by Adam Hartung | Jul 28, 2011 | Books, Current Affairs, Defend & Extend, eBooks, In the Rapids, Innovation, Leadership, Television, Web/Tech
“It’s easier to succeed in the Amazon than on the polar tundra” Bruce Henderson, famed founder of The Boston Consulting Group, once told me. “In the arctic resources are few, and there aren’t many ways to compete. You are constantly depleting resources in life-or-death struggles with competitors. Contrarily, in the Amazon there are multiple opportunities to grow, and multiple ways to compete, dramatically increasing your chances for success. You don’t have to fight a battle of survival every day, so you can really grow.”
Today, Amazon(.com) is the place to be. As the financial markets droop, fearful about the economy and America’s debt ceiling “crisis,” Amazon is achieving its highest valuation ever. While the economy, and most companies, struggle to grow, Amazon is hitting record growth:
Source: BusinessInsider.com
Sales are up 50% versus last year! The result of this impressive sales growth has been a remarkable valuation increase – comparable to Apple!
- Since 2009, valuation is up 5.5x
- Over 5 years valuation is up 8x
- Over the last decade Amazon’s value has risen 15x
How did Amazon do this? Not by “sticking to its knitting” or being very careful to manage its “core.” In 2001 Amazon was still largely an on-line book seller.
The company’s impressive growth has come by moving far from its “core” into new markets and new businesses – most far removed from its expertise. Despite its “roots” and “DNA” being in U.S. books and retailing, the company has pioneered off-shore businesses and high-tech products that help customers take advantage of big trends.
Amazon’s earnings release provided insight to its fantastic growth. Almost 50% of revenues lie outside the U.S. Traditional retailers such as WalMart, Target, Kohl’s, Sears, etc. have struggled in foreign markets, and blamed poor performance on weak infrastructure and complex legal/tax issues. But where competitors have seen obstacles, Amazon created opportunity to change the way customers buy, and change the industry using its game-changing technology and capabilities. For its next move, according to Silicon Alley Insider, “Amazon is About to Invade India,” a huge retail market, in an economy growing at over 7%/year, with rising affluence and spendable income – but almost universally overlooked by most retailers due to weak infrastructure and complex distribution.
Amazon’s remarkable growth has occurred even though its “core” business of books has been declining – rather dramatically – the last decade. Book readership declines have driven most independents, and large chains such as B. Dalton and more recently Borders, out of business. But rather than use this as an excuse for weak results, Amazon invested heavily in the trends toward digitization and mobility to launch the wildly successful Kindle e-Reader. Today about half of all Amazon book sales are digital, creating growth where most competitors (hell-bent on trying to defend the old business) have dealt with stagnation and decline.
Amazon did this without a background as a technology company, an electronics company, or a consumer goods company. Additionally, Amazon invested in Kindle – and is now developing a tablet – even as these products cannibalized the historically “core” paper-based book sales. And Amazon has pursued these market shifts, even though these new products create a significant threat to Amazon’s largest traditional suppliers – book publishers.
Rather than trying to defend its old core business, Amazon has invested heavily in trends – even when these investments were in areas where Amazon had no history, capability or expertise!
Amazon has now followed the trends into a leading position delivering profitable “cloud” services. Amazon Web Services (AWS) generated $500M revenue last year, is reportedly up 50% to $750M this year, and will likely hit $1B or more before next year. In addition to simple data storage Amazon offers cloud-based Oracle database services, and even ERP (enterprise resource planning) solutions from SAP. In cloud computing services Amazon now leads historically dominant IT services companies like Accenture, CSC, HP and Dell. By offering solutions that fulfill the emerging trends, rather than competing head-to-head in traditional service areas, Amazon is growing dramatically and avoiding a gladiator war. And capturing big sales and profits as the marketplace explodes.
Amazon created 5,300 U.S. jobs last quarter. Organic revenue growth was 44%. Cash flow increased 25%. All because the company continued expanding into new markets, including not only new retail markets, and digital publishing, but video downloads and television streaming – including making a deal to deliver CBS shows and archive.
Amazon’s willingness to go beyond conventional wisdom has been critical to its success. GeekWire.com gives insight into how Amazon makes these critical resource decisions in “Jeff Bezos on Innovation” (taken from comments at a shareholder meeting June 7, 2011):
- “you just have to place a bet. If you place enough of those bets, and if you place them early enough, none of them are ever betting the company”
- “By the time you are betting the company, it means you haven’t invented for too long”
- “If you invent frequently and are willing to fail, then you never get to the point where you really need to bet the whole company”
- “We are planting more seeds…everything we do will not work…I am never concerned about that”
- “my mind never lets me get in a place where I think we can’t afford to take these bets”
- “A big piece of the story we tell ourselves about who we are, is that we are willing to invent”
If you want to succeed, there are ample lessons at Amazon. Be willing to enter new markets, be willing to experiment and learn, don’t play “bet the company” by waiting too long, and be willing to invest in trends – especially when existing competitors (and suppliers) are hesitant.
by Adam Hartung | Mar 4, 2011 | Current Affairs, In the Rapids, Innovation, Leadership, Openness, Television, Web/Tech
My high school physics teacher spent a week teaching students how to use a slide rule. I asked him, "why can't we just use calculators?" At the time a slide rule was about $2, and a calculator was $300. The minimum wage was $1.14/hour. He responded that slide rules had been around a long time, and you never knew if you'd have access to a calculator. To the day he retired he insisted on using, and teaching, slide rule use. Needless to say, by then plenty of folks were ready to see him go. Too bad for his students he stayed as long as he did, because that was a week they could have spent learning physics, and other important materials. Ignoring the new tool, and its advantages, was a wasteful decision that hurt him and his customers.
Yet, I am amazed at how few people are using today's new tools for business, and marketing. At a small business Board meeting this week the head of marketing presented his roll-out of the boldest campaign ever in the business's history. His promotion plan was centered around traditional PR, supplemented with radio and billboard ads. I asked for his social media campaign, and after he confirmed I was serious he said he had a manager working on that. I asked if he had a facebook page ready, the videos on YouTube, a linked-in program ready to run against targets and his twitter communications established, including hash tags? He said if those things were important somebody had to be working on them. Two weeks from roll-out and he wasn't giving them any personal consideration.
I then asked the roughly 20 attendees, all but one of which were over 40, some questions:
- How many of you use skype at least once/month? Answer – 5%
- How many of you have a facebook page and check it daily? A – 15%
- How many of you check twitter daily? A – 5% Tweet at least 5 times/week? A – none
- How many own and use a tablet? A – 10%
- How many of you have a smartphone on which you've downloaded at least 10 apps? A – 10%
- How many of you carry a laptop? A – 100%
- Who knows the #1 company for new hires in Chicago in 2010? Answer – 5% (GroupOn)
- Who has used a Groupon coupon? Answer – 30%
Slide rule users.
