by Adam Hartung | May 8, 2009 | Current Affairs, Defend & Extend, Disruptions, Food and Drink, General, Innovation, Leadership, Lock-in, Openness, Television, Web/Tech, Weblogs
Where the people go, advertisers will follow. Why pay for an ad at the end of a never traveled dead-end street? The purpose of advertising is to reach people with your message. And now "Forrester: Interactive Marketing to grow 11% to $25.6 Billion in 2009" reports MediaPost.com. When print advertising is dropping (direct mail down 40%, newspaper down 35% and magazines down 28%), the on-line market is growing and expected to reach over $50billion by 2014. Search ads is the biggest, with over half the market, but social media is expected to grow the fastest at over 34%/year.
Such a market shift indicates that those who buy ads need to be very savvy about what works. Like I said, you don't want to be the fool who jumps into billboards, only to get placed on the one at the end of a dead-end road. Success means Disrupting your assumptions about advertising, and learning what work by entering White Space with tests and measurements.
In "Mobile Marketing Won't Work Here" Bret Berhoft explains why GenY simply won't tolerate intrusive ads – especially on their mobile devices. Social media are different conduits, with different users and different behaviors. Where older folks (and our parents) were content to be interrupted by ads – such as on TV – the avid users of new media aren't. And they've been known to create counter-movements attacking advertisers that don't adhere to their on-line behavior requirements.
What won't work is trying to do what Sears has done. Instead of learning how people use social media, and how you can connect with them to meet their needs, "Sears to Launch Social Networking Sites" we learn. Where everybody is using Facebook, MySpace, Twitter, Linked-in, etc., Sears decided to open two new sites called MySears.com and MyKmart.com. They hope people will go to these sites, register, and tell stories about their experiences in both retail chains. Then Sears intends to flow through good comments to Sears.com and KMart.com sites.
The horribly Locked-in Sears management keeps trying to Defend & Extend its outdated model. As people have left Sears and KMart in droves for competitors, they aren't looking for a site to "connect" with other people who are Sears centric. People use social networks to learn, grow, exchange ideas, keep up with trends. They don't register for a site because their parents used to shop there.
Sears has missed the basics of Disrupting its old Success Formula, so it keeps trying to apply it in ways that don't work. It keeps doing what it always did, only trying to do it in new places. These sites aren't White Space projects trying to participate in the social networks that are growing (like everything from illness questions to home how-tos). Rather, they are still trying to take the position that Sears is at the center of the world, and people want to be part of Sears.
Exactly how advertisers will capture the attention of participants still isn't clear. Some ideas have gone "viral" producing mega-returns for minimal investments. Other ideas have flopped despite big spending. The market is shifting, and variables keep changing (Marketers Search for Social Media Metric.) But for those who Disrupt their old Lock-ins, those who attack their assumptions, they can use White Space to learn what does work.
"Pizza Hut 'Twintern' to Guide Twitter Presence" is a great example of creating White Space to study social media advertising by participating. The new position will interact with Twitter users, and be a leader in how to interact with Facebook and other sites – even the notorious YouTube! where user content can include the very bizarre. By participating where the customers are, these leaders can develop insights to how you can consistently advertise effectively. Already Sony and Dell have demonstrated they can achieve high recall (Word of Mouth goes Far Beyond Social Media) beyond Social Media with their on-line efforts. These participants, who Disrupt their assumptions and bring in others to work in White Space will be the winners because they aren't trying to Defend & Extend the old Success Formula. They are trying to create a new one to which they can migrate the old business.
by Adam Hartung | May 3, 2009 | Current Affairs, In the Swamp, Leadership, Web/Tech
Warren Buffet held the annual meeting for Berkshire Hathaway this weekend, and upwards of 40,000 people came to hear his opinions. For hours he waxed eloquently, offering opinions on a wide range of topics sure to cover websites, blogs and tweets for a few days. But I was interested in the comment "Buffett, Munger praise Google's 'moat" according to Marketwatch.com's headline. It's pure 1980s industrial thinking, and why you have to be careful about forecasting and investing following Mr. Buffett.
The concept is that a business can be like an old castle, with a moat around it protecting it from competitors. The company can prosper because no competitor can jump the moat, and thus the profits of the business are protected. And today, Buffett and his partner think Google has such a moat. Now, remember, Buffett bought only 100 shares in Microsoft and long eschewed other high tech companies like Apple, Oracle, SAP and Cisco systems. His favorite phrase was to say he didn't understand these businesses. Now, suddenly, the elder Buffett is becoming tech-savvy, he'd have us think, and he loves Google. Or perhaps he's late to the game, and trying to apply outdated concepts.
