by Adam Hartung | Dec 21, 2009 | Current Affairs, Defend & Extend, General, In the Swamp, Leadership, Lock-in
Great blog today at MidasNation.com. Rob Slee is a book author and blogger focused on privately held companies. And today he took on "Old White Men" – or OWM – in his blog "Why 60 Year Old White Men are Killing America." Telling the story about how GM management drove the profits out of suppliers while bankrupting the company, he contrasted GM's behavior with the Japanese run firms in America who partnered with suppliers to make a better product customers more highly valued. We know who ended up with the profitable approach.
Similar to Defend & Extend management, Mr. Slee talks about "past as predicate" as he discusses older managers who keep doing what they always did, even though results keep worsening. And how "command and control" hierarchies sucked the value out of the traditional Big 3 automakers. His views about how OWM leaders expect a "return to the norm," creating a recipe for disaster in an ever changing world increasingly producing black swans. His stories are an action call for all leaders to change their behavior.
According to Marketwatch.com today, "GM Hires Microsoft Exec Liddell as CFO." Is this good, or just more OWM? According to BusinessWeek, Mr. Liddell is 50 – which makes him 10 years shy of the minimum 60 Mr. Slee denotes for OWM. More disconcerting was the final paragraph of his bio at Microsoft.com which claims Mr. Liddell "has completed a number of triathlons, including an Ironman and also enjoys rugby, yoga, golf and tennis." Pretty seriously testosterone laden language – and appealing primarily to OWM types. Like his new boss, the retired Southwestern Bell Chairman, now running GM.
Triathlon and rugby often have a way of making people Lock-in on the values of persistence, hard work and sacrifice. Jim Collins is a rather famous triathlete who loves Lock-in. Creativity and innovation are rarely the stuff of winners in those sports. Of course, competing in a global marketplace with fast changing competitors who defy all rules is a far cry from any sport. Sport analogies are usually more harmful than good in today's global marketplace, where adaptability is worth more than repetitive behavior seeking scale.
Mr. Liddell's last boss, Steve Ballmer, is one of the 10 most Locked-in CEOs in corporate America. Not a great mentoring for open-mindedness. And during Mr. Liddell's 4.5 year career at Microsoft the company's big launches were the me-too, and underwhelmingly exciting, Vista and System 7 products. Mr. Liddell didn't seem to push the innovation engine much in Seattle.
From appearances it would seem likely he'll focus on cost reductions pretty hard — something unlikely to make GM a success. GM doesn't need to launch it's own version of Vista. GM doesn't need a tough guy to whack the chicken coop hoping to get more eggs – instead just making the hens all upset. GM needs significant Disruption – attacks on its Success Formula – with a revitalization of new product development and technology application. GM needs an entirely new Success Formula, not just a better Defended and Extended one.
Keep your eyes on Mr. Liddell. Perhaps he'll surprise us. Look for Disruptions and White Space. It doesn't seem to be Mr. Liddell's nature. But watch. Until then, there's no sign yet that GM is taking the right actions to make itself a vital competitor against Hyundai, Kia, Tata Motors, Honda and Toyota.
by Adam Hartung | Dec 2, 2009 | Current Affairs, Defend & Extend, In the Swamp, In the Whirlpool, Leadership
"Henderson Never Fit In At GM Helm" is the Detroit Free Press headline. Imagine that – the CEO of GM has been asked to leave. Industry sales are down about 24%, and GM is down 32%. Meanwhile, Mr. Henderson had proposed selling 4 divisions (Saab, Opel, Hummer and Saturn) – which were the most interesting divisions in the company – and none of those deals have closed. In fact, 3 have fallen apart completely. Only the Hummer sale to a Chinese firm is potentially going to happen. In fact, it's hard to find anything good that's happened at GM since Mr. Henderson took over. Including closing Pontiac.
When the government invested in GM this year the existing Chairman/CEO, Rick Waggoner, was forced to resign. Imagine that, after puting several bilion in a company the investor's transition team replaced the CEO who got the company into bankruptcy, almost out of cash, with no plan for recovery. Also, the Board, which had allowed GM to get into such a mess without even raising tough questions, was replaced. All seems remarkably sensible given the sorry state of the company.