New tools are here, and adopters will be the winners. If you still think we're a nation of laptop users, you need to think again. Laptop usage declined 20% in the last 2 years, to 2006 levels, as people have adopted easier to use technology
Chart Source: Silicon Alley Insider of BusinessInsider.com
If you are trying to pump out ads the new medium is mobile – not television, radio, outdoor or even web sites. Have you tested the look and feel of your web site on popular mobile devices? Do you know if new users to your business are even able to access your information from a mobile device?
And, it's more likely a customer will hear about you, and obtain a review of your product or service, via Facebook than vai the web! A CNet.com article asks the leading question "Will Facebook Replace Company Web Sites?" Want to understand the importance of Facebook, check out these same month comparisons:
- Starbucks: Facebook likes – 21.1M, site visits – 1.8M
- Coca-Cola: Facebook likes – 20.5M, site visits – .3M
- Oreo: Facebook likes – 10.1M, site visits – .3M
Yes, these are consumer products. But if you don't think the first place a potential customer looks for information on your business is Facebook, whether it's financial services, business insurance, catering or blow-molded plastic housings you need to think again. The use of facebook is simply exploding.
According to Business Insider, by the end of December, 2010 Facebook apps were downloaded to iPhones at a rate exceeding 500,000/day as the total shot to nearly 60million! Meanwhile the Facebook app downloads to Android devices grew to over 20million! Blackberry Facebook users has reached 27million, bringing the total by end of 2010 to well over 100M – just on smartphones! In September, 2010 Facebook became the #1 most time spent on the internet, passing combined time on all Google and all Yahoo sites! With over 500million users, Facebook isn't just kids checking on their friends any longer. When somebody wants a first peak at your business, odds are great it will be done over a smartphone and likely via a Facebook referral!
Chart Source: Silicon Alley Insider at Business Insider
As fast as smartphone usage has grown, tablet usage is on the precipice of explosion. Tablet sales will be 6 times (or more) notebook sales in just a few years! The second most popular product will be, of course, continued sales of advanced smartphones as the two new platforms overtake the traditional laptop. So what's your budgeted spend on mobile devices, mobile apps and mobile marketing?
Chart Source: Silicon Alley Insider of Business Insider
And in the effort to attract new customers, if you think the route will be newspapers, radio, TV, billboards, or direct mail – think again. Digital local deal delivery is projected to grow at least 45%/year through 2015 creating a market of over $10billion! If you want somebody to know about your product or service, Groupon and its competitors is already taking the lead over older, traditional techniques. By the way, when was the last time you bothered to open that latest Vallasis direct mail package – or did you just throw it immediately in the recycling bin without even a look?
Chart Source: Silicon Alley Insider of Business Insider
So, what is your business doing to leverage these tools? Are your marketing, and technology, plans for 2011 and 2012 still mired in old approaches and technologies? If so, expect to be eclipsed by competitors who more quickly implement these new solutions.
Too often we become comfortable in our old way of doing things. We keep implementing the same way, like the teacher giving slide rule instructions. And that simply wastes resources, and leaves you uncompetitive. The time to use these new solutions was yesterday – and today – and tomorrow – and every day. If you don't have plans to adopt these new solutions, and use them to grow your business, what's your excuse? Is it that much fun using the old slide rule?
by Adam Hartung | Feb 18, 2011 | Current Affairs, In the Swamp, Innovation, Leadership, Lock-in, Openness, Television, Web/Tech
Business people keep piling onto the innovation and growth bandwagon. PWC just released the results of its 14th annual CEO survey entitled “Growth Reimagined.” Seems like most CEOs are as tired of cost cutting as everyone else, and would really like to start growing again. Therefore, they are looking for innovations to help them improve competitiveness and build new markets. Hooray!
But, haven’t we heard this before? Seems like the output of several such studies – from IBM, IDC and many others – have been saying that business leaders want more innovation and growth for the last several years! Hasn’t this been a consistent mantra all through the last decade? You could get the impression everyone is talking about innovation, and growth, but few seem to be doing much about it!
Rather than search out growth, most businesses are still trying to simply do what their business has done for decades – and marveling at the lack of improved results. David Brooks of the New York Times talks at length in his recent Op Ed piece on the Experience Economy about a controversial book from Tyler Cowen called “The Great Stagnation.” The argument goes that America was blessed with lots of fertile land and abundant water, giving the country a big advantage in the agrarian economy from the 1600s into the 1900s. During the Industrial economy of the 1900s America was again blessed with enormous natural resources (iron ore, minerals, gold, silver, oil, gas and water) as well as navigable rivers, the great lakes and natural low-cost transport routes. A rapidly growing and hard working set of laborers, aided by immigration, provided more fuel for America’s growth as an industrial powerhouse.
But now we’re in the information economy. Those natural resources aren’t the big advantage they once were. Foodstuffs require almost no people for production. And manufacturing is shifting to offshore locations where cheap labor and limited regulations allow for cheaper production. And it’s not clear America would benefit even if it tried maintaining these lower-skilled jobs. Today, value goes to those who know how to create, store, manipulate and use information. And success in this economy has a lot more to do with innovation, and the creation of entirely new products, industries and very different kinds of jobs.
Unfortunately, however, we keep hiring for the last economy. It starts with how Boards of Directors (and management teams) select – incorrectly, it appears – our business leaders. Still thinking like out-of-date industrialists, Scientific American offers us a podcast on how “Creativity Can Lesson a Leader’s Image.” Citing the same study, Knowledge @ Wharton offers us “A Bias Against ‘Quirky’ Why Creative People Can Lose Out on Creative Positions.” While 1,500 CEOs say that creativity is the single most important quality for success today – and studies bear out the greater success of creative, innovative leaders – the study found that when it came to hiring and promoting businesses consistently marked down the creative managers and bypassed them, selecting less creative types!
Our BIAS (Beliefs, Interpretations, Assumptions and Strategies) cause the selection process to pick someone who is seen as less creative. Consider these comments:
- “would you rather have a calm hand on the tiller, or someone who constantly steers the boat?”
- “do you want slow, steady conservatism in control – or irrational exuberance?”
- “do we want consistent execution or big ideas?”
These are all phrases I’ve heard (as you might have as well) for selecting a candidate with a mediocre track record, and very limited creativity, over a candidate with much better results and a flair for creativity to get things done regardless of what the market throws at her. All imply that what’s important to leadership is not making mistakes. Of you just don’t screw up the future will take care of itself. And that’s so industrial economy – so “don’t let the plant blow up.”
That approach simply doesn’t work any more. The Christian Science Monitor reported in “Obama’s Innovation Push: Has U.S. Really Fallen Off the Cutting Edge” that America is already in economic trouble due to our lock-in to out-of-date notions about what creates business success. In the last 2 years America has fallen from first to fourth in the World Economic Forum ranking of global competitivenes. And while America still accounts for 40% of global R&D spending, we rank remarkably low (on all studies below 10th place) on things like public education, math and science skills, national literacy and even internet access! While we’ve poured billions into saving banks, and rebuilding roads (ostensibly hiring asphalt layers) we still have no national internet system, nor a free backbone for access by all budding entrepreneurs!