I too like Google. But not for the reasons Buffett does. There is no doubt Google is far in front in the search business, and coupling that with ad placement gives them a huge market share today producing double digit revenue and profit growth. Big growth and profits is a good thing. But moats have a way of being jumped, or drained, or filled incredibly rapidly these days. And as good as Google is, what makes Google a good company is how it does not rest on its business success. The company keeps branching into other businesses which have the ability to extend company growth even if search runs into some unforeseen problem.
"Moats" are the industrial classicists way of thinking about strategy. Moats were powerful tools a few hundred years ago, but competitors changed tactics and moats lost their value. Even America's moats – the Pacific and Atlantic oceans - have been breeched by attackers from Japan and the middle east. And the same is true for business moats. They were an industrialists tool, based on big investments and high share, but they no longer have the ability to defend a business's profits. Just look at the Buffalo newspaper Buffett owns. "Newspapers face 'unending losses,' Buffett says" as he now admits newspapers (including his) are not going to make profits any more. Their "local market moat" was made obsolete by internet news competitors and ad sites like Craig's list and Vehix.com.
And now even Berkshire Hathaway is facing a growth stall. Nobody would dare predict bad things for the "oracle of Omaha." But reality is that Berkshire stock is at the same value it was 6 years ago as "Berkshire quarterly operating profit falls." Even the amazing financial machinations and sophisticated tools (like derivatives and credit default swaps) almost nobody understands and Berkshire has been famous for have been unable to overcome losses in the 60+ operating units. And even some of these financial tools are losing money – something Buffett historically avoided completely. But he's learning that competitors are making even these products less profitable.
Times have changed. It's no longer the era for the industrialist, and the financial whiz that can extend an industrialists profits. We live in a fast-paced world where adjusting to market shifts is at the core of maintaining ongoing profits. Google's willingness to Disrupt and use White Space to expand makes it a company worth watching. But stay away from those "moat' protected businesses. Not even one of the world's richest men can make money in that game any longer.
by Adam Hartung | May 1, 2009 | Current Affairs, Defend & Extend, In the Whirlpool, Innovation, Leadership, Lock-in, Web/Tech
My book talks about Growth Stalls. Whenever a company sees two consecutive quarters of flat or declining sales or profits, or 2 consecutive quarters where year over year sales or profits were flat or declining, it is in a growth stall. Unfortunately, only 7% of companies that hit a growth stall will ever again consistently grow at a mere 2%. Yes, that's damning and almost unbelievable. And very worrisome given how many companies are now entering growth stalls.
Take a look at Motorola. They stumbled badly in mobile phones because they didn't keep pushing out new products into the market. They tried to Defend & Extend their popular Razr product, and eventually profits disappeared as they cut price. Then sales fell off a cliff as people shifted to newer products. The stall was created by the company insufficiently pushing innovation into the market, and the market shifted to new solutions.
Now "Motorola to cut more jobs as non-cell business weakens" according to ChicagoBusiness.com by Crain's. When the mobile business weakened, management took action to "shore up" the business. It went hunting for a buyer (none found), and it started cutting resources. Including monster layoffs. But it still had to keep investing or the business would collapse entirely. This had a cascading, spiraling negative effect on the rest of Motorola. With resources pushed into the failing cell phone business, there was less management attention and money spent on other businesses. Those also stopped pushing new innovations to the market. Now sales of network gear, set-top boxes, and 2-way radios are all down double digits.
So Motorola plans to cut another 7,500 jobs. More resource cuts, which will cause more cuts in innovation, fewer new products, less White Space. The process of Defending & Extending the past becomes more entrenched, because there are fewer resources around. What gets cut most is anything new. The stuff that could generate growth. Cuts lead to people hoping for an economic recovery that will somehow improve their competitive position. But it won't.
Motorola is now pinning its future on successful smart phone sales. But reality is that every quarter Motorola becomes a far more distant provider in mobile phones. While the best performer had flat volume last quarter, Motorola saw unit sales drop 46%. Motorola moves farther from the market, and into role of niche player. And even though cell phones is supposed to be for sale as a business, as we can see the company is diverting resources from the best part of Motorola (non-cell phones) to mobile handsets because they won't quit trying to Defend & Extend that business.
It's now clear that Motorola is in a vicious circle of cutting resources, losing sales, losing market share, discontinuing innovation, delaying new products, cutting more resources, losing more sales, losing more profits, doing even less innovation, offering up even fewer new products, …… Almost no one ever recovers from this spiral. By trying to Defend & Extend the old business, the actions – including layoffs – significantly harm the business. With less and less innovation, and fewer resources, the company slips into decline and failure.
