Using White Space to learn and grow - Google v Microsoft

Google keeps on growing.  While many companies bemoan revenue losses and poor results in 2008 and 2009, Google keeps new products flowing out the door and revenues continue to increase.  New markets are being developed.

This Google revenue growth is powered by use of White Space, as CNN.com reported in "Gmail holds Graduations and Funerals."  GMail labs is a White Space team that develops new applications and uses for Gmail.  Its operating premise is that it should develop the products rapidly, then push into the market to get feedback.  Then the team can determine what to modify and test further, what to push into the market as non-beta and what to kill.  As recently demonstrated in the headlined behavior, Google is ready to keep some things and kill others based upon market feedback - not just what the internal people or analysts think.

• "This isn't the first time Gmail Labs has graduated and killed some test features since Gmail Labs started in June 2008, but the event does underscore an idea that Google says is key to its success as an innovative company: Let people create products they'd use themselves, get those products out to the public as soon as possible, and make consumers think it's OK for things to break."
• ""At Google, in general, the philosophy is to get things out quickly in front of our users and not make huge promises," said Ari Leichtberg, another Google engineer"

Nothing is more accurate than real market feedback, as readers of this blog have heard me say often.  Scott Anthony of Innosight recently took up this mantra in a Harvard Business Review blog "How to Kill Innovation: Keep Asking Questions."  He relates how a large company with a new idea kept asking "what if" questions about a new idea.  Each piece of research led to more "what if" questions.  With its massive resources, the company could keep asking and researching forever, never getting real market input and never getting the innovation to market.

In traditional companies, with a new product funnel and stage gate implementation process which can take years to run through, once something moves into the market the internal "champions" are so vested in the innovation they can't stand for it to fail.  Far too often, if the innovation were to fail the champions would lose their jobs - or see their careers tank.  Too much analysis causes too few ideas to make it to market, and causes the organization to overspend on the innovation that does.  After launch market feedback is often ignored, or manipulated, to allow the innovation to be pushed harder and longer on the hopes that with "just a little more time and effort" it will succeed.

What keeps Google growing, and attracting top talent, is its willingness to use White Space.  It is willing to develop ideas quickly and obtain real market feedback.  Then decide what to keep, and what not to keep. Because it moves quickly, market input shapes the offering.  Market input allows the company to see what people really use, and thus worthy of additional investment.  Or what people don't use, and thus needs to be dropped before too much is sunk into the idea.

When Microsoft decided to add "clippy" to its products it was a herculean effort to install it across all products.  This computerized help tool has had little use, and is often despised by users.  Microsoft decided to create this feature based on almost no market input, instead relying on some customer focus groups.  After making the enormous investment - in lieu of many other opportunities passed over internally - Microsoft simply became "married" to the innovation.  Now "clippy" is still on the applications, but is almost never used.  And it gives Microsoft's products no user advantage.

All companies can grow in 2010.  You need to act more like Google.  Develop early stage products quickly, and get them into White Space projects which will market test them.  Don't spend too much time, money and effort "what iff-ing" or doing "market research" trying to predict future customer behavior.  Listen carefully for market input, then modify.  Have more than one opportunity in White Space, because you don't want to over-invest in any single idea that ran the internal gauntlet.  Be ready to move forward quickly with things that work, and abandon those that don't.  If you use give yourself permission to test new things in White Space, and resources, you too can grow in 2010 and climb out of this recession.

Waiting for the economy? That won't work.

Every day it seems someone tells me they "are looking forward to an improved economy."  When I ask "Why?" they give me a horrified look like I must be stupid.  "Because I want my business to improve" is the most frequent answer.  To which I ask "What makes you think an improved economy will help you?"

This recession/depression is the result of several market shifts.  What people/businesses want, and how they want it, has changed.  They no longer are willing to part for hard earned (and often saved) dollars for the same solutions they once purchased.  They want advances in technology, manufacturing processes, communications and all aspects of business to give them different solutions.  Until that comes along, they are willing to put money in the bank and simply wait.

