"From the day we start kindergarten we fear the teacher's call to our
parents saying, "Hello Mr. and Mrs. Smith. I'm sorry to tell you that
Mary has been disruptive in class." We are taught, trained and
indoctrinated to go along and get along, to not disrupt. In fact we're
constantly told to seek harmony. But in business that can destroy your
entire value."
That's the first paragraph from my Forbes.com column, posted today,"To Succeed You Must Seriously Disrupt." Companies that don't Disrupt remain Locked-in to Success Formulas with declining value until all hope is lost – just look at Sun Microsystems. Although Chairman Scott McNealy was famous for his Disruptive corporate behavior – he was unwilling to tolerate disruptions from his own organization to the company business model. In 10 years Sun went from $200B market cap to out of business.
Now Toyota is struggling because it wouldn't Disrupt. Meanwhile Honda is doing much better than most, because it is willing to Disrupt. Listen to the 40 second video on Disruptions, and read the article so you can see the need for Disruption and adopt in your business!
"Strategic Plans Lose Favor" is a recent Wall Street Journal headline. Seems like some big companies, and big consulting firms like Accenture, McKinsey and the Boston Consulting Group are rapidly learning what this blog has been pushing for a few years. That flexibility trumps traditional approaches to strategic planning.
When Office Depot's strategic plan was leading to revenue struggles, the company set up a situation room to track key indicators and adjust to market shifts much quicker.
"Strategy as we know it is dead" according to Walt Shill, head of strategic planning at Accenture. "increased flexibility and accelerated decision making are much more
important than simply predicting the future." (Do you think he's been reading this blog and my book?)
"business leaders will start to rely less on static five-year strategic
plans and more on rough "adaptive" strategies that consider multiple
scenarios" according to Martin Reeves, Senior Partner at BCG. (Where'd he read that – on this site?)
""The rate of change and width of volatility is much wider and faster
than what we would have assumed coming into this," Jeff Fettig, CEO at Whirlpool
McKkinsey has opened a "Center for Managing Uncertainty." Really.
As this recession has come on, and lingered, businesses are clearly starting to realize that market shifts happen fast, and businesses cannot be slow to change. Adaptability is one of the most important capabilities to compete in the post-2000 business world.
And the real market leaders are incorporating this kind of thinking into their organizations. While the earlier quotes show how, caught on the defensive, organizations are finding new ways to react, the best performing organizations are taking market leadership by being Disruptive. Like Apple. In a Harvard Business Review blog Roberto Verganti, professor at Politecnico di Milano tells us "Apple's Secret: It tells us what we should love."
The good professor of design and management points out that Apple does not ask customers what they want. Instead the company designs products which take customers to new levels of performance beyond what they imagined. Instead of being reactive, Apple uses scenario planning to understand future market needs and create shifts with its products. This approach leads to breakthrough performance, such as the success of Nintendo and its Wii product line.
To be successful businesses can no longer try to Defend & Extend their old strategies. They have to be market focused, and flexible to manage through market shifts. And to earn superior rates of return they have to be market leaders that use scenario planning and White Space to launch new solutions meeting emerging needs which attract customers and grow sales.
We all love awards and lists. Who doesn't like being rewarded for their accomplishments. At the same time, we have acquired a strong taste for lists "The best…" Another verification of success. But both can be harbingers of potential problems – and even destruction.
Ben Bernanke became Time magazine's "Man of the Year" and now he's at some risk of losing his job (see 24/7WallStreet.com "In Not Bernanke, Who?" Think about the list of Great Companies that appear in books, like Good to Great, only to end up in big trouble – like Circuit City and Fannie Mae. Why does it seem those who top awards and lists end up shortly struggling?
Too often businesses, and business people, "win" by doing more of the same. They work hard to optimize their Success Formula. They get really committed to practicing what they do (remember Outliers by Malcolm Glaldwell and his recommendation to practice, practice, practice?) They get better and better. And in fields like sports and music, where the rules are well understood and the approach is clear, this often works. And as long as they keep practicing top athletes and musicians often remain near the top of competitors.
