot, learn, and define a new Success Formula for health care. Politicians often say "we need a debate on the options." Debates we’ve had. What we need is to try new solutions, and see if they work. We need to begin variations of the multiple scenarios so we can see what works, and what doesn’t. Massachusetts, for example, is a great experiment in a state-implemented program. But we also need to experiment with changes to the federal systems (Medicare and Medicaid) to see what they can actually do. And we need to experiment with subsidies and tax changes in the workplace to see what private programs can be developed. In the end, only in White Space do we actually test possible answers and thereby develop a new solution to which people migrate. The best solution is not the one debated to success, but instead the solution which is proven to work – and that is the solution to which people migrate. Anyone will change when they can see a better result, and that can only happen in White Space.
This is exactly what businesses have to do as well. The Phoenix Principle has demonstrated that whether a problem needs to be solved at the macro level (like national health care coverage) at an industry level (like national access to broadband telecommunications) or at a company, or function, work team or even an individual level Disruptions must be supplemented with White Space if a solution is actually to be developed and implemented. New solutions don’t come out of the universities or other "brain trusts". They come out of White Space where new Success Formulas that include strategies and tactics are actually tested and demonstrated to work. Then these new Success Formulas don’t have to be foisted upon people, because the better results attract people to them. Of course there are laggards, but we see that migration to a better result works far better than trying to debate, design, declare and then demand change – a model that almost never gets implemented nor works well.
So, we need White Space for experiments in health care coverage. And the state programs fit as one example. Let’s hope this Disruption will lead to more experiments. And we need more White Space in our companies, our departments and our lives so that we can experiment and find ways to produce better results. In the end, we can equate long-term success with White Space – and we’ve never needed more of it than we do today.
by Adam Hartung | Jan 28, 2007 | Disruptions, General, In the Rapids, Leadership, Openness
How can we recognize a Phoenix company? One that will sustain its success for a prolonged period? We can start by looking at the one and only company which has been on the Dow Jones Industrial Average ever since it was created. The one company that has overcome Schumpeter’s dire predictions of individual company failure, and demonstrated it is possible to earn above average rates of return for extended time and simultaneously grow. That company is General Electric.
A recent article on GE’s Medical Devices business (see article here) highlights key characteristics of how to overcome Lock-in to an existing Success Formula by internally Disrupting and using White Space. Mark Morita is the Manager for Disruptive Technologies within this GE business. Mark is not an engineer, nor is he in product development. GE recognizes that it must maintain a powerful group always focused on making incremental improvements in their products and markets. But, they simultaneously must have a Disruptive focus that can produce breakthrough results.
And that is where Mark comes in. Mark Disrupts the engineers by introducing technologies from entirely other fields. While they attend medical equipment conferences, Mark attends gaming and consumer electronics conferences. While they try to make sonogram machines that are 10% lighter or 10% cheaper, Mark looks for ways to make them the size of a GameBoy at less than half current cost. His role is not only tolerated in GE – it is mandated. All across the many GE businesses they maintain roles which are dedicated to attacking Lock-In and Disrupting the existing Success Formula. Mark and his counterparts constantly keep the GE businesses operating White Space to create new Success Formulas leading to growth.
Jack Welch, the famed former CEO of GE, had the nickname "Neutron Jack." This referred to his willingness to Disrupt GE in order to seek above average results and growth. No business was sacred in GE, and no market was beyond their reach. Welch constantly Disrupted GE from within, and kept Lock-in from leading to deteriorating performance. It wasn’t mere goal-setting that kept GE dynamic, it was an institutionalized practice of internal Disruption and extensive use of White Space. New CEO Jeffrey Immelt is now continuing that practice, with dramaticly large recent acquisitions of about 2/3 of Abbott Labs (medical diagnostic equipment) and Smiths Group (aerospace) while indicating he plans to sell the $10B plastics business (see article here).
