What business are you in?
Overcoming Identity – Apple & HP
by Adam Hartung
“What business are you in?” is one of the most common business questions asked. People usually want a simple answer, like “I make widgets” or “I provide widget services.” A simple answer allows people to easily cubbyhole the business, and remember what it does. And many think it provides for a well run business – through a simple focus – sort of like the Kentucky Fried Chicken advertisement “We only do chicken, and we do chicken right.” Because the business’s Identity is easy to understand employees can focus on Defending that Identity.
But in reality when your Identity is tightly tied to a product or service bad things happen when demand for that item wanes — or demand turns flat while supply is ample (or possibly growing). Competitors start trading punishing blows back and forth, and profits wane as competition intensifies. Business leaders start acting like gladiators trapped in a coliseum pit, undertaking ever more dangerous actions to survive amidst punishing competitiveness. Many don’t survive. As results are increasingly threatened, the business’s Identity is under attack, and the tendency to Defend that Identity is extremely strong. Such defense usually grows, even as results continue deteriorating.
There is an alternative. Instead of trying to always be what you always were, you can do something different. Think about Hewlett Packard. HP started as an instrumentation company, making electronic tools, such as oscilloscopes, for engineers. But as the market shifted, HP’s leaders have moved the company into new business – allowing the company to keep growing.
Source: Business Insider
By entering new businesses, some organically and some via acquisition, HP has been able to continue growing sales and profits. By letting each of these businesses do whatever they need to do to succeed, by giving them permission to do what the market demands and providing these new businesses with resources, HP has been able to compete in old businesses, while developing new businesses toward which the Success Formula can migrate. Thus, HP has become a company with a less simple Identity – but it also has been able to continue years of profitable growth.
Too often, opening these White Space projects for growth causes the traditional business to feel threatened. Those in the old Success Formula will often say that the company is “abandoning its past” and “walking away from a very profitable business.” Like the old story of Homer, this is a “siren’s song” – very dangerously pulling you toward the rocks which can sink your ship – because each month profitability is becoming more and more threatened. While it might have been a profitable business in the past, as growth slows profitability is less and less likely in the future. As sales growth slows it is important the business do its best to develop a new Success Formula so it can maintain growth.
“Has Apple Forgotten the Mac?” is a recent PC World article. The authors point out that as Apple’s revenues have transitioned toward new businesses, such as music and now mobile computing/telephony, the Mac business receives less attention and resources. Those who support the Mac business question if Apple should spend more resources on what has recently returned to profitability.
This is the kind of internal threat that can be very risky. While the Mac is a great product, with a loyal following, and regained profitability – we can see that in the future there will be less and less need for such desktop and laptop products. Apple is migrating toward the new mobile future – and as a result it must reduce the resources on the Mac business. Each year, more resource needs to be allocated toward the new, faster growing businesses, and less invested in the slower growing traditional computing products.
Apple’s Identity was once all Mac. And that nearly bankrupted the company – as it almost ran out of cash back at the century’s turn. Only by overcoming its Identity as a single product company, and rapidly moving into White Space with new products in new markets, was Apple able to regain its profitable growth path.
HP and Apple both show us that an Identity, created early in the lifecycle, is very powerful. But inevitably markets shift, and the results possible from a simple, easy to understand identity will decline. Only by overcoming that original Identity via entering new markets – and using White Space to evolve the Success Formula, can a business hope to have long-term revenue and profit growth.
Adam Hartung, author of “Create Marketplace Disruption“, is a Faculty and Board member of the Lake Forest Graduate School of Management, Managing Partner of Spark Partners, and writes for “Forbes” and the “Journal for Innovation Science.”
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