The goverment led transition team, which rocketed GM through bankruptcy, cleaned the ceiling, but then selected Mr. Waggoner's hand-picked successor (Mr. Henderson) to replace him. The claim was they'd need 6 months to search for somebody new and didn't want to take the time. And they put in a lifetime monopolist, Mr. Whiteacre of AT&T, as Chairman. And a 40+ year industry veteran was made head of marketing (Mr. Lutz.) And a 40+ year company employee was kept as CFO. And we're supposed to be surprised that things aren't going well?
The Chairman and replacement CEO says of the company says "Whiteacre: GM On the Right Path," also in the Detroit Free Press. But do you believe him? What does he know about competing successfully against intense foreign led competitors who move fast? The AT&T that trained him early in his career failed horribly, never succeeding in any market outside the U.S. and getting cleaned by offshore competitors in hardware and mobile telephony. And as head of Southwestern Bell, all he did was rebuild the old "Bell system" of land-line companies – without effectively taking a leading position in any new telephony business. Or any other business. Broadband, mobile phones, digital television – can you think of any market where today's AT&T is a technology, product development, innovation or other market leader? He may have bought up a bunch of the old spun out businesses, but those are on their last legs as people give up land lines and transition to a different sort of connected future.
What's surprising is that GM isn't doing worse. But it's unlikely Mr. Whiteacre, or Mr. Henderson's replacement, will do much better. Several candidates are from inside GM – all with the same Lock-ins that allowed Messrs. Waggoner, Henderson and Lutz to perform so abysmally – despite incredible pay packages for many years. In "Selling GM's CEO Job to be Tough Task" (Detroit Free Press) headhunters claim that the industry is so complex they'll have a hard time finding someone talented who will work for the pay. Balderdash. That's only true because they are so Locked-in to traditional thinking about who should lead GM that they keep trying to recycle already overpaid CEOs who have done little for shareholders. That's not what's needed at GM.
Give us a break. Who would want an industry veteran in the job at all? And why would a recruiter hunt for somebody with a lot of industrial-era Lock-ins. GM's investors (that's the citizens of the USA and Canada,) employees and vendors need somebody who's ready to move beyond the old industry and company Success Formulas and do something very different. Willing to develop entirely new scenarios of the future which alter the competitive playing field and then Disrupt the organization in order to start doing new things. Before Tata Motors and China's Chery auto join the other companies ready to put GM into the grave.
It's amazing how "inside the box" the people who are leading GM, and advising the company, remain. Why not try to recruit somebody from Tesla to take over? The long-delayed electric Chevy Volt might well get to market faster – and in a more desirable form – if that were to happen. Or how about an heir apparent at fast growing Cisco Systems? Those people know how to pay attention to the market and move quickly to give customers what they need – profitably.
Turning around GM requires leadership that will change the Success Formula. Not try to Defend it, or Extend it with slowly evolving variations and minimal change. The whole house needs to be cleaned. The investor representatives who led the transition pulled up short of finishing their job. Only by bringing in new managers who are willing to see a very different future, unbounded by the GM legacy, can GM's competitive position be changed – and if GM tries to keep competing the way it has Toyota, Honda, Hyundai, Kia, Tata Motors, et. all will eat GM's dinner. And only by Disrupting the old Lock-ins, using White Space teams to develop new solutions, can GM regain viability.
by Adam Hartung | Oct 21, 2009 | Defend & Extend, In the Swamp, Lifecycle, Lock-in
Boeing is the world's largest aircraft manufacturer. But the Crain's headline "Boeing Loses $1.6B, slashes 2009 profit estimate" should get your attention. Revenues in 2008 dropped some 10% – which the company blamed on a strike. Of course, management always has some bogeyman to blame for poor performance. But revenues have not yet recovered to 2007 levels. Much, much worse is the fact that its newest product launch, the 787 Dreamliner, is some 2 years behind schedule, leaving industry experts skeptical of when it will get out the door.
The reason to really be wary of Boeing isn't just this one plane. Instead, look at the market shift happening in all transportation – including aircraft. It's unclear that the marketplace has much interest in the Dreamliner. Boeing's Success Formula has long been to develop really big projects, billions in investment, and make bigger and bigger aircraft. And the Dreamliner is the latest in Defending & Extending this Success Formula. Even though the product is way over budget, really late and will be a big aircraft when it's unclear that's what people want.
