WalMart’s the Titanic, and Mexican Bribery is its Iceberg – JUMP SHIP

WalMart's been accused of bribing officials in Mexico to grow its business.  But by and large, few in America seem to care.  The stock fell only modestly from its highs of last week, and today the stock recovered from the drop off to the lows of February. 

But WalMart is going to fail.  WalMart is trying to defend and extend a horribly outdated industrial strategy.

Sam Walton opened his original five and dime stores in the rural countryside, and competed just like small retailers had done for decades.  But quickly he recognized that industrialization offered the opportunity to shift the retail market.  By applying industrial concepts like scale, automation and volume buying he could do for retailing what Ford and GM had done for auto manufacturing.  And his strategy, designed for an industrial marketplace, worked extremely well.  Like it or not, WalMart outperformed retailers still trying to compete like they had in the 1800s, and WalMart was spectacularly successful.

But today, the world has shifted again.  Only WalMart is putting all its resources into trying to defend and extend its industrial era strategy, rather than modify to compete in the information age.  Because its strategy doesn't work, the company keeps wandering into spectacular failures, and horrible leadership problems.

• In 2005 WalMart's Vice Chairman and a corporate Vice President tried to use the company's size to wring more out of gift card and merchandise suppliers.  Both were caught and fired for fraud. 
• In 2006 WalMart hired a new head of marketing to update the strategy, and improve the stores and merchandise.  But upon realizing her recommendations violated the existing WalMart industrial strategy the company fired her after only a few months, and went public with character besmirching allegations that she and an ad agency executive were having an affair.  Like that (even if true, which is hotly disputed) somehow mattered to the changes WalMart needed.  Changes which were abruptly terminated upon firing her.
• In 2008 a WalMart employee became an invalid in a truck accident.  When the employee won a lawsuit related to the accident, WalMart sued the invalid employee to return $470,000 in insurance payments made by WalMart.  As if WalMart's future depended on the return of that money.
• In a cost saving move, WalMart moved its marketing group under merchandising, in order to reduce employees and the breadth of merchandise, as well as keep the company more tightly focused on its strategy.

All 3 of these incidents show a leadership team that is so entrenched in history it will do anything – anything – to keep from evolving forward.  And sd that history developed it paved a pathway where it was only a very small step to paying bribes in order to open more stores in Mexico.  Such bribes could easily be seen as just doing "whatever it takes" to keep defending the existing business model, extending it into new markets, even though it is at the end of its life.

It has come to light that after paying the bribes, the leadership team did about everything it could to cover them up.  And that included spending millions on lobbying efforts to hopefully change the laws before anyone was caught, and possibly prosecuted.  The goal was to keep the stores open, and open more.  If that meant a little bribing went on, then it was best to not let people know.  And instead of saying what WalMart did was wrong, change the rules so it doesn't look like it was wrong. 

At WalMart right and wrong are no longer based on societal norms, they are based on whether or not it lets WalMart defend its existing business by doing more of what it wants to do.

WalMart's industrial strategy is similar to the Titanic strategy.  Build a boat so big it can't sink.  And if any retailer could be that big, then WalMart was it.  But these scandals keep showing us that the water is increasingly full of icebergs.  Each scandal points out that WalMart's strategy is harder to navigate, and is running into big problems.  Even though the damage isn't visible to most of us, it is nonetheless clear to WalMart executives that doing more of the same is leading to less good results.  WalMart is taking on water, and it has no solution.  In their effort to prop up results executives keep doing things that are less and less ethical – sometimes even illegal – and guiding people down through all levels of management and employment to do the same.

WalMart's problems aren't unions, or city zoning councils, or women's rights and fair pay organizations.  WalMart's problem is an out of date retail strategy.  Consumers have a lot of options besides going to stores that look like airplane hangers, and frequently without paying a premium.  There is wider selection, in attractive stores, with better quality and a better shopping experience.   And beyond traditional retail, consumers can now buy almost anything 24×7 on-line, frequently at a better price than WalMart – despite its enormous and automated distribution centers and stores, with tight inventory and expense control.

But WalMart is completely unable to admit its strategy is outdated, and unwilling to make any changes.  This week, amidst the scandal, WalMart rolled out its latest and greatest innovation for on-line shopping.  WalMart will now allow an on-line customer to pay with cash.  After placing an order on-line they can trot down to the store and pay the cash, then WalMart will recognize the order and ship the product.