And that's why growth stalls are deadly. They exacerbate Defend & Extend's weakness as a management approach. The lack of innovation, remaining Locked-in, was what caused the stall. Blaming a recession is just looking for a bogeyman so the business doesn't have to take responsibility for its own mistake. But after a couple of quarters of bad performance, the next wave of actions – the "best practices" to "shore up a problem company" – kill it. The layoffs and resource cuts – especially the delaying or killing of White Space projects and new products – cause customers to accelerate their move to competitors. And the company simply fails.
Today employees in those companies in growth stalls have a lot to worry about – as do their investors. If you hear leadership talking about job cuts and other D&E actions – while deflecting blame elsewhere besides the lack of meeting new market needs – then you're best off to find a new job and sell the stock. These companies will only continue to get weaker, and competitors will displace them as market leaders. An improving economy will be created by their growing competitors, not them, and their boat will not rise with the tide.
The solution is obviously not to practice D&E management. When you identify a growth stall is when all attention needs to be focused on rolling out new solutions to return to growth. Instead of cutting costs while trying to save the past, the business needs to move as rapidly as possible to the solutions needed in the future. Old businesses that caused the stall need to see dramatic resource constraints, while the new opportunities take front and center attention.
It wasn't "the economy" that got Motorola into desperate straits. It was Apple's iPhone and Nokia's relentless new product introductions. Without commensurate innovation, Motorola will never return to its former leadership position. And without resources, that cannot happen.
By the way, thanks Carl Icahn. You were the first to really push Motorola down this track of resource cutting. You're efforts to push Motorola this direction worked, even if you didn't get to lead the cuts. But the results are the same. And if Motorola isn't careful, the whole company may disappear as both halves of what now remain continue declining.
by Adam Hartung | Apr 21, 2009 | Current Affairs, Defend & Extend, In the Whirlpool, Leadership, Lock-in, Web/Tech
"With Oracle, Sun avoids becoming another Yahoo," headlines Marketwatch.com today. As talks broke down because IBM was unwilling to up its price for Sun Microsystems, Oracle Systems swept in and made a counter-offer that looks sure to acquire the company. Unlike Yahoo – Sun will now disappear. The shareholders will get about 5% of the value Sun was worth a decade ago at its peak. That's a pretty serious value destruction, in any book. And if you don't think this is bad news for the employees and vendors just wait a year and see how many remain part of Oracle. A sale to IBM would have fared no better for investors, employees or vendors.
It was clear Sun wasn't able to survive several years ago. That's why I wrote about the company in my book Create Marketplace Disruption. Because the company was unwilling to allow any internal Disruptions to its Success Formula and any White Space to exist which might transform the company. In the fast paced world of information products, no company can survive if it isn't willing to build an organization that can identify market shifts and change with them.
I was at a Sun analyst conference in 1995 where Chairman McNealy told the analysts "have you seen the explosive growth over at Cisco System? I ask myself, how did we miss that?" And that's when it was clear Sun was in for big, big trouble. He was admitting then that Sun was so focused on its business, so focused on its core, that there was very little effort being expended on evaluating market shifts – which meant opportunities were being missed and Sun would be in big trouble when its "core" business slowed – as happens to all IT product companies. Sun had built its Success Formula selling hardware. Even though the real value Sun created shifted more and more to the software that drove its hardware, which became more and more generic (and less competitive) every year, Sun wouldn't change its strategy or tactics – which supported its identity as a hardware company – its Success Formula. Even though Sun became a leader in Unix operating systems, extensions for networking and accessing lots of data, as well as the creator and developer of Java for network applications because software was incompatible with the Success Formula, the company could not maintain independent software sales and the company failed.
Sort of like Xerox inventing the GUI (graphical user interface), mouse, local area network to connect a PC to a printer, and the laser printer but never capturing any of the PC, printer or desktop publishing market. Just because Xerox (and Sun) invented a lot of what became future growth markets did not insure success, because the slavish dedication to the old Success Formula (in Xerox's case big copiers) kept the company from moving forward with the marketplace.
Instead, Sun Microsystems kept trying to Defend & Extend its old, original Success Formula to the end. Even after several years struggling to sell hardware, Sun refused to change into the software company it needed to become. To unleash this value, Sun had to be acquired by another software company, Oracle, willing to let the hardware go and keep the software – according to the MercuryNews.com "With Oracle's acquisition of Sun, Larry Ellison's empire grows." Scott McNealy wouldn't Disrupt Sun and use White Space to change Sun, so its value deteriorated until it was a cheap buy for someone who could use the software pieces to greater value in another company.