From cars to buses to planes, we're seeing people change to smaller and more efficient products. The last time you flew, were you on a big aircraft? Or did you find yourself on a small plane from Bombardier (of Canada) or Embraer (of Brazil)? Airlines need to keep planes fairly full if they have any hope of making a profit. Couple that with customer desires for convenience – meaning several flights to a city daily, and you can quickly see why smaller airplanes make sense. As a result, the leader (Embraer) in small commercial planes is growing at over 20%/year!
Meanwhile, people are getting less and less excited about flying commercial airlines every year. TSA hassles, flight delays, extra charges for bags, there's a long list of reasons business people are looking for alternatives. And that's where the Jet Taxi business comes in. Whether you buy a fractional interest in an aircraft, or simply rent a plane for a single trip, businesses are figuring out that small aircraft from Beechcraft, Cessna, Lear Jets and even the new Honda jet are providing a very affordable option to commercial flying when even a few people are traveling – and with a lot more convenience. The largest manager of this option is NetJets owned by Berkshire Hathaway – who's lead investor is Warren Buffet.
Add on top of this webinars and video conferencing. Increasingly, people are using digital technologies to communicate without flying at all. Again, with hassles up – and terrorism threats more real than 10 years ago – people are turning to really low cost, and ultra convenient, alternatives to traveling at all.
So are you really optimistic about the future demand for big jet aircraft that take more than a decade to develop and get approved? And built by a company that competes with a government subsidized player supported as a matter of national defense in Europe (Airbus)? It's really hard to be optimistic about the future for Boeing – and the Dreamliner delays seem to just be the early warning signs of a Success Formula very long in the tooth. Boeing is definitely stuck in the Swamp, and it's unclear the company has any effort underway to develop new options.
by Adam Hartung | Sep 2, 2009 | Current Affairs, Defend & Extend, General, In the Rapids, In the Whirlpool, Leadership, Openness
"Huffington Says Her Site Is Close To Making Money" is the video headline at Marketwatch.com. For years this blog has chastised traditional news publishers for trying to Defend & Extend their traditional business, when the market has shifted on-line —- both for readers and advertisers. Of course, the newspaper companies counter this argument by saying that they can't make any money on-line. They have to defend their traditional business – even from web competitors.
When shifts happen it's best to get started experimenting and migrating early. You may hate the political bent of HuffingtonPost.com, but that it's near making money shows that the model can work. Just differently than a newspaper or magazine. Unfortunately, most traditional media have been too busy trying to fend off the web to learn anything. For example, Tribune Corporation has long owned equity stakes in CareerBuilder.com and Cars.com as well as FoodChannel.com. But the company refused to learn from these ventures and migrate toward a different Success Formula.
Now it's too late for these traditional companies. You may think that if HuffingtonPost.com is still not quite profitable there's still time to compete. But reality is that Ms. Huffington's organization has been experimenting and learning and creating this Success Formula for 4 years. That kind of learning you can't pick up overnight. You have to participate in the marketplace, then make what you learn (good and bad) available for everyone to see. Then you have to discuss what you've learned openly so the organization can become knowledgable about what works and migrate toward a new Success Formula in which they have confidence. And that's why most companies react to market switches way too late. They think they can jump in at the last minute. But by then the HuffingtonPost.coms and Marketwatch.coms and MediaPost.coms have already learned how to succeed at this business, developed a subscriber base and created a viable ad sales program.
Take for example "Clunkers Program Boosts Ford, But Not GM, Chrysler" as headlined on Marketwatch.com. Now that the results are in from the government stimulated "clunkers" program, we know that the market has shifted away from GM and Chrysler. Year-over-year, Hyundai sales were up 47%, Honda up 9%, Toyota up 6.4%. Ford scored big with sales up 17%. But GM sales were down over 20%, and Chrysler sales fell 15%. We can see from this data that people were ready to buy cars, given a boost. While the overall market was up, we can see that it has shifted to a new batch of competitors. GM and Chrysler simply weren't prepared to compete – and it's doubtful they ever will be. They've missed the market shift, and now they don't have the R&D, products, distribution, marketing, etc. to remain competitive with companies that are seeing volumes and revenues rise.