Really.  Now, if this is targeted at customers that are so out of the modern loop that they have no credit card, no debit card, no on-line checking capability and no Paypal account tied to checking – do you think they have a PC to place an online order?  And if they did go to the local library to use a computer, why would they go pay at the store only to have the item shipped – rather than simply buy it in the store and take it home immediately? 

Clearly, once again, WalMart isn't trying to change its strategy.  This is an effort to extend the old WalMart, in a bizarre way, online.  The company keeps trying to keep people coming into the store. 

Amazingly, despite the fact that there's a 50/50 (or better) chance that the CEO and a number of WalMart execs will have to be removed from their position – and could well go to jail for Foreign Corrupt Practice Act violations – most people are unmoved.  The stock has barely flinched, and option traders see the stock remaining at 55 or higher out into September.  Nobody seems to believe that all these hits WalMart is taking really matters.

A famous Titanic line is "and the band played on."   This refers to the band continuing to play song after song, oblivious to disaster, until the ship suddenly broke, heaved up and dove into the ocean leaving only those in life boats to survive.  As the Titanic was taking on water not the captain, the officers, the crew, the passengers or those listening over the airwaves wanted to accept that the Titanic would sink.

But it did.

So how long will you hold onto WalMart shares?  WalMarts growth has been declining for a decade, and even went negative in 2009.  Same store sales have declined for 2 years.  Scandals are now commonplace.  Online retailers such as Amazon and Overstock.com are stripping out all the retail growth, leaving traditionalists in decline.  WalMart may be doing better than Sears, or Best Buy, but for how long? 

WalMart has no ability to stop the economic shift from an industrial to an information age.  It could choose to adapt, but instead its leaders have done the opposite.  The retailers now succeeding are those eschewing almost all the WalMart practices in favor of using customer information to offer what people want (out of their much wider selection) when customers want it, often at surprisingly good prices.  This is the current carrying emerging retailers to better profitability – and it is the current WalMart remains intent on fighting.  Even as its executives face prison.

Sayonara Sony – How Industrial, MBA Management Killed a Great Company

Who can forget what a great company Sony was, and the enormous impact it had on our lives?  With its heritage, it is hard to believe that Sony hasn't made a profit in 4 consecutive years, just recently announced it will double its expected loss for this year to $6.4 billion, has only 15% of its capital left as equity (debt/equity ration of 5.67x) and is only worth 1/4 of its value 10 years ago!

After World War II Sony was the company that took the transistor technology invented by Texas Instruments (TI) and made the popular, soon to become ubiquitous, transistor radio.  Under co-founder Akio Morita Sony kept looking for advances in technology, and its leadership spent countless hours innovatively thinking about how to apply these advances to improve lives.  With a passion for creating new markets, Sony was an early creator, and dominator, of what we now call "consumer electronics:"

• Sony improved solid state transistor radios until they surpassed the quality of tubes, making good quality sound available very reliably, and inexpensively
• Sony developed the solid state television, replacing tubes to make TVs more reliable, better working and use less energy
• Sony developed the Triniton television tube, which dramatically improved the quality of color (yes Virginia, once TV was all in black & white) and enticed an entire generation to switch.  Sony also expanded the size of Trinitron to make larger sets that better fit larger homes.
• Sony was an early developer of videotape technology, pioneering the market with Betamax before losing a battle with JVC to be the standard (yes Virginia, we once watched movies on tape)
• Sony pioneered the development of camcorders, for the first time turning parents – and everyone – into home movie creators
• Sony pioneered the development of independent mobile entertainment by creating the Walkman, which allowed – for the first time – people to take their own recorded music with them, via cassette tapes
• Sony pioneered the development of compact discs for music, and developed the Walkman CD for portable use
• Sony gave us the Playstation, which went far beyond Nintendo in creating the products that excited users and made "home gaming" a market.

Very few companies could ever boast a string of such successful products.  Stories about Sony management meetings revealed a company where executives spent 85% of their time on technology, products and new applications/markets, 10% on human resource issues and 5% on finance.  To Mr. Morita financial results were just that – results – of doing a good job developing new products and markets.  If Sony did the first part right, the results would be good.  And they were.

