by Adam Hartung | Feb 22, 2007 | Uncategorized
Readers of this blog know I think all companies must create and maintain White Space. but some readers have told me that for big companies such spaces are just too hard to create and manage. So I was delighted to read about Wrigley‘s recent acquisition of A. Kurkonov (see full article here.)
Everyone knows Wrigley makes chewing gum. They’ve done so for years. But recently Wrigley has started forays into a number of new areas. They opened a new R&D center in Goose Island, IL to develop new products. They also bought fast growing Altoids mints (from Kraft no less) and quickly launched a chocolate covered Altoids. Both of these were small steps.
Wrigley recently spent $300million to buy the Russian chocolate company A. Kurkonov. This is a significant investment in a business where Wrigley needs to learn. Chocolate candy is a big step outside the old Wrigley Success Formula primarily which was focused on gum and other low priced items located near the register in the check-out line. Now they have a business that is operated outside the Success Formula, with new products and in markets where Wrigley management can watch and learn – outside the U.S. Wrigley can observe how the products are made and distributed, and how customer preferences vary and are changing, as well as how pricing and promotion play into the marketing mix for this market segment. Wrigley will be able to learn how to devleop both new strategies and tactics, and do so in a foreign market away from the meddling of management focused on the old Success Formula.
As Wrigley learns how to successfully compete in "chocolates" (however that market should be defined) the company can develop a method to migrate this old "chewing gum" company into a new Success Formula [which may or may not be closely tied to chocolates, who knows?]. Management can be attracted to what works rather than trying to force ideas that don’t. And through this migration the company can develop new tactics, new strategies and eventually a new identity – in sum a new Success Formula. And that is what White Space is all about.
by Adam Hartung | Oct 22, 2006 | Uncategorized
The Chicago Mercantile Exchange (the Merc) is acquiring the Chicago Board of Trade (BOT). If you’re not a commodities trader, you probably don’t really care. But for millions of people who buy commodities, having a functioning liquid market for commodities is critical. And the upcoming merger of the top two exchanges has raised many eyebrows in America’s midwest.
Most importantly, the Merc was built on electronic trading. The Board of Trade was built on pit trading. The cultural divide is enormous to those who built a fortune in one or the other, and to those who place millions of dollars on the line every day in trades. What will the future organization look like? One would hope it would be a brilliiant combination of human traders and electronic capability like what is being built by the New York Stock Exchange (NYSE) and their acquired partner Archipelago. From that merger we’re seeing an ever-developing, new, seemless 24-hour equity trading market.
But, the merger of these two stalwarts is not as likely to be so easy. As the Chicago Tribune quoted me, in this instance of two bitter rivals there is a likelihood that the entity which controls the resources and processes will emerge as the lone surviving company. The customers will be transitioned, and only one company will exist.
This is too bad. What the Tribune didn’t have space to discuss is what should happen. The two groups should create a White Space team dedicated to designing a merger which brings out the best of both companies. This team must be given resources to actually develop a unique solution, and it should have independence by reporting to the top people of both companies. This team should design a solution that utilizes the best of both company’s processes, driving the best in customer satisfaction while opening commodities to even more investors. A White Team approach to the merger would give the Merc’a investors, as well as all customers, the best solution.
Such a merger need not be a vicious battle about who is in charge. Although almost all do end up that way. Instead, everyone would benefit if the merger were viewed as a Disruption. One driven by market Challenges. And then seen as an opportunity to create a new solution, previously not available, that can expand the market for commodities investing by not only traders but ever more corporations and individual investors. By using a Phoenix Principle solution to the merger, including White Space, a better result could be obtained than from any one-sided approach.
We’ll have to see if the companies take an enlightened approach, or instead use "clout" to drive toward a fast, but single-sided solution.
by Adam Hartung | Oct 17, 2006 | Uncategorized
We’ve added Chris Rollyson to our Blog Roll. Chris is writing about how Outsourcing can be a tremendous tool helping businesses to create additional White Space. His insights and stories of how innovation is fostered and developed via Outsourcing casts the practice in an entirely different light than mere cost cutting. He recently posted a story about how Williams Company used outsourcing in a critical role for its turnaround. Readers should give it a look at The Global Human Capital Journal .
by Adam Hartung | Sep 7, 2006 | Uncategorized
Today Budweiser, that venerable beer producer, made a surprising announcement. Starting in February, 2007 they will lanch their own internet network. This was surprising, because Budweiser has spent the last few years in the most traditional sort of competition – spending on media commercials, going toe-to-toe with traditional brands, and doing lots of price discounting. Ugh! Profits had lagged and investors haven’t seen an increase in value since 2004.
