SUCCESS CREATES ITS OWN PROBLEMS

The Polaroid Corporation -- Its Success melted away in line with the rise of the digital age

How many times have successful enterprises challenged themselves to see what they should be doing in the future? Not very often it would seem. If things are going well and the money is rolling in, it is not easy to challenge whether things are on the right path. Senior management often thinks that the answer is so obvious that it just isn't worth instigating critical thought processes to think differently. We are okay, lets not rock the boat, our dominance will continue, we hope? Those who do challenge the present levels of success are seen as a bit strange ( Bozo's in Steve Jobs' terminology) spoilers, negatively attuned etc. There is nothing further from the truth.

It is a brave person who argues against success but it is a process which should be pursued for the long term future of the enterprise. Success makes an enterprise complacent. We think we have got it right for now and for all time and this is seldom the case. When an Enterprise is doing well no-one looks too critically  at the strategy,cash flow, finances,budgets and performance because everything is alright, isn't it? When the external environment becomes more difficult then greater scrutiny is undertaken and things start to come out of the woodwork. Things that an enterprise did not consider too serious when the cash was flowing in, now become more critical in more challenging times.Often issues emerge which should have been tackled in the good times but it is often too late to resolve them now or there aren't enough resources to tackle them. We should have fixed the roof when the sun was shining not when it is raining.

This is the case when future trends are not properly built into strategies and managers are seduced by their current success. Funds are not adequately set aside to change direction and if they are then it is too late. Profits are not adequately assigned to R and D.Take the example of the Polaroid Corporation which was dominant in the camera,film and instant picture market for so long but did not predict the rise of digital cameras and digital photography. The British motorcycle industry, successful for so long without realising that there would be intense Japanese competition just around the corner.

 

According to Peter Drucker, the most successful US industries in the 1920's were anthracite coal mining and railroads. Both believed their monopolies would last forever and there was no need to challenge the status quo and to think critically. Success was taken for granted. When an enterprise has seemingly achieved its objectives it should keep challenging itself. What is our business now and what will it be in the future? Without challenging current success the alternative is very often decline.

 

The publicshing industry is perhaps being more successful at this. In the last century the successful focus was on book publishing. In the future, publishers will need to transform themselves into multi-meida enterprises concentrating on the printed word in electronic format. Paperback book sales are flat whilst e-book and e-music sales advance at an increasing pace.

 

Success is often ephemeral and fleeting. Even a sustained period of success is often only a relatively small part of an enterprise's total business life.

So next time your enterprise is rightly celebrating success in a company meeting and someone challenges the roots and foundations of that success. Do not automatically think they are off their rocker, they may well have the future of the enterprise more at heart than those who are focusing on current success without planning for radical future changes in politics,science,economics, social trends and tastes and the impact of new technologies. The interaction of new technologies and social tastes and trends is particularly important here.

 

To celebrate tomorrow we have to plan for it and not revel in our current success as it may not last.

 

STEVE JOBS - SINNER, SAINT OR GENIUS?

Steve Jobs - A man who thought different

Just read the biography of Steve Jobs by Karen Blumenthal and it really was interesting. Such a driven single minded person who wanted to ensure that technological products were easy for the consumer to use and also looked aesthetically pleasing as well. He put himself in the consumer's skin and dreamt up ideas and concepts that the consumer himself had not considered and did not even think that he\she would ever want. Steve Jobs could think of what the consumer would go for without mountains of marketing research. Would consumers themselves have reported that they would need an Ipad or even an I phone? Probably not -- the ability to predict what people will want is invaluable and he had that ability.He was not alone in this. His partner Steve Wozniak was technically superior -- but preferred the development of the product side rather than "ordering people around".

Opportunities were seized and ideas stolen and modified -- especially from Rank Xerox which invented the mouse and the concept of tiled ( Window like screens) -- about 10 years before they were commercially developed by both Apple and Microsoft. The lesson for Xerox was that having a good idea is not enough -- developing it and bringing it to market is just as important and also needs a lot of capital skill guts and determination. Also the ability to argue against people who are "right" when you are perceived to be "wrong".

Steve Jobs could also be mean spirited  -- he did not offer all of his close collaborators company stock in Apple. When he got a better than expected return from a deal he only gave Steve Wozniak $350 when it should have been $2,500. He used to rubbish certain ideas then after he had thought things through he later claimed that he had supported them or even that he had thought of them in the first place. Yes I know people like that too!!

