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PROSPER or PERISH Workshop
I n n o v a t I o n L A B s
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PROSPERor
perish
ADVANCE READING
PROSPER or PERISH Workshop
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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?”
©2017CBInsights
How Experts Respond to New Ideas