by Adam Hartung | Jun 20, 2010 | Current Affairs, In the Rapids, Innovation, Web/Tech, Weblogs
Will YouTube be the USAToday or Wall Street Journal or New York Times of 2015 or 2020? According to Mediapost.com "YouTubes Secret Citizen Journalism Plot Exposed." Referring to a SFWeekly article by Eve Batey "YouTube Explains Top Secret 'News Experiment' to Local Media, But Doesn't Really" the reporting is that YouTube plans to hire groups of citizens in major cities, starting in San Francisco, to report news events via YouTube. Could this replace the local newspaper? Or maybe even the local evening news?
Americans are so used to freedom of speech that it's easy to forget what the concept launched in the USA. 200 years ago anybody who could access a printing press, of any size, could produce a newspaper. That as revolutionary. "Citizen journalism" was the norm, and there were literally thousands of newspapers. That situation remained very true well into the 1900s. Eventually acquisitions led to consolidation and a dramatic reduction in the number of newspapers.
The decline in the number of newspapers was aided by consumer journalism preferences shifting, in part, to radio and television. As radio and television journalism was born the limitation was "bandwidth" and therefore access. Thus, from the beginning there was government control over the number of stations. That scenario very different from the founding of newspapers, as there were limited channels from the beginning. But that didn't mean that the desire for video journalism was lower.
What will journalism be in 2020? We know that most major city newspapers are on the brink of failure, with bankruptcies (such as Tribune Corporation, owner of The Chicago Tribune and The Los Angeles Tkimes as well as others) not uncommon. As newspaper pages have shrunk, the internet has allowed the return of "citizen journalism" as bloggers and reporters have emerged able to tell a story, and with very low cost access to potential readers. Having internet access is possibly cheaper, and certainly easier, than operating a printing press in the era of Benjamin Franklin, or even a local newspaper of 1900. By numbers there is no doubt many more "citizen journalists" than "professional journalists" working at American newspapers today.
So why couldn't YouTube take advantage of a preference for video, and link together the armies of independent "journalists?"
I can't help but recall the television program Max Headroom from 20 years ago – where it was perceived that real-time information on practically all topics would be reported on millions of televisions everywhere – televisions which could not be turned off by law. Wasn't Max simply an avatar, running around what we could now consider the web, popping up on computer – rather than television – screens? Today I can create my own Max Headroom avatar to search the web for real-time content – mostly text. Why couldn't YouTube give me a tool to do the same thing with video?
Many people are bemoaning the decline of traditional journalism. But is this a bad thing? Given all the screaming about today's "media bias" it would seem that citizen journalism could become a great equalizer. If YouTube and Google can help give me the tools to search for what's interesting to me that would seem to be a very good thing. And if in the process they sell some ads so that the content can grow, that doesn't seem like a bad thing either.
In the movie Network, made some 30 years ago, the thesis was put forward that news would become entertainment – and less "news". With the growth of Fox News, MSNBC News and the number of broadcast minutes given to television news magazines like Nightline, one could reasonably claim that the movie was surprisingly foretelling. Today, getting up to the minute news is even hard on a channel like CNN. It's not at all unclear that providing a platform for citizen journalists, via YouTube and Google searches of the web, is a bad thing at all.
Are you prepared? Are you learning how to use these new tools? Are you prepared to change your learning behavior? Your advertising programs? Could you be a citizen journalist? It certainly looks clearer every year that journalism in 2020 will look substantially different than it does in 2010.
by Adam Hartung | Jun 17, 2010 | Current Affairs, Defend & Extend, In the Swamp, In the Whirlpool, Leadership, Web/Tech
"Google Bans Use of Microsoft Company-Wide" is the headline on HuffingtonPost.com. The reason given is that Microsoft had too many security issues. This could be easily dismissed as a competitive trick. Except for a couple of facts:
- Microsoft does have a number of security issues. It's not just Google that's worried about the problems encountered when relying on Microsoft products. While Microsoft is the gorilla, it does have problems.
- Today their are very reasonable alternatives. Fifteen years ago Scott McNeely at Sun Microsystems tried to enforce the same discipline as Google. Only there ware no good alternatives to Windows and Office. That has now changed. Significantly.
As Microsoft has lost share in all its products, it is worth noting that a leading-edge tech company is able to enforce, successfully, a ban on their products. Aided by the fact that they can offer alternatives which are easy to use and better meet many user requirements today. This is not good news for investors, employees, suppliers and customers of Microsoft. A serious shift to alternative solutions has emerged, and Microsoft has given no indication it is participating in the shift.
The impact is amplified by SeekingAlpha.com's article "Apple's Growing Corporate Market Share." Like many businesses in a leading market share position, Microsoft has simply accepted that customers will keep buying their products. But their near-monopoly is increasingly threatened as organizations realize there are very real alternatives. Not just from Google, but from Apple as well as others. As companies recognize that PCs are failing faster, and as managers are displeased by Microsoft requirements that they upgrade software with new purchases, corporate customers are looking for alternatives. This can be easily dismissed as the behavior of a few "odd-balls." But increasingly such behavior is becoming mainstream. While Microsoft is busy forcing customers to upgrade, many companies are looking for greater stability and satisfaction with their information technology suppliers – including Microsoft replacements.