He also made his fair share of mistakes -- the Apple 3 computer did not sell as well as the Apple 2 and there was a lack of contact points for peripherals to be connected to it -- even though this was suggested to him by his technical staff. He ignored this - he did not like on\off buttons,especially on the I Pod. When he was 30 - he was summarily stripped of his duties at Apple as a disruptive trouble maker and left the company. He then formed NeXT computers trying to produce big knowledge based scientific machines - This did not work either and he was saved by purchasing Pixar and ensuring that he funded talented animators to produce films like Toy Story, Cars and finding Nemo. Apple bereft of of new products and ideas welcomed him back and he became an advisor and then Apples Chief Executive in 1997. Just over 10 years after he left the company as a failure.  Yes there can be redemption for all of us.

Not a computer geek nor a techie, through Pixar and Apple he revolutionised the world of films ( computer animation), personal computing, music , phones and then mobile computing with the Ipad. For him the "journey was the reward." Simplicity was the ultimate sophistication

Perhaps the last words should be left to him, from part of his 2005 address at Stanford University.

"You've got to find what you love. And that is as true for your work as it is for your lovers. Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven't found it yet, keep looking."

"Your time is limited, so don't waste it living someone else's life. Don't be trapped by dogma — which is living with the results of other people's thinking. Don't let the noise of others' opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary."

Wise words but do we have the courage to follow them?

Full text of the speech is at: http://news.stanford.edu/news/2005/june15/jobs-061505.html

FINANCIAL FAILURE - COMMENCES WITH MANAGEMENT

Sir Fed Goodwin - Not the greatest collegiate manager?

A fish rots form its head and so it is with an organisation with poor corporate management. Failures in organisations especially financial failures are rooted in things that went on sometimes years before but were never tackled.  Later the results of earlier inaction manifest themselves in serious corporate problems both in the public and private sectors. Some work by the writer John Argenti seems to back this up to a large degree.

The accounts of failing organisations seem very often to be presented late and also they are often embellished with creative accounting tricks which may render them pretty difficult to interpret

 properly. A failing organisation puts great pressure on the Chief Executive to dress things up in the best way possible to avoid potential embarrassments. John Argenti identified a typical sequence of events, this was ;defects, mistakes and signs and symptoms of failure.

In terms of  Defects the following should be considered;

1. Management: Autocratically run companies are as successful or unsuccessful as their autocratic leader. With a more collegiate management approach there is usually a greater chance to change course. Companies with autocratic leaders usually have passive boards( intentionally so) which hardly ever challenge the course determined by the autocrat. The directors also lack all round business skills to do their jobs effectively. The finance director is usually backward looking - an excellent number cruncher but not good at dealing with future financial challenges. Accountancy systems are weak. Budgetary control is not exercised. Budgets are produced but not followed and targets are ignored or by passed. Basic feeder system reconciliations and bank reconciliations are negelected or are months in arrears.Cash flow collection and forecasting is not properly addressed and the managers do not know what their products actually cost and they have no knowledge of the contribution each product or department is making to the business.

Sounds familiar?

They are also too slow to react to changes in their business environments and greatly suffer as a consequence.

2. Mistakes : According to John Argenti there are only three basic mistakes:

(a) Leverage: The ratio of debt to equity becomes too large and the interest burden and the need to provide for repayments sinks the business.

(b) Over trading: A company grows too quickly and does not have adequate funding sources to meet its future demand growth.

(c) The big project: A project that is too big for the company's skills set and resources will bring it down.

I would add a fourth mistake to this. Failure to predict differing future scenarios and plan for them accordingly even if it means making some painful decisions about products and sometimes people. This can also mean actively planning for change and re-training people as well and introducing new systems.

3. The Symptoms: These can surface some time later but will include deterioration in the traditional accounting ratios of the organisation, creative accounting -this takes on a whole new life e.g.

Very optimistic public statements about the organisation, stocks are overvalued, repairs are capitalised, depreciation charges are underestimated, big projects are delayed, product quality deteriorates, service complaints increase, staff sickness levels rise, staff morale drops and internal rumours fly. From personal experience -- income estimates are greatly embellished and dodgy debtors also make an appearance to bolster income. The latter can be doubtful or even fraudulent.

The behavioural aspects of failure are often as important as the financial one's, however they are seldom addressed until it is too late -- because in may ways they are the roots of financial failure.