Compare this with Steve Jobs. When Jobs left Apple in disrepute he founded NeXt to be another hardware company – something like a cross between Apple and Sun. But he found the Unix box business tough sledding. So he changed focus to a top application for high powered workstations – graphics – intending to compete with Silicon Graphics (SGI). But as he learned about the market, he realized he was better off developing application software, and he took over leadership of Pixar. He let NeXt die as he focused on high end graphics software at Pixar, only to learn that people weren't as interesed in buying his software as he thought they would be. So he transitioned Pixar into a movie production company making animated full-length features as well as commercials and short subjects. Mr. Jobs went through 3 Success Formulas getting the business right – using Disruptions and White Space to move from a box company to a software company to a movie studio (that also supplied software to box companies). By focusing on future scenarios, obsessing about competitors and Disrupting his approach he kept pushing into White Space. Instead of letting Lock-in keep him pushing a bad idea until it failed, he let White Space evolve the business into something of high value for the marketplace. As a result, Pixar is a viable competitor today – while SGI and Sun Microsystems have failed within a few months of each other.
It's incredibly easy to Defend & Extend your Success Formula, even after the business starts failing. It's easy to remain Locked-in to the original Success Formula and keep working harder and faster to make it a little better or cheaper. But when markets shift, you will fail if you don't realize that longevity requires you change the Success Formula. Where Unix boxes were once what the market wanted (in high volume), shifts in competitive hardware (PC) and software (Linux) products kept sucking the value out of that original Success Formula.
Sun needed to Disrupt its Lock-ins – attack them – in order to open White Space where it could build value for its software products. Where it could learn to sell them instead of force-bundling them with hardware, or giving them away (like Java.) And this is a lesson all companies need to take to heart. If Sun had made these moves it could have preserved much more of its value – even if acquired by someone else. Or it might have been able to survive as a different kind of company. Instead, Sun has failed costing its investors, employees and vendors billions.
by Adam Hartung | Apr 15, 2009 | Books, Current Affairs, Disruptions, General, Leadership, Web/Tech
I was delighted recently to find a weekly blog named www.IsSurvivor.com. Bob Lewis writes in a clear and frank tone about what he often sees as not working correctly – especially in the world of information management. I would recommend this blog to everyone because his advice applies to all aspects of business – not just IT.
And I was delighted to recently read his book "Keep the Joint Running: A Manifesto for 21Century Information Technology." Despite the book's tagline, this is a book for everyone in business – not just IT people. As the author reminds readers over and again, IT is a really important, and integrated, part of the modern business. You can't consider it a stand-alone silo or you'll have really big problems. And I find myself thinking the same is true for all functions. The book is a great read as well. Not pompous (although the author has a mountain of experience to draw upon), very matter-of-fact, and incisive when cutting into multiple myths that detract from performance of functional groups as well as the corporation overall.
One thing all readers should love is the book's focus on getting work out the door. Mr. Lewis points out, with great examples, that if you aren't competent you can't be strategic. I was reminded of so many people I've worked with over the years who lacked prodigiously in competence yet seemed to maintain their positions by taking "the strategic view." Far too often we see in consulting firms the partner that's good at relationships, but couldn't actually do the work if his life depended upon it. In the end, when those without competency are in charge, problems happen. A simple rule – like the many Mr. Lewis gives us – that we so often ignore.
Business, and IT even moreso, are very new fields of academia. Unlike math, English, botany or geology, we've been studying business only a short time. Yet, the die-hard followers of early theories are surprising. Given the lack of any labs to test these theories, and the very visible number of failures these theories incur, the willingness to turn an idea into dogma (in incredibly short time) and then remain tied to that dogma should intrigue all investors and business leaders. Mr. Lewis shows himself a great Disruptor as he wastes no time taking an axe to many dogmas, exposing them as myths, as he works his way through the sea of bad approaches he finds functional heads utilizing. Best practices, process optimization, workforce optimization, applying metrics regardless of experience or ties to goals, development methodologies and documentation practices are just a few of the dogma he successfully analyzes, finds wanting, and discards in favor of better approaches that don't find enough use. (Read the book to get the magic answers.)
I spent my own time in IT working for vendor companies, as a CIO, and for several years as a partner in the giant IT services firm Computer Sciences Corporation. Item by item I found Mr. Lewis spot-on with his assessment of most IT firms, and IT practitioners. Not that folks can't get it right – but that for the most part their assumptions about what would work are so misguided that they have no hope of success. Only by rethinking the approach can the business do better. Which, after all, is the goal of all functional groups – to improve the sales and profits of the company.