Ask the question, “If Steve Jobs (or his clone) showed up at our company asking for a job – would we give him one?” Don’t forget, the Apple Board fired Steve Jobs some 20 years ago to give his role to a less creative, but more “professional,” John Scully. Mr. Scully was subsequently fired by the Board for creatively investing too heavily in the innovative Newton – the first PDA – to be replaced by a leadership team willing to jettison this new product market and refocus all attention on the Macintosh. Both CEO change decisions turned out to be horrible for Apple, and it was only after Mr. Jobs returned to the company after nearly 20 years in other businesses that its fortunes reblossomed when the company replaced outdated industrial management philosophies with innovation. But, oh-so-close the company came to complete failure before re-igniting the innovation jets.
Examples of outdated management, with horrific results, abound. Brenda Barnes destroyed shareholder value for 6 years at Sara Lee chasing a centrallized focus and cost reductions – leaving the company with no future other than break-up and acquisition. GE’s fortunes have dropped dramatically as Mr. Immelt turned away from the rabid efforts at innovation and growth under Welch and toward more cautious investments and reliance on a set of core markets – including financial services. After once dominating the mobile phone industry the best Motorola’s leadership has been able to do lately is split the company in two, hoping as a divided business leadership can do better than it did as a single entity. Even a big winner like Home Depot has struggled to innovate and grow as it remained dedicated to its traditional business. Once a darling of industry, the supply chain focused Dell has lost its growth and value as a raft of new MBA leaders – mostly recruited from consultancy Bain & Company – have kept applying traditional industrial management with its cost curves and economy-of-scale illogic to a market racked by the introduction of new products such as smartphones and tablets.
Meanwhile, leaders that foster and implement innovation have shown how to be successful this last decade. Jeff Bezos has transformed retailing and publishing simultaneously by introducing a raft of innovations, including the Kindle. Google’s value soared as its founders and new CEO redefined the way people obtain news – and the ads supporting what people read. The entire “social media” marketplace is now taking viewers, and ad dollars, from traditional media bringing the limelight to CEOs at Facebook, Twitter and Linked-in. While newspaper companies like Tribune Corp., NYT, Dow Jones and Washington Post have faltered, pop publisher Arianna Huffington created $315M of value by hiring a group of bloggers to populate the on-line news tabloid Huffington Post. And Apple is close to becoming the world’s most valuable publicly traded company on the backs of new product innovations.
But, asking again, would your company hire the leaders of these companies? Would it hire the Vice-President’s, Directors and Managers? Or would you consider them too avant-garde? Even President Obama washed out his commitment to jobs growth when he selected Mr. Immelt to head his committee – demonstrating a complete lack of understanding what it takes to grow – to innovate – in today’s intensely competitive information economy. Where he should have begged, on hands and knees, for Eric Schmidt of Google to show us the way to information nirvana he picked, well, an old-line industrialist.
Until we start promoting innovators we won’t have any innovation. We must understand that America’s successful history doesn’t guarantee it’s successful future. Competing on bits, rather than brawn or natural resources, requires creativity to recognize opportunities, develop them and implement new solutions rapidly. It requires adaptability to deal with new technologies, new business models and new competitors. It requires an understanding of innovation and how to learn while doing. Amerca has these leaders. We just need to give them the positions and chance to succeed!
by Adam Hartung | Feb 1, 2011 | Current Affairs, In the Rapids, Innovation, Leadership, Television, Web/Tech
Summary:
- There is dramatic change in the television/media industry
- NBC Universal/Comcast is changing ownership, and leaders
- The company’s future success will have more to do with which battles the new President invests in than the history, or style of the past and future company President’s
- Trying to “fix” the old business will waste resources and harm future prospects
- Success will require developing a management approach that gives permission and resources to find a path to the future – a future that will be nothing like the past
NBC Universal is changing owners, from General Electric to Comcast. The former NBC President, Jeff Zucker, is being replaced by Steve Burke. Stylistically, it’s hard to imagine two fellas less alike. Mr. Burke, portraited in the New York Times “A Little Less Drama at NBC,” is a mild-mannered, quiet, self-effacing executive who almost attended divinity school. He avoids the limelight as much as he avoids being abrasive with colleagues. The outgoing Mr. Zucker is by all accounts brash,abrasive and quick to make decisions, as he was portraited in PaidContent.org “Was Jeff Zucker Really So Bad For NBC Universal?“
But it isn’t executive style that will determine whether Mr. Burke succeeds. Although NBCU just returned its highest profits since 2004, the television and media industries are in dramatic transition. Things aren’t like they used to be, and they will never be that way again. Growing revenues, and profits, at the combined NBCU/Comcast will require Mr. Burke quickly move both companies into a different kind of competitor focused on the changed market of 2015 – when media customers and suppliers will both be very different, with quite different demands.
Although Mr. Zucker is blasted for allowing NBC’s ratings to fall to last among the Big 3 networks (including CBS and ABC), it’s not at all clear why that wasn’t a smart move. What has grown NBC’s profits has been far removed from network programming. It was the acquisition of cable channels USA and Sci Fi (now Syfy) via Universal, and later Bravo, Oxygen and The Weather Channel that contributed greatly to NBC’s revenue and profit growth. These were also enhanced by building, from scratch, the #1 business-content television channel at CNBC, and the profitable, somewhat populist counter-channel to powerhouse conservative Fox News with MSNBC. Despite what the critics (who are largely interested in programs rather than profits) have said, it may have been an act of brilliance to avoid investing in the declining business that is prime time network programming.
What anyone thinks about the brouhaha over Jay Leno’s attempt at prime time, and Conan O’Brien’s stint leading The Today Show, is immaterial to revenue growth and profits. I’m a late boomer, so I remember when there were only 3 stations, and Johny Carson dominated the post-news late evening. But now I have college age sons that don’t even own televisions, have almost no idea who Jay Leno is (other than know of him as a car and motorcycle collector) and find all interview programs boring. “Network” TV is something they don’t quite understand – since their tolerance for watching entertainment on someone else’s pre-determined schedule is non-existent, and their patience for sitting through commercials of real-time programming is even lower. In other words, what happens in the “prime time” race, or with network celebrities, really doesn’t matter any more. And if NBCU can’t grow viewers it can’t grow ad revenues – so why should it invest in the prime time business? Just because it used to? Or started that way?
While lots of media “experts” are screaming for Mr. Burke to “fix” NBC, that business is already well into the hospice. Network share of entertainment interest is falling rapidly as boomers die, dozens of new offerings are micro-targeting across the channel spectrum, and we all turn to the internet for downloads, ignoring the TV for news or entertainment several additional hours each year. Meanwhile, people under the age of 30 aren’t even watching much television any more. They just pretend to watch while sitting with their parents as they text, check Facebook or watch a downloaded program on their iPhone.