By the middle 1980s, America was panicked over the absolute domination of companies like Sony in product manufacturing.  Not only consumer electronics, but automobiles, motorcycles, kitchen electronics and a growing number of markets.  Politicians referred to Japanese competitors, like the wildly successful Sony, as "Japan Inc." – and discussed how the powerful Japanese Ministry of Trade and Industry (MITI) effectively shuttled resources around to "beat" American manufacturers.  Even as rising petroleum costs seemed to cripple U.S. companies, Japanese manufacturers were able to turn innovations (often American) into very successful low-cost products growing sales and profits.

So what went wrong for Sony?

Firstly was the national obsession with industrial economics.  W. Edward Deming in 1950s Japan institutionalized manufacturing quality and optimization.  Using a combination of process improvements and arithmetic, Deming convinced Japanese leaders to focus, focus, focus on making things better, faster and cheaper.  Taking advantage of Japanese post war dependence on foreign capital, and foreign markets, this U.S. citizen directed Japanese industry into an obsession with industrialization as practiced in the 1940s — and was credited for creating the rapid massive military equipment build-up that allowed the U.S. to defeat Japan.

Unfortunately, this narrow obsession left Japanese business leaders, buy and large, with little skill set for developing and implementing R&D, or innovation, in any other area.  As time passed, Sony fell victim to developing products for manufacturing, rather than pioneering new markets. 

The Vaio, as good as it was, had little technology for which Sony could take credit.  Sony ended up in a cost/price/manufacturing war with Dell, HP, Lenovo and others to make cheap PCs – rather than exciting products.  Sony's evolved a distinctly Industrial strategy, focused on manufacturing and volume, rather than trying to develop uniquely new products that were head-and-shoulders better than competitors.

In mobile phones Sony hooked up with, and eventually acquired, Ericsson.  Again, no new technology or effort to make a wildly superior mobile device (like Apple did.)  Instead Sony sought to build volume in order to manufacture more phones and compete on price/features/functions against Nokia, Motorola and Samsung.  Lacking any product or technology advantage, Samsung clobbered Sony's Industrial strategy with lower cost via non-Japanese manufacturing.

When Sony updated its competition in home movies by introducing Blue Ray, the strategy was again an Industrial one – about how to sell Blue Ray recorders and players.  Sony didn't sell the Blue Ray software technology in hopes people would use it.  Instead it kept it proprietary so only Sony could make and sell Blue Ray products (hardware).  Just as it did in MP3, creating a proprietary version usable only on Sony devices.  In an information economy, this approach didn't fly with consumers, and Blue Ray was a money loser largely irrelevant to the market – as is the now-gone Sony MP3 product line.

We see this across practically all the Sony businesses.  In televisions, for example, Sony has lost the technological advantage it had with Trinitron cathode ray tubes.  In flat screens Sony has applied a predictable, but money losing Industrial strategy trying to compete on volume and cost.  Up against competitors sourcing from lower cost labor, and capital, countries Sony has now lost over $10B over the last 8 years in televisions.  Yet, Sony won't give up and intends to stay with its Industrial strategy even as it loses more money.

Why did Sony's management go along with this?  As mentioned, Akio Morita was an innovator and new market creator.  But, Mr. Morita lived through WWII, and developed his business approach before Deming.  Under Mr. Morita, Sony used the industrial knowledge Deming and his American peers offered to make Sony's products highly competitive against older technologies.  The products led, with industrial-era tactics used to lower cost. 

But after Mr. Morita other leaders were trained, like American-minted MBAs, to implement Industrial strategies.  Their minds put products, and new markets, second.  First was a commitment to volume and production – regardless of the products or the technology.  The fundamental belief was that if you had enough volume, and you cut costs low enough, you would eventually succeed.

By 2005 Sony reached the pinnacle of this strategic approach by installing a non-Japanese to run the company.  Sir Howard Stringer made his fame running Sony's American business, where he exemplified Industrial strategy by cutting 9,000 of 30,000 U.S. jobs (almost a full third.) To Mr. Stringer, strategy was not about innovation, technology, products or new markets.  

Mr. Stringer's Industrial strategy was to be obsessive about costs. Where Mr. Morita's meetings were 85% about innovation and market application, Mr. Stringer brought a "modern" MBA approach to the Sony business, where numbers – especially financial projections – came first.  The leadership, and management, at Sony became a model of MBA training post-1960.  Focus on a narrow product set to increase volume, eschew costly development of new technologies in favor of seeking high-volume manufacturing of someone else's technology, reduce product introductions in order to extend product life, tooling amortization and run lengths, and constantly look for new ways to cut costs.  Be zealous about cost cutting, and reward it in meetings and with bonuses.

