Monday, November 30, 2009

Classic Must-Read Books for All Leaders

This week, I plan on profiling classic books that every leader should take the time to go back and read. Actually, I'm going to feature a pair of books each day, focusing on books that complement one another well or provide for an interesting contrast in viewpoints on leadership and strategy.

For today, the books are Michael Porter's classics on strategic management. In 1980, Porter published the classic book, Competitive Strategy. While tons of books have been published in this field over the past three decades, this book remains the foundation of a vast amount of thinking on strategy. The "five forces" framework became ubiquitous and continues to be a great starting point for any strategic analysis. In 1985, Porter followed up his earlier work with Competitive Advantage, a book that introduced the world to the concept of generic strategies. Porter argued that firms must choose between differentiation and low cost strategies, and that attempts to straddle both positions can lead to being "stuck in the middle" with no clear competitive advantage. Porter argued too for the importance of making trade-offs, rather than trying to be all things for all people.

Everyone should take the time to return to this seminal work from time to time, to recall the critical lessons that Porter offered regarding how to analyze a company's competitive landscape, craft a distinctive position, and create and sustain competitive advantage. His simple and clear frameworks provide a very useful starting point, even today, for any leader trying to assess his firm's competitive position and formulate a strategy for the future. Many have argued against Porter's ideas over years, but in many ways, these efforts prove the value of these classic works. When volumes have been written attempting to contrast new ideas with your original arguments, you know that you have penned a classic must-read for all leaders.

Wednesday, November 25, 2009

Comp the Retail Sales Force

Jeff Lubel, founder of True Religion jeans, spoke to Fortune magazine recently about the lessons that he learned building his company. I thought that this particular lesson was important to emphasize:

Comp the sales staff.

I went to Fred Segal on Melrose and showed the jeans to a guy who was running the jeans bar. He hated them. I knew his boss, so I showed her the line, but she said, "I don't get it. I don't think my customer is going to get it." It took me an hour to wear her down, but she finally took 24 pairs. A month went by, and I went back, and they'd only sold two pairs. I asked the sales guy if I could give him a pair free. He and the other workers came out to my truck and I gave them the jeans. Four days later I went back and couldn't find my jeans. I asked where they were, and he said, "People would come in and ask, 'What are those that you're wearing? I want those.'" They sold out.


My students have been working with a specialty food company on a project for the past few months. We have heard the same thing from that company's president. In his case, it's not about being seen with the firm's product. By giving free product to employees at retailers, this specialty food company has created a force of knowledgeable ambassadors for their product. They understand the product - its flavors, ingredients, and the like - and can speak with customers about its distinctiveness. That store level conversation with customers proves priceless, and it's a far less expensive form of promotion than advertising, sales, and the like.

Tuesday, November 24, 2009

Cutting Your Losses

My new article about "cutting your losses" has just appeared in the Ivey Business Journal. The article tries to offer some practical advice for how leaders can avoid the so-called "sunk cost trap" in their decision-making. Here is an excerpt:

In a highly volatile world, leaders cannot keep marching in the same direction simply because they have invested heavily in a particular course of action. Instead, leaders must react to changing conditions and be willing to shift direction accordingly, perhaps even to pivot one hundred eighty degrees if the situation warrants it. In a turbulent environment, leaders must gather feedback from multiple voices and assess progress against their original goals and objectives on a regular basis. As negative feedback emerges, or external conditions change, successful leaders learn and adapt. Unfortunately, far too many leaders stick to outdated strategies for far too long. Why do they fail to adapt? In part, many leaders do not want to “waste” the time and money that they have already spent. Thus, they keep plowing ahead despite all the changes taking place in their environment. Rather than cutting their losses and changing course, they “throw good money after bad.”

Persistence can be a valuable leadership quality, perhaps even more so in a volatile environment. Sometimes, we want our leaders to push through obstacles; no one likes a quitter, as they say. However, we must be concerned if someone ignores all the advice and evidence to the contrary and continues to throw good money after bad. We certainly should be wary if an individual or a team appears to have a track record indicating a reluctance to cut their losses when projects go south. In sum, in a volatile world, perhaps we must question the extent to which our organizational cultures emphasize the value of perseverance. How much value do we destroy by making people feel as though reversing direction and cutting losses are things about which we should be ashamed? Should we not strive to create an organizational climate that makes admitting and learning from mistakes as valued as persistence and perseverance?


To read about the strategies that leaders can use to avoid the sunk cost trap, click here to read the entire article.