While Microsoft keeps struggling to maintain its customers, sales and share in its old business, Apple keeps moving forward. This week SeekingAlpha.com also reports "Apple Hits 10,000 iPad Apps, Doubling in the Past Six Weeks." Again, this might be easy to ignore for Microsoft (or status quo) fans. But as the app library keeps building Apple keeps building a bigger advantage over everyone – including Microsoft. What do we think the future holds – a world full of laptops (as we know it today) or a lot more tablets and similar smart devices? Increasingly, Microsoft is Defending its past position in the face of a tsunami of innovation for new solutions gaining adoption, and growing, very, very rapidly.
When you're the market leader it is easy to ignore competitors. To dismiss them as "fringe" with "small share" and "not important." But that is very risky. Markets can shift really fast. New competitors offer new solutions, and they allow customers to do new things. They give customers new choices, and often customers who are less than thrilled with current solutions will switch. As competitors make it easy to do new things, the customers switch even faster. Before long the unexpected can happen, and leadership can switch very quickly. Like Apple's market share in mobile devices exceeding that of Microsoft's – or Apple's cash hoard exceeding the market value of Dell (a supply chain partner of Microsoft).
Microsoft is offering a real-time lesson to business leaders. Planning your future based upon your past strengths is dangerous. Smart competitors can offer alternatives faster than you think – and create market shifts that leave you in the lurch quickly. It's a high-risk strategy to think you can succeed by Defending you past position when alternatives are on the horizon.
PS – ChannelInsider.com today published "Spotlight: 10 Things Tablet Computer Makers Must Do To Take On iPad." Item 5 is "Windows Won't Make Much Sense" Item 4 is "Chrome O/S Does Make Sense" Item 3 is "Give Android O/S Consideration". For Microsoft this is a set of recommendations that cannot sit well. The market for laptops is predicted to peak and begin declining as users shift to smaller, easier products like tablets. The market pundits, as they recommend new products, are moving away from Microsoft products. How long can Microsoft continue its focus on Defending Windows and Office?
by Adam Hartung | Jun 15, 2010 | Current Affairs, In the Swamp, Leadership, Web/Tech
There's always controversy around a politician. Some like the person, some hate the person. And that is true for Mayor Richard M. Daley in Chicago. Crain's Chicago Business decided to do an analysis of the mayor's last 20 years in office in "Mayor Daley Runs Up Big Debts Building His Global City; What About the Rest of Chicago?"
(As I write this, please keep in mind I live in Chicagoland and have done so for 20 consecutive years. This is my second time in Chicago, having first in 1982 – almost 30 years ago. It is my home, and I obviously like the area. But that doesn't mean (a) some criticisms and concerns aren't warranted and (b) that other cities and/or states aren't in equal, or worse, condition and should learn something from a look at Chicago.)
The article has a host of ways to look at. evaluate, the mayor and the city. Most of them compare one or the other to the Chicago suburbs, or to other big cities like New York, or to the situation in Chicago when he took office. In other words, relative measures. As a result, in many areas, it is possible to say Chicago is doing better than it was, or better than some comparable city. And that's the problem with relative measures – you can always say things are somewhat different. But, does it mean the city is in "good" shape, or that it is going to be prospering in 2020 – or 2050?
However, what's important isn't how a governmental leader performs in comparison to others, but absolutely. I don't care of I'm less starving than another person, I care that I'm not starving. Nor does it matter how well the leader performs on a host (15 or 20 or 30) of measures, but rather how they perform on the critical, absolute measures. I don't care how well I'm dressed, or coiffed, or energized if I'm starving.
It's also important we avoid popularity polls as a way of determining "success." The article points out that Mayor Daley is a favorite of business leaders. According to the article largely because he thinks a lot like them, talks a lot like them and enjoys associating with them. But just because he shares their personal Success Formulas, and he's a great "Happy Harry," to be around, and because he might be easier to talk to than his predecessors, or other city mayors, does not make Mayor Daley great, or the city great. It just makes him popular. Do you remember any popular students from your high school or college that simply didn't accomplish much? They were probably even very popular with the faculty in many cases. But did they make the school's reputation grow? Or help improve the test scores of students rise, or improve the success of the athletic department? Popularity is just that, but it doesn't create a long-term viable economic strategy.
That the mayor has brought a few corporate headquarters to Chicago, such as Boeing and Miller/Coors, is no doubt. And retained United Airlines. This shows the mayor is good at talking to CEOs. And it has some "celebrity" and "symbolic" benefit. Unfortunately, headquarters locations do not produce many jobs.
In the case of Chicago and mayor Daley, there are really 2 critical variables. And they aren't how well he removes snow, or how many flights go through O'Hare airport. Rather, it's debt and jobs.
Debt can be used to help growth, otherwise it's bad. If you can earn 7%, and borrow at 5%, then debt helps you grow. But if you borrow at 5% and invest in something that has no growth, well then you're just losing money faster.