Take for example restaurants.  Many owners and operators are complaining business was horrid in 2009, and still far from the way it was years ago.  And regularly we hear it is due to "the recession.  People fear they'll lose their jobs, so they don't eat out as often."  Nicely said.  Sounds logical. Makes for a convenient excuse for lousy results. 

Only it's wrong.

In "Dinner out Declines:  Economy Not Sole Factor" MediaPost.com does a great overview of the fact that dining out started declining in 2001, and has steadily been on a downward trend.  Across all age groups, eating out is simply less interesting - at least at current prices.  When the recession came along, it simply accelerated an existing trend.  Increasingly, people were less satisfied with cookie-cutter, similar establishments that had similar food (almost all of which was prepared somewhere else and merely heated and combined in the restaurant) and exorbitant drink prices.  For years restaurant prices had outpaced inflation, and simultaneously family changes - along with the growth of better prepared foods at grocers and specialty markets - was enticing people to eat at home.

This is true across almost all industries.  A revived economy will not increase demand for land-line phone service.  Nor for large V-8 American autos costing $60,000.  Nor for newspapers, or magazines - or even books most likely. Or for oversized homes that cost too much to heat and cool.   In fact, it was the trend away from these products which caused the recession.  People simply had all of these things they wanted, so they stopped buying.  Fearful of economic change, they simply accelerated a trend brought on by shifts in technology and underlying ways of doing things.  When we once again talk about better economic growth in America it will not drive people to these purchases.  Rather, people will be buying different things.

For the recession to go away requires a change in inputs.  Providers have to start giving buyers what they want.  They have to understand market needs, and give solutions which entice people to part with their money.  Waiting for "the economy" will make no difference.  Government stimulus can go on forever, but it won't create growth.  It can't.  Only new products and services that fulfill needs create growth.  That will cause spending (demand), which generates the requirement for supply.

There are companies that had a great 2009. Google, Apple and Amazon are popular names.  Why?  Not just because they are somehow "tech" or "internet" companies.  2009 saw the demise of Sun Microsystems and Silicon Graphics, for example.   The difference is these companies are studying the market, looking to the future and introducing new products and services which meet market needs.  Because of this, they are growing.  They are doing their part to revitalize the economy.  Not with stimulus, but with products that excite people to part with their cash.

Those who are waiting on the economy to improve are destined to find a rough road.  An improving economy will be full of new competitors with new solutions who did not wait.  To be a winner businesses today must be bringing forward new products and services that meet today's needs - not yesterday's.  And if we start getting winners then we will climb out of this economic foxhole.

Looking for Winners - Dell

It's easy to recognize a company in the winner's circle.  Like Apple or Google.  Most of us want to know how to spot the winners early.  And that can be hard, because often the reported information will make an emerging winner sound horrible.  Like the expected demise of Apple in 2000.

Last week Dell reported sales and earnings, and valuation fell (Marketwatch.com "Dell Shares Fall as Company Net Slips").  The article notes that sales were "surprisingly strong," but claims that a dip in profits was bad news sending the stock price downward.  Of particular concern was a lack of growth in desktop PCs.  Many analysts are expecting (I should say hoping) that System 7 is going to spur additional desktop sales and are upset that Dell isn't getting "its fair share" versus Hewlett Packard.

This is entirely the wrong way to evaluate Dell's results.  Simultaneously, the Mobile unit had very strong performance.  As did Services, greatly aided by the Perot acquisition.  As I blogged months ago, Dell has started moving in a new direction.  Toward the growth markets of mobile devices and the need to build out applications using Cloud computing architectures.  These markets are certain to grow in the future.  Meanwhile, desktop PC sales are destined to decline.  There is no doubt about this.

Dell has been undertaking some Disruptions, and using White Space to develop and go to market with new products in these newer, growing markets.  Amidst this effort, it has put less money into the hotly contested and profit-margin-declining old fashioned PC business.  This is clearly the right move.  If Dell is the first and strongest to transition to new markets it has the best chance of regaining old growth rates.  For Dell, the best thing possible is to see it growing beyond anticipation in these markets. 

