From The Times May 1, 2009
Need to know:
Motorola: The US mobile phone maker reported a first-quarter loss of $231 million (£156 million), an improvement on its $194 million loss for the same quarter last year. Sales were down by 28 per cent.
DSG International: The owner of Currys and PC World has raised £310.6 million to shore up its capital base after credit insurance fears contributed to a surprise rise in its net debt.
Chrysler: The American carmaker has gone into Chapter 11 bankruptcy protection, having won $8 billion (£5.4 billion) in US government funding to help it to restructure.
Smith & Nephew: The London-listed medical devices company reported an 18 per cent rise in first-quarter profits to £66.2 million, as the benefit of cost cuts outweighed a 5 per cent slump in revenues, caused by patients deferring non-essential orthopaedic surgery and by hospitals tightening their expenses.
From the Competitive Strength Point of View –
Going – Motorola, a once great technological leader that loudly trumpeted its own excellence that has been struggling for years. At best this is a company that is exhibiting the Comparative Competitive Strength symptoms of a Constrained condition. There is much that it needs to do to recover its previous value to shareholders, customers and employees – market leadership, product innovation, quality and delivery are examples. The fact that none of these are new factors over the last 18 months suggests that the only focus is now survival – that is a Constrained condition.
Going – DSG International, a large business that loudly claims market leadership but has been the subject of our adverse predictions over a number of years. The list of operational quality failures is massive and widely documented, especially where there is interest in customer service experiences. This report seems to indicate the next step in the inevitable death throes as this business slides from Constrained towards The Abyss.
Gone? – Chrysler, a motor company that has been so spectacularly uncompetitive for so long that the only wonder is that it has lasted so long. However, it has never been immodest – the blowhard communication habits of the Motor Industry run through its veins. The various managements of this vast corporation have been ducking and diving over the decades with acquisitions such as Jeep, international misadventures such as the shambles that was Chrysler Talbot, mixed ventures such as the mutually disastrous tie up with Mercedes, and a new vehicles that remain firmly unmatched to market needs (just look at the current range!) – and last but not least, a quality and reliability reputation that almost any Third World vehicle builder can beat hands down. This is a long Constrained business that has toppled into The Abyss.
The tragedy now is that their extensive Supply Chain will suffer a massive financial blow that they are also ill equipped to withstand. It is very probable that much of their Supply Chain is also in a Constrained condition and that The Abyss awaits them too. And, meanwhile, the worthless Brand Name totters on in the name of job protection, is there any other logical reason? This time about to be hitched to the paragon of automotive quality leadership that is FIAT – another Constrained organisation that exists only by governmental fiat – what a combination that promises to be..
A Lesson from Chrysler – the LCD Effect
The brutal reality of the Competitive Strength point of view is that, in the majority of cases, in any interdependent business relationship the Lowest Common Denominator sets the pattern of values, thinking and behaviour for the whole. So, because Chrysler has been for so long in a Constrained condition, tragically many of their suppliers may also have come to share the condition – and be therefore be doomed in turn.
The Mercedes/Chrysler tie up illustrates this so well. Mercedes, strong in the self belief that they were an example of Excellence in Competitive Strength, entered a joint venture with Chrysler (a Constrained operation desperately seeking yet another silver bullet). There were two unexpected outcomes – first, Mercedes’ reputation in the USA for quality and reliability with engineering excellence suffered nearly terminal damage from their first locally built vehicles – second, the world wide market spotlight fell across the quality and reliability of all Mercedes’ range and they too were seen to be found wanting. Mercedes’ self perception of Excellence had been a myth – they were in fact, and had been for some time, merely in a Comfortable condition. And that is why they slipped downhill with Chrysler without even realising that it was happening.
However, although it has taken a few years, Mercedes’ leadership realised what was happening, distanced themselves from Chrysler as far as possible, and made a massive investment in restoring their internal culture towards Excellence. The only question now is whether they have made enough progress to withstand the credit crunch?
However, the News is not all doom and gloom today -
Staying – Smith & Nephew, is a company with a quiet reputation for excellence in everything that they do. It has demonstrated a high degree of agility in both market shaping and leadership through an adept and innovative mixture of product leadership and flexibility in distribution channel development. In fact, it exhibits several symptoms of the Competitive Strength condition beyond Excellence that we call Free. So it is no surprise to see, as reported, that they have been able to respond rapidly and productively to a sudden shift in market conditions.
So, does your company think it is the greatest?
Do you shout your superiority from the rooftops? Are you one of the business leaders fooling your customers, your suppliers, your shareholders and, worst of all, yourself that You Are The Best?
Times are tough – and in Warren Buffet’s memorable phrase - the tide is going right out.
In terms of Competitive Strength levels -
· If your business is in the condition of Excellence – you are in for some nasty surprises
· If your business is in the condition of Comfortable – you are in for a terrible time – you will very probably slide into a Constrained condition without knowing it has happened until it is too late.
· If your business is in the Constrained condition – you are unlikely to survive
· If your business is in the Free condition – you don’t need us to tell you what to do, you will already have done it.
Whether you are a business leader, proprietor, investor, financier, supplier, banker, manager or employee – you would be wise to look hard at the Competitive Strength condition of the companies with which you are closely associated. If they are going down, they may take you with them without you even realising that it is happening.
If you want to find out more about the Competitive Strength Report, the true financial value of exceeding expectations and the importance of changeability for survival and prosperity, please look at our ChangeWORLD web site here. If you have the courage to wake up and face reality – contact us before it is too late.
