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How Experts Respond to New Ideas

FootInMouth:33QuotesFromBigCorporateExecsWhoLaughedOffDisruptionWhenItHitDecember14,2016https://www.cbinsights.com/research/big-compay-ceos-execs-disruption-quotes/Sometimesdisruptionisstaringyourightinthefaceandyoucan’thelpbutlooktheotherway.That’sdoublytruewhenyou’retheheadofalegacybusinessdesperatetostayrelevant.Smallplayershavehistoricallychangedthebusinesslandscapewhentheolderguysaren’tawareenoughornimbleenoughtorespond.HerearesomeexamplesofbigCEOsandexecutiveswhominimizeddisruptivethreatswhentheyappeared.Whenaskedaboutthesesmallerplayersatthetime(andevennow)somecompanieshaveremainedwoefullydismissive.1.TheiPhoneandiPodPerhapsthemostglaringexampleofthetendencytodismissinnovativenewplayerswaswhenApple’siPhonehitthemarketin2007.Itwasthefirstexampleofasmartmobilephone.Onlookerswereunsurewhatthisdevicewouldcompetewith:WouldithurtmobilephonemakerslikeNokiaordevelopersofhandheldplannerslikePalm,whowerealsotryingtoenterintothephonespace?Atthetime,bothcompaniesrefusedtoadmitthethreat.Here’sPalm’sCEO:“We’velearnedandstruggledforafewyearsherefiguringouthowtomakeadecentphone…PCguysarenotgoingtojustfigurethisout,”saidthen-PalmCEOEdColliganin2006,afternewsthatApplewasdevelopingaphone.“They’renotgoingtojustwalkin.”Here’stheheadofstrategyatNokia:“ThedevelopmentofmobilephoneswillfollowasimilarpathtothatfollowedbyPCs,”saidNokia’sChiefStrategyOfficerAnssiVanjoki,inaGermaninterview(translatedthroughGoogleTranslate).“EvenwiththeMac,Appleattractedalotofattentionatfirst,buttheyhaveremainedanichemanufacturer.Thatwillbetheirroleinmobilephonesaswell.”MicrosoftCEOSteveBallmerhadthistosayabouttheiPhone’slackofaphysicalkeyboard:“500dollars?Fullysubsidized?Withaplan?Isaidthatisthemostexpensivephoneintheworld.Anditdoesn’tappealtobusinesscustomersbecauseitdoesn’thaveakeyboard.Whichmakesitnotaverygoodemailmachine.”RIM’sco-CEO,JimBalsillie,wroteofftheiPhonealmostcompletely:“It’skindofonemoreentrantintoanalreadyverybusyspacewithlotsofchoiceforconsumers…Butintermsofasortofasea-changeforBlackBerry,Iwouldthinkthat’soverstatingit.”Ofcourse,let’snotforgetthatphonemanufacturershadbeenwronglydismissiveofApplebefore.Here’sMotorola’sCEOontheiPod:

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“ScrewtheNano.WhatthehelldoestheNanodo?Wholistensto1,000songs?”saidMotorolaCEOEdZander,speakingataconferencein2006.2.AmazonPerhapsmorethananyotherinternetcompany,Amazonhasembodiedinternet-basedchallengestotraditionalbusinessandcommerce.Fromthemomentitbeganshippingbooksandthreateningbrick-and-mortarbookchains,CEOJeffBezos(picturedabove)hassethissightsontransformingindustrieswithAmazon’scustomerfocusandobsessionwithefficiencyandlogistics.Butalsofromthebeginning,Amazonhasbeenunderestimatedbyincumbents. Here’sIBM’schairmanminimizinghowAmazonmighttransformretailandinternetsalesallthewaybackin1999. “Amazon.comisaveryinterestingretailconcept,butwaittillyouseewhatWal-Martisgearinguptodo,”hesaid[IBMChairman,LouisV.GerstnerJr.].Mr.GerstnernotedthatlastyearIBM’sInternetsaleswerefivetimesgreaterthanAmazon’s.Mr.GerstnerboastedthatIBM“isalreadygeneratingmorerevenue,andcertainlymoreprofit,thanallofthetopInternetcompaniescombined.”Morerecently,onaMarch2016earningscall,FedExExecutiveVPMikeGlennminimizedtheimpactofAmazon’sdecisiontoleaseaircraftandbuyitsowntruckstogetintothelogisticsandshippingbusiness.“WhilerecentstoriesandreportsofanewentitycompetingwiththethreemajorcarriersintheUnitedStatesgrabsheadlines,therealityisitwouldbeadauntingtaskrequiringtensofbillionsofdollarsincapitalandyearstobuildsufficientscaleanddensitytoreplicateexistingnetworkslikeFedEx,”[Mike]Glennsaid.3.Salesforce/cloudsoftware

Waybackbeforemostenterprisesoftwaresolutionswerecloud-based,SalesforcewasofferinganewanddifferentkindofCRMproduct.Whileitmadewavesearlyon,legacysoftwarecompaniesdidn’tthinktoohighlyoftheproduct.“Microsoftwillroll[Salesforce]over,”ThomasSiebelofSiebelSystemsflatlytoldBloombergin2003.“TheygetZambonied.”