Which gets us to jobs. Debt incurred by a municipality should have the impact of creating growth. It should create jobs. But, looking at Crain's "Chicago Economic Indicators" we see that between 1989, Daley's first year in the job, and 2009 jobs shrunk by 150,000 (from 1.33million to 1.18million,) or negative 11.25%. So the debt did not help Chicago grow – the only viable reason for incurring debt. In the 20 years debt (including long-term capital leases), adjusted for inflation, grew 263%. Fully 74% more than the property tax base. Or, when compared to jobs, the inflation adjusted debt per job grew by 85% (almost doubled!) in the last 20 years! What we can see is that those who are working now have one heck of a lot of debt to repay for the expenditures made by "city hall" the last 20 years! Adjusted for inflation, twice what they had to pay back when I came to Chicago!
And this is AFTER the mayor sold off the city's parking meters and other sources of income! He took one-time payments in order to keep the debt down, but gave up future income that used to be available to repay debt. Throwing even more of the debt repayment load onto each job than existed when he took office. And this hasn't factored in unfunded pension liabilities and anticipated escalating costs for infrastructure, education, public transit, etc. which will require some form of tax – or economic growth.
There is no doubt that even though he has detractors, Mayor Daley is a popular mayor. From what I've heard, he's a charismatic individual. He is obviously smart, and has great leadership skills. And masterful political skills. He also seems, from watching him on the news, to be a genuinely caring person who wants the best for all people in Chicago – and wants Chicago to be a great city for the next century. But much of what's happened during his tenure has garnered him votes, while leaving Chicago with more debt and fewer jobs to pay for that debt.
If you live in Chicago, or any other major city, it is worth spending time not getting lost in the beauty. Thirty years ago Detroit was full of glee about its investments in the Renaissance Center and other civic programs. Didn't do any good when they couldn't keep jobs in the city – or region. Pretty buildings surrounded by blight has been the result. Civic leaders need to be paying attention to the debt per job – and realize that without growth – more jobs – its tough for any city to remain "a great place to live and work."
So what should mayor Daley do? I'm offering up one idea, one article, from MedCityNews.com "I-Q Corridor is Stuff of Dreamers." This article discusses how some well placed funds, and not all that much given the overall budgets of the states and cities involved, could make a huge difference. The notion is to invest in creating a "health care corridor" from Minneapolis, MN through Madison, WI and Milwaukee, WI into Chicago, IL. This would bring together the resources of s
everal of the top engineering and health care schools in the USA, with several of the premier facilities (nearby Minneapolis area Mayo Clinic, Marshfield Clinic in WI, and Rehabilitation Institute of Chicago just to name 3 of many). This kind of investing is the kind of thing that could create a LOT of jobs in a growing industry. And probably for less than the cost of the proposed O'Hare expansion.
For 2 years I listened to the mayor trumpet the need for Chicago to seek being an Olympic venue. He roused up many corporate leaders to support him. And he spent millions of dollars. Even though it was never clear that the Olympics could even break even. And far less clear it would create even one job post-Olympics. So why not view the I-Q Corridor as a White Space project for Chicago? Why not use it to Disrupt old Lock-ins about the "rust belt" of manufacturing, and figure out how to generate high job growth? It is just one idea, but I can get a lot more excited about spending money on creating some sort of "corridor of job growth" than putting on the Olympics.
(PS – I recently met the City of Chicago CIO at the CIOMagazine Perspectives event in Chicago. He led a great panel with leading industry CIOs from the city. It was a great conference, well attended, with a number of thoughtful people. The event demonstrated what a great city Chicago is for business. You can read a flattering review I've my presentation written by Steven Stern at SternData.com "Innovate – Don't get Locked-In." I'll be updating that presentation which you can register to attend at the CIO 100 Conference August 22-24 near Los Angeles, CA.)
by Adam Hartung | Jun 14, 2010 | Defend & Extend, Disruptions, Leadership, Web/Tech
I was struck by a recent Baseline.com article that described the top 6 reasons IT projects fail in "What Dooms IT Projects." Primarily because the reasons have nothing to do inherently with information technology, and thus are identical to why all projects fail – including new product launches, new market expansions, new manufacturing technology adoption, new financing forms and any other new projects companies start. AND because these are the same reasons I've been reading for 20 years!
- Insufficient user (or customer) involvement. Inevitably someone says that if the team had just spent more time talking to users/customers everything would have worked out OK. As if for some reason the team had no interest in the customers, and were so arrogant as to simply not care! We all know that lots of time is spent capturing user/customer input. The problem is that users/customers don't really know what they want! Therefore, their recommendations are insufficient to describe what it would take to really make them happy with any change.
- Unrealistic Timetable. Why do people say they'll do a project in 3 months that everyone knows will take 9? Simply, the team has no choice. In today's world we have to achieve results quickly. Long projects are never completed, because conditions keep changing (more on this in #4 below). So the team is forced into very rapid deadlines. Only, the deliverables are usually kept the same, making it impossible for the project to complete on time!
- Poor Requirements. As if there was no target? There are plenty of requirements, it's just that (back to #1 above) the customer doesn't really know what they want, so the requirements which look great at the beginning look insufficient (poor) after people are a lot more educated from the completed work! The requirements look great until you get into the effort and start seeing how much more could be done, and how much of the value lies in going the next step (often in multiple places.)
- Scope Creep. During the project users/customers see early examples or interim deliverables. Once that happens they say "Oh, now I have a LOT better idea what I really want. So can't you just make this small change? It will make all the difference imaginable in how I'll use this – or even whether I'll use this." Given this interim input, there's almost no way to NOT add on to the project.
