Like Sbarro, Will You Be the Next Domino to Fall?

Like Sbarro, Will You Be the Next Domino to Fall?

by | Mar 13, 2014 | Food and Drink, Investing, Leadership, Lock-in, Trends

Understanding trends is the most important part of planning.

Yet, most business planning focuses on internal operations and how to improve them, usually neglecting trends and changes in the external environment that threaten not only sales and profits but the business’ very existence.

Take Sbarro’s recent bankruptcy.  That was easy to predict, especially since it’s the second time down for the restaurant chain.  You have to wonder why leadership didn’t do something different to avoid this fate.

Traditional retail has been in decline for a decade.  As consumers buy more stuff on-line, from a rash of retailers old and new, there is simply less stuff being bought at stores.  It’s an obvious trend which affects everyone.  But we see business leaders surprised by the trend, reacting with store closings and cost reductions, and we are surprised by the headlines:

Thousands of retail stores will close in 2014. It should surprise no one that physical retail traffic has been in dramatic decline.  Large malls are shutting down, and being destroyed, as the old “anchor tenants” like Sears and JC Penney flail.  Over 200 large malls (over 250,000 square feet) have vacancy rates exceeding 35%.  Retail rental prices keep declining as the overbuilt, or under-demolished, retail square footage supply exceeds demand.

Business planning is about defending and extending the past.

Given this publicly available information, you would think a company with most of its revenue tightly linked to traditional retail would —- well —- change.  Yet, Sbarro stuck with its business of offering low cost food to mall shoppers.  Its leaders continued focusing on defending & extending its old business, improving operations, while trends are clearly killing the business.

Almost all business planning efforts begin by looking at recent history.  Planning processes starts with a host of assumptions about the business as it has been, and then try projecting those assumptions forward.  Sbarro began when malls were growing, and its plans were built on the assumption that malls thrive.  Now malls are dying, but that is not even part of planning for the future.  Planning remains fixated on execution of a strategy that is no longer viable .

No one can “fix” Sbarro – they have to change it.  Radically.  And that means planning for a future which looks nothing like the past.  Planning needs to start by looking at trends, and developing future scenarios about what customers need.  Regardless of what the business did in the past.

Planning should be about understanding trends and developing future scenarios.

For all businesses the important planning information is not sales, sales per store, product line offerings, cost of goods sold, labor cost, gross margin, rents, cleanliness scores, safety record, location, etc., etc.  The important information is in marketplace trends.  For Sbarro, what will be dining trends in the future?  What kind of restaurant experience do people want not only in 2014, but in 2020? Or should the company move toward delivery?  At-home food preparation?

Success only happens when we understand trends and build our business to deliver what people want in the future. The world moves very fast these days.  Technologies, styles, fashions, tastes, regulations, prices, capabilities and behaviors all change very quickly.  Tomorrow is far less likely to look like today than to look, in important ways, remarkably different.

Plan for the future, not from the past.

To succeed in today’s fast changing environment requires we plan for the future, not from the past.  We have to understand trends, and create keen vision about what customers will want in the future so we can steer our business in the right direction.  Before we even discuss execution we have to make sure we are going to give customers what they want – which will be aligned with trends.

Otherwise, you can have the best run operation in the country and still end up like Sbarro.

Connect with me on LinkedIn, Facebook  and Twitter.
Links:

Radio Shack is a leader… in irrelevancy… and why that’s important for you

Old assumptions, and the CEO’s bias, is killing Sears

Winners shift with trends, losers don’t – understanding Sears’ decline

The CEO problem and the failure of JCPenney

The RIGHT way to implement planning to thrive in changing markets

How to plan like Virgin, Apple and Google

 

4 Myths and 1 Truth About Investing

by | Oct 18, 2012 | Investing, Trends

Today is the 25th anniversary of the 1987 stock market crash that saw the worst ever one-day percentage decline on Wall Street.  Worse even than during the Great Depression.  It’s a reminder that the market has had several October “crashes;” not only 1929 and 1987 but 1989, 1998, 2001 and 2007.