“Network” programming is a business which is not going to grow again. Given how costs are increasing for traditional shows, and the over-explosion of inexpensive “reality” or “news” shows, and fragmentation and decline of advertising why would anyone ever expect this to be a profitable business? Being last in that 3 horse race is about as interesting as tracking share of market for printed phone directories. Probably the first to quit ist he big winner. So why should Mr. Burke spend much time, or money, fighting the last war? “Fixing” that outdated business model is fraught with high risk, and low return. Now that tthe artificial limits on news and entertainment programming have been removed (thanks to the internet) isn’t it time to let go of that historial artifact and focus on the future?
We know the future will be a mix of traditional TV (at least for a while, but don’t make any bets on it being too long), as well as targeted channels we now refer to as “cable” (even though that moniker is clearly losing meaning in a WiFi world.) Some of these will be free access, and some will be paid content. But all of that now must compete with downloads from Netfilx, Hulu (in which NBCU is a part owner) and YouTube (partially owned by Google.) People can create and post their own programs, and even do their own marketing. Instant availability, reviews and promotion will be couresy of Twitter and Facebook. This is a lot more complex than just ordering a new crime drama series, or situation comedy, and foisting it on a market with only a handful of channel options.
Viewership will range from 50″ panels, to 2″ hand-held screens – with a plethora of optional sizes in between. Program length will be infinitely variable from hours of non-stop viewing to constantly interrupted sound bites, no longer proscribed by 30 minute increments. Traditional programming, like local or national “news” will have little meaning, or value, in 2020 (or maybe 2015) when we will be receiving instant updates several times each day on our mobile device.
Mr. Zucker did a yeoman’s job of steering NBCU toward the future. He was smart enough to understand that only historians, locked-in media critics and old farts in Lay-Z-Boys care about what’s happening on The Tonight Show or the NBC News. His primary investments were oriented toward understanding the future, and getting NBCU’s toes into that rapidly churning water where future growth lies. But he’s leaving just as the stream is turning into a torrent. Even what he did could well be out of date within a few years – or months!
Now it is Mr. Burke’s turn. The very pleasant fellow has a daunting challenge. If he isn’t supposed to “double down” his bets in network TV, and traditional “cable,” what is he supposed to do? In a dramatically changing advertising world, where Google, Facebook and mobile device ads are now becoming the hot markets, what is the role for NBCU/Comcast? If we no longer need the physucal cable (say in 2020), won’t Comcast lose subscribers for cable access just like we’re seeing declines in subscribers for newspapers, DVD subscriptions, land-line telephones and land-line long distance? What is the role of a “programmer” like NBCU if viewers all have unlimited access to everything, anytime, anywhere, in any format? And what is the value of a content provider if self-published content streams onto the web by the terabyte daily? And is sorted by engines like Google and YouTube?
What Mr. Burke must do, regardless of style, is develop some scenarios about the future, and understand the much more complex playing field that is today’s media business. He has to find the holes in competition, and learn how to leverage what the “fringe” competitors are doing that drives all that usage, and viewership. And, most importantly, he has to keep experimenting – just as Mr. Zucker did. He has to create opportunities to test the newly developing markets, figure out who will buy, and what they will buy. He has to set up white space teams who have permission to be experimental, even if they attack the old businesses like “network” TV – even cannibalizing the historical viewr base as they transition toward future media markets. If he can create these teams, give them the right permission and resources, NBCU/Comcast could be the next great media company.
We’ll have to wait and see. Will the sirens of the past, looking backward, pull the company into gladiator battles with old foes trying to hold share in narrowing, declining markets? That path looks like a sure disaster. Despite being an early leader with satellite TV and MySpace that approach has not helped NewsCorp. But betting on the future is more a bet on the journey, and finding the right path, than betting on any particular destination. The future-based approach takes a lot of faith in company leadership, and the company management team. It will be interesting to see which way Mr. Burke goes.
by Adam Hartung | Dec 15, 2010 | Current Affairs, In the Swamp, Leadership, Openness, Television, Web/Tech
Summary:
- Business leaders are honored for creating profitable growth
- Those who create the greatest growth disrupt the status quo and change the way things are done – such as Zuckerberg and Jobs
- Too many CEOs act as caretakers, overlooking growth
- Caretakers watch value decline
- Under Welch, GE dramatically grew and he was Time’s Person of the Year
- Under Immelt, GE has contracted
- Too many CEOs are like Immelt. They need to either change, or be replaced
It’s that time of year when magazines like to honor folks for major accomplishments. This year, Time’s Person of the Year is Mark Zuckerberg, honored for leading Facebook and its dramatic change in social behavior amongst so many people. Marketwatch.com selected Steve Jobs as its CEO of the Decade – an honor several journals gave him last year!
There is of course a bias in these selections. Most journals highly favor CEOs that drive up their stock price! For example, Ed Zander was CEO of the year in 2004 for his “turnaround” at Motorola – and within 2 years he was fired and Motorola was facing possible bankruptcy. Obviously his “quick fix” (getting the RAZR out the door with a big marketing push) didn’t pan out so well over time. We’ll have to see if Alan Mulallly deserves to be CEO of the Year at Marketwatch, since it appears his selection has more to do with not letting Ford go bankrupt – like competitors GM and Chrysler – and thus reaping the benefits of customers who wanted to buy domestic but feared any other selection. Whether Ford’s “turnaround” will be a winner, or another Zander/Motorola, we’ll know better in a couple of years.
One fellow who isn’t on anybody’s list is Jeff Immelt at General Electric. His predecessor was. Given that
- GE is the oldest company on the DJIA (Dow Jones Industrial Average)
- GE is one of the most widely held of all corporations
- GE is one of the largest American corporations in revenues and employees
- GE is in a plethora of businesses, globally
- Mr. Immelt is paid several million dollars per year to lead GE
It is worthwhile to think about why he’s not on this list – whether he should be – and if not, whether he should keep his job!
Since Immelt took the helm at GE, the value has actually declined. He’s not likely to win any awards given that sort of performance. Amidst the financial crisis, he had to make a very sweet deal with Berkshire Hathaway to invest cash (via preferred shares) in order to keep GE out of bankruptcy court – a deal that has enriched Mr. Buffett’s company at the expense of GE. GE has exited several businesses, such as its current effort to unload NBC via a deal with Comcast, but it has not created (or bought) a single exciting, noteworthy growth business! GE has become a smaller, lower growth company that narrowly diverted bankruptcy. That isn’t exactly a ringing endorsement for honors!
Yes, GE has developed a nice positive cash flow, which will allow it to repurchase the preferred shares from Berkshire (Marketwatch “GE to Buy Back Buffett’s Preferreds Next Year.”) But what is Mr. Immelt doing to create future shareholder value? His plan to make a few acquisitions, pay some higher dividends (suspended when the company faltered) and repurchase equity offers shareholders very little as a way to generate high rates of return! Why would anyone want to own GE? Nobody expects the company to be a growth leader in 2012, or 2015. With its current businesses, and strategy, there is no reason to expect GE to produce double digit earnings growth – or double its equity within any reasonable investing horizon.