- Lack Executive Support. Of course no executive is going to say "I am four-square behind this project" once user/customer feedback starts coming back less than enthusiastic, timetables start slipping, the deliverable starts looking a lot bigger (and the work a lot more expensive) and finger-pointing has started about "why didn't we figure this all out before we started!" Even when the entire management team yells "go" at the beginning, once a project is deemed problematic support evaporates faster than ethyl alcohol rubbed on hot stainless steel!
- Poor Testing. Sure, blame the testers. Given how many variables have shifted and turned since the project started, who remembers, or knows, what to test any longer? Exactly what performance requirements will be the triggers that determine acceptability? Which variables are most important? And, if the project is now struggling with changed requirements, the timetable is blown, scope has been redefined more than once, users/customers have started griping about delays and the executives are saying "will this nightmare project ever end" exactly what tester is going to stand in front of the train and say "hey, let's stop this thing"?
Bad projects are expensive. According to Baseline.com, just in American IT projects $63B is lost every year to failed IT projects. About 25% of the time – really, 1 in 4 times – projects are considered complete failures. Less than 1/3 of the time are projects considered successful. Yet, there is nothing new in this list. It's been the same list for at least 20 years! Even though "project management" has now become an academic discipline – results are not improving.
The approach to project management since the 1960s has been the same. Write down requirements, use some sort of "scientific management" effort – some kind of time/motion study – to estimate the time to complete, freeze the project, get agreement on project outcomes and funding, then "execute." And project management has been all about how to improve this process by adding more, and more, and more, and more steps. There are now checklists that are book after book of things to do in order to "nail down" each step. And there are hundreds of articles written about the "discipline" of keeping to the plan, not changing things, and keeping "everyone on board to the original project" until it is complete.
But all of this simply adds up to do more of what we've always done, try to do it better, via automation try to do it faster and consider using consultants or offshore resources to do all of this extra work cheaper. There's been no change to how we do project management, no change to the underlying premise. Even though results are no better now – in fact they may well be worse – than 40 years ago!
So why don't we change the approach?
The problem is that shifts happen. Customer needs change every day, based upon what happens not only in their work but in what their customers want and in what competitors do. As the world shifts, requirements change. Customers that don't really know what they want, because they only know what they've done, are asked to do the impossible to define their requirements – and then asked to do the even more impossible task of not wanting more as things shift. As demands on customers change, and as competitors change the environment, shifts demand changes in expectations. And testing is all about "does the hurdler jump the bar" without any consideration, by design, as to whether he finishes the race (much less how fast he finishes.) And the incentives are for judges to lower the bar, so the darn race can just end.
The old approach was designed for a nice, slow-paced, static world. Where everything is known, and that's impossible with market needs. It can work if you're trying to build a bridge maybe, but when trying to design some solution for a complex system (like the modern market, or IT community, or logistics design, etc.) that has infinite moving parts? And where the speed with which parts change can be amazingly fast? Let's get real, traditional project management simply won't work in today's complex IT, marketing, finance, HR, operations, production, logistics, manufacturing, sales world!
So, instead, try a new approach. We've used this for 10 years with all kinds of projects, and it works a whole lot better. Undertake your project realizing that if it aligns with future needs it will add value – and that is what really matters.
- Don't ask users what they want. Don't ask them for requirements. They don't know.
- Develop your scenario of what would be the PERFECT, ideal solution in 2 or 5 years. Really. Not just an improvement over today, what would be perfect! Even if you have no idea how you would ever do it. Write that down. Then, say what those requirements are. Design to those specs – which are probably 10 to 100 times beyond the current state. Don't settle for some fractional design. Don't start if you can't deliver what the market will want in the future when customers aren't bridled by what they don't know today. Build for a future scenario that is way better than today – not just some initial requirements your Locked-in customer thought about.
- If you don't know how to design it, study your competitors – including fringe competitors. Look at everyone imaginable that is solving a similar problem and see how those you may never before considered are doing it. See how people in China, Bangladesh, Hyderabad, San Paulo, Moscow, Taipei or Bangkok are doing it. See how some 20 year old college kid and her buddies are trying to do it. Look at how the upcoming competitor with .1% market share is doing it. Don't just go for the well known solution approach. Don't settle for "best practice" which is a 6 year old innovation that has little competitive value left. Don't be afraid to do what can provide huge value improvement.
- Write a long story, with detail, about how completing this project is going to really screw with your existing competitors. Describe the huge pain they will feel. How they will be in shock and awe of your performance once you are able to blow them away with this new capability. Destroying the traditional competition is a great motivator. Make them into the villain – after all, they are! (By the way, if you don't think the project will have a positive competitive impact – why are you doing it?)
- Focus really, really, really hard on defining important early valuable deliverables. Fast wins. Don't just figure out what the end state will look like, it's critical to know what you can deliver successfully in 90 or 120 days! We can't wait forever for results, so throw out complex ROI analysis. Instead ask the team to simply say how quickly they can start producing, rather than spending, money – and how quickly their project will pay back the investment. Force them to prove that there are measurable wins in the first year, and payback in less than 3 — on something!! Don't worry about "scale." Just the opposite, worry about how to demonstrate value quickly! Keep all timelines under a year, most under 4 months.