Even a huge company, such as GE, can operate according to The Phoenix Principle and sustain success. The Phoenix Principle does not apply only to small companies, nor those in high-tech markets. Any company can achieve and sustain success if they are willing to identify their Success Formula and Lock-ins, attack those Lock-ins with programs designed to generate internal Disruptions, then fund White Space in which permission is given to develop new Success Formulas. These steps may seem mundane, but those who follow them can become the next GE – and that would not be a bad thing.
by Adam Hartung | Jan 21, 2007 | General, In the Rapids, Innovation, Leadership, Lifecycle, Openness
Walgreen’s is the kind of company that can make an investor very worried. It’s an "old fashioned" retailer, and the company has certainly seen dramatica changes in its markets. Over the last decade, we have changed how we purchase licensed pharmaceuticals, as well as how we think about "drug stores" as many competitors have begun offering to fill prescriptions. The "corner pharmacists" has practically disappeared. Is Walgreen’s a company on the brink of disaster?
As I’ve written before, look for a growth stall. Any time a company sees declining revenue or profits for 2 or more consecutive quarters, or two or more quarters of declining year-over-year sales or profits, the company enters a growth stall. When this happens, there is a less than 7% chance the company will ever again sustain growth of a meager 2% per year. Interestingly, Walgreen’s has not stalled. This despite all the changes in insurance rules about drug payments, the advent of on-line and mail-order pharmacies, corporate moves to drastically cut employee drug costs, the entry of new competitors such as discount retailers (WalMart and Target) and just about every grocer, and competitor moves to offer generic drugs at extremely low prices.
At its recent annual meeting (see article here), the new CEO very clearly identified many of these influences as Challenges the company must face. He followed this up by listing all the actions Walgreens had taken to set up White Space projects to maintain company growth, which include but are not limited to: digital photo processing, refilling printer ink cartridges, introducing exclusive department store type cosmetics, and now even opening in-store health care clinics for walk-in customers. As the CEO, Jeffrey Rein said, "We’re testing everything we possibly can to see what happens, to see what does work. We don’t know until we put it out there." After a very clear statement that the company faces many market shifting Challenges, similarly clear statements about using White Space to drive new growth.
This new CEO is not an outsider by the way. He’s a 25 year company veteran. So it’s clear that companies can internally develop leaders who can recognize Challenges, Disrupt and establish White Space. Whether Walgreens can maintain its 32 years of ongoing growth is no sure thing. The fact that the company has not stalled however is a great testament to identifying Challenges and reacting. As a company that is facing tremendous Challenges, Walgreen’s leadership is a model of how to keep up the growth by using White Space.
by Adam Hartung | Jan 12, 2007 | General, In the Rapids, Innovation, Leadership, Lifecycle, Openness
My last blog led to a reader comment "Can there be White Space without Innovation?" (click here to read full comment) Quite simply, I don’t see how. Of course, innovation is a term open to wide interpretation. Some think that innovation requires a huge breakthrough invention, a new product, or a never-before-seen business model. Maybe a patent or a copyright. In fact, innovation simply means introducing a new way of operating for yourself or your customers. Defined this way, we can innovate in all parts of our business model, and innovations can be "small" or "large". What’s important about White Space is that we use innovation processes to attack old Lock-ins and develop a new Success Formula.
Take for example Foulds, a 121 year old $25million revenue company that makes pasta in Libertyville, IL (see full article here.) Pasta is far from a "high-tech" business. And the distribution channels are extremely stable and well known. Suppliers are HUGE agribusinesss competitors like Cargill, and customers are HUGE supermarket chains like Jewel, Dominick’s, Safeway and Kroger. Many competitors are extremely well funded such as New World Pasta that spend millions of dollars on ad campaigns for Prince and Creamette brands. In this competitive situation, the world changed in the late 1990s when the Atkins diet craze swept across America and many people stopped eating pasta entirely. Suddently, Foulds was facing a stagnant market, surrounded by industry forces much, much better resourced than they were.
