Tom Peters - Big-Firm Innovation: Good Luck!

 

My columns are meant to help practicing managers. Yet when it comes to innovation, especially in big firms, I am stymied.

Strategy analyst Mike Kami says that Sears, Roebuck's "brand new" 1988 strategy is a carbon copy of its 1973 and 1983 "brand new" strategies. Nothing much seems to happen. And it's been 10 months since IBM's latest "radical" reorganization. We can expect another momentous upheaval any day, once again aimed at speeding up innovation.

In the 1985 book, Final Cut, the story of how conglomerate Transamerica concocted the all-time movie disaster, "Heaven's Gate," author Steven Bach cites screenwriter William Goldman's chief observation about Hollywood: "NOBODY KNOWS ANYTHING." I'd argue for putting Goldman's line on a plaque to be hung behind the desk of every big-firm executive involved with innovation.

Final Cut recently kept me up until 4:00 a.m. It does a top- notch job of capturing the day-to-day process of innovating in sizable firms. Bach was the head of production, later fired, for Transamerica's United Artists subsidiary. (The "Heaven's Gate" fiasco led to the dismantling of UA.)

Political considerations caused a dozen miscues. For starters, Bach failed to express the depth of his initial reservations about the project. As the newly appointed co-head of production, he didn't want to begin by shooting down his new colleague's pet project. Subsequently, standard big-company doctoring of bad news led to repeated false optimism. And then there was the equally standard lack of consequences following adverse outcomes; deadline slip after deadline slip led only to frenzied meetings, never decisive action.

But the biggest UA problem was money. Not too little, but too much. UA liked big bets; and Transamerica had very deep pockets. The brakes were never applied, and UA repeatedly stood idly by as Director Michael Cimino indulged his every over-done whim.

The woes resulting from Transamerica's too-deep pockets is almost interchangeable with the saga of Xerox's personal-computer blunder, described in gory detail by Douglas Smith and Robert Alexander in their new book, Fumbling the Future: How Xerox Invented, Then Ignored, the First Personal Computer.

Xerox's Palo Alto Research Center (PARC) is a lovely lab in a lovely setting, the compelling vision of then-Xerox chairman, Peter McColough. PARC was staffed with brilliant minds and awash in cash. Product after pioneering product was conceived at PARC. However, Xerox's Connecticut-headquarters team was preoccupied with turning back the challenge of IBM and Kodak, then Minolta and Canon in the copier business. PARC blissfully trundled on in pursuit of a dream -- an expensive toy, which someday would deliver. But someday never seemed to come. Visitors to PARC, like Apple's Steve Jobs, got turned on by what they saw. Jobs' exposure to Xerox's overcomplicated, overexpensive Star system gave him essential ideas for the Macintosh.

The book's epilogue tells the story best, listing the current occupations of former standouts at PARC: One founded GRiD Systems, the successful lap-top computer producer; two founded pioneering Metaphor Computer. A trio are senior officials at Apple Computer, and a score more are in key posts at Digital Equipment, Microsoft, et al.

In another book of the same genre, Fast Forward: Hollywood, the Japanese and the VCR Wars, author James Lardner lays out every pathetic detail surrounding the failure of RCA, Bell & Howell and a host of other big outfits to come up with a commercially successful VCR. The villains are the same: big-firm politics; too much money; too little accountability; grandiose plans; too much complication; too big a bet.

This series of books, mostly about failure, occasionally about success (Tracy Kidder's classic Soul of a New Machine), warrant more attention than the numerous management texts that lay out the ABCs of managing innovation.

Maybe the term "managing innovation" is part of the problem. It implies the possibility of rules and the reign of rationality. But innovation is hopelessly messy. Any honest recounting of either a simple or a complex innovation project reveals 10,000 unexpected twists and turns -- from problems with the science to the vagaries of getting customers to use anything new.

In fact, even the success tales are ultimately discouraging. Soul of a New Machine, for instance, documents the exploits of Data General's renegade group that developed a save-the-company mini- computer, after the firm's rich, central lab flopped. But the book mainly reveals the most unlikely set of circumstances that led to this rare success; replication would be all but impossible.

Ideas for managers? Autonomy for business units. Short deadlines. Low budgets. Lots of tries. Focus on small markets. Customers involved from the start. Would-be champions selected for passion and persistence more than for organizational or technical skills. These suggestions have merit, but even the track record of those who have tried them all is disheartening.