- Tell everyone you are going to do something new. You are prepared to be the innovator. You can, and will, Disrupt the things you've done in order to give spectacular results. You don't just want a 5% improvement, you want to win. It's not about how much better you were than before – it's about being competitively better than everyone else. You simply want to win in the marketplace – and you'll do new things to accomplish this. You care about results more than process.
- Give the team permission to do whatever they have to do to succeed. Don't give them a list of "rules" within which the project has to operate. Give them the permission to really focus on success – that they can do what's needed to accomplish their goal. Don't set up barriers. Instead, tell them there are no barriers and you don't want them to talk about there being any barriers.
- Make sure the team does not report to the Status Quo management. Structure the project so that the team reports to someone who can focus on project success first, rather than abiding by old rules, or fears cannibalization, or has a vested interest in the success of the Status Quo.
- Commit enough resources so the project can succeed. Don't give it piecemeal funding that will require the team constantly battle to keep the project moving forward. Don't expect success from part-time resources borrowed from other full-time work, or from a team assembled only to do this project then return to their old jobs. Everyone has to be committed to the project, and its success, and the money should be there if they reach their goals (regardless of the route they took.)
This may not sound like a typical project management approach. But hey, given how well the old approach has worked out don't you think it's time to give something new a chance? Would medicine have ever advanced if we just kept on blood-letting? When will we try something new if not now?
PS – Don't miss my newest column in CIOMagazine. "IT Strategy, Use Scenario Planning to Get Beyond Legacy Systems." As IT has become one of our highest costs, it's more important than ever we change how we do IT planning and project management.
by Adam Hartung | Jun 9, 2010 | Current Affairs, Defend & Extend, In the Swamp, Innovation, Leadership, Lock-in, Web/Tech
I so enjoyed the feedback from my article on Chicago and Illinois politicians I decided to take on another sacred cow – so let's talk about education.
According to Inside Higher Education's article "In Search of Innovators" there is a distinct lack of innovation in higher education. They cite a number of studies that show colleges are much better at enrolling students than graduating them. Especially private schools and junior colleges. And, imagine this, professors and administrators are more interested in continuing their positions and jobs than what students learn ("learning outcomes" in the industry vernacular.) Seems that keeping things from changing is the highest interest for educators, rather than actually teaching anything students need to learn to compete today.
But, we all know this. We've all seen colleges that have courses taught by only one or two professors, who only teach at odd hours, only allow a few students, refuse to keep office hours, or refuse to post previous exams. We're all familiar with schools that limit the hours administration offices are open, and are intractable about the requirements for graduation – even if they were set 20 years ago.
Quite simply, Lock-in drives most schools. Programs like tenure which make it impossible to fire anyone help maintain Lock-in. And professors would rather argue about what they don't want to do than try anything new and different. For all of us who went to college, and especially for those of us with students in college, it's clear that students are a route to their money (or their parent's money) – sort of little money pumps – intended to allow the college to not change. Many colleges even brag about how little they've changed over the last 20, 50 or even 100 years! In a world where change is every present, and dealing with change is now one of the most important skills a young person needs!
According to The Chronicle of Higher Education "For Innovation to Occur, Colleges Need a Big Push, Scholars Say." This journal cites program after program where a college tried to start up something new, only to have the program fail. But of course, because there is no White Space in colleges. White Space is where you give Permission to break all Lock-ins and do whatever it takes to be successful – and then provide the resources for success to occur. This does NOT exist in a college, where none of the Lock-ins can be violated. A professor can't even decide to change from teaching in class to using video instruction or on-line training because it's not allowed. So how can something new really be tried?
Where we have seen growth in higher education has been in for-profit schools like Devry and Phoenix that have rapidly challenged tradition and moved into new education models. Traditional schools decry these institutions, claiming the quality isn't acceptable. Of course, the "quality" argument is what printers used to claim Xerox machines would never succeed. It's what DEC said about AutoCad – before DEC went out of business. It's what Kodak executives said would make digital photography a tiny market compared to film. It's what executives at Sony said would keep music customers from buying MP3 devices/music before Apple launched the iPod. Quality is the #1 excuse used by Locked-in organizations to justify why they shouldn't change.
Forty years ago it was pretty clear that if you could afford college and grad school, it was worth it. But as costs/prices have skyrocketed, and the relevancy of education in many institutions has declined, that argument has lost a lot of credibility. Increasingly students are saying they want their education to be meaningful, practical and applicable. The market has shifted. They want to study on their schedules, without giving up their incomes or struggling with horrible commutes. And increasingly, these customers are moving to the suppliers that meet their needs – rather than trying to Defend & Extend old practices.
It's ironic that in the one place where we should most be open to new models we have almost no innovation. But it's impossible without a change in the structures and processes – and that requires a willingness to create a lot of White Space. For most colleges, I'm not optimistic.
by Adam Hartung | Jun 6, 2010 | Current Affairs, Defend & Extend, Innovation, Leadership, Lock-in, Openness, Web/Tech
According to Crain's Chicago Business, "Walgreen's Same Store Sales Nearly Flat." Walgreen's has been Locked-in for 3 decades. Build more stores. Simple. Just like WalMart did for many years. Demand seemed insatiable, until there was a store on almost every corner. Build stores, turn the product fast and keep people coming in for prescriptions or something on sale. Their Success Formula worked, and it helped them grow and grow.