But like I said earlier, I recommend Mr. Lewis's blog, and his book, for every CEO, executive, manager or front-line employee who works with IT – so that means everyone. His ideas will help improve the performance of any organization and its functions – not just IT. And for IT folks it offers a world of insight to why things in the past were often so hard, and how they can be much better going forward. You'll gain good insight for doing better planning, using Disruptions effectively instead of following outdated practices that simply don't work, and finding White Space where you can rapidly improve the success of your organization. His recommendations make sense, and you'll find them incredibly practical for improving performance today
by Adam Hartung | Apr 9, 2009 | Current Affairs, Defend & Extend, In the Whirlpool, Leadership, Lifecycle, Lock-in, Web/Tech
$193billion dollars. An amount that seems only viable for governments to discuss. But that is how much the value of Sun Microsystems declined in less than one decade (see chart here). At the height of its dominance as a supplier to telecom companies in the 1990s Sun was worth over $200billion. Recently IBM made an offer at just under $8billion. But Sun has rejected the IBM bid, which was more than double its recent market value, and Sun is now worth only about 60% of the bid. An amazing loss of value for a company that never paid a dividend. And the failure can be tied to a single problem.
Forbes magazine is having a field day with the leadership at Sun these days. "Sun May Be Pulling a Yahoo!" the magazine exclamed on Monday when Sun said it was turning down the IBM offer. The similarity is that both companies turned down values at above market price, but both probably won't receive offers from anyone else. The difference, however, is that Yahoo! has a chance to compete with Google, and Microsoft would have suffocated those chances. Sun, on the other hand, won't survive and the only way investors will get any value is if Sun agrees to the buyout.
Reinforcing the thinking that Sun won't make it on its own, Forbes today led with "Sun's Six Biggest Mistakes" which decries recent (last 4 years) tactical failings of the company. But in truth, Sun was destined to fail 8 years ago – as I argued clearly in my book Create Marketplace Disruption (buy a copy from my blog or at Amazon.com.) The company never overcame Lock-in to its initial Success Formula, and when its market shifted in 2000 the company went into a nosedive from which no tactical changes could save it.
Scott McNealy was the patriarch of Sun Microsystems. Son of an auto executive, he had a love for "big iron" as he called the large, robust American cars of the 50s, 60s and 70s. And when he started Sun Microsystems he imbued it with an identity for "big iron." Mr. McNealy wasn't interested in creating a software company, he wanted to sell hardware – like the days when computing was all about big mainframe machines. His might be smaller and cheaper than mainframes, but the identity of Sun was clearly tied to selling boxes that were powerful, and expensive.
Everything about the company's development linked to this identity (see the book for details). The company strategy was tied to being a leader in selling hardware systems. First powerful desktop systems but increasingly powerful network servers. Iron that would replace mainframes and extend computing power to challenge supercomputers. All tactics, from R&D to manufacturing and sales tied to this Identity. And because the products were good, and met a market need in the 80s and 90s, this Success Formula flourished and reinforced the Identity.
A lot of new products came out of Sun Microsystems. They were an early leader in RISC chips to drive faster processing. And faster memory schemes and disk array technology. These reinforced the sale of hardware systems. The company also extended the capabilities of Unix software, but of course you could only buy this enhanced system if you bought one of their computers. Sun even invented Java, a major advancement for internet applications. But then they gave away this software because it didn't reinforce the sale of their hardware. Sun felt that if everyone used Java it would generally grow internet ue, which would grow server demand, which would help them sell more server hardware – so don't even bother trying to build a software sales capability. That did not reinforce the Identity, so it wasn't part of the Success Formula. Everything leadership and the company did was focused on its core – Defending and Extending the sales of Unix Workstations and Servers. It's hedgehog concept was to be the world's best at this, and it was. Sun intended to Defend & Extend that Identity and its Success Formula at all costs.
But then the market shifted. The telecom companies over-invested in infrastructure, and their demand for Sun hardware fell dramatically. Workstations based on PC technology caught up with Sun hardware for many applications, rendering the Sun workstations overpriced. Makers of PC servers developed advancements making their servers faster, and considerably cheaper, meaning Sun servers weren't required or were overpriced for company applications. Within 2 years, the market had shifted away from needing all those Sun boxes, causing Sun sales and market value to collapse.