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For some people this serves as a reminder to invest very, very cautiously.  For others it is seen as market hiccups that present buying opportunities. For many it is an admonition to follow the investing advice of Mark Twain (although often attributed to Will Rogers) and pay more attention to the return of your money than the return on your money.

I’ve been investing for 30 years, and like most people I did it pretty badly.  For the first 20 years the annual review with my Merrill Lynch stock broker sounded like “Kent, why is it I’m paying fees to you, yet would have done better if I simply bought the Dow Jones Industrial Average?”  Across 20 years, almost every year, my “managed” account did more poorly than this collection of big, largely dull, corporations.

A decade ago I dropped my broker, changed my approach, and things have gone much, much better.  Simply put I realized that everything I had been taught about investing, including my MBA, assured I would have, at best, returns no better than the overall market.  If I used the collective wisdom, I was destined to perform no better than the collective market.  Duh.  And that is if I remained unemotional and disciplined – which I didn’t assuring I would do worse than the collective market!

Remember, I am not a licensed financial advisor.  Below are the insights upon which I based my new investing philosophy.   First, the 4 myths that I think steered me wrong, and then the 1 thing that has produced above-average returns, consistently.

Myth 1 – Equities are Risky

Somewhere, somebody came up with a fancy notion that physical things – like buildings – are less risky than financial assets like equities in corporations.  Every homeowner in America now knows this is untrue.  As does anybody who owns a car, or tractor or even a strip mall or manufacturing plant.  Markets shift, and land and buildings – or equipment – can lose value amazingly quickly in a globally competitive world.

The best thing about equities is they can adapt to markets.  A smart CEO leading a smart company can change strategy, and investments, overnight.  Flexible, adaptable supply chains and distribution channels reduce the risk of ownership, while creating ongoing value.  So equities can be the least risky investment option, if you keep yourself flexible and invest in flexible companies.

Hand-in-glove with this is recognizing that the best equities are not steeped in physical assets.  Lots of land, buildings and equipment locks-in the P&L costs, even though competitors can obsolete those assets very quickly.  And costs remain locked-in even though competition drives down prices.  So investing in companies with lots of “hard” assets is riskier than investing in companies where the value lies in intellectual capital and flexibility.

Myth 2 – Invest Only In What You Know

This is profoundly ridiculous.  We are humans.  There is infinitely more we don’t know than what we do know.  If we invest only in what we know we become horrifically non-diversified.  And worse, just because we know something does not mean it is able to produce good returns – for anybody!

This was the mantra Warren Buffet used to turn down a chance to invest in Microsoft in 1980.  Oops. Not that Berkshire Hathaway didn’t find other investments, but that sure was an easy one Mr. Buffett missed.

To invest smartly I don’t need to know a lot more than the really important trends.  I don’t have to know electrical engineering, software engineering or be
an IT professional to understand that the desire to use digital mobile
products, and networks, is growing.  I don’t have to be a bio-engineer to know that pharmaceutical solutions are coming very infrequently now, and the future is all in genetic developments and bio-engineered solutions.  I don’t have to be a retail expert to know that the market for on-line sales is growing at a double digit rate, while brick-and-mortar retail is becoming a no-growth, dog-eat-margin competitive world (with all those buildings – see Myth 1 again.)  I don’t have to be a utility expert to know that nobody wants a nuclear or coal plant nearby, so alternatives will be the long-term answer.

Investing in trends has a much, much higher probability of making good returns than investing in things that are not on major trends.  Investing in what we know would leave most people broke; because lots of businesses have more competition than growth.  Investing in businesses that are developing major trends puts the wind at your back, and puts time on your side for eventually making high returns.

Oh, and there are a lot fewer companies that invest in trends.  So I don’t have to study nearly as many to figure out which have the best investment options, solutions and leadership.