But then about 3 years ago growth slowed. A lot. Raising capital got a lot harder to build these stores, and the apparent need for more stores was a lot less obvious. But Walgreen's didn't attack it's Lock-ins to the old Success Formula. Management kept defending it, and trying to extend by acquiring other chains they could convert into Walgreen's. But as we've seen in same-store results, Walgreen's has stalled. And we know that less than 7% of stalled companies ever consistently grow more than 2% ever again. Walgreen's just refuses to realize that health care programs are forcing more people to drugs over the web, and that retailing is fast moving to on-line sales for both convenience and price. So the Success Formula keeps struggling a bit more every year, with hope that things will somehow return to the "good old days."
A much better management team is in place at Netflix. Netflix has clobbered Blockbuster with their on-line model for movie rentals. You'd expect them to keep pushing hard for on-line rentals, in order to Defend & Extend the Success Formula – just like Walgreen's management has done. In spite of the fact that everyone knows DVD rental growth is threatened by more people simply downloading movies. Thus, I was delighted to see Netflix publish this chart:
Source: BusinessInsider.com
Netflix has admitted that its "core" business will peak in 2013! How great. And what's even better is that they are rapidly changing their model by investing heavily into streaming downloads. Where most management would say "we have to stop that transition, it will cannibalize our very profitable existing revenues" Netflix is planning for the change – and preparing to help the market move in that direction!
Only by allowing a streaming download White Space team to be formed 3 years ago is Netflix able to make this transition. It attacked its Lock-in to the traditional – and wildly successful model – in order to allow a team to have the permission and resources to figure out how to move into the new business profitably. That means Netflix has a really decent chance of keeping the company growing as the market shifts! Great news for investors, suppliers, employees and customers!
You don't want to be like Walgreen's management. They may have a chart showing the maximum number of stores needed in the USA – but they won't publish it. Because they have no idea how they'll migrate away from the old Success Formula. They have no Disruptions or White Space. They are fighting market transitions, and slowly seeing results falter. But the growth stall is a big sign that Walgreen's has a lot of heavy problems ahead.
You do want to be like Netflix. Be honest about where markets are headed. Quit trying to protect an old Success Formula with arguments like cannibalization. Instead, attack the old Success Formula with Disruptions and launch White Space teams designed to figure out how you can grow with the market shift – even if price points are destined to deteriorate. Long-term its the only way to survive – and thrive.
Don't forget, I will be the keynote speaker for the breakfast CIO Perspectives meeting hosted by CIO Magazine this Wednesday, June 10. You can hear more about how to be a market leader using The Phoenix Principle at the Intercontinental Hotel Chicago – please register and I hope to see you there!
by Adam Hartung | May 26, 2010 | Defend & Extend, In the Swamp, Leadership, Lock-in, Web/Tech
In theory, Sustaining Innovations that help a company Defend & Extend its products are supposed to be cheap. The breakthrough is done, and the investments on variations, derivatives and enhancements are "engineering" as opposed to "science" so the development is supposedly more easily planned, the costs better understood and the returns more predictable. That's the theory, anyway, and as a result most managers constantly defend their decision to keep investing more in Defending & Extending past products rather than investing in new things which would develop new markets and new revenue streams.
But, like a lot of business myths, there's really no proof for this theory. It just sounds good. It seems "to make sense", and the big issue is that "it simply has to be less risky to spend on what you know rather than what you don't know." And "after all, this is investing in our own market and what could have a higher rate of return than defending our mother ship?" I'm sure everyone has heard these kind of comments when it comes time to allocate resources. Management supports doing more of what's been done, reinforcing Defend & Extend behavior. It just HAS to make sense to do more of what we know rather than invest in something new that we don't know as well – right?
But look at this chart from Business Insider:
Microsoft has spent billions of dollars in R&D Defending its desktop PC near-monopoly with enhancements to Office (Office 2007 and now Office 2010) and the operating System (Vista and System 7). It has spent heavily on other things as well, but in the end its entertainment division and mobile O/S products as well as others have not successfully grown revenues. As a result, Microsoft's value has not risen and Apple is about to eclipse Microsoft's value despite being a smaller company (see yesterday's blog for a more thorough review of valuation issues).
Now we can see that all this spending on R&D to Defend & Extend is in no way cheap. In dollars, Microsoft spent 3.5 times as much as Google and 8 times as much as Apple in 2009 – companies which as a result of their spending generated considerably more growth than Microsoft. Microsoft even spent more dollars, and more money as a percent of revenue, than IBM and Cisco (companies that rely heavily on hardware as well as software sales)! By any measure, Microsoft's efforts to Defend & Extend its "base," or its "core" has come at a very, very high price – in dollars or as a percent of revenue.
Consider that a good measure of R&D should be its ability to generate incremental revenue. Using that yardstick, Microsoft is a disaster, while Apple is a star.
