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Talking Management

Transcript: How do you know when your business dominance has waned? Add to ...

KARL MOORE – This is Karl Moore of the Desautels Faculty of Management at McGill University, with Talking Management for The Globe and Mail. Today I am delighted to speak to Robert Burgelman who is a senior professor at the Stanford Graduate School of Business.

Good morning, Robert.

ROBERT BURGELMAN – Good morning, Karl.

KARL MOORE  – Xerox and Kodak have both recently have gotten into tremendous trouble but when I was younger they were great successes. How do you deal with great success, the strategy that got you there, but change it before you get into deep trouble as they did?

ROBERT BURGELMAN – So, we have to understand first why this happens and I think it happens because companies like Kodak and like, even in the old days, Ford – remember Henry Ford would be able to tell his customers, “You can have the Model T in any color…as long as it is black.” That shows extraordinary capacity to dominate an environment in a particular moment in time, a product market environment. To the extent that you are able to achieve that, you also now face an important problem of continuing to do that and therefore you are going to have to do more and more things to stay dominant in that environment. That implies that you become more and more specialized in that environment. That implies that all your resources are getting sucked into that core business that you have, that made you so successful, and it is very difficult to actually learn to do something new.

KARL MOORE – But Robert it makes sense that if you are doing something really well, like Intel, and the money is pouring in, keep doing that! The question is how do you know when that shift has come and you need to refocus, how do you tell that?

ROBERT BURGELMAN – It’s always hard, it’s always clear in retrospect to be sure, but maybe one way of telling that – Andy Grove and I have written about that in a paper that we call Strategic Dissonance. Strategic dissonance means that the senior executives of the company at a particular moment in time no longer see the world in the same way as it was which creates friction, dissonance, disquiet conflict, you can call it different words, but the idea is that suddenly that different people see that things have changed. However, it is very difficult to actually come to grips with that.

So one way to think about it, I think, is to think about the rate of change of your first derivatives on the curve. So in 1997 Grove, at one point, told me, “I am going to give a speech to my top executives and maybe you should come and listen to it.” So I did that, and so Andy was in front of 40 or so of his top senior executives, the ones who were not travelling and were all there, and he was actually telling the top management of Intel that they were not paying enough attention to the low end of the market.

In fact, he was very worried that they completely ignored the low end of the market and he said, and this is the point, at one point in time in his speech that, “You guys are not paying enough attention to the low end and we are actually falling behind. I know because I have looked at the channel data and the rate of which the low-end PC is growing is far higher than the rate at which the high-end PC is growing and therefore we are falling behind. We don’t have a processor product to deal with the low-end.” So that is one way that you can begin to think about seeing that a change is coming is by looking at the rates of change. That is one way, I think, in addition to paying attention to the different voices that will emerge in the organization that are no longer sure about whether the situation as it has been, or maybe it still is, will continue or not in the future.

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