Myth 3 – Dividends Are Important to Valuation

Dividends (or stock buybacks) are the admission of management that they don’t have anything high value into which they can invest, so they are giving me the money.  But I am an investor.  I don’t need them to give me money, I am giving them money so they will invest it to earn a rate of return higher than I can get on my own.  Dividends are the opposite of what I want.

High dividends are required of some investments – like Real Estate Investment Trusts – which must return a percentage of cash flow to investors.  But for everyone else, dividends (or stock buybacks) are used to manipulate the stock price in the short-term, at the expense of long-term value creation.

To make better than average returns we should invest in companies that have so many high return investment opportunities (on major trends) that the company really, really needs the cash.  We invest in the company, which is a conduit for investing in high-return projects.  Not paying a dividend.

Myth 4 – Long Term Investors Do Best By Purchasing an Index (or Giant Portfolio)

Stock Index chart 10.20.12

Go back to my introductory paragraphs.  Saying you do best by doing average isn’t saying much, is it?  And, honestly, average hasn’t been that good the last decade.  And index investing leaves you completely vulnerable to the kind of “crashes” leading to this article – something every investor would like to avoid.  Nobody invests to win sometimes, and lose sometimes. You want to avoid crashes, and make good rates of return.

Investors want winners.  And investing in an index means you own total dogs – companies that almost nobody thinks will ever be competitive again – like Sears, HP, GM, Research in Motion (RIM), Sprint, Nokia, etc. You would only do that if you really had no idea what you are doing.

If you are buying an index, perhaps you should reconsider investing in equities altogether, and instead go buy a new car. You aren’t really investing, you are just buying a hodge-podge of stuff that has no relationship to trends or value cration. If you can’t invest in winners, should you be an investor?

1 Truth – Growing Companies Create Value

Not all companies are great.  Really.  Actually, most are far from great, simply trying to get by, doing what they’ve always done and hoping, somehow, the world comes back around to what it was like when they had high returns.  There is no reason to own those companies.  Hope is not a good investment theory.

Some companies are magnificent manipulators.  They are in so many markets you have no idea what they do, or where they do it, and it is impossible to figure out their markets or growth.  They buy and sell businesses, constantly confusing investors (like Kraft and Abbott.)  They use money to buy shares trying to manipulate the EPS and P/E multiple.  But they don’t grow, because their acquired revenues cost too much when bought, and have insufficient margin.

Most CEOs, especially if they have a background in finance, are experts at this game.  Good for executive compensation, but not much good for investors.  If the company looks like an acquisition whore, or is in confusing markets, and has little organic growth there is no reason to own it.

Companies that are developing major trends create growth.  They generate internal projects which bring them more customers, higher share of wallet with their customers, and create new markets for new revenues where they have few, if any competition.  By investing in trends they keep changing the marketplace, and the competition, giving them more opportunities to sell more, and generate higher margins.

Growing companies apply new technologies and new business practices to innovate new solutions solving new needs, and better solve old needs.  They don’t compete head-on in gladiator style, lowering margins as they desperately seek share while cutting costs that kills innovation.  Instead they ferret out new solutions which give them a unique market proposition, and allow them to produce lots of cash for adding to my cash in order to invest in even more new market opportunities.

If you had used these 4 myths, and 1 truth, what would your investments have been like since the year 2000?  Rather than an index, or a manufacturer like GE, you would have bought Apple and Google. Remember, if you want to make money as an investor it’s not about how many equities you own, but rather owning equities that grow.

Growth hides a multitude of sins.  If a company has high growth investors don’t care about free lunches for workers, private company planes, free iPhones for employees or even the CEO’s compensation.  They aren’t trying to figure out if some acquisition is accretive, or if the desired synergies are findable for lowering cost. None of that matters if there is ample growth.

What an investor should care about, more than anything else, is whether or not there are a slew of new projects in the pipeline to keep fueling the growth. And if those projects are pursuing major trends.  Keep your eye on that prize, and you just might avoid any future market crashes while improving your investment returns.

