My colleague Alex van Putten was kind enough to forward along this interesting image from a report written by the Silicon Alley Insider. It visually depicts the fast erosion of Motorola's competitiveness in the phone market, with Apple outselling it by number of phones for the second quarter in a row. The article makes interesting reading as well.
- Posted Rita McGrath on July 30, 2010
A reporter recently asked me about the downsides of a firm going public - why might it not be the best course of action for them? Here are my "top ten":
- It is a major distraction from the business of serving customers and meeting customer needs.
- Leadership teams today have to ‘recruit’ the right kinds of shareholders – activity which has nothing to do with actual business wealth creation but everything to do with staying alive in the stock markets.
- Being publicly traded means you will tend to overpay your executives.
- Executive (particularly CEO) tenure will tend to shorten as public company pressures make any slip up intolerable.
- It depresses the interest in long term innovations that are good for the company.
- You need a whole bureaucracy to manage the relationships with the Street.
- You can’t dispose of assets or businesses which still generate cash without huge stock price hits, so you tend to stay in things far longer than you should.
- Great people with somewhat tarnished reputations would never be able to use their talents in a public company (I can give examples).
- It depresses flexibility because of the pressure to meet expectations.
- It is manifestly unrealistic – only 8% of companies from 2004-2009 were able to grow by 5% top line each year and only 4% of companies in the same period were able to grow bottom line during the same period, and yet the investing community looks for double digit growth??? (data from a study I recently conducted with Accenture)
Food for t hought, no?
- Posted Rita McGrath on July 21, 2010
It must be my week for seeing bad news in many places. I just love reading Scott Anthony's blog over at the HBR web site, where I also am a regular blogger. Scott is part of Innosight, a terrific consulting firm which helps companies figure out how to address some of the more characteristic problems that can get in the way of their capacity to grow. He recently talked about a phenomenon which a number of us have written about, the Innovator's Paradox. While he used Microsoft as a case in point, it applies to many situations, in which phenomenal success can put in place all the wrong incentives if your ambition is growth.
When a company is really successful, it's hard to make investments in new initiatives that attract meaningful attention or that are appropriately resourced. By the time a company really needs those growth opportunities, it is often too late and too constrained to go after them with conviction. The result is often that the mighty fall pretty hard, even amidst some of the best cash flows of their corporate lives. Consider Motorola, on the bring of being broken apart. Or IBM with a near-death experience that very nearly did it in. Or Kodak - sigh...
So what do you do about this? I think it's really important to have an innovation system that recognizes the challenges and puts in place mechanisms to address them, early. So separate units which are kept small and hungry and which aren't swamped by the mother ship, resources that are not trapped in the existing business, people who feel they can build a career doing something new and different kinds of political leadership that don't let success go to their heads -- all valuable when things seem just too good for too long.
- Posted Rita McGrath on July 15, 2010
We've often talked about a "wave" of competitive advantage, in which insights form the basis for the launch of an offering, a company gets to exploit it for a while, and then inevitable erosion sets in. Well, imagine my surprise at seeing almost exactly that pattern in a Business Week story about Blackberry's attempts to stay relevant in a world of ever more intriguing smartphones. Have a look!
- Posted Rita McGrath on July 13, 2010
This interesting article, entitled "How to be a demographic realist" notes that the vast changes in demographics that are to be upon us in the coming decades is likely to cause us to challenge many assumptions we make about saving, retirement, the role of the state and even the kinds of homes we live in. I thought it quite interesting to note that a home that is perfectly OK for a retired 65 year old may be an expensive albatross by the time someone is 20 or 30 years older and no longer able to drive or maintain a garden.
Think of this as an "early warning" to those of us with older parents. The time to move is clearly when you are still well and relatively healthy, not after you have to move. So is that an entreprenuerial opportunity lurking there?
- Posted Rita McGrath on May 18, 2010
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