4.Netflix/videostreamingVideostreamingserviceNetflixlaunchedasapotentialthreattoBlockbusterwithitsDVDmailingservice.Notonlydiditkillthevideorentingindustry,itnowhasitseyessetonbroadcasttelevision.AndleadersinbothindustrieswerereluctanttoadmitthatNetflixwasarealthreat.“NeitherRedBoxnorNetflixareevenontheradarscreenintermsofcompetition,”saidBlockbusterCEOJimKeyes,speakingtotheMotleyFoolin2008.“It’smoreWal-MartandApple.”

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How Experts Respond to New Ideas“Thenotionthat[companieslikeNetflix]arereplacingbroadcastTVmaynotbequiteaccurate,”

saidAlanWurtzel,NBCUpresidentofresearchandmediadevelopment,ashepresentedratingsof

popularshowsfromstreamingcompaniesearlierthismonth.“Ithinkweneedalittlebitofperspective

whenwetalkabouttheimpactofNetflixand

outlets.”

MovietheaterchainexecshavealsotriedtosoundbraveinthefaceoftheNetflixthreat.Here’s

Cinemark’sCEOonaFebruary2016earningscall.“Wedon’thaveanyconcernthere,”saidMarkZoradi,

CinemarkCEO.“Netflixisagreatservice,it’sagreatin-homeservice.They’vehadothermovies.Netflix

isverymuchatelevisionnetworkandnotunlikewhatHBOandShowtimehavedoneforyears,they

havesomeoriginalproductthatgoesoutthere.Soit’snotplayingintheaters,it’splayingonNetflixand

wehopetheyhavegreatsuccesswithitbutIdon’tseeitasanissuerelativetothetheatricalbusiness.

It’snotonereallythatwetalkabout.”

5.Mobilegaming

Mobilegamingisanotherindustrylegacyexecsdidn’tsee

coming.WhileapphitslikeAngryBirdshavebecomehuge,for

alongtimecompanieslikeNintendo—thoughawareofthe

app’smonumentalrise—didn’tseeanylastingvaluethere

andhesitatedtogetinvolved.

Thesemobilegamesare“candidlydisposablefroma

consumerstandpoint,”saidNintendopresidentReggieFils-

Aime,speakingin2011.

6.Airbnb

Inthenextfewyears,Airbnbcouldovertakemajorhotelchains

intotalguestbookings,accordingtoaBarclaysreportnoted

inQuartz,buthotelsarestillreluctanttospeakopenlyaboutthe

Airbnbthreat.

“Ourguestsdon’twanttheAirbnbfeelandscent,”

saidChristopherNorton,EVPofglobalproductandoperationsat

theFourSeasons,speakingtoFastCompanyacoupleofyears

ago.Hewentontoexplainthathiscustomersexpecta“levelof

servicethatisdifferent,moresophisticated,detailed,andskillful.”

“Wehavenotseenadirecteffect[fromAirbnb]inanyofourhotels…Wedon’tfeelit’shavingany

impactonourresultsorthatithashitourradarasofyet,”saidRichardJones,seniorVPandCOOof

HospitalityVenturesManagementGroup,in2014.

7.Robo-advisors

CompanieslikeWealthfrontandBettermentbelievetheircomputeralgorithmswillbebetteratinvestingcustomers’moneythanpersonalfinancialadvisers.Butsomefinanceprofessionalsarenotbelievers.

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“[Wealthmanagement]servicesrequireeducated,credentialed,experiencedadvisorsactingasfiduciariesonbehalfofclientsandactivelyengagedinarelationshipwiththem,”saidJimMaurer,directorofpersonalfinanceatBuckinghamandTheBAMAlliance,writinginanop-edinCNBC,andheconcludes,“Idon’tseetheirservicesascompetingwithcomprehensivewealthmanagement.”InaMarch2016note,Citigroup’sfintechanalystssaidrobo-advisorsmaybeallwellandgood,butthattheywon’tworkforthewealthyclientsthatarethebread-and-butterofthebigbank-wealthmanagementindustry.“Weseetheadventofrobo-adviceasanexampleofautomationimprovingtheproductivityoftraditionalinvestmentadvisers,andnotasituationwherethereissignificantriskofjobsubstitution,”CitianalystsledbyRonitGhosewroteintheirreport.“Highernetworthormoresophisticatedinvestorswill,inourview,alwaysdemandface-to-faceadvice.”8.Wearables/smartwatchesTheAppleWatchwasreleasedlastyear,andit’sstillunclearwhetherornotitwillbecomemainstream.Allthesame,wearablesaremoreandmorelookinglikwtheywillhaveanimpactonthetraditionalwatchindustry.TheApplewatchisaninterestingtoy,butnotarevolution,”saidSwatchexecutiveNickHayekJr.,speakingtoaSwissnewspaper.HayekwasalsoquotedassayinginTheGuardianthathedoesn’tbelieveinawatchcompanyhandlinghealthcaredata.“Ipersonallydon’twantmybloodpressureandbloodsugarvaluesstoredinthecloud,oronserversinSiliconValley…Icannotaccepttheresponsibilityofwhethermydevicewarnsacustomerintimebeforeaheartattack.”9.TheConnectedCar/Tesla