Some analysts complained that both mobile and services are too small as businesses at Dell, and therefore the company needs to put more resources (meaning price actions) into traditional PCs.  These same analysts will lambaste Dell when the market shift is completely pronounced and the traditionalist (which now appears to be HP) is left in decline.  Dell has used White Space to begin launching products.  If it uses these White Space efforts to learn the company can become smart, faster than other competitors, and "jump the curve" from its old business/market to the new one.  Isn't that what every business needs to do?

What we want to see now is ongoing investment in these growth markets, with breakout products that can make a big revenue difference.  White Space is good, but it is critical that Dell invest fast and smart to replace old revenues as quickly as possible.

I was encouraged by Dell's results.  The company is growing where it needs to, and de-emphasizing businesses that can become slaughterhouses.  For investors, employees and suppliers this is a good thing.  When companies are using White Space it is easy to beat them up and ask them to "refocus" on traditional markets.  It also can kill them.  Here's hoping Dell stays on track.

Killing Me Softly - Sears, Sara Lee

About 30 years ago Roberta Flack hit the top of the record charts (remember records anybody?) with "Killing Me Softly" - a love song.  Today we have 2 examples of CEO's softly killing their shareholders, employees and investors.  Definitely NOT a love song.

Sears has continued its slide, which began the day Chairman Lampert acquired the company and merged it with KMart. I blogged this was a bad idea day of announcement.  Although there was much fanfare at the beginning, since day 1 Mr. Lampert has pursued an effort to Defend & Extend the outdated Sears Success Formula.   And simultaneously Defend & Extend his outdated personal Success Formula based on leveraged financing and cost cutting.  The result has been a dramatic reduction in Sears stores, a huge headcount reduction, lower sales per store, less merchandise available, fewer customers, empty parking lots, acres of unused real estate and horrible profits.  Nothing good has happened.  Nobody, not customers, suppliers or investors, have benefited from this strategy.  Sears is almost irrelevant in the retail scene, a zombie most analysts are waiting to expire.

Today Crain's Chicago Business reported "Sears to Offer Diehard Power Accessories for Sale at Other Retailers." Sears results are so bad that Mr. Lampert has decided to try pushing these batteries, charges, etc. through another channel.  At this late stage, all this will do is offer a few incremental initial sales - but reduce the appeal of Sears as a retailer - and eventually diminish the brand as its wide availability makes it compete head-to-head with much stronger auto battery brands like Energizer, Duralast, Optima and the heavily advertised Interstate.  Sears has attempted to "milk" the Diehard brand for cash for many years, and placed in retail stores head-to-head with these other products it won't be long before Sears learns that its competitive position is weak as sales decline. 

Mr. Lampert needed to "fix" Sears - not try to cut costs and drain it of cash.  He needed to rebuild Sears as a viable competitor by rethinking its market position, obsessing about competitors and using Disruptions to figure out how Sears could compete with the likes of WalMart, Target, Kohl's, Home Depot, JC Penneys and other strong retailers.  Now, his effort to further "milk" Diehard will quickly kill it - and make Sears an even less viable competitor.

Simultaneously, Chairperson Barnes at Sara Lee has likewise been destroying shareholder value, employee careers and supplier growth goals since taking over.  During her tenure Sara Lee has sold buisinesses, cut headcount, killed almost all R&D and new product development, sold real estate and otherwise squandered away the company assets.  Sara Lee is now smaller, but nobody - other than perhaps herself - has benefited from her extremely poor leadership.

As this business failure continues advancing, Crain's Chicago Business reports "Sara Lee to Spend $3B on Stock Buyback." In 2009 Sara Lee announced it was continuing the dismantling of the company by selling its body-care business to Unilever and its air-freshener products and assets  to Procter & Gamble Co. for approximately $2.2 billion.  As an investor you'd like to hear all that money was being reinvested in a high growth business that would earn a significant rate of return while adding to the top line for another decade.  As a supplier you'd like to hear this money would strengthen the financials, and help Sara Lee to invest in new products for growth that you could support.  As an employee you'd like this money to go into new projects for revenue growth that could help your personal growth and career advancement. 