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Avoid Gladiator Wars – Invest in David, Make Money Like Apple

by | Jul 14, 2011 | Investing, Leadership, Trends


When you go after competitors, does it more resemble a gladiator war – or a David vs. Goliath battle?  The answer will likely determine your profitability.  As a company, and as an investor.

After they achieve some success, most companies fall into a success formula – constantly tyring to improve execution. And if the market is growing quickly, this can work out OK.  But eventually, competitors figure out how to copy your formula, and as growth slows many will catch you.  Just think about how easily long distance companies caught the monopolist AT&T after deregulation.  Or how quickly many competitors have been able to match Dell’s supply chain costs in PCs.  Or how quickly dollar retailers – and even chains like Target – have been able to match the low prices at Wal-Mart. 

These competitors end up in a gladiator war.  They swing their price cuts, extended terms and other promotional weapons, leaving each other very bloody as they battle for sales and market share.  Often, one or more competitors end up dead – like the old AT&T.  Or Compaq. Or Circuit City.  These gladiator wars are not a good thing for investors, because resources are chewed up in all the fighting, leaving no gains for higher dividends – nor any stock price appreciation.  Like we’ve seen at Wal-Mart and Dell.

The old story of David and Goliath gives us a different approach.  Instead of going “toe-to-toe” in battle, David came at the fight from a different direction – adopting his sling to throw stones while he remained safely out of Goliath’s reach.  After enough peppering, he wore down the giant and eventually popped him in the head. 

And that’s how much smarter people compete. 

  • When everyone was keen on retail stores to rent DVDs, Netflix avoided the gladiator war with Blockbuster by using mail delivery. 
  • While United, American, Continental, Delta, etc. fought each other toe-to-toe for customers in the hub-and-spoke airline wars (none making any money by the way) Southwest ferried people cheaply between smaller airports on direct flights.  Southwest has made more money than all the “major” airlines combined.
  • While Hertz, Avis, National, Thrifty, etc. spent billions competing for rental car customers at airports Enterprise went into the local communities with small offices, and now has twice their revenues and much higher profitability.
  • When internet popularity started growing in the 1990s Netscape traded axe hits wtih Microsoft and was destroyed.  Another browser pioneer, Spyglass, transitioned from PCs to avoid Microsoft, and started making browsers for mobile phones, TVs and other devices creating billions for investors.
  • While GM, Ford and Chrysler were in a grinding battle for auto customers, spending billions on new models and sales programs, Honda brought to market small motorcycles and very practical, reliable small cars. Honda is now very profitable in several major markets, while the old gladiators struggle to survive.

As an investor, we should avoid buying stocks of companies, and management teams that allow themselves to be drug into gladiator wars.  No matter what promises they make to succeed, their success is uncertain, and will be costly to obtain.  What’s worse, they could win the gladiator war only to find themselves facing David – after they are exhausted and resources are spent!

  • Research in Motion became embroiled in battles with traditional cell phone manufacturers like Nokia and Ericdson, and now is late to the smartphone app market – and with dwindling resources.
  • Motorola fought the gladiator war trying to keep Razr phones competitive, only to completely miss its early lead in smartphones.  Now it has limited resources to develop its Android smart phone line.
  • Is it smart for Google to take on a gladiator war in social media against Facebook, when it doesn’t seem to have any special tool for the battle?  What will this cost, while it simultaneously fights Apple in Android wars and Microsoft for Chrome sales?

On the other hand, it’s smart to invest in companies that enter growth markets, but have a new approach to drive customer conversion.  For example, Zip Car rents autos by the hour for urban users.  Most cars are very high mileage, which appeals to customers, but they also are pretty inexpensive to buy.  Their approach doesn’t take-on the traditional car rental company, but is growing quite handily.

This same logic applies to internal company investments as well.  Far too often the corporate reource allocation process is designed to fight a gladiator war.  Constantly spending to do more of the same.  Projects become over-funded to fight battles considered “necessity,” while new projects are unfunded despite having the opportunity for much higher rates of return.

