First Hostess, then Kodak. Two of my childhood brands declare bankruptcy in the same week. As a consumer of their products, I never imagined either of those two companies going away. But as one who spends time examining how businesses are led, I realize the importance of strategic challenge – an agenda topic that both of these companies missed.
No one can argue that the landscape changed for both of these firms. For Hostess, the push for nutritional foods and the focus on childhood obesity has certainly affected their business. Although Hostess publicly states a commitment to responsible advertising and health and nutrition (eliminating trans fats), their website reports that top sellers are still the sweet snacks that we all knew from our childhood. The customer base was shrinking, and no one did enough to identify and capture growth markets.
For Kodak, the digital age undoubtedly changed their business model. I can’t remember how long it’s been since I bought a roll of film. Although Kodak modified their product line and business around the changes in how memories are recorded, they’re really only known for one component of that “Kodak moment” – the film – and it was the one component that was going away. The competitive set for that “moment” expanded beyond the traditional cast of characters (Fujitsu, Samsung) to the wider digital world of Apple and Sony.
Industry leaders are rarely the ones who change the game
Successful companies know that one of the greatest business risks is to have someone come in and re-write the strategic landscape. Notwithstanding that, you can take a look at just about any changed industry, and trace the interloper to an unexpected entrant. Sears and Montgomery Ward paid no heed to a retailer named Walmart that was building stores in markets that didn’t seem to matter. American car companies were thrown off balance by an unlikely Japanese auto industry that redefined what quality was to the automotive consumer. And Amazon, a company that realized we never needed to touch the book before we bought it, put large bookstore chains out of business.
In hindsight, every company in trouble can go back and see where the adjustments should have been made. So what is it that causes good companies to miss that important conversation?
Conversations can only be as informed as the level of life experience around the table.
I say “life experience” because it’s exactly that. Our professional resumes state what jobs we’ve had, but don’t really reflect our values, our biases, and all of our experiences. But when we contribute, we bring all of those variables to the table – which is the fundamental reason why diversity is important. A quick look at the executive makeup of both Kodak and Hostess shows that the lack of diversity could have contributed to a limited perspective in strategic conversation. There is little age, gender, and ethnic diversity in their board or leadership makeup. You’d think a company that sells products to families would have a woman on the leadership team. You’d also think a global company would have extensive international makeup at the board level. I’m not saying that diversity is the sole answer. But based on my experience, now sitting on four public boards, the conversation is far richer when there are different experiences around the table. There’s less likely to be a common blind spot, and it’s more likely that someone sitting at the table has gone through any possible business scenario.
One of the most important roles that business leaders have is to challenge and pressure test the business strategy. But we can only challenge and test to the extent of our experience. It’s even more difficult if a company has a heritage of success. Kodak and Hostess both had enviable competitive positions at one point. But those around the table lacked the wisdom to measure a familiar trajectory against a different horizon.