But, instead, Ms. Barnes will use this money to buy company stock.  This does nothing but put a short-term prop under a falling valuation.  Like bamboo poles holding up a badly damaged brick wall.  As investors flee, because there is no growth, low rates of return and no indication of a viable future, the money will be spent to prop up the price by buying shares from these very intelligent owner escapees.  After a couple of years the money will be gone, Sara Lee will be smaller, and the shares will fall to their fair market value - no longer propped up by this corporate subsidy.  The only possible winner from this will be Sara Lee executives, like Ms. Barnes, who probably have incentive compensation tied to stock price -- rather than something worthwhile like organic revenue growth.

Both of these very highly paid CEOs are simply killing their business.  Softly and quietly, as if they are doing something intelligent.  Just because they are in powerful positions does not make them right.  To the contrary, this is an abuse of their positions as they squander assets, and harm the suburban Chicago communities where they are headquartered.  That their Boards of Directors are approving these decisions just goes to show how ineffective Boards are at looking out for the interests of shareholders, employees and suppliers - as they ratify the decisions of their friendly Chairperson/CEOs who put them in their Board positions.  The Boards of Sears and Sara Lee are demonstrating all the governance skill of the Boards at Circuit City and GM.

It's too bad.  Both companies could be viable competitors.  But not as long as the leadership tries to Defend & Extend outdated Success Formulas unable to produce satisfactory rates of return.  Lacking serious Disruption and White Space, these two publicly traded companies remain on the road to failure.

Change How You Do Market Research - New Book "Remote Research"

Paralysis from analysis is all too common.  Why? Because for the longest time people have assumed that it's possible to predict the future by studying history.  And there has been ample belief that if you ask customers questions, they will give you the answers which will guide your future.  Further, people want to believe that it was possible to find hidden meaning via discovering previously unseen correlations -- even though almost all these sorts of low-score correlations turn out to be spurious, merely mathematical artifacts. 

Readers of this blog know that when we investigated The Phoenix Principle we learned that  traditional market research rarely improves understanding of customers or markets.  And we learned that customers are incredibly unreliable at telling you what they really want, or what they are likely to do next.

Nate Bolt of market research firm Bolt Peters now confirms this.  His recent column at Venturebeat.com "Stop Listening to Your Customers" is an indictment of traditional market research observed through his 9 years working with clients in the field.

• "A common assumption... is that listening to potential customers is the best way to find out whether your product or idea will succeed in the market. Honestly — don’t bother."
• "Opinions are often inconsistent with behaviors or other attitudes, especially when discussing hypotheticals."
• "Remember 'Clippy" the little character that appeared in Microsoft Word years ago? That little bastard arose, in part, from Microsoft asking users if they wanted help working on their documents — everyone said, “Sure, sounds great.” But once people started actually using it in the real world, they hated it — it might be one of the most hated features in the history of computing."
• "Never ask people what they think of your product or idea."
• "Test ideas early by watching behavior. It’s fine if you don’t have a 100 percent functional interface — having eight people interact with a prototype or even wireframes or design mockups can be incredibly useful. Even recruiting strangers from the street to use your prototype is better than nothing."
• "Use unorthodox methods. Companies like Apple and 37signals make a big deal about never conducting user research. They lie... Releasing products in generations, like Apple does, provides them with mountains of reviews, task-specific complaints, crash reports, customer support issues, and Genius Bar feedback"

Too much money is spent on research that can never, by it's design and method, tell the business what it needs to know.  The only way to know how to compete is to get into the market.  Quit trying to analyze - go do it!  An ounce of  "doing it" is worth a kilogram of research and analysis.  Get out of the office, out of the conference room, and into the market.  Set up a White Space team and make them responsible for launching, learning, reporting and figuring out what customers want that you can sell at a profit.  That feedback is the research which is really worthwhile.  It's faster, easier to get and more accurate than anything you'll get from a market study or focus group!

Nate Bolt's new book is "Remote Research."  The link I found to the book was at RosenfeldMedia.com.