In 2000, Apple could have chosen to keep pouring money into the Mac.  Instead it radically cut spending, reduced Mac platforms, and started looking for new markets where it could bring in new solutions.  IPods, iTunes, IPhones, iPads and iCloud are now driving growth for the company – all new approaches that avoided gladiator battles with old market competitors.  Very profitable growth.    Apple has enough cash on hand to buy every phone maker, except Samsung –  or Apple could buy  Dell – if it wanted to.  Apple’s market cap is worth more than Microsoft and Intel combined.

If you want to make more money, it’s best to avoid gladiator wars.  They are great spectator events – but terrible places to be a participant.  Instead, set your organization to find new ways of competing, and invest where you are doing what competitors are not.  That will earn the greatest rate of return.

 

Book Reviews

by | May 18, 2009 | Books, Lifecycle, Phoenix, Trends

What Thought Leaders are saying about Create Marketplace Disruption

“Companies that cannot change die. Companies that respond eventually survive but see their profits squeezed, their growth flattened. Long-term winners create their own disruptions and thrive on change. Hartung shows how to become one of the winning companies: how to attack competitors’ lock-ins, make their success formulas obsolete, and create the space needed to invent formulas for success.”
Harvard Business School Bulletin, March, 2009

“How do you participate in market disruptions which threaten your current leadership status? In this book Adam Hartung shows the kind of thinking needed to deal with the creative destruction that underlies global capitalism today.” Geoffrey Moore, author Dealing with Darwin” and “Crossing the Chasm,”
Managing Director TCG-Advisors venture capital, September, 2008

“Create Marketplace Disruptions is as thought-provoking as it is entertaining. Adam Hartung offers business managers and leaders new insights to long-term success that apply across markets and industries.”
Steve Burke, President Comcast, August, 2008

“This is a disruptive book. In times of ever accelerating, deep change survival through “ever better management” is an illusion. This is the book for the entrepreneur in us. Unite the entrepreneurial soul with corporate resourcefulness. Adam’s framework should be tried.”
Jost Stollman, Shadow Minister Economy and Technology Federal Republic of Germany, July, 2008

“The Fortune 1000 is a very fluid list. They become successful doing something right, but then keep doing that (because it’s what they know) even when marketplace conditions change. Companies need to reinvent themselves, become flexible, and do something completely different.”
Nick Morgan, CEO Public Words, February, 2009

“In what is possibly one of most stimulating books ever written on business management, Adam Hartung explores various ways for a corporation to achieve adaptive success: such as stop the ‘Defend & Extend’ old habits, generate controlled disruptions of the corporate personality, and create autonomous ‘White Space’ to continuously create revised success formulas.”
Jean-Louis Vullierme, global venture capitalist, January, 2009

“Talking innovation is easier than practicing innovation. Adam offers an excellent approach for corporations to identify how to innovate to gain competitive advantage. A must read. ”
Praveen Gupta, President, Accelper Consulting, author Business Innovation in the 21st Century, The Six Sigma Performance Handbook and Six Sigma Business Scorecard, September, 2008

“Adam Hartung gives a workable guide to overcome business inertia. Create disruption in your own business to keep ahead of the competition. Hartung looks at the reasons why businesses have difficulty changing, and provides help in overcoming those issues. Create Marketplace Disruption is an easy to read, helpful book and recommended.”
Sacramento Book Review, November, 2008

“Adam Hartung has forever changed the paradigm of what constitutes the leadership of change and innovation. He provides answers to why so many good organizations fail. He shows how leaders trained to focus on core competencies and customers may be sowing the seeds for their organization’s destruction in a time of accelerating change.”
Paul Davis, President Scanlon Leadership Network, October, 2008

“Adam Hartung offers courageous leaders a new language system and framework for generating long term profitable growth. Rich with compelling metaphors, stories, and illustrations, Create Marketplace Disruptions explains why even aggressive efforts to reinvent fail. Hartung provides leaders with practical tools for keeping companies ahead of declining results and obsolescence. Every leader needs to understand Hartung’s framework and heed his advice.”
Judi Rosen, Managing Director, CSC Index and President, The Concours Group, August, 2008