In the end, Goldman's advice -- NOBODY KNOWS ANYTHING -- may be the best starting point. Acknowledging the frightful innovation pitfalls and giving up dreams of the perfect innovation checklist or the "right" inspiring vision are big steps toward dealing realistically with the top management problem of our age: big- firm innovation in an increasingly ambiguous, crowded and fast- moving world.

1988 TPG Communications.

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How Not To Suffer The Fate of RIM Blackberry. A Lesson in Commoditization and Longevity

 

 

They have volumes in common with you.

It shouldn’t come to much surprise that the embattled Research In Motion, makers of Blackberry, will become that next failed company. Despite occasional resuscitation from loyal fans, reminiscent of Saab’s recent fiascos which lasted years too long, RIM created a niche only to fall prey to the enemy of the great: Commoditization. RIM’s stock is down ytd at this writing by a mind numbing 70%. This didn’t need to happen. 

RIM was “The” smartphone company until a competitor named Apple out innovated and out competed their own product. How did Apple deftly spring past RIM? Surprisingly with ease. RIM forgot they would have competition. Most would presume that RIM with its well priced iconic product Blackberry would assuredly not be affected by commoditization in which a product becomes indistinguishable from its competitors. You would be wrong. What is happening with RIM is probably occurring in your company. 

The road to ubiquity is laced with land mines.  At a time when business moves at the speed of thought RIM responded to business demands traditionally slow if at all. RIM was slow to advance from its core market of B2B to B2C which was fast becoming tepid and then continually released poorly designed products. Flanked by a perpetual assault by competitors i.e. proliferators on price and innovation such as Google android and Apple with their “rope a dope” techniques, RIM continued to over promise and under perform.

I find three reasons why RIM has failed. 

1. Deterioration – When low end competitors move in with low-cost, low benefit drawing the mass market.
2. Proliferation – When competitors develop new combinations of price and unique benefits attacking an existing market.
3. Escalation - When competitors squeeze profits by offering more benefits at the same or lower price.

If you were RIM’s CEO or Board person you would find they have faced two out of three of the challenges. Deterioration and proliferation.

 Now, RIM is undermined by a reputation of poor quality, lack of innovation an inadequate customer service.   

Earlier this year at RIM's Capital Market Day Mike Lazaridis founder and Co-CEO of RIM announced he was presenting on RIM’s Playbook. He discussed the features but little to nothing on differentiation. 

In Jonathan Geller’s the "Boy Genius” he writes: 

“Picture yourself sitting in an executive briefing at Research In Motion. You’d hear Mike Lazaridis unequivocally state time and time again that BlackBerry smartphones would never have MP3 players or cameras in them because it just does not make sense when the company’s primary customers were the government and enterprise. “BlackBerry smartphones will never have cameras because the No. 1 customer of ours is the U.S. government,” Mike Lazaridis would say in meetings. “There will never be a BlackBerry with an MP3 player or camera.” 

What does Mr. Jobs do? 

He strutted the iPhone which eschewed the design of then top players RIM’s BlackBerry and Palm’s Treo line. Avoiding groupthink, Apple and Jobs dropped the keyboard, and replaced the stylus with the finger and multitouch. RIM? 

Continues Geller: "When you hear Mike (RIM CEO) talk about the latest and greatest, it's been the same thing for ten years: security, battery performance, and network performance. RIM has positioned battery life and network performance for years. People are not concerned with iPhone batter life," one source told me. Network performance to Mike trumps any innovation a device like iPhone offers. Mike is convinced people won't buy an iPhone because battery life isn't as good as a BlackBerry."

This is a textbook example of deterioration. The outcome is predictable.

In today’s business environment there are new rules of war: 

• Speed
• Agility
• Adaptability
• Innovation
• Fierce competitive resolve.

This is the new world of business competition at the speed of thought. The old days are the old days. RIM's leadership looks grim. They are models of security conscious businesses for sure. A feeling of victory is understandable. But not where investors are lukewarm with growth prospects and more erstwhile competitors are nipping frantically at the flanks.   

