Outside the Lunch Box

This week before Christmas, 2005 I had a great lunch.  I was in L.A. and I called an old acquaintance to join me for lunch.  He's a great guy, somewhat trapped in an "old-line" American manufacturing company that's been Locked-in for several years.  They've not done their shareholders, nor their employees, much good for a decade.  Executive turnover hasn't helped as new leaders just follow worn-out strategies that have eroded their pricing and competitiveness.

"How about some Sushi?" I asked.  Now, this buddy was a "meat and potatoes" guy, so my question was intended as a ribbing.  I was surprised when he said, "Sure.  Whatever you like."  "You must be kidding" I said, "since when do you eat so adventurously?"  "Over lunch" he said, leading me to wait for a juicy answer.

During the last year, he had taken on a new role helping develop a company strategy.  In that role, he had made a half dozen trips to China.  "You know" he said to me "I never really understood just how dramatic the globalization changes were going to be to our business until I went to China.  They do work entirely differently than us.  It's beyond culture and how smart we versus they are.  The Chinese are using resources we ignore, and approaching the opportunities differently.  If our company doesn't change - fundamentally change - we won't survive another 10 years.  The decision, the opportunity, is up to us.  If I can get our top management to see what I've seen, and we step up to the Challenges, we can get out of our Lock-in and create a future that exceeds everyone's expectations.  But, if we sit doing what we've done - well, we're a gonner."

My friend got outside the box.  When he changed roles and entered strategy he Disrupted his thinking about the business.  He visited foreign companies, and he saw opportunities for sales, marketing, product development, and manufacturing that he believes obsolete the existing Success Formula and create opportunities for a new one.  And, while doing this, he changed himself.  His personal Lock-ins to "the way this business is done" for the last 20 years disappeared and he sees a new industry competition developing.

Now he eats Sushi.  And he eats all kinds of Chinese food I've never had the opportunity.  He also eats Indian, or whatever food is served.  He got outside the box, he started thinking, and the old barriers fell away as he moved toward a new definition of success

I hope everyone enjoys their Christmas, Hanukah or Kwanzaa meals in joy and peace this year.  Whether it's roast beef, turkey, goose, lamb --- or Sushi.

The World is Flat

If you haven't read it yet, I strongly encourage you to read The World is Flat by Thomas Friedman.

Too many of us get up every day and do our jobs without looking just beyond the horizon.  Yet, what's over there is available for us to see if we will just take the time to look.  Thomas Friedman gives us a great look at what the future holds by examining the existing trends and what promotes those trends.

Those who are Locked-in to old Success Formulas may choose to disregard this book.  That would be a mistake. Every company in America and Europe - and increasingly developed Asia - will find themselves Challenged (if not already so) by the emergence of new competitirs in the developing world.  These competitors don't survive just on low labor rates, but by finding new ways to compete.  These new competitors aren't Locked-in to old processes.  They are busy upsetting existing competitive Lock-in and creating new Success Formulas.  They are succeeding by targeting the Lock-in of existing competitors.  Targeting you.

Let The World is Flat get you "Outside the Box."  Then think ---- think about what you'll have to do to succeed in this rapidly changing competitive landscape.

Hurricanes and Plane Crashes

Can you tell the difference between a disturbance and a Disruption?  I've found in my speeches that most people can't. 

There's actually a big difference.  A disturbance will cause you to pause and think about how to get your Success Formula to react quickly.  But a Disruption causes you to stop and think about the viability of your Success Formula.  It creates a pattern interrupt that it causes you to think about your Lock-ins and consider entirely new Success Formulas.  A disturbance is often externally generated, a whack to your head so to speak, while a Disruption comes from within the organization because it attacks your Lock-in.

I'm going to reach out of business for this example.  When Katrina hit the Gulf Coast I urged the government to stop business as usual, and create White Space for rebuilding the area into a better, more powerful economic environment.  Katrina created a severe Challenge to the area.  The problems left behind were so large that business as usual could not deal with them.  But would the area actually change, or be left to cope via its old means and resources?