There’s more to being a CEO than being a “caretaker.” Mr. Immelt’s predecessor, Jack Welch, created enormous value for shareholders. Mr. Welch was willing to disurpt the GE status quo. In fact, he intentionally worked at it! He made sure business leaders were constantly challenged to find new markets, create new products, expand into new businesses, leverage new technologies and generate growth! Mr. Welch was willing to take GE into growth markets, give leaders permission to create new Success Formulas, and invest in whatever it took to profitably grow revenues. During the Welch era, competitors quaked at the thought of GE entering their markets because things were always shaken up – and GE changed the game in order to create higher rates of return. During the Welch era investors received amongst the highest rate of return on any common stock! GE value multiplied many-fold, making pensioners (invested in the stock) and employees quite wealthy – even as employment expanded dramatically. That’s why Mr. Welch was Time’s Person of the Year in 2000 — and for many the CEO of the previous decade.
Mr. Immelt, on the other hand, has done nothing to benefit any of his constituencies. Like far too many CEOs, he took a much less aggressive stance toward growth. He has been unwilling to challenge and disrupt existing leaders, or promote aggressive market disruptions through the GE business units. He has not invested in White Space projects that could continue the massive expansion started during the Welch era. To the contrary, he has moved much more slowly, and focused more on selling businesses than growing them. He has resorted to trying to protect GE – rather than keep it moving forward. As a result, the company has retrenched and actually become less interesting, less valuable and less clearly able to produce returns or create new jobs!
Mr. Immelt certainly has his apologists, and seems to securely have the support of his Board of Directors. But we should question this. It actually has an impact on the American economy (and that of several other countries) when the CEO of a company as large as GE loses the ability to create growth. The malaise of the American economy can be directly tied to CEOs who are operating just like Mr. Immelt: doing almost nothing to create new markets, new sources of revenue, new jobs. Many business journalists like to say the government doesn’t create revenue, or jobs. So who will create them when corporate leaders are as feckless as Mr. Immelt? Especially when they control such vast resources!
Congratulations to Mr. Zuckerberg and Mr. Jobs (and Mr. Hastings of Netflix who was named Fortune magazine’s CEO of the Year.) They have created substantial new revenues, profits, cash flow and return for investors. Their company’s employees, suppliers, customers and investors have all benefitted from their leadership. By disrupting the way their company’s operated they pushed into new markets, and demonstrated how in any economy it is possible to create success. Caretakers they are not, so like Mr. Welch each deserves its recent accolades.
And for all those CEOs out there who are behaving as caretakers – for all who are resting on past company laurels – for all who have watched their company value decline – for those who think it’s OK to not grow – for those who blame the economy, or government, or competitors, or customers or their industry for their inability to grow —- well, you either need to learn from these recently honored CEOs and dramatically change direction, or you should be fired.
by Adam Hartung | Dec 8, 2010 | Food and Drink, General, In the Rapids, Innovation, Leadership, Television, Web/Tech
Summary:
- We too often think of competition as “head to head”
- Smart competitors avoid direct competition, instead using alternative methods in order to lower cost while appealing directly to market needs
- Proctor & Gamble has long dominated advertising for many consumer goods, but the impact, value and payoff of traditional advertising has declined markedly as people have switched to the web
- New competitors can utilize internet and social media tools to achieve better brand positioning and targeted marketing at far lower cost than old mass media products
- Colgate is in a great position to blow past P&G by investing quickly and taking the lead in internet marketing for its products
- Eschew calls for investing in old methods of competition, and instead find new ways to compete that allow you to end-run traditional leaders
According to a recent Advertising Age article (“To Catch Up Colgate May Ratchet Up Its Ad Spending“) Colgate has done a surprisingly good job of holding onto market share, despite underspending almost all its competitors in advertising. This is no mean feat in consumer products, where advertising dominates the cost structure. But the AdAge folks are predicting that to avoid further declines, and grow, Colgate will have to dramatically up its ad spending. That would be old-fashioned, backward-thinking, short-sighted and a lousy use of resources!
Colgate competes with lots of companies, but across categories its primary competitor is Proctor & Gamble. In toothpaste, P&G’s Crest outspends Colgate by over $25M – or about 35%. In dishsoap Colgate spent nothing on Palmolive in 2010, compared to P&G’s spend of $30M on Dawn. In deodorant/body soap Colgate spent about $9M on Softsoap, Irish Spring and Speedstick while P&G spent 9 times more (over $82M) on Old Spice and Secret. (Side note, Unilever spent $148M on Dove and a whopping $267M when adding in Axe and Degree!) In pet food, Unilever spends $35M dollars more (almost 4x) on Iams than Colgate spent on Hills Science Diet. Altogether, in these categories, P&G spent almost $158M more than Colgate (2.5x more)! As a big believer in traditional advertising, AdAge therefore predicts that Colgate should dramatically increase its annual ad budget – and maintain these higher levels for 5 years in order to overcome its historical “underspending.”
But that would be like deciding to trade punches with Goliath!
Why would Colgate want to do more of what P&G does the most? While advisors try to pit competitors directly against each other, head-to-head “gladiator style” combat leaves the combatants bloody – some dead. That’s a dumb way to compete. Colgate has long spent in other areas, such as supporting dog rescue operations and with product specialists gaining endorsements while eschewing more general advertising. Now, if Colgate wants to take action to grow share, it should pick up a sling (to continue the (Biblical metaphor) in its ongoing battle. And the good news is that Colgate has an entire selection of new, alternative weapons to use today.
Across all its product categories, Colgate can utilize a plethora of new social media marketing tools. At costs far lower than traditional mass advertising, Colgate can build promotional web programs that appeal directly to targeted consumers. Twitter, Facebook, Foursquare, Groupon, YouTube, Google and many other tool providers allow Colgate to spend far, far less than traditional advertising to provide specific brand promotions, product information, purchase incentives (such as coupons) and product variations targeted at various niches.
With these tools Colgate can not only reach directly into buyer laptops and mobile devices, but offer specific information and incentives. Traditional advertising, whether print (newspaper and magazine), radio, television or coupons is a low percentage tool. Seeking response rates (or even recall rates) of just 1 to 5 percent is normal – meaning 90% percent of your spending is, quite literally, just “overhead” cost. But with modern on-line tools it is very common to have response rates of 50% – or even higher! (Depending upon how targeted and accurate, of course!)
Colgate is in a great position!
It has spent much less than competitors, and maintained good brand position. It’s biggest competitors are locked-in to spending vast sums on traditional tools that have low impact and are in declining media. Colgate could now decide to commit itself to using the new, modern tools which are lower cost, and have decidedly more targeted results. In this way, Colgate can get out of the “colliseum” where the gladiators are warring, and throw rocks at them from the stands. Play its own game – to win – while letting those in the pit whack away at each other becoming weaker and weaker trying to use the old, heavy and unsophisticated tools.