Thus, during his brief tenure running Sony Mr. Stringer will not be known for new products.  Rather, he will be remembered for initiating 2 waves of layoffs in what was historically a lifetime employment company (and country.)  And now, in a nod to Chairman Stringer the new CEO at Sony has indicated he will  react to ongoing losses by – you guessed it – another round of layoffs.  This time it is estimated to be another 10,000 workers, or 6% of the employment.  The new CEO, Mr. Hirai, trained at the hand of Mr. Stringer, demonstrates as he announces ever greater losses that Sony hopes to – somehow – save its way to prosperity with an Industrial strategy.

Japanese equity laws are very different that the USA.  Companies often have much higher debt levels.  And companies can even operate with negative equity values – which would be technical bankruptcy almost everywhere else.  So it is not likely Sony will fill bankruptcy any time soon. 

But should you invest in Sony?  After 4 years of losses, and entrenched Industrial strategy with MBA-style leadership focused on "numbers" rather than markets, there is no reason to think the trajectory of sales or profits will change any time soon. 

As an employee, facing ongoing layoffs why would you wish to work at Sony?  A "me too" product strategy with little technical innovation that puts all attention on cost reduction would not be a fun place.  And offers little promotional growth. 

And for suppliers, it is assured that each and every meeting will be about how to lower price – over, and over, and over.

Every company today can learn from the Sony experience.  Sony was once a company to watch. It was an innovative leader, that pioneered new markets.  Not unlike Apple today.  But with its Industrial strategy and MBA numbers- focused leadership it is now time to say, sayonara.  Sell Sony, there are more interesting companies to watch and more profitable places to invest.

Why EVERY Company Must Be a Tech Company – Apple, Amazon, Facebook, Instagram Lessons

Apple's amazing increase in value is more than just a "rah-rah" story for a turnaround.  Fundamentally, Apple is telling everyone – globally – that there has been a tectonic shift in markets.  And if leaders don't understand this shift, and incorporate it into their strategy and tactics, their organizations are going to have a very difficult future.

Recently Apple's value peaked at $600B.  Yes, that is an astounding number, for it reflects not only 50% greater value than the oil giant Exxon/Mobil (~$390B), but more than the entire value of the stock markets in Spain, Greece and Portugal combined!

Source: Business Insider.com

This astounding valuation causes many to be reticent about owning Apple shares, for it seems implausible that any one company – especially a tech company with so few employees – could be worth so much.

Unless we look at this information in the context of a major, global economic shift.  That what the world values has changed dramatically.  And that what investors are telling business (and government) leaders is that in a globalized, fast paced world value is based upon what you know, when you know it – in other words information.  Not land, buildings or the ability to make things.

Three hundred years ago the wealthiest people in the world owned land.  Wars were fought for centuries to control land.  Kings owned land, and controlled everything on the land while capturing the value of everything produced on that land.  As changes came along, reducing the role of kings, land barons became the wealthiest people in the world.  In an agrarian economy, where most human resources (and all others for that matter) were deployed in food production owning land was the most valuable thing on the planet.

But then some 120 years ago, along came the industrial reveolution.  Suddenly, productivity rose dramatically by applying new machines to jobs formerly performed by humans.  With this shift, value changed.  The great industrialists were able to capture the value of greater productivity – making people like Cyrus McCormick, Henry Ford and Andrew Carnegie the wealthiest of the wealthy.  Worth more than most states, and many foreign countries. 

The age of manufacturing was based upon the productivity of machines and the application of industrial processes to what formerly was hand labor.  Creating tools – from entignes to automobiles to airplanes – created great wealth.  Knowing how to make these machines, and making them, created enormous value.  And companies like General Motors, General Dynamics and General Electric were worth much more than the land upon which food was produced.  And the commodity suppliers, like Exxon/Mobil, feeding industrial companies captured huge value as well. 

By the middle 1900s America's farmers were forced to create ever larger farms to remain in business, and were constantly begging for government subsidies to stay alive via price controls (parity programs) and land "set-asides" run by the Agriculture Department.  By the 1980s family farms going broke by the thousands, agricultural land values plummeted and the ability to create value by growing or processing food was a struggle.  Across the developed world, wealth shifted into the hands of industrial companies from landowners.

Sometime in the 1990s the world shifted again, and that's what the chart above shows us.  Countries with little or no technology companies – no information economy – cannot create value.  On the other hand, companies that can drive new levels of productivity via the creation, management, use and sale of information can create enormous value. 

