I was in New York this week, running a workshop on “leading innovation” for a group of executives, when someone pointed this question at me: do you need a crisis to convince people to change?
We have heard much chatter this year about the value of troubles - the Obama team supposedly saying to “never waste a crisis,” for example, or the reminder that the Chinese use the same character for crisis and opportunity - yet what I sense in every large corporation is an undercurrent of continued dread.
Executives are working long hours, feeling heightened stress, taking on expanding responsibilities (read an interesting McKinsey survey on the topic here: http://download.mckinseyquarterly.com/bonus/leaders_in_crisis.pdf). In the last two months, I have worked with 300 executives from various multinationals and, while the talk is often of a better 2010, behind the bullishness I hear hope, behind the analysis I hear fear, and behind concern for the company I hear worry about losing jobs.
As the shopping season speeds up, I thought it might be refreshing to hear how a transformative retail concept sprung out of a near-fatal fall.
My colleague, Helmut Albrecht got a chance to interview Lowell “Bud” Paxson a few months ago about a crisis Bud navigated in the late 1980s. He shared his story. He was running an AM radio station in Clearwater, Florida. In 1977, one of his advertisers found himself in a financial crunch and could not afford to pay for air time. Instead, he offered Bud what seemed a desperate deal. He would pay for the airtime in the currency he had: Rival can openers.
What can a radio station do with a box of red can openers? Bud might have simply sent them back and put his collections department on the advertiser (as most creditors seem to be doing now). He could have given them away as gifts to his other corporate customers. But instead, he instructed one of his hosts to sell the can openers on the air.
To everyone’s surprise, this desperate move proved a brilliant one. The can openers sold faster than anyone expected and gave Bud a radical new business model. Instead of selling advertising to customers who sold products, maybe Bud could just sell the products himself!
A few years later, Bud got financial backing to launch a cable channel to pursue this business model fully. The channel, named the “Home Shopping Network” (today HSN), would simply sell products on the air 24 hours per day.
The subsequent chapters of this story are already well known. HSN (NASDAQ: HSNI) quickly took off. It was soon carried by cable companies around the country and then expanded into other languages and countries. It spurned an entirely new media category. Today HSN sells nearly $3 billion a year, making it the size of Abercrombie & Fitch (ANF), and with exception of a loss in 2008 caused by a large unusual non-operating expense, has consistently produced profits.
The issue with new ideas, or “fourth options” as I call them, is that they require us to break comfortable patterns of behavior. Had Bud simply been paid in cash, he would have no reason to try selling can openers on air. He would have probably continued doing what he was doing, selling advertising. We feel no urge to change what seems to be working, so when our options are acceptable, we repeat what has been done before.
In this dilemma lies the gift of crisis. It encourages us to reconsider what we have accepted. Ask yourself the following questions to see if you can find a way to change before a crisis occurs.
1. What do we do best? Can we do it better?
2. What is the weakest part of our business?
3. Should we abandon our weakest position or can we discover a way to make it stronger?
4. What are the top ten crises that could destroy this company?
5. Do I see opportunities in this list to advert disasters before they occur?