Of course, every company has the opportunity to shift with markets – or be crushed by changes. The latest economic reports show that too many American businesses, like GM and Chrysler, are waiting to be crushed. "US productivity rises at fastest pace in nearly 6 years, while labor costs plunge in spring" is the ChicagoTribune.com headline. This is bad news for those thinking an economic upturn will save them.
When an economy grows productivity improvements are good. Imagine you sell 100 items. You have 100 employees. Productivity is 1. A growing economy allows you to sell 105, your employment remains the same, and productivity jumped 5%. Lots of winners – between the employees (more pay or bonus), the customers (possibly lower prices down the road based on rising volume), for investors (more profits) and for suppliers (more volume and less pressure on prices.) Let's say the economy slackens – like 2009. Volume drops to 90. But through cost saving measures employment drops to 86. Productivity just went up almost 5%! But nobody won. And that's what's happening today. Labor rates keep dropping because there's more labor supply than product demand – and if businesses keep cutting costs we'll improve our productivity right up while the economy keeps going down.
Business leaders need to be more like Huffington Post, and less like GM. To improve profits they need to recognize that markets have shifted, and move quickly to develop new Success Formulas which get them growing. Trying to Defend & Extend the old business, like newspaper publishers, simply drives you toward bankruptcy. Instead, it's time to Disrupt the status quo and create some White Space projects to learn what the market wants. It's time to experiment and get the whole company involved in applying the collective brainpower to develop new a new Success Formula which gets you growing, making more money, and improving productivity for real!
by Adam Hartung | Aug 3, 2009 | Current Affairs, In the Swamp, Innovation, Leadership, Lock-in, Openness
"Honda's New CEO is Also Chief Innovator" is the recent Businessweek headline. Think of the contrast with GM. Both companies have seen their auto sales hurt this year. Although the downdraft at GM is about 130% of that at Honda. But the reactions to the weakness could not be different.
GM kept trying to sell more of its existing cars until it finally declared bankruptcy, dropping half its models and all its obligations. Then the same people that lead GM into bankruptcy remained in place. While the Chairman was forced out of a job in order to obtain government loans to stay alive, he was replaced by his own #2 who is just as Locked-in as the old Chairman was. Even worse, to me, was bringing back a 77 year old industry veteran to head marketing. He may have been one of the more creative of the "old guard" but he was every bit as much "old guard" as anyone — to the point of belittling Tesla and those succeeding today with electric and hybrid vehicles.
Honda reacted by replacing the CEO of Honda Motors. But the person put into the job comes from a background in R&D. Rather than trying to do more of the same, Honda's approach is to get product developers closer to customers — even at the very top job. Honda isn't leaving the same people in charge, nor even people with the same backgrounds. Honda is planning, from the outset, to use product innovation (rather than financial engineering) to get Honda Motors back on track.
And this aligns with Honda's approach to business. Where GM was once a company with multiple businesses (IT in its ownership of EDS and aviation electronics in Hughes) GM leadership sold off those assets, using profits to subsidize the ailing auto business. Comparatively, Honda has thriving businesses in robotics, factory automation, motorcycles, small yard equipment and new ventures in aircraft and elsewhere. GM reacts to market shifts by ignoring them, and trying to do what it's always done better, faster and cheaper. GM behaves as if its returns will do better if it can just do what it has always done – but more. Honda reacts to market shifts by entering new markets, developing new products and getting itself aligned with market requirements. Honda develops new solutions to changing market needs.
There is no doubt which approach is more sensible, and into which you might consider investing. Honda uses its scenarios about the future to help it develop new products and solutions. Honda obsesses about competition, offering new products for almost every niche opportunity and learning how to be profitable across the market spectrum. Honda is very open to Disrupting its old Success Formula, getting into new businesses that will help it grow even when not "core" to the company's history or its current capabilities. And Honda gives its new business leaders the White Space to succeed, with permission to do what the market requires even if different that the past and the resources to develop new solutions through ongoing market tests.
If you have any doubts about who will grow share over the next 5 years, and who will lose share, check out the free new ebook "The Fall of GM: What Went Wrong and How to Avoid Its Mistakes." Pay attention to the results of America's "Cars for Clunkers" program to see who comes out a winner. It will be important to see if this raises sales at the American companies – or elsewhere.