Think about the incredible shift that has happened in retail.  America's largest and most successful retailer from the 1900 turn of the century well into the 1960s was Sears.  In an industry that long equated success with "location, location, location" Sears has had, and continues to control, enormous amounts of land and buildings.  But the value of Sears has declined like a stone pitched off a bridge, now worth only $6B (1% the Apple value) despite all that real estate!

Simultaneously, America's largest retailer Wal-Mart has seen its value go nowhere for over a decade, despite its thousands of locations that span every state.  Even though Wal-Mart keeps adding stores, and enlarging stores, adding more and more land and buildings to its "asset" base the company's customer base, sales and value are mired, unable to rise.

Yet, Amazon – which has no land, and almost no buildings – has used the last 20 years to go from start up to an $86B valuation – doing much better for shareholders than its traditional, industrial thinking competitors.  In the last 5 years, Amazon's value has roughly quadrupled!

Source: Yahoo Finance

Yes, Amazon is a retailer.  But the company has learned that applying an industrial strategy is far less valuable than applying an information strategy.  As an internet leader, first with most browser formats on PCs and smartphones, Amazon has reached far more new customers than any traditional real-estate focused company.  By launching Kindle Amazon focused on the information in books, rather than the format (print) revolutionizing the market and capturing enormous value.

By launching Kindle Fire Amazon takes information one step further, making it possible for customers to access new products faster, order faster and build their own retail world without ever going to a building.  By becoming a tech company, Amazon is clearly well on the way to dominating retail, as Sears falls into irrelevancy and almost surely bankruptcy, and Wal-Mart stalls under the overhead of all that land, buildings and vast number of minimum-wage, uninsured employees.

We now must realize that value is not created by what accountants have long called "hard assets" – land, buildings and equipment.  In fact, the 2 great U.S. recessions since 2000 have demonstrated to everyone that there is no security in these – the value can decline, decline fast, and decline far.  Just because these things are easy to see and count does not insure value.  They can easily be worth less than they cost to make – or own.

Successful competition in 2012 (and going forward) requires businesses know about customers, products and have the ability to supply solutions fast with great reach.  Winning is about what you know, knowing it early, acting upon the information and then being able to disseminate that solution fast to those who have emerging needs. 

Which is why you have to be excited about the brilliant move Facebook made to acquire Instagram last week.  In one fast, quick step Facebook bought the ability to easily and effectively provide mobile image solutions – across any application – to millions of existing users. Something that every single person, and business, on the planet is either doing now, or will be doing very soon.

Source:  Wired

On a cost-per-existing-customer basis, Facebook stole Instagram.  And that's before Facebook spreads out the solution to the rest of its 780million users!  Forget about how many employees Instagram has, or its historical revenues or its assets.  In an innovation economy, if you have a product that 35million people hear about and start using in less than a year, you have something very valuable!

Kudos go to Mark Zuckerberg as CEO, and his team, for making this acquisition so quickly.  Before Instagram had a chance to hire bankers, market itself and probably raise its value 10x.  That's why Mr. Zuckerberg was Time Magazine's "Man of the Year" at the start of 2011 – and why he's been able to create so much more value for his shareholders than the CEOs of industrial companies – like say GE.

Going forward, no company can plan to survive with an industrial strategy.  That approach, and those rules, simply don't create high returns.  To be successful you MUST become a tech company.  And while this may not feel comfortable, it is reality.  Every business must shift, or die.

 

Momentum is a Killer – The Demise of RIM, Yahoo and Dell

Understand your core strength, and protect it.  Sounds like the key to success, and a simple motto.  It's the mantra of many a management guru.  Only, far too often, it's the road to ruin.

The last week 3 big announcements showed just how damning the "strategy" of building on historical momentum can be. 

Start with Research in Motion's revenue and earnings announcement.  Both metrics fell short of expectations as Blackberry sales continue to slide.  Not many investors were actually surprised about this, to be honest.  iOS and Android products have been taking away share from RIM for several months, and the trend remains clear.  And investors have paid a heavy price.

Source: BusinessInsider.com

There is no doubt the executives at RIM are very aware of this performance, and desperately would like the results to be different.  RIM has known for months that iOS and Android handhelds have been taking share. The executives aren't unaware, nor stupid.  But, they have not been able to change the internal momentum at RIM to the right issues.