Setting Expectations for White Space - Apple iPad

It's easy to misunderstand White Space.  About twenty years ago Apple launched the Newton.  The company sold about 375,000 of the first commercial PDAs, but Apple's leadership thought the market wasn't really there - and decided instead to focus on growing Mac sales.  Obviously, as Palm and other PDA makers demonstrated, there was a tremendous market for PDAs.  Apple misread the feedback from White Space.

Look now at the recent iPad launch.  Silicon Alley Insider headlined "Now That They've Seen Apple's iPad, Most People Don't Want One."  The headline keys on the fact that after the launch the number of people who said they were not interested to buy doubled (26% to 52%).  Wrong fact to grab onto.

Instead, look at the fact that the number who said they would buy one tripled, from 3% to 9%.  This is incredible, and should excite Apple's management as well as employees, suppliers and shareholders.

Most people will see a new, innovative product and say "why would I want that?  I already have this other thing and it works great."  And that is what marketers should expect.  Most people are just trying to Defend & Extend what they regularly do, and thus all the want is a product that helps them do their thing a little easier, faster, better and cheaper.  They want minor improvements - variations and derivatives of what they already have.  Improvements that are immediate, without them doing anything new or different. 

All new deeply innovative products start with customers who are under-served or unserved.  And this is why it is so important they be launched in White Space.  White Space teams aren't intended to develop the big, mass market of known customers looking for something new.  White Space is about doing new things that bring in new customers, give new solutions that attract real growth.  And White Space teams have to learn how the market is evolving, how they fit into the market shift and how their solution will advance the market in order to sell more.

For the iPad, the 3% to 9% shift in likely buyers is huge because it shows that the iPad is an offering that appeals to people who are not today well served by their existing PC, laptop, netbook, mobile phone, kindle or mix of these solutions.  9% of respondents are saying that they see the iPad and they see a solution for what they want to get done.  And if 9% of potential buyers see this option, that is HUGE.  By White Space standards, often there are only .5% or 1% or 2% of people who initially see how the new product fulfills their under-served needs.

Set expectations right for White Space.  White Space is not for launching variation 4 of an existing product - targeted at existing customers.  That's what the marketing and sales department can do fine, thank you very much.  White Space is the team that finds the 3% (or in Apple's case 9%) of users that see value in this solution, then works with them to implement the product/solution in order to make sure it fulfills the market need and is priced to sell effectively while providing a profit to the company.

Apple understands this, you can be assured.  Look at how successfully the Apple White Space teams found the underserved users that jumped all over the iPod and iTunes, the iTouch and then the iPhone.  They got the product positioned and selling in a hurry.  And now that Apple has that skill, the company is going to apply it to the iPad.  If you understand this chart correctly, you understand that it bodes very, very good things for Apple. 

And it tells you the importance of having White Space teams, setting their expectations correctly, and managing them for the kind of results that can turn your organization into the next Apple.  It took Apple 10 years to reach this skill level.  It did not happen overnight.  Or with one product introduction.  And it will take your organization a few years to build this skill.  So, what are you waiting on?

Participate, don't Spectate - Google uses White Space

Lots of new things are happening with technology.  Everyone knows that.  We see the emergence of new communication vehicles like Facebook, and  new ways to exchange data - like Apple's iPhone and RIM's Blackberry.  Skype replaces the telephone and in-person meetings.  iTunes replaced CDs. The list is pretty long.  But how much of these new technologies do you use regularly, how many do you use in your business, and how many do you use in "mission critical" applications of things you do? 

Most of us watch new markets develop.  Many even think the smart thing to do is to wait, let things evolve, see what happens.  Be a late adopter when technology is "stabilized" and prices are lower.  These are spectators to the world of innovation, doing what they've always done and waiting for some future time when it will seem better to switch.

Then there are participants.  The participants are learning.  While others  watch, they actually learn how to get new customers, how to sell more product, how to apply technology to lower cost while improving the solution, how to be more competitive, how to read market shifts (and prepare) - how to make more money.  Like Google.

