Today Budweiser, that venerable beer producer, made a surprising announcement. Starting in February, 2007 they will lanch their own internet network. This was surprising, because Budweiser has spent the last few years in the most traditional sort of competition – spending on media commercials, going toe-to-toe with traditional brands, and doing lots of price discounting. Ugh! Profits had lagged and investors haven’t seen an increase in value since 2004.
But this announcement could be a sign of an important change. The project has all the earmarks of White Space. The company has allocated a significant budget – 10% of its huge ad budget – to give this the resources to succeed. They have partnered with outsiders for internet expertise, and have hired in two new people as producers. They are being public with the commitment, and are demonstrating that they have Disrupted their old approach to reaching customers (while also creating Challenges for traditional media companies.) Even though BUD has not looked like a company to watch, I now would give them very close attention. This could be a good company to add to your portfolio.
Simultaneously, one of America’s historically most innovative companies is going the opposite direction strategically. Intel is announcing it is cutting 10,500 jobs through 2007 in an effort to restructure for 2008. All in reaction to addressing a Challenger one tenth their size (AMD). Although Intel has long dominated the microprocessor marketplace, as this Challenger has shown innovation in its product offerings and marketing Intel is reacting in the least productive way, disturbing its existing Success Formula but not taking steps to create a new one which will address market Challenges.
Rather than reacting with more innovation, more White Space, to regain its leadership position in customer eyes Intel is cutting back and hoping it will put a few pennies toward the company’s earnings per share. They are "selling underperforming busineses" (rather than improve them), and are taking this action on the heels of a "streamlining" project that cut 1,400 jobs just 3 months ago. Now they are caught up in chasing a cost-reduction goal that is never going to be big enough to meet Wall Street’s expectation – and simultaneously offering no new competitive strategy. Who will care if EPS rises if the company isn’t able to regain it’s growth rate and position as market technology and innovation leader?
I was surprised by these two stories, reported on the same day. And you may be as well. It just goes to demonstrate that ANY business can recognize Challenges, Disrupt itself and create White Space to take the lead in its market. And simultaneously even the best thought of company can fall into Lock-in and create excuses for poor performance while retrenching to what it knows rather than seeking a brighter future.