The success formula at RIM has long been to "own" the enterprise marketplace with the Blackberry server products, offering easy to connect and secure network access for email, texting and enterprise applications.  Handsets came along with the server and network sales.  All the momentum at RIM has been to focus on the needs of IT departments; largely security and internal connectivity to legacy systems and email.  And, honestly, even today there is probably nobody better at that than RIM.

But the market shifted.  Individual user needs and productivity began to trump the legacy issues.  People wanted to leave their laptops at home, and do everything with their smartphones.  Apps took on a far more dominant role, as did ease of use.  Because these were not part of the internal momentum at RIM the company ignored those issues, maintaining its focus on what it believed was the core strength, especially amongst its core customers.

Now RIM is toast.  It's share will keep falling, until its handhelds become as popular as Palm devices.  Perhaps there will be a market for its server products, but only via an acquisition at a very low price.  Momentum to protect the core business killed RIM because its leaders failed to recognize a critical market shift.

Turn next to Yahoo's announcement that it is laying off 1 out of 7 employees, and that this is not likely to be the last round of cuts.  Yahoo has become so irrelevant that analysts now depicct its "core" markets as "worthless."

Source: SiliconAlleyInsider.com

Yahoo was an internet pioneer.  At one time in the 1990s it was estimated that over 90% of browser home pages were set to Yahoo! But the need for content aggregation largely disappeared as users learned to use search and social media to find what they wanted.  Ad placement revenue for keywords transferred to the leading search provider (Google) and for display ads to the leading social media provider (Facebook.) 

But Yahoo steadfastly worked to defend and extend its traditional business.  It enhanced its homepage with a multitude of specialty pages, such as YahooFinance.  But each of these has been outdone by specialist web sites, such as Marketwatch.com, that deliver everyhing Yahoo does only better, attracting more advertisers.  Yahoo's momentum caused it to miss shifting with the internet market. Under CEO Bartz the company focused on operational improvements and efforts at enhancing its sales, while market shifts made its offerings less and less relevant. 

Now, Yahoo is worth only the value of its outside stockholdings, and it appears the new CEO lacks any strategy for saving the enterprise.  The company appears ready to split up, and become another internet artifact for Wikipedia.  Largely because it kept doing more of what it knew how to do and was unable to overcome momentum to do anything new.

Last, but surely not least, was the Dell announced acquisition of Wyse. 

Dell is synonymous with PC.  But the growth has left PCs, and Dell missed the markets for mobile entertainment devices (like iPods or Zunes,) smartphones (like iPhone or Evo) and tablets (like iPads and Galaxy Tab.)  Dell slavisly kept to its success formula of doing no product development, leaving that to vendors Microsoft and Intel, as it focused on hardware manufacturing and supply chain excellence.  As the market shifted from the technologies it knew Dell kept trying to cut costs and product prices, hoping that somehow people would be dissuaded from changing technologies.  Only it hasn't worked, and Dell's growth in sales and profits has evaporated.

Don't be confused.  Buying Wyse has not changed Dell's "core."  In Wyse Dell found another hardware manufacturer, only one that makes old-fashioned "dumb" terminals for large companies (interpret that as "enterprise,") mostly in health care.  This is another acquisition, like Perot Systems, in an effort to copy the 1980s IBM brand extension into other products and services that are in like markets – a classic effort at extending the original Dell success formula with minimal changes. 

Wyse is not a "cloud" company.  Rackspace, Apple and Amazon provide cloud services, and Wyse is nothing like those two market leaders.  Buying Wyse is Dell's effort to keep chasing HP for market share, and trying to pick up other pieces of revenue as it extends is hardware sales into more low-margin markets.  The historical momentum has not changed, just been slightly redirected.   By letting momentum guide its investments, Dell is buying another old technology company it hopes it can can extend its "supply chain" strenths into – and maybe find new revenues and higher margins.  Not likely.

Over and again we see companies falter due to momentum.  Why? Markets shift.  Faster and more often than most business leaders want to admit.  For years leaders have been told to understand core strengths, and protect them.  But this approach fails when your core strength loses its value due to changes in technologies, user preferences, competition and markets.  Then the only thing that can keep a company successful is to shift. Often very far from the core – and very fast.

Success actually requires overcoming internal momentum, built on the historical success formula, by putting resources into new solutions that fulfill emerging needs.  Being agile, flexible and actually able to pivot into new markets creates success.  Forget the past, and the momentum it generates.  That can kill you.