Now is a wonderful time to be the “underdog” competitor. “Media” and advertising are in transition. How people obtain information on products and services is moving from traditional advertsing and PR (public relations) focused through mass media to networks with common interests in social media. Instead of delays in obtaining information, based upon publisher programming dates, customers are seeking immediate, and current information, exactly when they need it – on their mobile devices. Those competitors who rapidly adopt these new tools are well positioned to be the new Davids in the battle with old Goliaths. And that includes YOU.
by Adam Hartung | Nov 29, 2010 | Current Affairs, Disruptions, In the Rapids, Innovation, Leadership, Lifecycle, Openness, Television, Web/Tech
Summary:
- Most leaders optimize their core business
- This does not prepare the business for market shifts
- Motorola was a leader with Razr, but was killed when competitors matched their features and the market shifted to smart phones
- Netflix's leader is moving Netflix to capture the next big market (video downloads)
- Reed Hastings is doing a great job, and should be emulated
- Netflix is a great growth story, and a stock worth adding to your portfolio
"Reed Hastings: Leader of the Pack" is how Fortune magazine headlined its article making the Netflix CEO its BusinessPerson of the Year for 2010. At least part of Fortune's exuberance is tied to Netflix's dramatic valuation increase, up 200% in just the last year. Not bad for a stock called a "worthless piece of crap" in 2005 by a Wedbush Securities stock analyst. At the time, popular wisdom was that Blockbuster, WalMart and Amazon would drive Netflix into obscurity. One of these is now gone (Blockbuster) the other stalled (WalMart revenues unmoved in 2010) and the other well into digital delivery of books for its proprietary Kindle eReader.
But is this an honor, or a curse? It was 2004 when Ed Zander was given the same notice as the head of Motorola. After launching the Razr he was lauded as Motorola's stock jumped in price. But it didn't take long for the bloom to fall off that rose. Razr profits went negative as prices were cut to drive share increases, and a lack of new products drove Motorola into competitive obscurity. A joint venture with Apple to create Rokr gave Motorola no new sales, but opened Apple's eyes to the future of smartphone technology and paved the way for iPhone. Mr. Zander soon ran out of Chicago and back to Silicon Valley, unemployed, with his tale between his legs.
Netflix is a far different story from Motorola, and although its valuation is high looks like a company you should have in your portfolio.
Ed Zander simply took Motorola further out the cell phone curve that Motorola had once pioneered. He brought out the next version of something that had long been "core" to Motorola. It was easy for competitors to match the "features and functions" of Razr, and led to a price war. Mr. Zander failed because he did not recognize that launching smartphones would change the game, and while it would cannibalize existing cell phone sales it would pave the way for a much more profitable, and longer term greater growth, marketplace.
Looking at classic "S Curve" theory, Mr. Zander and Motorola kept pushing the wave of cell phones, but growth was plateauing as the technology was doing less to bring in new users (in the developed world):
Meanwhile, Research in Motion (RIM) was pioneering a new market for smartphones, which was growing at a faster clip. Apple, and later Google (with Android) added fuel to that market, causing it to explode. The "old" market for cell phones fell into a price war as the growth, and profits, moved to the newer technology and product sets:
The Motorola story is remarkably common. Companies develop leaders who understand one market, and have the skills to continue optimizing and exploiting that market. But these leaders rarely understand, prepare for and implement change created by a market shift. Inability to see these changes brought down Silicon Graphics and Sun Microsystems in 2010, and are pressuring Microsoft today as users are rapidly moving from laptops to mobile devices and cloud computing. It explains how Sony lost the top spot in music, which it dominated as a CD recording company and consumer electronics giant with Walkman, to Apple when the market moved people from physical CDs to MP3 files and Apple's iPod.
Which brings us back to what makes Netflix a great company, and Mr. Hastings a remarkable leader. Netflix pioneered the "ship to your home" DVD rental business. This helped eliminate the need for brick-and-mortar stores (along with other market trends such as the very inexpensive "Red Box" video kiosk and low-cost purchase options from the web.) Market shifts doomed Blockbuster, which remained locked-in to its traditional retail model, made obsolete by competitors that were cheaper and easier with which to do business.
But Netflix did not remain fixated on competing for DVD rentals and sales – on "protecting its core" business. Looking into the future, the organization could see that digital movie rentals are destined to be dramatically greater than physical DVDs. Although Hulu was a small competitor, and YouTube could be scoffed at as a Gen Y plaything, Netflix studied these "fringe" competitors and developed a superb solution that was the best of all worlds. Without abandoning its traditional business, Netflix calmly moved forward with its digital download business — which is cheaper than the traditional business and will not only cannibalize historical sales but make the traditional business completely obsolete!
Although text books talk about "jumping the curve" from one product line to another, it rarely happens. Devotion to the core business, and managing the processes which once led to success, keeps few companies from making the move. When it happens, like when IBM moved from mainframes to services, or Apple's more recent shift from Mac-centric to iPod/iPhone/iPad, we are fascinated. Or Google's move from search/ad placement company to software supplier. While any company can do it, few do. So it's no wonder that MediaPost.com headlines the Netflix transition story "Netflix Streams Its Way to Success."
Is Netflix worth its premium? Was Apple worth its premium earlier this decade? Was Google worth its premium during the first 3 years after its Initial Public Offering? Most investors fear the high valuations, and shy away. Reality is that when a company pioneers a growth business, the value is far higher than analysts estimate. Today, many traditionalists would say to stay with Comcast and set-top TV box makers like TiVo. But Comcast is trying to buy NBC in order to move beyond its shrinking subscriber base, and "TiVo Widens Loss, Misses Street" is the Reuters' headline. Both are clearly fighting the problems of "technology A" (above.)
What we've long accepted as the traditional modes of delivering entertainment are well into the plateau, while Netflix is taking the lead with "technology B." Buying into the traditionalists story is, well, like buying General Motors. Hard to see any growth there, only an ongoing, slow demise.
On the other hand, we know that increasingly young people are abandoning traditional programing for 100% entertainment selection by download. Modern televisions are computer monitors, capable of immediately viewing downloaded movies from a tablet or USB drive – and soon a built-in wifi connection. The growth of movie (and other video) watching is going to keep exploding – just as the volume of videos on YouTube has exploded. But it will be via new distribution. And nobody today appears close to having the future scenarios, delivery capability and solutions of Netflix. 24×7 Wall Street says Netflix will be one of "The Next 7 American Monopolies." The last time somebody used that kind of language was talking about Microsoft in the 1980s! So, what do you think that makes Netflix worth in 2012, or 2015?
Netflix is a great story. And likely a great investment as it takes on the market leadership for entertainment distribution. But the bigger story is how this could be applied to your company. Don't fear revenue cannibalization, or market shift. Instead, learn from, and behave like, Mr. Hastings. Develop scenarios of the future to which you can lead your company. Study fringe competitors for ways to offer new solutions. Be proactive about delivering what the market wants, and as the shift leader you can be remarkably well positioned to capture extremely high value.
by Adam Hartung | Sep 2, 2010 | Current Affairs, Defend & Extend, In the Rapids, Television, Web/Tech
Summary:
- Market shifts create losers, and winners
- Demand doesn’t decline, it just changes form – and usually grows!