Sun made one mistake. It never addressed the potential for a market shift that could obsolete its Success Formula. Sun never challenged its Identity. Sun leaders never developed scenarios that envisioned solutions other than an extended Sun leadership position. They only looked at competitors they met originally (such as DEC and SGI) and when they beat those competitors leadership quit obsessing about new comers, causing them to miss the shift to lower price platforms. Although Scott McNealy was an outrageous sort of character, he created lots of disturbance in Sun without creating any Disruption. People felt the heat of his presence, but there was no tolerance for anyone who would shed light on market changes (especially after Ed Zander was installed as COO). Nobody challenged the Success Formula. Nobody in leadership was allowed to consider Sun doing something different – like selling software profitably. And thus, there was no White Space in Sun. No place to with permission to do new things, and no resources to do anything but promote "big iron."
When any company remains tied to its Identity and its Lock-in failure will eventually happen. Markets shift. Then, all the tactical efforts in the world are insufficient. It takes a new Success Formula – maybe even an entirely new identity. Like Virgin becoming an airline rather than a record company. Or Singer a defense contractor rather than a sewing machine company. Or maybe something as simple as GE becoming something besides a light bulb and electric generation company – getting into locomotives and jet engines. The one big mistake made by Sun can be made by anyone. To remain Locked-in too long and let market shifts destroy your value.
by Adam Hartung | Apr 1, 2009 | Current Affairs, Defend & Extend, In the Swamp, In the Whirlpool, Lifecycle, Lock-in, Web/Tech
How many of these company names do you remember — Sperry Rand? Burroughs? Univac? NCR? Control Data? Wang? Lanier? DataPoint? Data General? Digital Equipment/DEC? Gateway? Cray? Novell? Banyan? Netscape?
I'm only 50, yet most of these companies were originated, became major successes, and failed within my lifetime. Now, prepare to add a couple more. In the 1980s Silicon Graphics set the standard for high-speed computing, using their breakthrough technology to open the door on graphics. There never would have been a PS3 or Wii were it not for the pioneering work at SGI. The company invented high speed graphics calculating methods that allowed for "real-time" animation on a computer, as well as "color fill" and "texture mapping" – all capabilities we take for granted on our computer screen today but that were merely dreams to early GUI users. But now SGI has disappeared according to the Cnet.com article "First GM, Now Silicon Graphics. Lessons Learned?" The company that expanded the high-speed computing market most on SGI's early lead was Sun Microsystems, building the boxes upon which the first all-computer animated movie was made – Toy Story. But 2 weeks ago we learned Sun will most likely soon disappear into the bowels of IBM ("Final Chapter for Sun Micro Could be Written by IBM" at WSJ.com)
When Clayton Christensen wrote The Innovator's Dilemma he said academics like to talk about the tech industry because the product life cycles are so short. Actually, he would have been equally accurate to say their company life cycles were so short. For business academics, looking at tech companies is like cancer researchers looking at white lab mice. Their lifespan is so short you can rapidly see the impact of business decisions – almost like having a business lab.
What we see at these companies was an inability to shift with changes in their markets. They all Locked-in on some assumptions, and when the market shifted these companies stayed with their old assumptions – not shifting with market needs. Like Jim Collins' proverbial "hedgehog" they claimed to be the world's best at something, only to learn that the world put less and less value in what they claimed as #1. Either the technology shifted, or the application, or the user requirements. In the end, we can look back and their lives are like a short roller coaster – up and then crashing down. Lots of money put in, lots spent, not much left for investors, vendors or employees at the end. They were #1, very good (in fact, exceptional), and met a market need. Yet they were unable to thrive and even survive – because a market shift emerged which they did not follow, did not meet and eventually made them obsolete.
Today we can see the same problem emerging in some of the even larger tech companies we've grown to admire. Dell taught everyone how to operate the world's best supply chain. Yet, they've been copied and are seeing their market weaken to new products supplied by different channels. Microsoft monopolized the "desktop", but today less and less computing is done on desktops. Computing today is moving from the extremes of your hand (in your telephone) to "clouds" accessed so serrendipituously that you aren't even sure where the computing cycles are, much less how they are supplied. And software is provided in distributed ways between devices and servers such that an internet search engine provider (Google) is beginning to provide operating systems (Android) for new platforms where there is no "desktop." As behemoth as these two companies became, as invincible as they looked, they are equally vulnerable to the fate of those mentioned at the beginning of this blog.
Of course, their fate is not sealed. Apple and IBM both are tech companies that came perilously close to the Whirlpool before finding their way back into the Rapids. When businesses decide their best future is to Defend & Extend past strengths they get themselves into trouble. To break out of this rut they have to spend less time thinking about their strengths, and more about market needs. Instead of looking at similar competitors and figuring out how to be better, they have to look at fringe competitors and figure out how to change with emerging market requirements. And just like they disrupted the marketplace once with their excellence, they must be willing to disrupt their internal processes in order to find White Space where they can create new market disruptions.