But we have to recognize that most of the time those "at the top" in business have emerged within a given market. Then they are knocked off by a shift. Like Ed Zander of Motorola being named #1 CEO in 2004, only to be fired within 2 years as RAZR sales toppled. Like Sun Microsystems perfecting Unix servers for an emerging client/server technology market that became saturated and shifted to PC servers. Like Michael Dell (and Dell Corporation) which emerged when lower cost made supply chain efficiencies critical for PCs, before the PC market became saturated and iPhones plus Blackberries started dominating the landscape. Or WalMart which also used a new supply chain to grow the emerging discount retailing sector, only now it is laying off 10,000 employees as it shuts Sam's stores across the country. These companies created a Success Formula and honed it quarter after quarter to maximize performance in a high growth environment. But the market shifted.
In business the rules are not "set". There is no written music to
perform. Instead, the market is highly dynamic. New competitors
emerge, new ways of competing emerge, new technologies emerge and new
solutions emerge. The market keeps changing. Suddenly, what worked last year isn't successful any more. When the market shifts, the previous winner becomes the new goat. That optimized business starts to look like the world's best wrestler, only to be obsolete when a flood occurs making swimming the new, necessary skill. Being last year's best is impossible to repeat because the market shift makes the old approach less valuable – possibly obsolete.
"Best practices" are usually little more than copying last year's list topper. In the 1990s everyone wanted to copy product development practices at Sun, and supply chain practices at Dell. But both led to horrible returns when demand for servers and PCs diminished. Best practices are almost guaranteed to be a solution developed to late, and applied even later, to solve previous years' problems. They aren't forward looking, and not designed to meet the needs 2 years into the future.
Business success isn't about topping a list. And, to a great degree, the Outlier approach (as is a hedgehog concept) is very risky. If you spend 10,000 hours doing something, only to see the value for that something go away, what good was it? Remember when Cobol writers were in demand? Being the world's best at something in business can cause you to be optimized on the past and inflexible to market change.
Business success requires adaptability. And that requires a focus on future markets. It requires the ability to constantly Disrupt your approach, to build capability in many different areas and markets. It requires skill at establishing and operating White Space projects to learn about new markets and shifts – the ability to know how to test and then understand the results of those tests. In business adaptability trumps optimization, because you can be sure that things will change – markets will shift – and the highly optimized find themselves behind the shift and struggling.
Over the last week everyone has heard stories about how Facebook, and Twitter, became primary communication conduits for people with connections in Haiti. Telephone and slower communication vehicles simply have not been able to connect family and friends in this crisis like Facebook. When shift happens, it accelerates as new uses come to the forefront quickly. For everyone trying to connect with employment candidates, suppliers and customers this shift has immediate and important impact on behavior.
For advertisers, the impact is significant. Where should ad dollars be placed? On a traditional home page and search site – like Yahoo! – or on Facebook?
And it's not just the sites themselves, but how long people are on these sites. From an advertising point of view, you can start to think about Facebook – and YouTube – almost like a "channel" from early television days. Where the audience comes back again and again – offering you not only a large audience, but more opportunities to reach them more often. Facebook and YouTube are beginning to dominate the "user views."
Of course, the impact isn't just regarding the web, but how any business would use media to reach a target audience. Most advertising agencies, and ad people, are still focused on traditional media. But, as we can see, that WILL shift — even more than it traditionally has.
Anybody investing in newspapers, expecting a resurgence in value, is pretty foolish. Newspapers are going to lose ad dollars – not gain. Relatively, newspapers already are getting too much of the ad spend. Talk radio has growth. And clearly the web. Since we can expect that newspaper and magazine readership will continue recent downward trends, and television is fragmenting as well as stalling, the big growth is on the internet.
The market shift is really pretty clear. We aren't speculating about the market direction with this data. The question becomes, will you be an early adopter of these new media channels or not? Given that the web and mobile have the lowest ad rates of all media, why wouldn't you? Over the last 2 months Pepsi has decided to NOT advertise on the Super Bowl, instead putting the money into social media. And after introducing the Granite Concept car at the Detroit auto show, even behind-the-times GM is now considering a launch of this vehicle, intended for buyers under 35, using only web advertising.