The easy answer for Foulds would have been to drop into a price war to drive volume. Or to have dumped money into advertising – largely to no avail. Or possibly closing shop, or looking for a buyer to "consolidate" the industry. Doing "more of the same" to Defend & Extend the 121 year old business model would have led to loss of share to the big players and possibly failure. So, company CEO Chris Bradley opened White Space in the company he ran. He allowed his employees to face the Market Challenge, and atack the Lock-ins so prevalent. In their effort, the team overcame commitment to a century-old recipe for pasta. They experimented with different ingredients and then different manufacturing processes (literally adjusting the time-proven work of generations). In the end they developed a pasta with 6 times the normal fiber of regular pasta and a taste and texture that is considered better than what dry pasta was like before.
This new pasta is not a patentable product. And it doesn’t open some new "food category." But it does allow people who seek a high-fiber, high-protein and healthy product for their diet to eat pasta – something not allowed on some diets at all and heavily restricted on others. And this innovation has helped the company to not only deal with the Market Challenge, but actually to thrive. Foulds recognized a Market Challenge, Disrupted its Lock-in to old recipes and hand-made manufacturing processes, and then gave permission to the team to innovate a new Success Formula which could appeal to a shifting market. The value of White Space is that it gives innovation a place to flourish, a place to succeed, by intentionally acquiring permission to break old Lock-ins and thereby develop a new Success Formula that incorporates innovation – of any type or scale that addresses Market Challenges.
by Adam Hartung | Jan 2, 2007 | Leadership, Openness
What is strategy? To far too many people, strategy is thought of as "how can we succeed doing what we’ve always done." To be honest, most of what is written on strategy, going back to the seminal work by Michael Porter "Competitive Strategy", deals with how to identify a strategy and then execute it. What strategy must be is developing an approach to win in a competitive marketplace.
On New Year’s Day, 2007 I observed one of the best uses of strategy I’ve seen in a long time. Little known Boise State University went into the Fiesta Bowl to compete with Oklahoma University. This was truly a David and Goliath match-up. Oklahoma has been a top 10 powerhouse in football for decades. Its annual funding for the football program is 10x the entire athletic department at Boise State. Why, Boise State wasn’t even qualified to be considered as a top-ranked football team because they weren’t considered a BCS team (BCS is the acronym for the people who determine the bowl games and how they will determine the national college football champion.) Nonetheless, Boise State was in the game and they were projected to be killed by the much better funded, more experienced and far larger Oklahoma football program.
But, Boise State did something no one predicted. They did not enter the stadium and play a traditional game. From the opening salvo, Boise State was executing plays not expected by Oklahoma. Within the first 5 minutes they had used unexpected play calling to jump into a 14 point lead. And Oklahoma was scratching its head. The game played on, and Oklahoma slowly scratched and clawed back. With just over a minute left in the game, Oklahoma finally went into the lead. But, Boise State did more than not give up. They came back with a series of unexpected plays. On what was destined to be the final play of the game, and needing to go a third of the field for a touchdown, Boise State executed a play from the 1930s – something never seen on the modern football field any more – the "hook and ladder" play. They scored, and tied the game. In overtime, Oklahoma jumped into the lead. But Boise State came back, once again with unexpected plays. On the final play, needing to score or lose, Boise State again used a play almost never seen any more – the Statue of Liberty play – and they won the game as the Boise State player walked all alone into the end zone.
After the game the announcers kept commenting on how Boise State kept Oklahoma off kilter. "They used every play in the playbook" an announcer said – by the way, that announcer was Barry Switzer who used to be the head coach at Oklahoma and had won a national championship. What was even more telling was how the announcers reacted. When asked who should be the "most valuable player" the agreement was they wanted to select THE COACH! By using plays that his competition did not expect, he managed to beat a team that was far better funded, with lots more resources and a lot more coaches.
Strategy mattered. Boise State did not play the game that the entrenched and better funded competitor wanted to play. They avoided the Lock-in, which was sure to beat Boise State. Instead, the coach kept Challenging the large competitor, and Oklahoma could not react. The much larger competitor had not ignored their smaller competitor, but they were not prepared for the use of an unexpected strategy. In the end, the team that pushed competition into White Space won by demonstrating a different Success Formula than what the traditional, entrenched competitor was prepared for.
