The London Olympics - One for the “flops file?”
One of my relatives, a UK-based small business owner, has argued for some time that the London Olympics would come to represent a ballooning cost burden for taxpayers and the reality of just what it will take to host the Games sets in. “Add two zeroes to those estimates” he argued when the city won the initial bid.
Well, it sure is starting to look as though the events are going to be a lot more expensive than was originally planned. According to one article I found on the topic, the costs admitted to so far look something like this:
2005: £2.4 billion later revised upward to £3.3 billion
2007: £9.3 billion, including a contingency fund of £2.7billion.
2009: £12.9 billion
Indeed, another highly critical article calls the financing story an “Olympic Sized Overspend”.
It’s a familiar pattern—initial optimistic projections fail to survive contact with reality. By the time more accurate information comes in, the spending decisions are made. Some pundits have even suggested that the UK could be looking at a £20 billion price tag before the final reckoning has been done.
Tweet This!Share this article: 
- Posted Rita McGrath on February 08, 2010
- Trackback
- Leave a comment
One from the flops file - Mattel’s all but forgotten “Flavas”
As part of my work on understanding how companies compete in dynamic markets, I run across a fair number of flops. Some are well intentioned, and others are just poorly thought through. I was reminded of this not long ago when reading a Wall Street Journal article on Mattel’s attempts to give its venerable “Barbie” franchise a face-lift. The company is introducing a new “fashionista” Barbie, but we can expect heated competition from two other companies introducing respectively the “Liv” doll and the “Moxie Girl” doll. The battle for market share is not childs’ play - Mattel won a lawsuit against the company that introduced the popular “Bratz” dolls and emotions run high in the rivalry.
So where do the flops come in? I wonder whether Mattel has put much energy into understanding why their previous attempts to compete with Bratz using the Barbie franchise and their considerable marketing muscle were so disappointing. The particular flop that comes to mind is a remarkably Bratz-like doll called the Flavas. Mattel came under wild criticism for being tone-deaf to cultural and social objections to the dolls’ supposedly hip vibe. Instead, observers felt they were insulting. And for staid old Mattel, introducing a doll with a jingle that asked people to “tell me what’s your flavor” seemed rather…um…risque, particularly considering the target age of the intended market.
In a sign, perhaps of how it has come to grips with more modern expectations, Mattel is even issuing commercials for the “fashionista” Barbie with a sound track that utilizes the “Barbie Girl” song penned a decade ago that Mattel initially tried to annihilate with a lawsuit. Curious as to how it works? You can judge for yourself by checking out the video. “Life in plastic, it’s fantastic” we are told.
So, will the fashionista Barbie manage to win the hearts and minds of ever-so-sophisticated girls before they grow out of dolls altogether? Let the holiday shopping season begin!
Tweet This!Share this article:
- Posted Rita McGrath on November 18, 2009
- Trackback
- Leave a comment
How decisions made under uncertainty can cast a long shadow - Internet Pricing
The reality of having to make decisions under uncertainty is that quite often, you’ll get things wrong. Unfortunately, sometimes those wrong things have very long and path-dependent consequences. I’m thinking in particular of two decisions that were made virtually industry-wide as the Internet evolved: 1) the decisions that content should be ‘free’; and 2) the decision to sell Internet access on a flat-fee for unlimited access basis. As a recent article in the Wall Street Journal points out, in the early days of the Internet (remember dial-up access?) consumers were perfectly happy to pay by the amount of connection time they used. If you cast your mind back to the old AOL business model, you paid a basic access fee to get your ID and password, and that covered a certain amount of usage. Then, if you went over that, you paid more. This kind of pricing makes a lot of sense when you have a resource that is vulnerable to overuse, and you want to encourage investment in the infrastructure to support it.
Then, along came a bunch of bright sparks with the idea of offering ‘always on’ unlimited access to the Internet at high-speeds for a fixed, flat rate. I’m sure the original idea was to try to undermine the AOL model both in terms of speed and in terms of ease of use. What was apparently not anticipated was that the amount of traffic that would eventually begin flowing through the networks as our lives become increasingly digital and on-line. Now, those who offer network services are in a pickle: How do you backtrack on that business model, once you have trained customers that your services should essentially be available in unlimited quantities for one flat price? I think it’s rather analogous to the problem news organizations and content providers are up against as well - how do you convince people to pay for content after spending over a decade providing the news for free?
There are a few examples in which companies have been able to get customers to pay for something they used to get for free - cable TV and (to some extent) Satellite radio might be cases in point. But it isn’t easy, and requires some kind of barrier to competition.
It will be interesting to see how the net neutrality legislation now making its way through the legislature will play into this. While I do agee that you don’t want network provides making decisions about which services customers can and can’t get, it doesn’t seem to honor basic fairness to me to dictate that they have to offer their services to any comer on an unlimited basis. After all, nobody is telling the electricity company that they can’t charge more to those who use more. And in telephony, interestingly enough, the operators seem to have avoided the seduction of giving their network minutes away for free. We have a strong interest in making sure that networks are capable of handling the traffic of the Internet future. And someone has to pay for that. Let’s hope that some reasonable compromise can emerge, in which network providers have an incentive to provide great service, while charging fair prices for the access they provide.
Tweet This!
Share this article:
Why smart projects so often go wrong - SAP and Business ByDesign
In class, I’ve been using German software giant SAP’s foray into Software as a Service as a ‘living case’ example of a company venturing into highly unknown territory. Without knowing more than what is available in the public domain, participants usually conclude from the analysis that the software maker’s ambitions for the project are highly ambitious, if not impractical.
Just today, then I ran across a most interesting blog on the topic of what went wrong with SAP and Business ByDesign, which they pulled from the market this year for a total do-over. In reading it, I continue to be amazed at how the same mistakes keep being made with large, ambitious projects designed to take companies into unknown territory.
This one started out wrong, with the company initially designing the technology for one type of application, but then ending up using it in another. A similar problem happened with Nokia’s N-Gage phone—instead of designing a phone specifically for gaming, they tried to adopt one of their existing technology platforms, with disappointing results.
Secondly, the scope of the program was huge. Rather than trying to operationalize a limited set of functions, the software was designed to be a full business suite. We often see this with companies who think their existing capabilities will let them tackle a whole new challenge in its entirety, rather than breaking things up into more manageable pieces. Big flops often result.
The project also suffered from a lack of internal cooperation, as existing business units feared (perhaps rightly) that if it succeeded, it would cannibalize their very profitable positions.
So, it’s back to the drawing board for SAP and another entry in my growing “flops” file for Rita.
Share this article:
- Posted Rita McGrath on October 21, 2009
- Trackback
- Leave a comment
recent entries
- Discovery Driven Planning Makes an Impression on CFO’s
- An application of Discovery Driven Planning by one of Mac’s students
- Video about “Leading Strategic Growth and Change” now up on YouTube
- Fascinating application of discovery driven planning to social ventures
- Sagantia Innovation Boot Camp - Kick Starting Innovation