- We want more entertainment and communcation – but not the old fashioned way
- Losers keep trying to sell what they have, and know
- Winners supply solutions aligned with market needs regardless of old competencies
How would you react if your customers said your product really wasn’t something they needed? Would you work hard to convince them they are wrong? Maybe try to add some features hoping it would regain their attention? Or would you start looking for what they really do need/want?
Pew Research Center, at PewSocialTrends.org headlines “The Fading Glory of the Television and Telephone” describing how quickly people are walking away from what were very recently considered absolute necessities. As a “boomer” and member of the “TV generation” I was surprised to read that only 42% of Americans now think a television is a necessity! This has been a rapid, dramatic decline from 52% last year and 64% in 2006! 1 in 5 Americans have changed their point of view about television as a necessity in just 4 years! And TV as a necessity is in an accelerating decline! I can remember when my generation went from 1 TV in the house to 1 in every room! This trend does not bode well for broadcast television networks, affiliates, advertisers, traditional production companies, television newscasters, manufacturers of TV sets and TV equipment – or many other businesses linked to TV as we know it.
Simultaneously, demand for a land line telephone has declined. Again, my generation remembers the days with one phone in the house – in some areas on a shared “party” line where multiple families shared a single phone line. The phone was in a central area so it could be shared. In the 1970s we saw things change as telephones were added to every room! Now, according to Pew, folks who consider a land-line phone a necessity has declined to only 62%, a 10% decline from just last year (68 to 62) and barely 3 in 5 Americans! Wow!
Of course, for every decline there’s a winner. 47% see the cell phone as a necessity – that’s 5 percentage points greater than the TV score, indicating mobile phones are seen as more of a necessity than television by the general population. And 34% see high speed internet as a necessity – only 9 percentage points fewer than the TV number – and more than half who see the need for a land-line phone.
Demand for entertainment and communication have not declined! If you are in television or land lines you might think so. Rather, that demand is accelerating. But it is just shifting to a different solution. Instead of the old technology, and supplier industry, people are changing to something new. First with video cassetttes, then digital video recorders (DVRs), then the plethora of available cable channels and on-demand TV, and now with on-line entertainment from YouTube to Hulu people have been changing the way they consume entertainment. Demand has gone up, but not from traditional consumption of TV, especially as viewing has switched from the TV to the computer monitor – or the hand held device.
Clearly, access to the internet (facebook, twitter, et.al.), texting and anytime/anywhere calling has increased both our access and use of one-way (such as reading web pages) and two way communication. Communication is continuing to grow, but it will be in a different way. No longer do we need a “dial tone” to communicate – and in most instances people are finding a preference to asynchronous rather than real-time communication.
These are the kind of industry transitions that threaten so many businesses. What Clayton Christensen calls “The Innovator’s Dilemma” as new solutions increase demand while making old solutions obsolete. The tendency is for the supplier of traditional solutions to say “my market is in decline.” But really, the market is growing! Just like Kodak said the demand for film was declining, when demand for photography – now in digital format – was (and is) escalating! When market shifts happen, incumbents have to resist the temptation to try “keeping” the “old customers” by undertaking Defend & Extend efforts – like adding features and functionality, while cutting price. This inevitably leads to disaster! Instead, they have to understand the shift is only going to accelerate, and develop an approach to entering the new market.
As this research comes out, Apple launched a series of new products to augment its set-top box and iPod/iTouch product lines. (San Francisco Chronicle, SFGate.com “Steve JobsUnveils Upgraded Apple TV, New iPods“) by doing so Apple recognizes that people still want entertainment – but they are a whole lot less likely to accept sitting in front of a communal television, serially deploying programming at them. They want their entertainment to be on-demand, and personalized. Why should we all watch the same thing? And why watch what some programmer at CBS, HBO or TMC wants to deliver?
Apple is bringing out products that align with the direction the market is now heading. Ping is designed to help people share program information and identify the entertainment you would like to receive. iTunes is upgrading to bring you in bite-size chunks exactly the entertainment you want, as you want it, aurally or visually. These are products which will grow because they are aligned with what the market says it wants — even more entertainment. Those who are hidebound to the old supply mechanism will simply find themselves fighting for declining revenue as demand shifts – and grows – in the new solutions
by Adam Hartung | Aug 11, 2010 | Defend & Extend, Food and Drink, In the Whirlpool, Leadership, Lock-in, Television, Web/Tech
“Playboy’s Circulation drops 34%” is the Chicago Tribune headline. Is anyone surprised? If ever there was a brand, and business, that was out of step with current markets it has to be Playboy. That the business still exists is a wonder. But let’s spend a few minutes to see why Playboy has fallen on hard times, and what the alternative might have been – and could still be.
The Playboy Success Formula is really clear. Since founded by Hugh Hefner, the company has focused on titillating the male libido with a magazine that focused on pictures of naked women, videos of same (physical videos, on-line videos and television), radio talk shows about sex, and alternative lifestyle issues such as recreational drug use. At one time this was unique, and in a male dominated 1960s it was even tolerated. Although never mainstream, the business was very profitable early in its lifecycle. Thus the founder kept doing more of the same, building a small empire and eventually taking the company public.
But the market shifted. Larry Flint and others ushered in a new era of pornography altering the market for prurient, sexually oriented material. Women in the workforce – and I’d like to think a heavy dose of decency – made public toleration of such material unacceptable. You couldn’t read a Playboy at work, or on the airplane, and you wouldn’t have a business lunch at their clubs. Other magazines sprung up to deal with men’s interests in automobiles, clothing, music, sports, etc. in a more acceptable – and for most people more significant and intelligent – manner. Other lifestyle publications were developed that discussed illicit drug use and non-traditional ways of life more directly, explicitly and with greater advocacy. The advent of cable TV and then the internet increasingly made access to the key features of Playboy’s product readily available, very inexpensive (often free) and targeted at niche audiences.
Yet, despite these many market changes, Playboy’s founder and his daughter, the company CEOs for 40+ years, steadfastly stuck to their old Success Formula. They kept thinking that people wanted those “bunny eared” products. They talked a lot about the heritage of Playboy, how it broke ground in so many markets, and opened the door for lots of new competitors. But they kept doing what the company always did – including foisting upon us the ever aging founder as a “role model” for male menopause and the anti-family aged entrepreneur. Playboy today is what it always was – and there simply aren’t a whole lot of people with much interest in those products any more. Nobody mismanaged the brand, the market just walked away from it. Sort of like the demand for Geritol.
Playboy focused on its core. And now its on the edge of bankruptcy. The company keeps outsourcing more and more of the work, as the staff has dropped to nearly nothing, cutting costs everywhere possible. Sales continue to decline, and the brand looks like it will soon join Polaroid and Woolworths on the heap of once famous but floundered companies. Playboy’s fatal mistake wasn’t that it was started as a prurient men’s magazine – but rather that for 40 years its leadership kept Defending & Extending that original Success Formula despite rather dramatic market shifts. Now, today, Playboy is a sour lemon that not many a marketer would want to be stuck promoting.