Google just launched Buzz ("Google Betting on Mo Better Buzz" at Mediapost.com.  Buzz is a new product that links up to social media sites for a variety of functions - one of which is its ability to deliver ads (imagine that) while also adding benefits to users like location tagging and enhancing email.  It does new things, and some things already available via Facebook or Yelp.  That it's market position, or even its functional position in the technology environment, isn't clear is not terribly important to Google management.  In "A Buzz and A Shrug: Why Should Google Kill Anything?" MediaPost.com goes on to describe that at the launch meeting management went out of its way refusing to declare a specific position, or competitive plan, for Buzz.  Google is in the market, trying something, learning and participating - being part of making Disruptions happen and seeing if it can find a way to create sales and profits.

And that's what White Space, and participation, is all about.  While spectators watch and get left behind, participants are in the market.  Spectators fall off the S-curve, as their capabilities fall away from market needs they become less relevant, sell less and profits fall.  Participants use White Space to jump the curve - to move from an old product/market S curve to a new one.  They are in the market learning, and adapting, and moving toward that point where the technologies and solutions collide - thus they are ready and able to move to the next new thing.  While spectators are stuck, doing the same old thing, falling farther behind.

Being a participant isn't hard, nor is it all that expensive.  It requires the willingness to get in the game.  To start.  To do less "planning" and instead get in there and do it - like the NIke ad recommends.  Instead of devoting all your money to defending and extending what you know, take some and invest in the places where growth is rampant.  The learning will pay for itself as it allows your business to move into new markets and generate new revenues.  You will have to Disrupt your thinking and processes to do this, but the payoff is it could save your company!

Long ago business education started with a lot of focus on industrial engineering.  Improving operations to get more stuff out the door.  This was augmented by sales and marketing, to help sell stuff so we could get more out the door.  And finance was added as a way to understand cash flow and funding in order to get more stuff out the door.  All of that was predicated on endless demand for the stuff.  But today, it's not about making lots of your stuff and cramming it down customer throats.  Instead, winners have to be adaptable to market needs - to be part of creating new solutions that generate more revenues and higher profit rates.

You don't need all the answers.  White Space is about having a plan, and goals, based upon scenarios.  But then avoiding analytical paralysis and getting into the market.  Google is phenomenal at this.  Not everything Google launches is a big hit.  Google Wave appears to be struggling.  But that's OK.  If you don't put all your eggs in one basket, because you get into markets earlier and faster, you can afford to have misses.  You still get the benefits of market learning - and move forward to possibly jumping the next S curve.  Google's Buzz is another stereotypical White Space entry into the market.  A product with a lot of possibilities, looking for how to fit into a quickly shifting market, teaching Google more about the marketplace and aiding the company toward maintaining its torrid growth pace.

Overcoming Hurdles and Growth Stalls - Microsoft vs. Apple

Sustaining growth is really hard.  Consulting firm Bain & Company just published the statistic that only 12% of companies were able to grow revenues and profits more than 5.5% from 1998 to 2008 (read more in the Harvard Business Review downloadable book excerpt Profit from the Core.) Given that all companies want to grow, it seems remarkable so many stall.

But while most managers blame lack of growth on the economy, truth is we can learn a lot from those who DID sustain growth.  What doesn't work, and what does, can be found by starting with a great OpEd column about Microsoft published in The New York Times "Microsoft's Creative Destruction." Former Microsoft Vice President Dick Brass provides insight to why Microsoft has become a market laggard in new products - despite enormous revenues, profits and new product development spending. Calling Microsoft "a clumsy, uncompetitive innovator," he says products are "lampooned" and the company is "failing." Harsh words. 

He points out that profits are almost entirely from legacy products Windows and Office.  "Microsoft has lost share in Web browsers, high-end laptops and smartphones. Despite billions in investment, its Xbox line is still at best an equal contender in the game console business."  He explains how internal managers set up false hurdles, often claiming quality was the primary issue, for ClearType and a tablet PC. He claims the internal executives "sabotaged" new projects and he blames inability to meet market needs on "internecine warfare."