So what are your plans? Do you have scenarios where Facebook and YouTube are integral to your marketing? Do you have pages, groups and channels on these sites? Do you post content? Are you using them to interact with potential customers, vendors and employees? If not – what are you waiting on? Do you need a Disruption to create some White Space and get started? If so – isn't it time to get going?
Many people think the best way to grow is by setting big goals – even Big Audacious Hairy Goals (BHAGs). But increasingly we're learning that goal setting is not correlated with success. At AmericanPublicRadio.org there's a partial text, and MP3 download, of a recent interview between General Motors leaders and a University of Arizona Professor titled "It's not always good to create goals."
The story relates how about a decade a go, with market share hovering at 25%, GM set the goal of moving back to 29%. It became a huge, multi-year campaign. Lapel pins with "29" were made and all kinds of motivational programs were put in place. The GM organization had its goal, and it was highly aligned to the goal. But it didn't happen. Despite the goal, and all the energy and talent put into focusing on the goal, GM continued to struggle, lose share – and eventually file bankruptcy. The goal made no difference.
Worse, the interview goes on to discuss how goals often lead to decidedly undesirable, sometimes unethical – even illegal – behavior. Instances are cited where goal obsession led company employees to falsify documents, even ship bricks in place of products to meet sales targets. No executive wants this, but goals and goal obsession – especially when there is a lot of reinforcement socially and monetarily on the goal – can become a serious problem.
Results are exactly that. Results. They are an outcome. They are the way we track our behaviors and activities – our decisions. When we focus on goals – usually some sort of result – we lose track of what is important. We have to focus on what we do. And for most organizations a big goal merely leads people to try working harder, faster,better, cheaper. But when the Success Formula is mis-aligned with the market – even when the whole organization is aligned on maximizing the Success Formula results will still struggle – even falter. Goals don't help you fix a Success Formula returning poor results. Just look at GM.
In fact, it can make matters worse. In "White Bears and Other Unwanted Thoughts" (available on Amazon.com) the authors point out that when you try to turn a negative (a problem) into a positive (a challenge, or goal), you often achieve a rebound effect making people obsess about the problem. Tell somebody not to think about a white bear – and it's all they think about. When your company has a problem and you try to tell employees "hey, don't think about the problem. Go do your job. Work harder, increase your focus, and all will work out. Sure share is down, but don't think about lost share, instead think about the goal of higher market share" frequently the employees will start to become obsessive about the problem. It will reinforce doing more of the same – perhaps manicly. Instead of becoming innovative and doing something new, obsessive devotion to trying to make the old methods produce better results becomes the norm. Goals don't produce innovation – they produce repetition.
So what should you do when facing a problem? Disruptions. GM didn't need a big goal. GM needed to Disrupt its broken Success Formula. GM needed to attack a Lock-in (or two). GM leaders needed to admit the market had shifted, and that competitors were changing the game. GM needed to recognize, admit and encourage employees to engage in attacking old assumptions – and recognize that market share would continue eroding if they didn't do things differently. Setting a big goal reinforced the old Lock-ins and even an aligned organization – working it's metaphorical tail off – couldn't make the outdated Success Formula produce positive results.
Only a Disruption would have helped save GM. After attacking some Lock-ins, like the desire to move all customers to bigger and more expensive cars, or the desire to focus on long production runs, GM should have set up White Space teams to discover new Success Formulas. Instead of putting all its management energy and money into growing volume at Chevrolet, Cadillac, Buick and GM nameplates, General Motors leadership should have revitalized the innovative Saturn and Saab to do new things – to develop new approaches that would be more competitive. Instead of pushing Hummer to have 3 identical cars in 3 sizes, GM leadership should have unleashed Hummer to explore the market for truly unique, limited production vehicles. GM should have allowed Pontiac to really take advantage of the design breakthroughs happening at the Australian design studio – to change the nameplate into a performance car segment leader. By attacking Lock-ins, Disrupting, and using White Space GM really could have turned around. Instead, by creating a BHAG GM reinforced its focus on its Hedgehog concept – and drove the company into bankruptcy.
