Umair Haque / Bubblegeneration
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Design principles for 21st century companies, markets, and economies. Foreword by Gary Hamel. Coming January 4th. Pre-order at Amazon.

Friday, January 18, 2008

The Death of the Modern Corporation, Special TWX Edition

Congratulations, TWX, you've just made the biggest strategic error of 2008 (so far :)

Why is this move is an error?

On the simplest level, it implodes the value proposition, destroys market space, and massively amplifies the incentives for innovators to capitalize on that slack demand. All this while deepening the competence trap TWX is already in - to which there's only one real solution: unbundling.

On a deeper level - does monopoly power give telcos the opportunity to end flat bandwidth prices?

In some areas, for a while, yes.

In the bigger picture - no.

Why not?

Simple: because they have no market power in the next value chain. Who does? Context guys - Google, etc.

Let me draw an analogy. It's like a cute little bunny rabbit on a moped trying to play a game of brinksmanship with the Millenium Falcon. Guess who's gonna lose?

But there's a deeper point, which is more important. Why do some firms seem stuck in an almost robotic cycle of strategic error? Why do they keep making bad decision, after bad decision, after bad decision?

After all, it's been almost 10 years of strategy decay for TimeWarner. That's a very long time.

The answer, of course is: it's in the DNA. It's not that TimeWarner made the wrong choice: rather, it's that its DNA prevents it from making anything but the wrong choice.

In this case, as a vertically integrated player with a totally obsolete set of managerial techniques, TimeWarner's ability to navigate strategy space isn't just limited - it's nonexistent.

Just ask yourself: is there any better way to commoditize yourself than failing to engage in strategic renewal, and instead playing elaborate pricing games?

Of course not. This move is bereft of insight or imagination - but, unfortunately, TimeWarner can make no other.

So, for TWX's sake, I hope that moped has like level 4 billion plasma shields - because the game it's playing isn't just dangerous, it's suicidal.

-- umair // 2:40 PM // 4 comments


OK just to be clear, none of us can change our DNA. We're not going to play for the NBA or sing at the Met. TWX can only do what it can do. If the environment is becoming dangerous, TWX should move or change the environment. Which is what corporations can Washington.
// Anonymous Drew // 4:12 PM

hi drew,

of course we can change our dna. we do so all the time. when i have a cigarette, my dna decays.

twx can change it's dna as well. how? it's not easy; it will likely involving a total restructuring of the corporate center, it's businesses, and the relationship between the boardroom and businesses.

lobbying isn't changing your dna - it's usually a signal, in fact, of firms who refuse to change their dna.

hope this helps + thx for the comment.
// Blogger umair // 4:20 PM

Guess we come to the value of this term "DNA". It kind of makes sense to alert us that you can't just overcome your problems with PR and marketing ... but is it much help when trying to solving the problem?

Imagine tackling "the crime problem" by saying "well, you know, it's just in these guys' DNA to be anti-social miscreants".

So, OK, suppose I recognise that DNA (rather than mere bad guesses, misinformation, failure of perception, being caught in the "innovators dilemma" etc.) is responsible for my strategy decay ... so where does one go for some gene-therapy?
// Blogger phil jones // 10:20 PM

hey phil,

dude, read more closely. this post has nothing all to do with marketing or pr.

it's about the relationship between strategy and dna.

bad dna is largely what causes firms to lack perception/judgment etc, and fall into error.

how do we refresh our dna? by rethinking how, why, and what we manage.

twx is trying to "manage" bandwidth. is that the right thing to be allocating? i seriously doubt it.

thx for the comment.
// Blogger umair // 10:40 PM
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