Today, with change affecting all companies, it is important that leaders look at the "lab results" from tech. It's important to recognize past Lock-ins, and assumptions about continuation (or return to) past markets. Markets are changing, and only those that take the lead with customers will quickly return to profitability and emerge market leaders. It's those new leading companies that will get the economy growing again, so waiting is really not an option.
by Adam Hartung | Mar 29, 2009 | Current Affairs, Disruptions, General, Innovation, Leadership, Openness, Web/Tech
"Management is not a science, like physics, with immutable laws and testable theories. Instead, management, at its best, is an intelligent response to outside forces, often disruptive ones." So says Steve Lohr in " How Crisis shapes the Corporate Model" in The New York Times Saturday.
For years, many people thought of management as being all about execution. How to build plants, make things, sell those things and finance the operations of building and making stuff. In fact, whole books were written on execution, with the basis that strategy was pretty much unimportant. If you could execute well, what's the need for strategy?
But the last year has shown everyone that the world is a dynamic place. GM missed many changes, and now is barely alive. Despite a focus on execution, the CEO Rick Wagoner has been forced to step down by the administration if GM is to get more bailout money (see "GM's Wagoner Will Step Down" WSJ.com March 29) When you get behind, a "re-invention gap" emerges where the competition keeps going with the market further and further into the future, while you are left behind struggling to sell, grow and make money as you focus on execution. The longer you keep focusing on execution, the bigger the gap gets. Depending on size and competition, eventually you end up completely out of step with the market and unable to compete. Like GM.
The pressure to change with market needs is high everywhere, from banks to manufacturers to newspapers. From General Electric to Sara Lee to Sun Microsystems to The Tribune Corporation, companies that can't adapt to changes have seen their valuation hammered. And the companies we like today are those demonstrating they can adapt to market needs – like Google, Apple, RIM and Virgin. These companies are today investing in launching new products, investing in growth, rather than just trying to cut cost and execute on old business practices while waiting for the return of "better times."
Globalization is now hitting everyone. No industry, and no player in any industry, can ignore the impact of global competition in the way they compete. Today, we can wire together businesses from various service providers, with precious little investment, and reach customers quite profitably while maintaining enormous flexibility. Just ask Nike if you want to know how to "do it."
Focus, hard work, diligence – these have been the mantra for many business leaders. It makes us feel good to think that if we work hard, if we keep our eye on execution, we can succeed. But as readers of this blog have known for 4 years, those admirable qualities do not correlate to success (as academics and journalists have been pointing out when arguing with Jim Collins and his spurrious mathematical exercises). To be successful requires adaptability. You have to constantly scan the horizon for market shifts and emerging competitors that are ready to disrupt markets. And be ready to change everything you do, not just part of it, if you want to compete in the markets as they shift.
The companies, and executives, that will fail as a result of these tumultuous times has not been determined. You can keep from being one of the downtrodden if your focus remains on identifying future market needs and adapting to new competitors through White Space where you can develop new solutions. It's very possible to succeed going forward, if you're adaptive. Or you can end up like Mr. Wagoner and the management team at GM.
PS – The New York Times Company had better start reading its own material and undergo same radical adaptation of its own, or it may not survive to be a media player very soon. To steal from an old saying, it's about time that cobbler started checking his own family's shoes.
by Adam Hartung | Mar 28, 2009 | Current Affairs, In the Whirlpool, Leadership, Lifecycle, Quotes, Web/Tech, Weblogs
"If you don't read the newspaper you are uninformed. If you do read the newspaper you are misinformed." — Mark Twain
"All I know is what I read in the newspaper. That makes me the most ignorant man alive." —- Will Rogers
What both these great writers understood was that when you get most of your news from one source, you get only what that source chooses to tell you, and only a single interpretation of the news. Since newspapers began there has been controversy about bias in news reporting. Many famous newspapers were considered "conservative" or "liberal" based upon the political opinions of the owners. The reality is that when a newspaper reporter tells you a story, what you read – down to the word choices - is affected by the opinions and feelings of the author, as well as those of the editor and perhaps even the publisher.
The great breakthrough of the internet is you aren't restricted to a single (or possibly) two sources. You can find articles about anything from a political speech to an automobile accident published by 5, 10 maybe hundreds or thousands of sources. And for many news items the internet provides you not only multiple opportunities to read how the "facts" are told, but you can find multiple articles that interpret those facts. This plethora of coverage means that internet readers have the opportunity to be as selective, or as broad, as they choose. And it means that the ability of publishers to "control the direction" of a story is dramatically diminished. Readers, by looking across multiple sources, can determine as a group which "facts" they find accurate, and which "interpretation" they find most genuine. Because of the internet, news coverage is "democratized" in a way that has never before been possible.