“Create Marketplace Disruption provides a model for competing more effectively in our constantly changing markets. Leapfrogging tired concepts which have largely focused on doing more of what you’ve always done, Adam Hartung focuses us on doing what it takes to do better. This is the book that all executives who want to leave a positive legacy must read!”
Ron Kirschner, Chairman Heartland Angels venture capital, December, 2008

“Adam Hartung blends stunning lessons learned from the fallen giants of business with set-you-back-in-your-seat insights that make this a must read for all business leaders of large and small companies alike. Hartung provides an intelligent blueprint for achieving what every business craves — competitive advantage and renewable growth. Smart, sophisticated treatment of a topic that no business executive worth his /her stock options can ignore — how to grow and differentiate your business”
John Popoli, President Lake Forest Graduate School of Management, January, 2009

“Create Marketplace Disruption is an engaging, enlightening, frightening, and occasionally upsetting book. Its contents will repay careful thought and periodic revisiting. It’s a book to keep in mind, and close at hand, whenever an organization faces the need to develop an effective plan for the future.”
Dr. Michael Vitale, Asia-Pacific Centre for Science and Wealth Creation, October, 2008

“The insights provided by Adam Hartung makes this book a must-read for all entrepreneurs. This is a blueprint for generating more wealth and getting to investor returns faster.”
William A Johnson, Founder and CEO CAER Group, March, 2009

“Creating Marketplace Disruptions is an outstanding approach for creating and maintaining growth and profitability in an increasingly dynamic and uncertain global economy. More importantly, the book moves beyond concepts with a well crafted set of tools and techniques for implementing change that are relevant regardless of industry or company size”
Sumeet Goel, Managing Director, HighPoint Associates, July, 2008

“Adam Hartung presents a fresh perspective and compelling case that demands business leaders pursue new markets – thirst to disrupt the status quo. Every business should apply Mr. Hartung’s principles – only hiring those individuals prepared to question the corporate culture, and vigorously willing to pursue White Space.”
Ken Daubenspeck, Chairman and CEO KDA global management recruiters, October, 2008

Investing or speculating? Making money in a tough marketplace

by | Mar 5, 2009 | Investing, Trends, Uncategorized

I've never met anyone who says they speculate in the stock market.  My colleagues always say they are investors; people who know what they were doing and savvy about the market.  But, reality is that most people speculate.  Because they don't invest on underlying business value.  Instead, they rely on words from "gurus" and follow trends.  That, unfortunately, is speculating.

Back on 12/21/08 (just a couple of months ago) the DJIA was at 8960, the S&P 918.  Looking at The Chicago Tribune for that day, the primary recommendation by analysts for 2009 was "Keep an eye on long-term horizons" and "weather out the storm".  The markets were down, but don't panic.  Famed investment maven Elaine Garzarelli recommended if you had $10k in cash to invest $2k in tech stocks, $2k in Citigroup Preferred, $2k in GE and $2k in an income-oriented fund.  Then put $2k into a short fund to hedge your risks!  She couldn't have been more dead wrong on the only two named companies – GE and C.  Both are at modern, or all time, lows.  Don Phillip, managing director at Morningstar, recommended investing all $10K in equities because "they've taken an unprecedented hit and are very cheap."

When you hear investment gurus, on TV or elsewhere, tell you to "stay the course, the market always recovers" they are basing their opinions on history – not the future.  This isn't last year, or the last recession, or the last economy.  Will all economies eventually recover?  Maybe not.  Will the U.S. economy recover in your lifetime? Not assured – Japan has been in a recession for over a decade!  Does that mean American companies will be the ones to lead the world in the next upmarket?  Not assured.  These "gurus" have been dead wrong for almost a year – and at the most important time in your investment history.  If they were so wrong for the last year, why are they still on TV?  Why are you listening?