Far too many companies Lock-in R&D and New Product Development to the existing business. The decision-making systems are geared to invest more in what is known. New investments are tagged with "risk adjustments" and "cannibalization charges" and a host of other costs to make them look less positive than doing more of what has historically been done. Lock-in to the Success Formula means that the financial review system, along with the technology assessments, are designed to give a major benefit to doing more of the same, while dramatically penalizing anything new!
In almost all companiess decision-making systems are designed to reinforce the Success Formula, not give an "independent" answer based upon markets. The processes are designed to do more, not do something new. And in the case of Microsoft, we can see how that has led to huge investments in simply defending the PC business while the technology marketplace is now rapidly shifting to new platforms – like mobile devices (smartphones and tablets), cloud-based applications and data access, and even gaming consoles. Competitors are developing a huge advantage by investing R&D and New Product Development dollars in new markets which provide greater growth opportunities – and higher rates of return over any time period other than the very short term.
Even if you're not in the computer/tech business, you don't want to end up like Microsoft. You don't want to over-invest in yesterday's solution trying to Defend it in the face of market shifts. That did not work out well for Polaroid, Kodak or Xerox which lost their luster as customers switched to new solutions and new competitors. Be sure to look not just at how much you spend, but that your spending is linked to markets and their growth, not simply doing more of what you already know!
by Adam Hartung | May 25, 2010 | Current Affairs, Defend & Extend, In the Swamp, Innovation, Leadership, Lock-in, Web/Tech
The leadership of Microsoft's entertainment division are leaving, as reported at TechFlash.com "Bach, Allard leaving Microsoft in Big Shift for Consumer Businesses." Whether by their own choice or by request, the issue is simply that Microsoft has not driven the XBox to a dominant position versus the Sony Playstation or the Ninendo Wii. It is competitive, but not a big winner. The entertainment division has only recently moved beyond break-even, after years of losing billions of dollars. In the high-growth gaming business, Microsoft has simply not performed, despite its vast resources. And mobile devices developed in this division have lost over half their market share in under 2 years to Apple and Google.
Some of the weakness may have been that the leaders were long-term Microsoft veterans, comfortable to Mr. Ballmer and other leaders, rather than executives committed to their markets. Messrs. Bach and Allard were not they type of leaders to challenge the Microsoft Success Formula, instead willing to accept mediocre results rather than violate Microsoft Lock-ins that would have jeopardized their careers. Microsoft was willing to lose money, and not be a big winner, as long as the division leadership didn't challenge Lock-ins or the company focus on desktop computing products.
I'm not optimistic now that the division is reporting directly to CEO Steve Ballmer. He had an enormous role in the company decision to commit vast resources to Defending the old Success Formula by massing hundreds of billions of dollars behind development and rollout of Office 2007, now office 2010, Vista and now System 7. Yet, these projects have done nothing to grow Microsoft; instead only helping the company hold onto old customers. Worse, Mr. Ballmer himself recently informed the world in his CEO Summit (as reported in Computerworld "Microsoft's Ballmer admits 'Window's Vista was just not executed well") that he's not a good leader of product development – costing the company thousands of man-years in wasted development when admittedly mismanaging Vista!
Chart source Business Insider
Now, largely due to the ongoing Defend & Extend management practices of Mr. Ballmer, Microsoft and Apple's valuations are in a dead heat. Growth at Microsoft is poor, while Apple with its multiple new products is growing much faster – causing Apple's value to catch up to what has historically been the world's largest software company.
As I commented on the recent interview for bnet.com (available as a podcast) Microsoft's Defend & Extend management practices are deeply rooted in the industrial economy. But they are insufficient for success in today's rapidly shifting marketplace. I discussed this in more depth for my keynote address at the Western Michigan Innovation & Energy Summit last week, and a second article was published in the local newspaper on Saturday "Customer is Always Right? Columnist says not for Innovative Businesses." Specifically, Microsoft's total commitment to maintaining old operating system and Office customers has created an inability to re-focus resources on high growth markets like gaming and mobile devices.
Although Microsoft has solutions – including tablet technology – it's management is Locked-in to Defending what it always did and not committing to new growth markets. Anyone who thinks Microsoft will be the major player in cloud computing, just because it has demonstrated some new products, must look closely at how poorly the company has developed these other growth markets. Technology and products are not enough when management is Locked in to protecting past markets. Microsoft is far behind Google, and has practically no catch of being a major player with so much resource dedicated to Office 2010 and System 7.
Thus investors as well as customers and employees are not doing so well at Microsoft. In the rapidly shifting technology and gaming markets, this inability to commit to new markets is deadly. For Microsoft, replacing the heads of the entertainment division is most likely analogous to rearranging the deck chairs on ocean liner Titanic. The pending outcome is rapidly becoming inevitable. Time to look for lifeboats!
by Adam Hartung | May 19, 2010 | Current Affairs, Defend & Extend, In the Swamp, In the Whirlpool, Leadership, Web/Tech, Weblogs
Do you lament "the way things used to be?" I remember my parents using that phrase. Now I often hear my peers. And it really worries me. Success requires constant growth, and when I hear business leaders talking about "the way things used to be" I fear they are unwilling to advance with market shifts.