Monday, November 23, 2009

Does Wall Street Do God's Work?

Wow... that's a loaded title for a blog post, isn't it? Lloyd Blankfein, CEO of Goldman Sachs, apparently used the phrase "God's work" in this interview with John Arlidge of the London Times. Here is a quote from Blankfein from that article:

But then, he slowly begins to argue the case for modern banking. "We’re very important," he says, abandoning self-flagellation. "We help companies to grow by helping them to raise capital. Companies that grow create wealth. This, in turn, allows people to have jobs that create more growth and more wealth. It’s a virtuous cycle." To drive home his point, he makes a remarkably bold claim. "We have a social purpose."

You can imagine many people's reaction to the phrase "God's work" used in conjunction with investment banking these days. However, John Tamny at Forbes.com offers a defense of Blankfein's comments in this article. While I think that I would have chosen a different phrase to make my point, I do agree that many people, including most journalists, do not understand the value created by bankers. They do not understand that helping entrepreneurs raise capital is one of the most critical functions in our economy.

Now, before you all recoil in horror, please understand that I'm not arguing all is right with behavior, incentives, and compensation on Wall Street. I am arguing that it's simply wrong to not recognize the social purpose achieved by those in our banking sector.

Top Ten Questions You Should Never Stop Asking

I love this column at Forbes.com by Marc Kramer of the Wharton School. The questions are fundamental, but I love the discipline of continuing to ask these questions on a routine basis.

Friday, November 20, 2009

Cola Wars: Coke vs. Costco

For many years, at business schools throughout the world, professors have taught a case study about the "cola wars" - i.e. Coke's long-running battles with Pepsi. Actually, the case focused mostly on the structure of the carbonated soft drink industry, and it helped students understand why the industry as a whole has been wildly profitable for decades. As part of that analysis, we always discussed the utter lack of buyer power in the industry. In other words, consumers, bottlers, and retailers had very little leverage relative to Coke and Pepsi. You simply had to have these products on your shelves, often on Coke and Pepsi's terms.

The world has changed though, as the grocery channel has consolidated dramatically in the United States (and other parts of the world). We've also seen the increased dominance of mass merchandisers such as Wal-Mart, and the rise of warehouse clubs such as Costco, BJ's and Sam's Club. Now, in 2009, the retail channel appears far more powerful than it was back in the 1960s and 70s. Indeed, this week's events in the soft drink business show just how much the soft drink industry has changed. Costco announced this week that it would no longer sell Coke products, after a breakdown in negotiations between the two firms. Now, the firms will almost assuredly settle their differences. However, the very fact that Costco would make such a pronouncement appears rather startling, given that Coke and Pepsi had very little reason to worry about such manifestations of buyer power for much of their history.

Thursday, November 19, 2009

Turnaround at Old Navy

The Wall Street Journal reports this morning that Old Navy, a division of Gap Inc., may be finally turning its fortunes around. According to the article, "Sales at Old Navy stores open at least a year rose 10% year-to-year in the fiscal third quarter, the first increase after 20 consecutive quarters of decline."

The article focuses mainly on Old Navy's past struggles and current strategies for revitalization. However, I believe that there's more to this story. The Gap situation strikes me as interesting corporate strategy question, i.e. is this multi-business unit corporation truly adding value to each of its units? Or, put another way, is the whole worth more than the sum of the parts? The question is interesting, because the Gap stores themselves have performed so poorly over the past decade.

For those who are not aware, Gap has three main business units: Old Navy, Gap, and Banana Republic (with each respectively representing a higher set of price points and more high-end image). To some extent, though, Gap stores has faced a challenge regarding the blurring of distinction among its brands. At times, Gap has, in some sense, been stuck in the middle between Old Navy and Banana Republic, without a clear identity of its own. That has caused some confusion in the marketplace and a degree of self-cannibalization. That problem, coupled with a series of other issues, has caused Gap's same-store sales to not fare well in recent times.

Clearly, synergies exist among the brands in the Gap corporation. However, any company trying to operate multiple brands in the same product category has to be careful about this blurring of brand identity risk. Just ask GM...

Wednesday, November 18, 2009

Is Your Mission Statement Dumb?

This article by Nancy Lublin at Fast Company struck a chord with me. She offers some very useful advice on how to "write a mission statement that isn't dumb." Let's face it... Most mission statements come filled with generalities and cliches. They fail to define what it is distinctive about a company. In fact, I often see mission statements that could easily pertain to a firm's direct rivals. When your mission statement is indistinguishable from your competitor's statement, you have a problem!