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How The World's Biggest Company Works With The World's Most Populous Nation - Walmart Is Changing China

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How Walmart Is Changing China

The world’s biggest corporation and the world’s most populous nation have launched a bold experiment in consumer behavior and environmental stewardship: to set green standards for 20,000 suppliers making several hundred thousand items sold to billions of shoppers worldwide. Will that effort take hold, or will it unravel in a recriminatory tangle of misguided expectations and broken promises?

By Orville Schell

 

 

A Map of Walmart in China

From sea cucumbers in Dalian to upscale Sam's Clubs in Shanghai, Walmart stores vary from province to province.

Stepping into the building’s vast, windowless interior, I have the sense of entering an oversize Fabergé egg. But instead of refined scenes of aristocratic czarist life, I encounter thousands of middle-class Chinese engaging in the newest, and already the most inalienable, right in this erstwhile “People’s Republic”: shopping. This is the Shijingshan Shanmuhui, a Sam’s Club, one of the 352 stores that Walmart now operates in 130 Chinese cities.

Just inside the doorway, a scrum of salespeople hawk everything from roasted sweet potatoes to fitness-club memberships and massage chairs. Throngs of energetic customers push overflowing carts (fitted with data screens touting the latest bargains) making that familiar sound of wobbling rubber wheels on concrete. Indeed, its familiarity makes me feel I’ve been astrally projected back to Walmart’s natal place—Bentonville, Arkansas, which the current president and CEO, Michael Duke, recently referred to as the “Lighthouse of the Ozarks.”

But the young Chinese women workers in green aprons and sanitary masks make it undeniable that we’re a long way from the Ozarks. They call out their wares in Mandarin, proffering samples of soya-bean milk, date juice, and lychee jelly. Around them are mountainous piles of fresh pig intestines; pillow-size bags of dried fungus, seaweed, and mushrooms; packages of desiccated deer tendons (still attached to hooves!); inky-black dehydrated sea slugs; glistening octopuses on nests of chopped ice; and tanks of gulping fish, dazed frogs and turtles, and hyperactive shrimp.

Although Walmart’s $7.5 billion in Chinese sales receipts account for only 2 percent of the company’s annual revenues, its sales in China have risen substantially over the past decade. Sales in the United States, by contrast, have been shrinking. And as China’s retail market—the world’s fastest-growing—expands by 18 percent a year, Walmart’s executives smell the intoxicating scent of more growth to come. Equally important, if not more so, some 20,000 Chinese suppliers, or “partners,” reportedly provide Walmart with about 70 percent of the nearly $420 billion worth of goods that it sells globally each year. (Because of the complexity of the global supply chain, the percentage from China is hard to calculate.) China has become so crucial to Walmart’s supply chain that in 2002, the retail giant moved its global sourcing headquarters across the border from Hong Kong to Shenzhen, in southern China. 

As I tramped across the country, from Shenzhen to Manchuria and from the North China Plain to Sichuan province, visiting Walmart retail outlets, factories, farm cooperatives, and executive offices, the Walmart/China axis loomed as something unprecedented. Beyond the sheer scale of the relationship, what struck me was how interactive Walmart and China have become.

Of course, over the past century and a half, most of the foreign missionaries, merchants, military emissaries, and educators who have sallied forth in hopes of “changing China” have returned home with little to show for their efforts. Like nitinol, a unique nickel-titanium alloy that possesses “shape memory,” bending at low temperatures only to regain its original form when heated, China has long rebuked foreign efforts to change it. So one might plausibly wonder why Walmart, a company that is so indelibly American, might now have an experience that is any different.

Indeed, Walmart has deep roots in conservative, southern, small-town, fundamentalist-Christian, anti-union, middle-American values. The founder, Sam Walton, was an ardent capitalist, devoted Christian, and militant anti-Communist who rolled all these values up into a quasi-religious/political credo, a founding faith for a business praised by then–Vice President Dick Cheney as “one of our nation’s great companies,” exemplifying “some of the very best qualities in our country—hard work, the spirit of enterprise, fair dealing, and integrity.” I encourage you to read this article in entirety at via theatlantic.com

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As the CEO and founder of InnoThink Group, Jim can help your organization enhance the strategic innovation and competitiveness of your business policy and strategy, with an emphasis on increasing top line growth. 

 If you’re interested in having Jim speak at your next event, simply use this form to send us your details and speaking requirements, and we’ll be in touch shortly. Or you may call us at 719-649-4118.