But – it didn’t have to be that way. Just imagine if you’d been given control of Playboy 30 years ago. What could you have done?
As soon as Hustler hit the newsstands, and the first women’s right protests developed – including the early push for the Equal Rights Amendment – it was clear that the future of the magazine was in jeopardy. Instead of doing “more of the same” could you have considered something else?
The growth of women in the workforce meant a lot of new opportunities. Why not jump onto that bandwagon? If you’re really at the forefront of “lifestyle” issues, as the leadership claimed, then you would have identified that women in the workforce meant something new was brewing – a group of consumers that would have more cash, and more influence. And not only would that be an appealing market, but so would the men who would be adjusting to new lifestyle issues as homes became dominated by 2-worker leadership.
Playboy was well positioned to be Victoria’s Secret. At a time before anybody else was really thinking about a significant market for attractive and comfortable lingerie Playboy certainly had the leading edge. Or, even more likely, the water carrying publication for Dr. Ruth-style discussions about sexuality. There was an emerging market for information targeted at increasingly affluent women about automobiles, stereos, apartments, resume writing, job hunting and even at-work etiquette — all topics that had been the dominant discussion areas for Playboy’s historically male readership. Had the leadership at Playboy opened its eyes, and scanned the horizon for growth markets being developed as a result of the trends which were negatively impacting it, these leaders would have been able to create a bevy of scenarios that were filled with opportunities for growth.
It’s hard to imagine today Playboy being anything else. But all that stopped stopped Playboy’s evolution was a commitment to its “core” – to its old Success Formula. That the CEO for over 20 years was a well educated woman is testament to the power of “core” philosophy versus a willingness to look at market opportunities. By keeping Playboy’s Success Formula tightly aligned with her father’s founding ideas she quite literally led the company into smaller and smaller sales with less and less profit. The big loser was, of course, investors. Playboy is worth very little today as Mr. Hefner hints at making a bid to take the company private once again.
Singer was once a sewing machine company. But when Japanese products surpassed Singer’s product capabilities and achieved a cost advantage in the 1970s, Singer leadership converted Singer into a defense contractor. And Singer went on to multiply its value before being acquired by General Dynamics.
IBM was an office machine company famous for mechanical typewriters and adding machines. The founder said he would never enter computers. Fortunately for employees and shareholders the founder’s son took the company into computers and the company flourished as competitive typewriter companies such as Smith Corona – stuck on the core business – disappeared.
There’s a time for lemons – in your tea or on a salad. But when markets shift, lemons just turn sour. If you want to succeed long-term you have to shift with markets. And that might well mean making significant change. Adding water and sugar to the lemons is a good start – as lemonade is less about lemons than what you’ve added to it. After you open that lemonade stand, see where the market leads you.
No matter where you start, every day offers the opportunity to head toward new, emerging markets. No matter what your historical “core” you can literally become any business you want to become. Coke was founded by a pharmacist who wanted to boost counter sales in his store – and it was worth a lot more than the pills he was constructing. Those who develop scenarios about the future prepare for market shifts, understand the competitive changes and use them to identify the opportunities for a new future. Then they use White Space teams to move the business into a new Success Formula. Anybody can do it. You could even have remade Playboy. So what’s the plan for the future of your business? More of the same …. or …..
by Adam Hartung | Apr 20, 2010 | Current Affairs, Defend & Extend, In the Rapids, Innovation, Leadership, Openness, Television, Web/Tech
News Corp. executives (and shareholders) need to be worried. Really worried. While they are busy trying to Defend their newspaper approach, including the planned move to charge everyone a subscription fee to access the Wall Street Journal on-line, there is a competitor ready to eliminate them. Of course, if you've read the WSJ for years you may think this sounds ridiculous. This competitor is vying to do the same to the Financial Times, a newspaper much more popular in Europe than the USA, which already charges for on-line access. But this competitor is serious, and just might pull it off.
According to BusinessInsider.com, "Bloomberg Redesigns Web Site as it Tries to Kill Journal." Hiring an executive from Yahoo, Bloomberg News is "pulling the gloves off" and preparing to take on old-line competitors as it steers a course to being #1. And the odds are looking good for its success.
The market for business news has been shifting for years. Once this market was dominated by two delivery mechanisms. One was very expensive, costing thousands or hundreds of dollars per month, driving information to terminals sitting at desks of traders and brokers. The other was a daily reporting of business news through the traditional business newspapers mentioned above. Both businesses were very profitable.
But today, almost everyone can get almost everything the expensive terminals had simply by scanning the web. And if you can get news real-time, why wait until tomorrow? News Corp. bought Dow Jones and has been trying to Defend the terminal business, in the face of intense Bloomberg competition for traders desks and much lower cost competition for everyone else. In an effort to shore up the P&L at Wall Street Journal the company has announced it will reverse all industry trends and start charging for WSJ content on-line. They still haven't figured out how to effectively take advantage of Marketwatch.com as a viable delivery mechanism for WSJ content. An admission they don't know how to develop a robust advertising model on the web and mobile devices that will support the publication.
Don't forget, News Corp. was early to the on-line world with its acquisition of MySpace.com. But instead of letting the people who run MySpace.com do what they needed to do to become Facebook – or possibly to become the next Marketwatch.com – News Corp. leaders interceded. They helped "manage" MySpace and applied News Corp. Success Formula parameters to it. MySpace was not allowed to operate as a White Space project. Now MySpace is a narrow site mostly for musicians and artists – missing the big opportunities in social media, business/financial news or even traditional news dissemination. Had it been given permission to do whatever it needed to succeed, permission to create a new Success Formula, who knows what MySpace might have become?
Today's marketplace will not produce acceptable returns for the old Success Formula. But the value of good business news is growing, as all investors want to know what traders know as fast as they know it. And that is where Bloomberg.com is headed. It is squarely directed at building a new business that is advertiser supported which will deliver the right news to the right place fast enough to capture those who want business news.
Bloomberg is now running 2 separate businesses. They continue to allow the terminal business to work hard as possible at defending its turf. Simultaneously they have established a White Space project that is designed to eventually obsolete the old business. In the process they will cannibalize the terminal business. But they also will very likely drive less agile competitors Dow Jones and Financial Times out of business. In the process they could capture significant ad dollars while learning how to dominate the mobile device market as well as the traditional web.
When markets shift, nobody can win by trying to Defend the old. Customers move on, and they abandon old solutions. Returns decline. The winner has to use Disruptions to overcome old Lock-ins to do whatever is necessary to profitably grow! (like having a web site that looked like an old terminal screen with amber text on a black background) and establish White Space with permission to do what is necessary to succeed! Even recognizing this may create cannibalization – but in the process learning how to earn high rates of return while crushing competitors.
Kudos to the management at Bloomberg. They are going for the jugular in the business news marketplace, and doing so by moving where the market is headed – while other competitors are trying to Defend & Extend old ways of doing business. It may not take Bloomberg long to create serious damage to the old institutions in business and financial news.
