lessons learned on the road to reinvention

Lessons Learned on the Road to Reinvention

23 March 2009

Chunka Mui

[email protected]

mailto:[email protected]

mailto:[email protected]


Reinvention at Kodak

KodakSP500

1981 1990 20071996

Text

http://www.BillionDollarLessons.com



“But it was filmless photography, so management’s reaction was, ‘that’s cute—but don’t tell anyone about it.’ ”

Steve Sasson, Kodak Engineer Inventor of the Digital Camera

Source: New York Times, 5/2/2008




Success is inspirational; disaster is educational.




The Research

Study of 750 major U.S. business failures, involving publicly traded companies with significant losses from write-offs, discontinued operations, and bankruptcies, 1981-2005*

* Research assistance from Diamond



http://www.diamondconsultants.com/

http://www.diamondconsultants.com/


46%


Failure Patterns

1. Illusions of Synergy

2. Faulty Financial Engineering

3. Deflated Rollups

4. Staying the (Misguided) Course

5. Misjudged Adjacencies

6. Fumbling Technology

7. Consolidation Blues

Strategy Matters




1. Seeing the future as a variant of the present

2. Making the economics of the new measure up to that of the old

3. Not considering all options

Staying the (Misguided) CourseRed Flags

Reinvention Challenges



“Laidlaw realized too late that ambulances are a health-care business, with complex regulatory issues, not a

transport business.”

– John Grainger,Laidlaw CEO

Misjudged Adjacencies





1. Driven by problems in the core rather than opportunities in the adjacency

2. Lack expertise in the adjacent market

3. Overestimating relevance of core assets to adjacent market

4. Overestimating hold on customers, especially expectations of cross-selling or up-selling

Misjudged AdjacenciesRed Flags




“There was so much excitement about bringing in a new brand, a brand with legs... We should have had a couple of

people arguing the ‘no’ side of the equation.”

– Bill Smithburg,Quaker Oats CEO

Illusions of Synergy





1. Synergies in the minds of strategist, not customers

2. Excitement leads to vast overpayment

3. Clashes of culture, skills, or systems make clear synergies impossible to achieve

Illusions of SynergyRed Flags





Why do bad strategies happen to smart people and good

companies?



“Decisions of the kind the executive has to make ... are made well only if based on

conflicting views, the dialogue between different points of view, the choice

between different judgments.”

– Peter Drucker© 2009 Chunka Mui | BillionDollarLessons.com




Three Models

Alfred P. Sloan Catholic ChurchAncient Persians




Internal Process Safeguards

1. Grant license to the devil’s advocate

2. Smooth management ruts

3. First, decide how to decide

4. Find history that fits

5. Bet on it

6. Stare into the abyss

7. Construct Alarm Systems

8. Always have escalation systems

9. Hold second-chance meetings




Have a Safety Net

1. Whenever an organization embarks on a high-stakes strategy, it should subject that strategy to an independent devil’s advocate review.

2. This safeguard should be instituted, if possible, before there is a particular strategic move on the table.




What does this mean for you?

• CEO

• Board of Directors

• Investors

• Functional Executives

• Business Unit Leaders

• Line Management

• Front Lines



Benefits

1. Arrive at the best answer. No plan is perfect; the Devil’s Advocate helps get to the strongest option as quickly as possible.

2. Identify key risks. Be clear-eyed about the implementation challenges, rather than let the process of selling the strategy paper over potential issues.

3. Build real consensus. The best way to achieve consensus is to have a constructive yet contentious deliberation, so that key issues are surfaced and considered. Avoid self-censorship, which forces problems to fester.

4. Preserve a graceful exit. Too often, the political capital expended to launch an initiative commits leaders to see it through, even to a bitter end.

Increase the chances for success by reducing the odds of failure.

© 2009 | BillionDollarLessons.com 20




Chunka is an independent author and business advisor.

Chunka is the co-author, with Paul Carroll, of Billion-Dollar Lessons: What You Can Learn from the Most Inexcusable Business Failures of the Last 25 Years. (Portfolio, 2008) The Globe and Mail named Billion-Dollars Lessons the best business book of 2008. Inc. recognized it as one of the best books for business owners published in 2008. A companion article, “Seven Ways to Fail Big,” appears in the September 2008 issue of Harvard Business Review.

Chunka is also the co-author of the best-selling Unleashing the Killer App: Digital Strategies for Market Dominance (Harvard Business School Press, 1998). In 2005, The Wall Street Journal named that book one of the five best books on business and the Internet.

Chunka’s consulting work focuses on two critical elements of strategic success. In the early stages of strategy setting, he helps clients identify and explore strategic options––with an emphasis on breakthrough thinking and ensuring that all plausible alternatives are considered. Later in the strategic process, Chunka orchestrates and leads independent reviews of strategies and acquisitions in development. These reviews, known as “devil’s advocate” panels, apply the lessons learned from others’ failures to head off strategic errors and, in the process, increase the odds of success.

Chunka was previously a managing partner and chief innovation officer at Diamond Management & Technology Consultants. Prior to Diamond, he was a vice president at CSC Index. Chunka holds a B.S. in electrical engineering and computer science from MIT.

Contact Chunka via his web site at chunkamui.com.

Biography



http://www.chunkamui.com/

http://www.chunkamui.com/

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