This is a sad piece. I typically try to keep emotions out of strategy but I feel bad for this company. It arranged a marriage between a new business and an old one, and it ran against what I’d call irreconcilable differences.

Companies in declining industries can get desperate, especially when they’re accustomed to market-leader status. They get beaten down by Wall Street, shareholders, and columnists. Sometimes they bolt way out of their comfort zone instead of trying to tune up the old business, scale down expectations, and ride peacefully into the horizon, making a lot of money in the process for shareholders.

In itself, venturing boldly into a new area when the old one is in decline is entrepreneurial vision at its best. Unless, of course, the new business is so far from the old business’ comfort zone — i.e., expertise, technology, infrastructure, etc. — that it’s like trying to cross a chasm in two steps. This is the case of Barnes & Noble. As USA Today reports, Barnes and Noble’s CEO, William Lynch, the one who led B&N into the e-commerce age with Nook, resigned on July 8, 2013. The reason is that the e-reader market is highly competitive (red, bloody ocean for sure) and Nook has been losing its shirt.

Read More →

The novel for which I’m best known, Ishmael, began its public life in a competition. In competi­tion for the half-million dollar Turner Tomorrow Award, some 2200 novels were entered from around the world, to be judged by a distinguished panel including names like Nobel-prize winner Nadine Gordimer, Ray Bradbury, William Styron, and others, who (I was told) identified mine as the winner very early on.

By the contest terms, the winner was guaranteed publication—but not, of course, success. In fact, it was rumored that, after the book’s rather tepid initial acceptance by the public, it would be allowed to go out of print without ever appearing in paperback. It did, however, appear in paperback and went on to earn one of publishing’s strangest histories. Without ever having popped up on the New York Times best-seller list, even for a day, Ishmael has sold more than a million and a half copies in more than 25 languages and is used in colleges and universities all over North America in courses as varied as philosophy, geography, history, religion, biology, archeology, zoology, ecology, anthropology, political science, economics, and sociology.

Among my favorite lost quotes (Google finds no trace of it and it appears in none of my many volumes of quotes from writers and others) is this one:

“Literature is not a horse race.”
(Anonymous)

Read More →

Good news! There are only two obstacles between you and glory for your startup.

Bad news. The first obstacle is your competitors.

Worse news. The second obstacle is your investors, who don’t want to hear about the first ob­stacle. That’s why the first obstacle doesn’t appear in your business plan.

Good news! There’s hope despite your competitors and investors.

Read More →

In “VCs aren’t [the] only ones able to show you the money” John Shinal, USA Today’s New Tech Economy columnist, reported that US venture-capital (VC) investment in 2012 fell to $29.7 bil­lion from $35.1 billion in 2011. Three years after the financial collapse, VC-backed investments haven’t returned to pre-great-recession levels.

In itself, this is not surprising. Some signs of recovery notwithstanding, little has returned to pre-recession levels in the US economy. The more-troubling news, though, is that the number of acquisitions of VC-backed companies declined by a whopping 21% last year. As Mr. Shinal ob­served, this is the second-lowest total in the past seven years, exceeding the lowest (in 2009) by only six deals. That cannot be attributed to the effects of the financial crisis alone.

Most readers are probably raising their eyebrows right now. Didn’t VC-backed Facebook go public last year in the largest IPO in US history? But Facebook was the exception. The most-dismal news for VCs is that the average internal rate of return for US VC funds over the past ten years strained to reach a dreary 6.1%. In comparison, the Nasdaq rose 10.3% and the Dow Jones, 8.6%. True, a lot of the rise happened in the last three years only as the stock market took off, but one would still expect the masters of the universe to beat stodgy old public corpora­tions!

Read More →

We are going to tell you two true stories of conflict between top management and product management. One involves a Fortune Global 200 pharmaceuticals company, the other a Fortune 500 consumer-product company. You may be surprised at the way the companies demonstrated skill at competing.

Conflict one: Triple sales!

We’ll start with the pharma giant. Their conflict was about sales goals.

Top man­agement wanted the business to triple sales of a recently launched product in a year. That was clearly a stretch goal but it was not unheard-of in the industry. Prod­uct managers did­n’t mind having a stretch goal, of course, but they wanted to be sure that the goal could be achieved in reality. That conflict is classic and both parties’ views are rational. Moreover, neither party is served by setting bad goals.

The company hired one of us, Mark, to help them quantify where stretch ended and fantasy be­gan for that product.

Read More →

YOU GOT AN OPINION ABOUT THAT?

A Broken Outsourcing Model,” by the Editorial Board of The New York Times. Suppliers in Bangla­desh compete to minimize cost at the risk to their workers lives. “A race to the bottom in the clothing industry needlessly puts lives at risk.”

Competing.com asks: How can we avoid races to the bottom? Should we avoid races to the bottom?

Read More →