Newspapers provided a method of informing the public for a very, very long time. But they have an internal weakness they cannot overcome – the printing means that only one version of a story is told and it can only be economically told once per day. The distribution method makes newspapers an "event" that occurs at "deadline", and the cost is high enough that there's only enough advertising to support the printing and distribution of one newspapers in most markets. When you get down to the printing – the "paper" in "newspaper" – it has limits that create a weakness.
The internet is disruptive because it overcomes the limitations of printing. It is available 24×7 not just to read, but to be updated and current with the latest information. A person anywhere can read input from multiple sources. The internet makes up-to-the-minute news coverage of everything available to people in rural, remote locations as quickly as it does those "on the scene", thus opening an interest in world or very local events to everyone on the planet, regardless of location. And this means this "no cost distribution" (not no cost of fact acquistion, or interpretation, or writing – just distribution) allows the internet to do what economist Joseph Schumpeter called "creatively destroy" the old value in newspapers.
Those who bemoan the loss of newspapers need to spend more time on the internet. There are so many sources for so much news that we are today the best informed society in the history of mankind. The financial problems at newspaper publishing have not diminished the quantity or quality of news coverage. Those are higher than ever. And the businesses that jump into this market, by developing networks to access the most/best news and interpretation at the lowest cost – while delivering it in a format that is easy for readers to find and absorb – will be successful. And it will be harder than ever for those trying to create the news (such as politicians and political pundits) to decry "bias" in a world where all opinions are available to everyone.
by Adam Hartung | Mar 27, 2009 | General, Innovation, Openness, Television, Travel, Web/Tech
If you can read this blog and not grin (or maybe even laugh) you're more grisly than me.
MediaPost.com posted "P&G Backs Public Toilet Database Site, App." Proctor & Gamble, supporting Charmin branding, has agreed to financially support the web site www.SitorSquat.com, which was originally developed by a New York homemaker. According to the Charmin brand manager this is considered part of the overall marketing effort which includes providing toilets at public events. His goal is that by helping people find clean places to go, it will help them remember to buy Charmin when they are at the grocery.
You have to admit, it's a clever and far from traditional idea. And certainly most of us have been in situations whether for ourselves or for someone with us (including children) we'd like to know the location of a toilet – especially a clean one. That the database can be downloaded, or accessed via the web or iPhone or Blackberry makes it a usable tool. Perhaps as valuable as an on-line restaurant guide. In times of "crisis" it could be the most valuable app on your iPhone.
But, despite the cleverness, P&G is operating in D&E mode rather than really growing toilet paper sales. The app does not discern whether the facility's paper is nice, soft Charmin, or more industrial single ply product. Nor does it even promote Charmin in rating the toilets. The stars seem to be more closely tied to mop and rag use by janitors, and accessibility, than anything else. It's unclear that this will increase demand for Charmin, much less toilet paper, and probably does little more than reinforce the brand name, by merely putting it on the site.
If P&G really wanted to grow the market for toilet paper, it would be more aggressive. For us world travelers, there are many places where toilet paper isn't as common as the USA – such as India. We all know of various health risks in India (mostly due to water issues), and P&G would be well served to promote hygiene in the developing world, including the use of disposable personal cleaning products like toilet paper. Further, P&G could develop products that use less wood pulp thus having less environmental impact, in effect a "green" toilet paper, that would incent additional use by the ecology-oriented. Or P&G could develop product from recycled or other waste material that has an even lower carbon footprint than paper (corn stalks? corn husks? banana leaves? straw?), again promoting use in the developing world (that often lacks enough wood) as well as environmental advocates.
While the database is interesting, and no doubt will get used, its business value will most likely be nill. A funny news column, but of no value to P&G shareholders. It doesn't help P&G address future needs of people regarding toilet paper (ecology, etc.), nor does it address the use of competitive products (which is non-use, or natural fibers [leaves] in the developing world). P&G has taken a clever new generation product like an iPhone app, and turned it into a very traditional, industrial use which is basic brand awareness reinforcement. Really not White Space, because no goals are given the project nor any positive results expected from it.
But, you have to admit, it's definitely "outside the box" thinking – especially for a company as stodgy as P&G. There is no doubt, this is an innovative (if sustaining) innovation in brand marketing – including the building of a web/iPhone app to promote a product. You'd just like to see P&G go a bit further in its efforts to find growth for shareholders. Have a happy weekend!