The President went on television in front of bright lights (powered by portable generators) to say that yes, New Orleans needed to be rebuilt.  And he promised lots of money.  But there were no specific agenda items that would change the old ways we had of dealing with catastrophes, nor solutions to the patchwork of local, parish, state and national approaches that often conflict.  At the time of the speech we all wished for a quick rebuilding, but it was clear that would not happen - and it hasn't.  It couldn't if we didn't change our way of operating - change our Success Formula.

This happened similarly when we responded to the attacks of September 11, 2001.  We gave families of the dead money, but otherwise we lost our opportunity to change how we prepare, how we manage first-responders, and how we operate our airlines.  Those things are all still the same - and unlikely to change - because we did not Disrupt our way of doing things and create White Space to develop new solutions.

We didn't Disrupt the way we deal with catastrophes.  We didn't change the way we'd always operated.  To mimic a recent clever TV ad, all that was really offered was "throwing money at the problem."  And that, in fact, hasn't happened because the way we distribute money is so broken the process can't allocate funds quickly enough to help.  The money is promised, but not distributed and it looks increasingly like it won't be due to chronic government deficits and urgent needs from elsewhere (such as Iraq, Medicaid, etc.)

Katrina was a Challenge.  It demonstrated our inability to prepare for and respond to catastrophes.  It begged for a Disruption to our Lock-in to old government approaches so we could develop new solutions.  But, rather than undertake a Disruption we instead mired ourselves in disturbances as lawmakers and spending officials haggle through the problems of our dysfunctional process.  The Challenge pointed out the flawed approach, but we have not done anything about it.

Some have said to me that these government examples are unfair - because government can't be Disrupted.  And that is simply untrue.  After December 7, 1941 we Disrupted government allowing businesses to react quickly in the production of Liberty Ships, airplanes and all manner of military apparatus to move us expeditiously into WWII.  We opened the floodgates to new ideas for fast action - and we produced more equipment (and solutions) faster than anyone, including our enemies, believed possible.   

Challenges expose weaknesses.  But we too often focus on the problems created by the Challenges rather than the Challenge itself.  We quickly reach for Disturbances that make a lot of noise, but don't really change our Success Formula.  When that happens, you can predict the future quite well - for behavior will remain unchanged.  Only by Disrupting - implementing pattern interrupts that cause us to question the status quo - and bringing in committed White Space can we meet the Challenge head-on and create Success.

It's all about growth

What's the most critical element for a successful business?  Without a doubt, it's growth.  Growth is the primary requirement for good business health.

Look no further than GM.  Because GM didn't maintain growth, the company now has 1 retiree for every 3 employees.  The "legacy costs" now killing GM are a result of insufficient growth - which has created more out-of-work union members and pensioners than they ever anticipated.  Without growth, they've created a huge number of people relying upon the productivity of a relatively small group.  Had GM maintained it's market share, and grown, it wouldn't have nearly as difficult problem today.

Or look at our U.S. consumer sentiment.  While some politicians tell us we're in a "good economy" the fact is that we are going to end this year with 5 consecutive years of over 1 million layoffs from large firms (source - Challenger and Gray.)  This doesn't count all the small and medium-sized firm layoffs, which the government tallied at 1.77million in September alone.  It's hard for consumers to feel good when the government brags about creating 215,000 new jobs in a month where that is less than one-fifth the layoffs.  So, lack of growth in jobs and you have trouble believing there will be a pension, social security, medicare/medicaid -- or even a decent future income. 

The key to success is growth. Growth can hide a multitude of mistakes undertaken in the pursuit of growth.  But without growth, every hiccup is a potential disaster.

CEO of the Year

Marketwatch has named Ed Zander of Motorola as it's CEO of the Year.  What a well deserved compliment.  Motorola's revenues are up an eye-popping 59% since before Zander joined, and the stock price has doubled.  The culture has changed from moribund and stifling to open and aggressive as they chase new opportunities in not only cell phones, but set top boxes and MP3 players.

We blogged Motorola's success story in early September.  The story has been a classic Phoenix Principle implementation as Zander first Disrupted the organization and then implemented several White Space projects.  As early as mid-2004 we predicted the success of Motorola (and recommended buying the stock) due to the classic Phoenix Principle steps being taken (see case study here.) 

Extremely few turnarounds ever actually regain any sustainable growth - and less than 7% achieve the success of Motorola.  It is great that the company should be noted for what's been accomplished.