GoogleandAppleareexploringdriverlesscartechnologies.Carmakers,however,haven’tbeensosuretechcompaniestakingtheautomotivereignsisthefuture.Daimler:“IftherewerearumourthatMercedesorDaimlerplannedtostartbuildingsmartphonesthenthey(Apple)wouldnotbesleeplessatnight,saidDaimlerheadDieterZetsche,speakingtoMotoring.com.aulastyear.“Andthesameappliestome.”Porsche’sCEOwasmoreblunt:“AniPhonebelongsinyourpocket,notontheroad,”saidPorscheCEOOliverBlumesaid.

JaguarLandRover:“Wedon’tconsidercustomerscargo,”saidJaguar’sheadofR&D,WolfgangEpple,in2015.“Wedon’twanttobuildarobotthatdeliversthecargofromAtoB.”

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Evenwhentheytalkaboutautonomousvehicles,bigautoiskeentodismisstheworkofnewercompetitorssuchasTesla,whichwasfoundedasasoftware-driven,electricalvehiclecompanyfromthestart.

Volvo:“Itgivesyoutheimpressionthatit’sdoingmorethanitis,”saidTrentVictor,seniortechnicalleaderofcrashavoidanceatVolvo,inaninterviewwithTheVerge.“[Tesla’sAutopilot]ismoreofanunsupervisedwannabe.”Inotherwords,Teslaiscreatingasemi-autonomouscarthatappearstobeautonomous.”

10. Bitcoin/blockchain

Bitcoinhashaditsshareoftroubles—includingtheMt.Goxscandal,pricevolatility,andanincreasingconcentrationofminingactivityinChina—butevenwiththesechallengesit’sstilltheleadingdecentralizedcurrencyandhasspawnedfinancialindustryinterestinapplicationsofitsunderlyingblockchainledgertech.JPMorganCEOJamieDimonopinedplainlyinlate2015thatbitcoinwillnotsurvive:“Thisismypersonalopinion,therewillbenoreal,non-controlledcurrencyintheworld,”saidDimon.“Thereisnogovernmentthat’sgoingtoputupwithitforlong…therewillbenocurrencythatgetsaroundgovernmentcontrols.”

11. Thepersonalcomputer

InwhatisperhapsthemostfamousfailedCEOprediction,executiveswhobuilttheircareersonthemainframeandenterprisecomputersofthepre-PCeraweredismissiveofthecentralideathattheywouldbecomethebedrockforthesuccessofMicrosoft,Intel,andotherPCtechgiants:thateverydeskinanofficewouldhaveacomputer,andthateveryhomewouldhaveoneaswell.“Thereisnoreasonanyonewouldwantacomputerintheir

home,”saidKenOlsen,founderofDigitalEquipmentCorporation,1977.“Ithinkthereisaworldmarketformaybefivecomputers,”saidThomasWatson,presidentofIBM,in1943.

12. Google

SteveBallmerisoneoftech’smostoutspokenCEOs.EarlyoninGoogle’sascendancy,hemadehisdisdainforthesearchgiantknown,uptoandincludingdiscountingitsverystatusasacompany.“Google’snotarealcompany.It’sahouseofcards.”

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13.AppleStanShihofAcerclaimedthatApple’sforayintocomputerswasanaberrationandthatthecompanywouldfailtomakeanicheforitself.“Appleislikeamutantvirus,escapingfromthetraditionalstructureofthePCindustry,buttheindustrywillstilleventuallybuildupimmunity,thusfurtherblockingthistrend,andwebelievethesizeofthenon-ApplecampwillexceedApple’s,becausethisishowtheindustrynormallyevolves.”14.Kindle

TheKindlewasaboldbetforAmazon:fromastartsellingbooks,Bezosandthecompanyapparentlyrecognizedthepotentialthatebookshadtooffer.Makingtheereadersinhousewasoneofthebestwaystoassurethattheburgeoningmarketcouldtakeoff.Almostnoonesawitcoming,though.Noteventheoften-prescientSteveJobs,whodecriedtheventure.“Itdoesn’tmatterhowgoodorbadtheproductis,thefactisthatpeopledon’treadanymore.”

15.TheTelevisionDarylZanuck,co-founderof20thCenturyFoxthoughtthattheTVitselfwouldn’tcatchon.“Televisionwon’tbeabletoholdontoanymarketitcapturesafterthefirstsixmonths.Peoplewillsoongettiredofstaringataplywoodboxeverynight.”16.TheTelephone

Thisoneisarealthrowback,butin1876,WesternUnionTelegraphcompanywasofferedthechancetopurchasethepatentonAlexanderGrahamBell’stelephone.WilliamOrton,PresidentofWesternUnion,failedtoseethevalueofthenewlyinventeddevice.“Whatusecouldthiscompanymakeofanelectricaltoy?”

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How Experts Respond to New Ideas