But all of that could be said about Apple as well. It once was just like Microsoft.  In the 1990s Apple stopped everything but new Macs from making it to market.  Remember that the first PDA (personal digital assistant) was Apole's Newton? Killing that product became a priority for several Apple executives, and caused the ouster of then CEO John Scully

So the Microsoft described behaviors can happen anyplace. When organizations begin to focus on Defending & Extending their "core" business it leads to hurdles and growth stalls. "Operational improvements" leads to "focusing" on doing what the business always did, perhaps just a touch better (like a next generation operating system [Vista], or a new variation on Office [2007].) The culture, decision-making processes and operating cost model all are geared to doing more of the same. Without intending any downside, in fact in pursuit of improved competitiveness in the "core" products, the business begins erecting hurdles to doing anything new, or different. 

This problem isn't limited to Microsoft  Although we can clearly see the impact and feel pessimistic about Microsoft's future. It has afflicted many companies, and is why they cannot adjust to market shifts. Even if loaded with executives and enormous budgets for R&D, technology or marketing. Don't forget how Apple looked even worse than Microsoft in 2000.

And that's why so few companies maintain growth. The desire to do more, better, faster, cheaper of what we've always done is overwhelming. Defending & Extending the existing business always looks marginally better, and marginally less risky, than doing something new, or different. In trying to maintain growth by getting better at what you've always done - you kill it.

Why? Because Defend & Extend management does not take account of market shifts. New products, new competitors, new technologies, new business models, new customer approaches -- the list is endless of variations which competitors bring to the marketplace. And these variations change the market. Trying to stay on the same course becomes suicide when customers begin moving on.

And that's where Apple has excelled. When Steve Jobs took over he quit trying to Defend & Extend the Mac platform. To the contrary, he reduced the number of Mac models.  Instead of planning based on old market share and sales, he pushed a rigorous scenario planning exercise to create a robust view of future markets - and what needs customers would like solved. He then led Apple to study competitors, both in-kind and on the fringe, to identify new markets being developed and new solutions being tested.  He then Disrupted Apple - by cutting the Mac platforms and investing heavily in other market opportunities like music (iPod and iTunes).  And he encouraged product managers to rush new products to market in order to obtain market feedback, using White Space teams to rapidly learn what would sell. And he repeated this again and again, agreeing to a joint development project with Motorola before entering into mobile phone testing and launch (iPhone.)

Microsoft's proclivity toward D&E management is putting its future at grave risk. All signs are it will become another fateful, negative statistic. But it doesn't have to be that way. Microsoft can learn a lesson from its resurrected competitor and follow The Phoenix Principle. It can escape from xBox, and other new product, second-tier status if it will get a lot more robust about scenario planning, quit acting like the only game in town and start obsessing about competition.  Disrupt its culture and decision making, and start using White Space to rapidly get new products in the market and learn how to match them with market needs to succeed!

Does your business Facebook?

I had two more Facebook ignorers this week.  First was an old friend who didn't use Facebook, and could not imagine how it would be beneficial to his business.  I responded with "that's kind of like the folks who didn't use a telephone saying that they didn't see any value in it for business."  When you don't use a tool, it's easy to pretend it isn't valuable.  Makes life easy on your competitors who do give it a try.

The second was a business that recruits people under 30.  The top marketers at this company are still doing all their efforts with newspapers, radio and typical broadcast forms of media.  They said they couldn't use social media to reach their base "because you can't control the message on Facebook."  OK, so  they don't use social media, and their focus is on message control so they don't intend to use social media.  But their target is a population that every month uses less traditional media, and more social media.  And these folks are wondering why media costs are up, and their success is way, way down.  Uh huh.

At MediaPost.com "Avoiding Social Media Malpractice" Chad Cappellman tells the story of a hospital division that gets more people coming for insight through Facebook than come through the highlighted links on the hospital's own web site!  People use Facebook today - a lot.  We all would prefer a personal referral when we have a question.  Often, a referral is better than 10 Google search hits at pointing you to the service provider or product which really fits your needs.  And Facebook is a fast way to generate referrals.  As is Twitter.  So when you want potential customers referred your way, why wouldn't you try to maximize the use of social media?  As the story above discusses, people would rather get info about a hospital (an example) from friends than from about any other source.

