Can Sony Sing?

Today John Dvorak claimed that Sony can no longer innovate.  Looking at recent history, he looks right.  But I'd say he's kneeling over the gravestone a bit early.  Yes, Sony somehow missed the whole MP3 phenomenon and let Apple steal what should have been their big show.  But given the half life of gee-whiz technology and entertainment, this movie is far from over.

Sony is still full of innovators.  Both in devices and content.  But they are hamstrung by applying old school best business practices that cut off the ideas before they get to market.  The change in Sony to "professional management" when Morita retired has caused too much internal focus and inhibited taking highly innovative insights to market.

Morita was a very un-Japanese businessperson.  He enjoyed innovation, and bristled at the bureaucracy and conformance that typified Japan.  He couldn't help looking for entrepreneurial new products and markets.  Now, the new CEO is an America-trained businessman.  America is known worldwide for its entrepreneurism and openness to new ideas.  Perhaps he will turn Sony toward this American style - and a return to the days of Morita.

What would we look for?  Stringer needs to disrupt the organization a bit by pointing out how their existing processes inhibit innovations working their way through the company.  And he needs to loosen up the organization.  Fewer number reviews in meetings and more gadget reviews might be a good start.  Stringer needs to put both content and gadget folks in the same teams and see what they develop.  With so many innovative folks, he needs to create White Space teams with permission to ignore the Sony business systems and create new success formulas.  Give these teams permission to be different, and resources to succeed.

Look for White Space in Sony.  If you see it, buy the stock.  Sony is loaded with ideas - heaven help competitors if they set those ideas free!

Drive for Success at GM

GM is having a tough time.  Last week, the stock (already beat up) dropped nearly 20% on news of weak sales and lower profit expectations. You have to go back more than 10 years (see chart) to find a time the company's market value was this low.  So, what should GM do?  What action will turn this venerable company around?

GM has responded to its problems by continuing decades of Defending & Extending its failing business model.  It continues to avoid addressing the real challenges to its business while it resorts to white collar layoffs and traditional cuts.  These are sure to make the problems worse for GM, and further inhibit the company's ability to reinvent itself.

GM once tried to re-invent itself.  Saturn was created as a way for GM to learn what works in today's market.  Remember the "GME" when they bought EDS?  Remember "GMH" when they bought Hughes electronics?  Chairman Roger Smith was first lauded, then later pilloried for these forays.  Over time, GM let it's lock-in to the past move them toward getting rid of both EDS and Hughes.  That's too bad, because they offered the White Space for GM to create a company much better at sustaining itself. 

Saturn offered GM the capability to turn its auto business around.  You CAN succeed making and selling cars in America - look at Toyota.  If GM could have given up its lock-in long enough to look at Saturn as White Space they could learn from, and migrate toward, GM could have succeeded. Instead, GM leaders hated the new division and the attack on their lock-in it represented.  So they acted to starve it to death.

Whacking a few more jobs isn't going to save GM.  I doubt even GM believes it will.  If they want to avoid "junk" status on their bonds, stay on the DJIA, and continue to represent American industry they better start using some White Space to undertake substantial change.  Our research has shown that turnarounds such as GM needs happen less than 10% of the time.  What works?  Changing the company business model via attack on the old operating parameters and the use of White Space to develop a new Success Formula. 

When you're as deep in the Swamp as GM you can't fine-tune or marginally improve your way back to success. 

Can You Co-Create?

C.K. Prahalad is a colleague of Adam's. His most recent book The Future of Competition is going to be highlighted March 30, 2005 at a University of Michigan symposium on experience co-creation. The university is launching its co-creation center. Good luck to Professor Ramaswamy on his efforts to get more businesses to incorporate customers in the marketing process!!

Ramaswamy and Prahalad use the same facts about business troubles as we use. They then use these facts as a burning platform to say businesses need to change their approach to marketing. They recommend bringing customers into the marketing process - co-creating products, distribution, promotion and pricing with customers. Overall, the act of co-creation is undoubtedly a good thing. I think better competitors already recognize the need for co-creation, and some are beginning to adopt such activity.

My speaking experience confirms that these facts are easily absorbed and agreed to by audiences. Unfortunately too often these facts are not "compelling" to people. The facts do not create a great enough sense of fear to cause people to change. Despite the ominous predicted outcomes (and they are ominous), reciting the facts does not create a Disruption (pattern interrupt) for people. The fact that businesses are in trouble is accepted. People seem willing to live with a disquieted concern while continuing past practices. In order to consider change, audiences want to know what to do about it. And here the co-creation authors say "go undertake experience co-creation."

As good as this idea is, it seems to me the authors have underestimated the organizational challenges faced when implementing a transformation of the magnitude they propose. We would recommend the authors augment their recommendations with more about how companies will change their embedded process, which (after all) was built upon past success. Our fear is that existing organizational Lock-in will keep organizations from embracing the next practice of experience co-creation.

It would seem to us that the only way experience co-creation can be implemented is if people incorporate it into their Success Formulas, and accomplishing that requires starting the effort in White Space and then migrating the organization toward these new processes. Our experiences would indicate that for most companies existing processes will be totally effective roadblocks to any organization actually attempting to implement this powerful new approach.

Overall, what these authors want readers to do is clear, but we would recommend they more powerfully explain the re-invention gap which exists between what companies do (from a traditional firm-centric vantage) and what would be more successful (a robust two-way dialogue with customers) in sufficient detail to drive leaders toward undertaking a disruption (pattern interrupt). Our case work has shown that only after this challenge-based disruption can White Space for these ideas take root. It's unclear from this book exactly what these authors would have companies do to implement, but we would observe that simply attempting to change existing processes to incorporate co-creation is extremely unlikely to work.

Our work indicates that readers who want to fully capitalize on the promise of experiece co-creation can increase markedly the odds of a big win if they apply co-creation to White Space projects which can operate freed from existing Lock-in and thus develop a new Success Formula built on co-creation. These new Success Formulas forged in White Space can then act as magnets for the existing organization to migrate toward a more customer-centric approach to marketing. The co-creation idea is clever, and combined with our approach using disruption and white space can have tremendously beneficial impact - quickly.

Adam Hartung in BusinessWeek

On February 11, 2005 BusinessWeek printed an article by the President of an ad agency specializing in small-budget clients.  The article said that a survey of 400 companies indicated growth stalls were caused by external factors, but that overcoming these stalls was up to internal company dynamics.

Adam wrote to BusinessWeek in an effort to overcome this traditional, but wrong interpretation. The solution to growth stalls is not found in an internal analysis and improvement in operations.  Rather, it requires understanding the use of White Space in order to develop new Success Formulas which can overcome the market challenges and simultaneously address existing Lock-In which got the enterprise in trouble in the first place.

Read the letter by clicking here