In the short term, stock markets are driven by momentum.  When most people are buying, the markets keep going up.  Even for individual stocks.  Sears had no reason to go up in value after being acquired by Ed Lampert's KMart corporation.  Sears and Kmart were overleveraged, earning below-market rates of return, and with assets that had long lost their luster.  But because Jim Cramer of CNBC Mad Money fame knew and liked Mr. Lampert he kept talking up the stock.  Other hedge fund operators thought Mr. Lampert had been clever in the past, so they guessed he knew something they didn't and they speculated in his investment.  The value went up 10x – and then came down 90%.  Wild ride – but in the history of markets unless you are a speculator, you should never have invested in Sears.  When you hear "don't be a market timer" remember that the only way to make money in Sears was to be a market timer – you had to buy and sell at the right time because the company wasn't able to increase its value.  Sears' Success Formula was out of date, and there was no sign of a plan for the future, nor obsession about market changes and competitors, nor willingness to Disrupt old behaviors nor White Space.  From the beginning this was a bad investment, and it has remained that way.

Today the market remains driven by momentum.  Who wants to say they are buying stocks when the major averages keep falling?  What CEO wants to say he's optimistic when it's popular to present "caution"?  Who wants to discuss opportunities for markets in 2015 being 3x bigger when right now demand for industrial products like cars is down 20-40%?  When momentum is up, you can't find a pessimistic CEO.  Nor a pessimistic investor.  So the likewise is equally true.

Reality is that there are good investments today, and bad.  If a business is firmly locked into the industrial economy, such as GM and Ford, making the same products in much the same way to sell to pretty much the same customers, but with new competitors entering from all around - those companies are not good investments.  Regardless of the rate of economic growth or debt availability.  Their Lock-in to outdated Success Formulas means that their rates of return will not improve, even if overall economic growth does.  Markets have shifted, and keep shifting.  Businesses that were not profitable in the old market aren't going to suddenly be better competitors in a future market.  Just the opposite is more likely.  Even if they survive in a foxhole for a year or two, when they come out the market will be filled with new competitors just as vicious as the old ones.

But there are businesses positioning themselves for the markets of tomorrow.  Apple with its iPod, iTunes, iPhone is an example.  Google with its near monopoly on internet ad placement and management as well as search.  And companies that are moving toward new markets rather than remaining frozen in the old model and exacerbating weaknesses with cost cutting.  Like Domino's pizza.

GM will never again be a great car company.  So what's new?  That was clear in 1980 when Chairman Roger Smith said the company had a limited future in autos operating as it always had.  That doesn't mean GM couldn't again be a growing, healthy company if new management sent the company in search of new markets with growth opportunities.  Like Singer getting out of sewing machines to be a defense contractor in the 1980s.  By purchasing an old-fashioned mortgage bank, and an old fashioned investment bank/retail brokerage, Bank of America is not strengthening its position for future markets.  Instead, it is fighting the last war.  But any company can change its competitive position if it chooses to focus on, and invest in, new markets.  And those who do it NOW will be first into the new markets and able to change competitive position.  When markets shift, those who move to the new competitiveness first gain the advantage.  And their position is reinforced by competitors who dive for cover through cost cuts not tied to business repositioning.

Why is GM still on the DJIA?  They should have been removed years ago.  That's how the Dow intelligentsia keeps the average always going up – by taking off companies like Sears and replacing them with companies that are more closely linked to where markets are going (at the time, Home Depot).  If we swapped out GM for Google, and Kraft for Apple, the numbers on the DJIA would be considerably better than we see today.  And if you want to make money as an investor, you have to do the same thing.  You have to dump companies that are unwilling to break out of Lock-in to outdated business models and invest in companies who are heading full force into future markets.  In all markets there are good investments.  But you have to find the companies that plan for the future, not the past – obsess about competitors – are not afraid to Disrupt themselves and markets – and utilize White Space to test new products and services that can create growth no matter what the economy.