As for implementation, social media is part of the more sweeping market shift affecting all businesses.  Historically, business people thought in terms of "control."  The business had communication walls, internally and externally.  More time was spent making sure information wasn't passed around than making sure communication was fluid and accurate.  But in another MediaPost.com article "Twitter and Facebook Could Get You Fired" we see that approach simply won't work any more.  We live in a "connected" and "networked" world today.  There are precious few secrets when everyone has a mobile phone, and most of those have cameras, and texting is ubiquitous, and the vast majority of people under 35 have multiple social network locations. 

Today, you can't win by limiting communications.  That is a failed approach.  Nor is it possible to "control" what is said about your business or its products and services.  What you can, and increasingly must, do is monitor the chatter and be part of it.  Of course some things will be inaccurate, so its now your role to help move the message in the right direction.  Don't think about control, think about helping the message move toward accuracy.  And leverage all the chatter to help you sell more stuff!

We live in a fast shifting world.  That is not going to change.  Slow moving traditional media is gradually dying.  No competitor can succeed by avoiding the shifts.  Those competitors that win will use scenario planning to help anticipate the shifts, and focus on fringe competitors to learn how to do new things which can create advantage.  Success isn't going to come from trying to Defend & Extend the "core" - but rather by rapidly adapting to new market needs even if it means changing your "core."  And the best way to stay connected to shifting markets today is through social media.  It not only gives great, and timely, feedback but offers everyone the chance to enter into a dialogue with potential new customers at remarkably low cost.  And in remarkably powerful ways.

Be Flexible, and Forward Thinking - Office Depot, Apple

"Strategic Plans Lose Favor" is a recent Wall Street Journal headline.  Seems like some big companies, and big consulting firms like Accenture, McKinsey and the Boston Consulting Group are rapidly learning what this blog has been pushing for a few years.  That flexibility trumps traditional approaches to strategic planning.

• When Office Depot's strategic plan was leading to revenue struggles, the company set up a situation room to track key indicators and adjust to market shifts much quicker.
• "Strategy as we know it is dead" according to Walt Shill, head of strategic planning at Accenture. "increased flexibility and accelerated decision making are much more important than simply predicting the future."  (Do you think he's been reading this blog and my book?)
• "business leaders will start to rely less on static five-year strategic plans and more on rough "adaptive" strategies that consider multiple scenarios"  according to Martin Reeves, Senior Partner at BCG.  (Where'd he read that - on this site?)
• ""The rate of change and width of volatility is much wider and faster than what we would have assumed coming into this," Jeff Fettig, CEO at Whirlpool
• McKkinsey has opened a "Center for Managing Uncertainty."  Really.

As this recession has come on, and lingered, businesses are clearly starting to realize that market shifts happen fast, and businesses cannot be slow to change.  Adaptability is one of the most important capabilities to compete in the post-2000 business world.

And the real market leaders are incorporating this kind of thinking into their organizations.  While the earlier quotes show how, caught on the defensive, organizations are finding new ways to react, the best performing organizations are taking market leadership by being Disruptive.  Like Apple.  In a Harvard Business Review blog Roberto Verganti, professor at Politecnico di Milano tells us "Apple's Secret:  It tells us what we should love." 

The good professor of design and management points out that Apple does not ask customers what they want.  Instead the company designs products which take customers to new levels of performance beyond what they imagined.  Instead of being reactive, Apple uses scenario planning to understand future market needs and create shifts with its products.  This approach leads to breakthrough performance, such as the success of Nintendo and its Wii product line.

To be successful businesses can no longer try to Defend & Extend their old strategies.  They have to be market focused, and flexible to manage through market shifts.  And to earn superior rates of return they have to be market leaders that use scenario planning and White Space to launch new solutions meeting emerging needs which attract customers and grow sales.