But this announcement could be a sign of an important change. The project has all the earmarks of White Space. The company has allocated a significant budget – 10% of its huge ad budget – to give this the resources to succeed. They have partnered with outsiders for internet expertise, and have hired in two new people as producers. They are being public with the commitment, and are demonstrating that they have Disrupted their old approach to reaching customers (while also creating Challenges for traditional media companies.) Even though BUD has not looked like a company to watch, I now would give them very close attention. This could be a good company to add to your portfolio.
Simultaneously, one of America’s historically most innovative companies is going the opposite direction strategically. Intel is announcing it is cutting 10,500 jobs through 2007 in an effort to restructure for 2008. All in reaction to addressing a Challenger one tenth their size (AMD). Although Intel has long dominated the microprocessor marketplace, as this Challenger has shown innovation in its product offerings and marketing Intel is reacting in the least productive way, disturbing its existing Success Formula but not taking steps to create a new one which will address market Challenges.
Rather than reacting with more innovation, more White Space, to regain its leadership position in customer eyes Intel is cutting back and hoping it will put a few pennies toward the company’s earnings per share. They are "selling underperforming busineses" (rather than improve them), and are taking this action on the heels of a "streamlining" project that cut 1,400 jobs just 3 months ago. Now they are caught up in chasing a cost-reduction goal that is never going to be big enough to meet Wall Street’s expectation – and simultaneously offering no new competitive strategy. Who will care if EPS rises if the company isn’t able to regain it’s growth rate and position as market technology and innovation leader?
I was surprised by these two stories, reported on the same day. And you may be as well. It just goes to demonstrate that ANY business can recognize Challenges, Disrupt itself and create White Space to take the lead in its market. And simultaneously even the best thought of company can fall into Lock-in and create excuses for poor performance while retrenching to what it knows rather than seeking a brighter future.
by Adam Hartung | Jun 19, 2005 | Uncategorized
Wall Street Week on PBS featured an interview with Richard Florida author of The Flight of the Creative Class. Try to catch the episode if you can.
In this second book by Dr. Florida, he makes a great argument that growth comes from the efforts of those in society who are most creative. His arguments are compelling. In a nutshell, those companies (and economies) that help develop and then use the talents of our most creative people are most successful.
This may not seem insightful, until you think about how we actually have been treating creative people since 2000. Business R&D budgets actually declined in 2002 – for the first time in 15 years. And with those budget declines went many jobs for those leading our economic innovation engine. Businesses went even farther, though, by actually farming out much of their R&D to offshore companies in an effort to lower development costs. As a result, non-U.S. companies began gaining ground in the ability to innovate and create competitive advantage.
Defend and Extend behavior can be deadly. Using the need for profits as the justification, management can literally shoot the goose which laid the golden eggs. Lock-in to old business ideas leads managers to believe they don’t need innovation, just better execution. They prefer the cost reductions to the investment in innovation. Yet, the data would indicate otherwise. Execution quickly becomes meaningless (and not very profitable) in a highly competitive world — where a more innovative competitor can obsolete your superior execution in a heartbeat.
Despite what the politicians might say, businesspeople know its tough out there. Profits are harder and harder to come by. Every trip to China or India produces less return. What’s needed is a change in management thinking. Away from a focus on execution, and a return to recognizing the importance, and value, of innovation.
Internal innovation is as critical to business as oxygen is to human life. Businesses won’t competitively win in a dynamic world unless they ask for, develop, seek out, relish and promote innovation.
Businesses need those highly creative people in Marketing, Sales, Product Development, R&D – and all aspects of the company. Businesses need to hire, and listen to, those outside organizations (lawyers, ad agencies, consultants) filled with "outside the box thinkers". These outsiders have been proven to drive innovation – and innovation drives growth!
by Adam Hartung | Nov 18, 2004 | Uncategorized
Adam Hartung was quoted in the Chicago Tribune today regarding the announcement of the Sears and K-Mart merger. Here’s what Adam had to say:
Kmart Corp.’s cheeky proposal to
acquire Sears, Roebuck and Co. for $11 billion may be wowing Wall
Street, but it doesn’t do anything to fix the serious problems
afflicting two of the country’s largest retailers, retail and business
strategy experts say.
Kmart’s retail business is shrinking at an alarming double-digit
rate. Sears is only slightly better off, closing in on its fourth
straight year of sales declines. Neither company has articulated a
strategy for attracting shoppers in a retail world increasingly
dominated by discount juggernauts Wal-Mart Stores Inc. and Target Corp.
"If I put Kmart and Sears together, I’m putting together two broken
business models," said Adam Hartung, managing partner in Spark
Partners, a business strategy firm in Long Grove. "You put a bad heart
and a bad liver together, and you don’t get a healthy body."
You can go to the Chicago Trib site to read the entire article: "Will Bigger Be Better: Retail experts not sold on the wisdom of combining 2 ‘broken’ companies".
