Whole Foods Market, once the darling of the grocery industry, is facing a whole lot of problems. Poor shareholder performance threatens founder and CEO John Mackey’s position. New directors have been added to deter activist investors and improve relationships with major institutional investors. Some argue that for all its previous success, Whole Foods has not mastered Retail 101 and that is why it is failing. Perhaps – no retailer gets away with poor service and unnecessarily high prices these days. From my perch, however, the core issue facing Whole Foods is its business model. Organic and healthy was once a unique niche within the grocery industry, warranting a separate store. Now, fresh and organic are mainstream. Niches are alcoves — protected places. They exist in our natural world. In our economy, they’re specialized markets. By serving a narrower target market (Four Seasons versus…
Disrupting the workplace
In 1989, the CEO of my global employer allowed me to work from home rather than demand I move halfway across the US to be near corporate headquarters. Two technologies made his decision possible: Overnight delivery and an early fax machine. I was the first distributed worker other than our sales and product service representatives. Flash forward to 2013. I worked for IBM where 45% of its global workforce (and growing) worked from home offices. Those of us already virtual referred to IBM as “I’m By Myself.” We used a shared on-line knowledge base so poorly structured that we often entered the IBM site pretending to be a customer—it was the fastest way to find the information that we needed to complete a pitch deck. Many a day, I thought I was working for a computer, not a company. Distributed work is an…
As CMOs become immersed in technology, beware of the CIO myopic thinking trap
If you thought that the move from the Industrial Era to the Digital Era was the last major economic transition that your business would have to deal with, think again. We are in the middle of yet another transformation of comparable magnitude. The slow but steady shift of power away from companies and to customers as we moved into the Digital Era will reach its zenith in the years ahead. Today’s customers, clients, and consumers are instrumented, interconnected, intelligent, engaged, informed and empowered. They want companies they buy from to know them, interact with them on their terms, and personalize marketing offers and customer support. They even want personalized products and services. IBM (my employer) calls this the Connected Consumer Era and it will lead into a digitization of the front office comparable to the back office digitization of the past two decades….
Remember to ask, “What business are we in?”
If, as a company leader, you did not lose a heartbeat over the bankruptcy filing of Kodak, Barnes and Noble, Blockbuster and AMR Corporation (American Airline’s parent) or Google’s pending purchase of Motorola phones, you should have. When previously solid businesses run out of cash, there are lessons to be learned. In particular, never forget the vital strategic question, “What business are we in?” Too narrow an answer, like Kodak’s “film” or Blockbuster’s “video store,” positions your business to be disrupted by a better solution. Look what stand-alone digital cameras and smart phones have done to film or what Netflix’s more convenient mail-order DVD model did to Blockbuster. A change in consumer preferences also leads to disruptions as Netflix found out with the surge in on-line media streaming. Too broad an answer to the question “What business are we in?” or an out-of-touch-with-the-market…
Does Carly Fiorina’s HP legacy foreshadow her Senate leadership?
It seems natural to judge a political candidate by her previous work performance, which is precisely why my eyes are on the California Senate race. Former HP CEO Carley Fiorina is challenging the incumbent democrat, US Senator Barbara Boxer, to represent the financially strapped state. While the two women trade public policy barbs, HP shareholders are debating whether to dump HP stock. From my perspective, the seeds for HP’s current problems were planted from 1999-2005 during Fiorina’s tenure as CEO of HP. (Disclosure: I vote in Wisconsin. I am an independent and have voted for both parties.) Before her forced exit, Fiorina changed HP in two ways that each demanded significant internal focus. First, she reorganized the company, a reorganization that Mark Hurd who followed Fiorina spent time dismantling, as it diffused responsibility for organic growth and delayed decisions. (Hurd’s reorganization cut out…
IBM’s Smart Business Model Strategy
IBM’s Smarter Planet initiative is more than smart branding. The initiative reflects smart evolution in IBM’s business model. Over the past decade, the Fortune 500 company exited commodity IT hardware (e.g., personal computers) to make investments in high-end IT, such as data analytics. As IBM’s income from hardware fell from $2.7b to $1.4b, income from software rose from $2.8b to $8.1b between 2000 and 2009. The broader scope and higher-end capabilities positions IBM as a catalyst to advance individual enterprise performance and significantly advance system-wide improvements in health care, transportation, energy, public safety, water and educational systems, or what IBM calls a creating a Smarter Planet. IBM is now positioned to improve how cities – where all these systems come together in a “system of systems” – operate. Thus the Smarter Cities initiative. The aim of the Smarter Cities initiative is to make…
IBM’s Smart Is a Smart Value Promise
Image via Wikipedia IT technology companies filled business page news the last few months with press releases leading us to rethink what business these companies are really in. Cisco is moving into HP’s market space. Dell with acquisition funds in hand is soon to follow. Intel whose margins are terribly low for a company so dominant in fast chips is trying to move into low power applications like cell phones where growth prospects look brighter. And IBM whose hoped for acquisition of Sun fell through when Oracle made a surprising and winning bid for Sun must find a new way into Sun’s market space. Business model strategy predicts moves such as these. As technologies mature and become commodity-like (which is possible no matter how sophisticated a technology is), industry boundaries between technologies collapse. Companies stuck in commodity-like competition redefine the definition of the…