by Adam Hartung | Oct 11, 2009 | Current Affairs, General, Innovation, Leadership
Saturday I had the good fortune to attend a presentation by President Bill Clinton. He spoke at the Indian Institute of Technology alumni conference – an event I attended as a speaker myself.
President Clinton must have used the word profit 100 times. In today's divided political climate with words like "socialism" bandied about you might be surprised. But his talk focused on the importance of making a profit as businesses meet customer needs.
The 42nd President discussed how new fish farms in Haiti were important to improving the devastated economy – because they allowed everyone involved to make a profit. He discussed how forests devastated for charcoal were being replaced by a new business that converted used paper and sawdust into a charcoal replacement for 75% less cost to the user — and yet created over 100 good paying jobs and produced a profit. His point was simple, you can't fix a down-and-out country's economy unless there is a profit in it. And he was seeing, through his foundations, multiple profit opportunities.
Across the board, the President reminded listeners that they can maintain the profit motive and solve big problems if they think about the business differently. American competitiveness is seriously challenged by rising health care costs. Yet Pennsylvania has shown it can contain costs by reporting cost and outcome statistics – a practice not shared in the other 49 states. Switzerland has a private health care system, and it incorporates wellness programs, but it spends only 11% of GDP on health care. The U.S. spends 17%. The U.S. needs to rethink how health care is sold and administered first – and if it does that private enterprise can continue to lead. But it takes a shift on the part of the health care insurers and providers.
After many years as the country with the highest percentage of college graduates in the 25 to 34 age group, in the last 8 years America has fallen to 10th. America has priced college out of the range of too many students, while other countries have modifed their approach and improved completion rates. To improve competitiveness requires an educated society. It takes different thinking if America is to regain strength as an educated country. Now that American competitiveness is being challenged (the theme of this meeting) the former President challenged whether that competitiveness can be regained if we don't think differently about how we provide education.
Of all his comments, I most enjoyed his discussion about how much . Americans love zero sum games. He and then pointed out that almost all games (football, soccer, etc.) have been modified to allow for overtimes so somebody wins. He brought up an Arkansas football game that went to 7 overtimes! Americans hate non-zero sum situations, where multiple people can win, or where it's possible to win by doing things differently. But he pointed out that in life, almost nothing is a zero sum game. That is limited to the sports field. Even in battles, it's often not clear who the winner is – for both sides will declare victory. He commented "all economic systems carry the seeds of their own destruction." And when it comes to succeeding in business you don't need to create a zero sum game. You can succeed by doing things differently.
Far too many business gurus discuss business like it is zero sum. For example, Jim Collins' BHAG and his love of fighting for a "hedgehog" concept is all about viewing business as a zero-sum game that you have to win. But today most growing, high return businesses intentionally avoid zero-sum games. Those lead to price wars and declining returns. Instead they (like Google) employ innovation, like the folks making charcoal from recycled paper, to develop new solutions that are superior and earn higher returns.
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.
