Thursday, November 29, 2007

Knowing When to Pull Your Head Out of the Sand

"To learn more and more about less and less, until eventually we shall know everything about nothing." Motto of the Bonehead Club of Dallas

History is littered with spectacular business failures caused by bonehead managers (BMs). Most of these failures come about by BMs refusal to come to terms with business reality, which many times requires them to admit to making a mistake. BM's don't like admitting to mistakes, or dealing with problems caused by their mistakes. BM's also don't like being caught with the deer in the headlights look when they are informed they have missed a major paradigm shift in the market or recieve the news that their competitor has just introduced a new product or just completed an acquisition to capitalize on the paradigm shift. No, BM's like to look smart and competent at all times even if the ship is sinking they won't flinch until the water reaches their eyebrows.

The most common way BM's cope is to put their heads in the sand and pretend nothing is wrong. There is positive reinforcement here, because 9 times out of 10 the problem is minor and goes away, they can eventually return to the surface and resume their BM activities.

But it's that one time out of 10 where the spectacular failure happens. This is the major strategic issue that needs immediate attention, the bad organizational change that is causing rot from the inside out and has to be fixed fast or any one of the multitude of other serious issues which if not addressed with clear, honest and intelligent thought will inflict a mortal wound.

“We can't put our head in the sand and ignore it. By the time we emerge, our world will have changed beyond recognition...” Alan Johnson

Let's take a look at a few examples in recent history.

AOL-TIME Warner Merger

This was the future, the convergence of new technology and old media that would revolutionize the business world.

"By joining forces with Time Warner, we will fundamentally change the way people get information, communicate with others, buy products, and are entertained," America Online founder Steve Case said of the merger of his Internet pioneer with old media publisher Time Warner in January 2000.

Two BM problems here, first not dealing with the reality of the situation after the merger. At the end of the day the companies weren't really compatible, Time even refused to use AOL as their E-mail provider. There was a significant failure to realize synergies anticipted in the deal. Second, the deer in the headlights look when there was a complete collapse of the online ad market and the AOL model/vision of how users would evolve with the internet.

New Coke

Coca-Cola executives concerned about the market errosion being caused by Pepsi and well aware of the fact that their overall market share was nearly half of what it was in the 1950's came up with a plan to introduce a Pepsi competitor, New Coke. Within hours of its rollut it was clear something was wrong. The BM's response was to put their heads in the sand, they call such compaints "relatively insignificant". Within 3 months there were 400,000 angry calls and letters. New Coke was quietly removed from the market.


"Future Days" 1977, the product of nearly a decade of study at the company's Palo Alto Research Center was introduce for the first time to Xerox's top managers.
The paperless electronic typewriter that displayed text on a screen, could store it with a click of a button, and send it around the office for review and edits, and print our hard copies.
The managers didn't get it and turned it down, leaving Xerox out of what would become a trillion-dollar industry.

Meanwhile Apple Computer's founders copied most of the technology in their Macintosh PC. And for those who worked at the Palo Alto Research Center like Bob Metcalfe, who had invented the Ethernet local area network, they were understandable PO'd and left and started their own companies.


The remarkable popularity of the Apple II computer forced IBM to rush their own PC to market, so fast that they decided no to build it from scratch but build it with off-the-shelf parts. They needed an Operating System and Bill Gates was happy to help them.

The first BM move wasn't by a manager at all but by Kildall's wife who sent IBM packing after refusing to sign their multi-page nondisclosure form. So Gates told IBM about his friend across town that had a "quick and dirty operating system" called QDOS. What they told IBM was out of a Dr. Seuss movie, according to Steve Balmer "We just told IBM, 'Look, we'll go and get this operating system from this small company, we'll take care of it, we'll fix it up, and you can still do a PC".

MS purchased QDOS for $50,000 with unlimited rights, made some minor modifications and sold it to IBM for $80,000. MS only provision was that they would retain the right to sell the renamed MS-DOS, IBM had no problem with that, they couldn't imagine who else would want the operating system.

By the way if your looking for a BM award to use in your office you can purchase it here. This is a picture from their catalog, the bone for whatever reason actually glows in the dark.

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