For 5 years newspaper publishers have been lamenting the good old days, when advertisers had little choice but to pay high rates for display or classified ads. Newspaper publishers complain that on-line ads are too inexpensive, and thus unable to cover the costs of "legitimate" journalism. While they've watched revenues decline, almost none have done anything to effectively develop robust on-line businesses that can offer quality journalism for the future. Instead, most are cutting costs, reducing output and using bankruptcy protection to stay alive (such as Tribune Corporation.) Even as more and more readers shift toward the digital environment.
Source: Business Insider 5/18/10
While most of the "major" newspapers (including Tribune owned LA Times) have been trying to preserve their print business (Defend & Extend it) HuffingtonPost.com has gone out and built a following. There's little doubt that with the last 3 years trajectory, HuffingtonPost will soon be the largest site. And reports are that HuffingtonPost.com is profitable.
In 2006 the CFO at LATimes told me he couldn't divert more resources to his web department. He felt it would be jeopardize to the print business. "After all," he said "you don't think that the future of news will be bloggers do you?" Clearly, he was unprepared for the kind of model Arianna Huffington was building – and the kind of readership HuffingtonPost.com could create.
On Tuesday I presented the keynote address at the Innovation and Energy Summit in Grand Rapids, MI – and as reported in West Michigan Business "Energy & Innovation Summit Speakers Urge Business Leaders to Seek New Businesses, Not Protect Old Ones." Defend & Extend management always "feels" right. It seems like the smart thing to try and preserve the old Success Formula, usually by cutting costs and increasing focus on primary revenue sources. But in reality, this further blinds the organization to market shifts and makes it more vulnerable to disaster. While NewsCorp and others are busy trying to think like newspapers, emerging news market competitors are developing entirely different models that attract customers – and make a profit.
That's why it is so important to use future scenarios to drive planning (not old products and customers) while passionately studying competitors. Talking to advertisers gave these publishers no insight as to how to compete, however had they spent more time watching HuffingtonPost.com, and other on-line sites, they might well have used Disruptions to change their investment models – pushing more resources to the web business. And had they set up dedicated White Space teams not constrained by old Lock-ins to traditional revenue models and goals of "avoiding advertiser cannibalization" they might very well have evolved to a more effective Success Formula necessary for competing on the internet into 2020.
by Adam Hartung | May 17, 2010 | Defend & Extend, Disruptions, In the Rapids, Innovation, Leadership, Openness, Web/Tech
I get the most heat when I talk about spending less time listening customers. But I'm not joking. To grow revenues and profits you have to go far beyond asking your customers – who are more likely to hold you back from growth than accelerate it.
BusinessInsider.com makes this point loudly in an Henry Blodgett article "Ignore the Scream's — Facebook's Aggressive Approach is Why It Will Soon Become the Most Popular Site in the World." Given how many people use Facebook, it's hard to remember that the site is only 6 years old. What we've also mostly forgotten is that Facebook wasn't even first. It followed the popular, and well financed after acquisition by News Corp, MySpace.com. Lots of companies got into social networking. But now the marketplace is dominated by Facebook – which will soon be the web's most popular site (as it closes in on Google.)
Facebook did not win by asking users/customers what they wanted. To the contrary, Facebook's leaders took the approach of offering what they perceived would be steps forward – and then letting the market react. Frequently a VERY loud contingent would be VERY upset. Screaming loudly they hated the change. But with each advancement, Facebook grew users and the site's success. Facebook didn't ask users what they wanted, nor did they ask users for permission to do new things. Facebook went into the market, and using its scenarios about the future Facebook's leaders drove toward what they expected to be a more popular site. They did it, and learned from their experience.
Too many businesses spend way too much time trying to make small advances, and miss the big shifts. Microsoft is a great example. As it launches Office 2010, Microsoft isn't trying to bring in new users to grow its base – like Facebook is doing. Instead it is trying to preserve its installed base. Nonetheless, some "loss" is a given. You can't preserve forever. If you don't bring in new customers, you can't grow because you have to replace lost ones and find incremental new ones. But what do we see in Microsoft's offerings (such as Office 2010 and System 7) that is designed to bring in new users?
Meanwhile, Google is offering more powerful and cheaper Cloud-based solutions, as Apple and Google grow the demand for mobile devices (like iPhone and iPad) that don't use Microsoft products. The big shifts are all away from Microsoft, while Microsoft's efforts at preservation are leaving these alternatives with limited competition.
Today Bnet Australia posted a podcast interview I did with Phil Dobbie, sponsored by CBS, last week. In "Disrupt To Win" we discuss the big difference between Apple and Google as compared to Microsoft. The growing companies use scenarios to develop new solutions which will appeal to new users. They keep expanding the marketplace. As new users adopt new solutions, eventually it becomes mainstream – further accelerating growth. Growth doesn't come from trying to Defend the old platform or user base, but from launching new solutions which grow the market leading to conversion and even greater growth.
Facebook is now a phenomenon, growing in 6 years from obscurity to the second largest global user base. Because, like Apple and Google, the leadership did not ask customers what they wanted (which was what MySpace.com did). Rather, they studied competitors and emerging markets to create new solutions – without worrying about cannibalization or moving faster than customers would recommend. And the leadership has been willing to overlook vocal user minorities in order to appeal to new users, thus driving more growth. You can't expect customers to deliver great growth, that has to come from aggressive scenario planning, deep competitive analysis and a willingness to Disrupt your organization and the marketplace.