We all can learn from Boise State and their upending of Oklahoma. As individuals, work teams and businesses we can recognize that those who develop strategies which change the competitive field have a distinct advantage. If we can overcome our Lock-in to traditional practices, and try new things that are unexpected, we can come out on top even if our competition is much larger, better funded and loaded with advantages we don’t have. Whenever you need reassurance of the value of innovating to change the competitive field, just remember the coaches at Boise State.
by Adam Hartung | Dec 11, 2006 | General, In the Rapids, Innovation, Leadership, Openness
The Phoenix Principle is not just for big or old companies. Any business, even small and family owned ones, can greatly increase their success using The Phoenix principle. And a great all-American example of this is NASCAR and the phenomenal growth it has achieved. (Read more about the success of NASCAR here.)
Forty years ago stock car racing was tied closely to blue collar guys with a set of wrenches and a desire to drive faster than the cops would allow – without getting caught. When we went to watch stock cars on hot nights you got muscled-up street cars driven with a fair bit of abandon. Most races were interspersed with local beauty pagents, and more than an occasional demolition derby. Sometimes you wondered if you came for the races, or for the crashes. A good time to watch, but not the stuff of big business. Not, at least, until the France family decided to try some new things.
The elder Mr. France realized that by linking all these fans to sponsors there could be money in this sport. As long as anyone could drive, the purse would be low and the competition would be less than stellar. So he didn’t start with cars, instead he started buiding his own tracks, where the environment could be safe and he could control who got on the track and what they drove. Then he helped good drivers find sponsors who would pay for the cars in exchange for advertising. Using personalities like Richard Petty, France slowly took stock car racing from broken down Pontiacs ready for the salvage yard (and modified cars coming from Detroit’s auto companies) into the world of Winston Cup Racing. And big money brought faster cars, better drivers and more fans. All of these ideas born of his family’s imagination and a relentless effort to find ways to get the winning purses up.
Now, his son Brian France is continuing to innovate. It’s no longer Winston Cup – with ties to cigarettes, the South, and old fashioned notions of stock car racing. Now its the Nextel Cup with ties to being national, technology, and innovation. And he truly understands the importance of recognizing Challenges and breeding White Space. As he said "The time to make changes in my view is when you don’t have to. If you’ve got a situation where you have to change, that’s a much tougher environment. You get more momentum when you don’t have to change." Now those are great words of advice for businesses seeking growth and long-term success.
Did you know that NASCAR racing is the second most watched television sport in the U.S.? (Surpassed only by the NFL). But if you go to the track (owned by France, don’t forget) you get even more. Attendees can actually get visuals from inside the car – see the race like the driver does – while getting real time stats on the race. And Mr. France is constantly pushing for changes in cars, including recently allowing Toyota to race on what has long been considered the asphalt dedicated to "big American iron." Why? Well, after all, have you seen "The Fast and the Furious"? All those young fans are driving a very different "hot car" than I grew up with – and they want to see on the track what they get in and drive home! It’s all part of trying new things, seeing what will work, and moving forward.
Seventy-Five years ago America’s sport was baseball. Babe Ruth and Joe Dimaggio, then Mickey Mantle and Roger Marris dominated our lives. Now, it’s a much more competitive world for athletic entertainment. Football, basketball, and hockey have all become major U.S. sports. Every four years the World Cup of soccer gets more U.S. fans as the children of "soccer moms" grow up. Golf has seen another emergence as Tiger Woods has reinvigorated watchers. It would have been easy for stock car racing to simply become a niche like watching billiards, darts or horseshoe pitching. But it’s not. And it’s not because this family-owned business recognized the Challenges which existed in attracting fans, Disrupted itself by constantly seeking out new sponsors and new competitive dynamics, and never stopped using White Space to find a better Success Formula that would help it grow.
The opportunity exists for any family-owned company to be long-lived and highly successful. And if you follow the model of the France family you could find your business very successful indeed. It’s not about vision and dedication. It’s about experimenting, feeling paranoid about competition, and never stopping the use of White Space to find a better Success Formula.
