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…
The danger of turning opinions into facts
One of the hardest challenges facing leaders is making decisions in the face of uncertainties. To deal with the discomfort of uncertainty, some leaders turn their assumptions and beliefs into “facts” in their mind. That’s unfortunate. Stick blindly to ill-informed thinking, as some prominent leaders have done, and you’ve doomed your company to decline. Let’s look at some examples. Ironically, it was a Kodak engineer (Steve Sasson) who invented one of the first digital cameras in 1975. Three decades later, Kodak’s leaders made decisions seemingly based on a belief that digital photography would have a slow uptake, even though by that time digital cameras dominated the marketplace. Why? Digital technology made saving and sharing photos effortless. Blockbuster believed stores offered the most convenient video rental and purchasing experience. Its CEO turned down an opportunity to purchase Netflix in 2000. “Netflix doesn’t do anything…
Medtronic avoids BlackBerry’s business model mistakes
Once a mobile phone leader, BlackBerry will pass from irrelevancy to bankruptcy absent an outside purchaser. Medtronic will wisely avoid this fate if it transforms its culture and business models following its recent acquisition of disease management and patient monitoring company CardioCom. Whereas BlackBerry missed the technology shift that required phones to provide mobile photography, music, and computing —not just calls and emails — Medtronic appears to understand it’s engine needs rebuilding. By further exploiting all the data collected by its chronic care devices (such as pacemakers and insulin pumps) and serving the chronically ill before they need devices, Medtronic can do more to improve health and lower its costs. Indeed, the medical device leader’s recent creation of a business model innovation center in Singapore demonstrates that the company knows that devices alone can no longer fuel its growth. Much as Caterpillar earth…
The yin and yang of business model innovation
The following quote (courtesy of a blog post by Esther Dyson, savvy internet investor) should be posted on billboards next to every large company, especially in Japan where once-great electronics giants face the Herculean challenge of reversing an accelerating decline. “Without order, planning, predictability, central control, accountancy, instructions to underlings, obedience, discipline — without these things nothing fruitful can happen, because everything disintegrates. And yet — without the magnanimity of disorder, the happy abandon, the entrepreneurship venturing into the unknown and incalculable, without the risk and the gamble, the creative imagination rushing in where angels fear to tread — without this, life is a mockery and a disgrace.” ~ E. F. Schumacher, Small is Beautiful Chico Harlan’s recent Washington Post column describes the “free fall” that Sony, Sharp, Panasonic and Toshiba are experiencing. They “once controlled the industry, outclassing and outselling their U.S….
Do you have a strong portfolio of business models?
The news has gone from bad to worse. The bad news: Kodak, the company that fueled the growth of the photography industry is selling its patents. Not the patents for intellectual property related to film photography, but its more than 1,000 patents for capturing, storing, organizing and sharing digital images, according to the Wall Street Journal. And the really bad news? Kodak has filed for bankruptcy. Yes, Kodak was that hard up for cash and did not find it. Its leaders failed one of the most important tests of strategic leadership – building a balanced portfolio of business models. Kodak invested in new business models too late. As film stopped delivering the riches, the printer/cartridge business model demanded too much cash for too many quarters, creating an unsustainable situation. A company can be viewed as a portfolio of different business models, each using…
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…
A sad “Kodak moment” business model failure
Louis Pasteur — “Chance favors the prepared mind.” This quote motivated Bill Welter to co-author The Prepared Mind of a Leader: Eight Skills Leaders Use to Innovate, Make Decisions, and Solve Problems (Jossey-Bass, 2006), a thoughtful leadership book. Bill’s also principal of Adaptive Strategies, a small business that specializes in the application of critical and strategic thinking for business through workshops, strategic thinking behavior programs and one-on-one coaching. And, as I write on the day after Steve Jobs’ sad passing, I am sure Bill would agree that Jobs modeled the attributes Bill wrote about. (See below.) From The Prepared Mind of the Leader Observing. Seeing beyond the obvious Reasoning. Moving from the known to the undetermined Imagining. Envisioning the future before it arrives Challenging. Pushing for higher and deeper thinking Deciding. Choosing with consequences in mind Learning. Keeping a developmental mindset Enabling. Exercising…