Here's Lublin's terrific advice on how to fix your firm's mission statement:

"Write a mission statement with a goal that's an action, not a sentiment; that is quantifiable, not nebulous. If you're trying to sell a product, how and how many? If you're trying to change lives, how and whose? Take your wonky mission statement and rip it to shreds. Then ponder your ambitions, and write and rewrite the thing until it reflects -- in real, printable words and figures -- the difference that you want to make."

Dark Side of Incentives

I don't know that I agree fully with this essay, titled "The Dark Side of Incentives," by Barry Schwartz (author of Paradox of Choice), but I do think that its thought provoking and worthy of consideration. I recommend taking a look.

Tuesday, November 17, 2009

Sara Lee: Unwinding a Conglomerate

Slowly but surely, the break-up of Sara Lee continues. Today, we learned that S.C. Johnson is bidding for Sara Lee's air freshener business, a unit that Proctor and Gamble had already expressed interest in acquiring.

Interestingly, the break-up of Sara Lee stretches back a full decade. Back in 2000, the company begin this transformation from an unrelated diversified firm to a more focused company. In 2000, Sara Lee divested units such as Coach, Champion Europe, PYA/Monarch, and its international bakery businesses in France, India, China and the U.K. This transformation accelerated when Brenda Barnes became CEO in 2005. Since that time, the firm has divested many businesses including the spin-off of its branded apparel business into a separate, publicly traded company called Hanesbrands.

Of course, I've noted before that the logic of unrelated diversification should be called into question in industrialized nations today. What's amazing is how long it has taken for Sara Lee to make this transformation, though the company is certainly not unique in this regard. It proves how difficult it can be for a conglomerate to leave behind its diversification strategy. At the heart of this challenge lies the fact that it can be so contentious to decide what businesses are truly related and which are not. No precise way exists to determine "relatedness" in corporate strategy; the term elicits much debate. Moreover, it can be especially contentious inside of a company, where executives have ties to a historical strategy and to particular business units in which they may have worked for many years (and which they may have even been responsible for acquiring many years earlier).

What's the lesson for executives in other firms? Contentiousness on the question of "relatedness" actually is a good thing. Top management teams ought to have a vigorous debate about what constitutes a related business. Perhaps such candid debates can prevent firms from making unwise acquisitions that have few synergies to exploit.

Monday, November 16, 2009

Apple Tablet

A day does not seem to pass without another story speculating on the "Apple Tablet" - a new multi-function device purportedly under development by Apple. The rumors swirl, in part, because Apple has so many fans who cannot wait to see what Jobs and company come up with next. The firm's history of secrecy naturally adds to the intrigue.

One can certainly argue that the rumors provide Apple with an incredible amount of free publicity in advance of a new product launch. While that does mean expectations are quite high, most firms would still die for such publicity.

Perhaps, though, another great benefit exists from this rumor mill. Maybe Apple has provided this extended period of time during which it can read about what customers would like from a new tablet-type device, as well as what early adopters and technology experts think should be incorporated into the product. In other words, perhaps this window of time represents an opportunity for something akin to mass collaboration, in which Apple is tapping into ideas, suggestions, and input from its legions of fans... and then using that to help drive the development process. No one knows for sure, but I cannot help but wonder whether Apple is watching all this speculation with great attentiveness and interest... and not just because it represents a bonanza of free pre-launch publicity.

Saturday, November 14, 2009

Confirmation Bias: The Yes-Man Inside Your Head

What a great article in today's Wall Street Journal about the power of confirmation bias in our investment decisions. For more on confirmation bias, check out the classic study by Lord, Ross, L., and Lepper: "Biased Assimilation and Attitude Polarization: The effects of Prior Theories on Subsequently Considered Evidence," Journal of Personality and Social Psychology.

Intuition at Mann Gulch

For those who don't know the Mann Gulch story, here's a bit more information. When the fire "blew up" that day, the leader - Wag Dodge - yelled to his team that it was a "death trap." Everyone began to run for the ridge, but Dodge soon realized that they probably could not outrun the fire. He bent down and lit another small fire in a grassy area with a match. Then, Dodge placed a handkerchief over his mouth and lay down in the smoldering ashes. Since the grassy area quickly burned, leaving nothing but dirt, the blaze went right over Dodge - leaving him unharmed. He had deprived the forest fire of the necessary fuel. Unfortunately, none of his crewmembers joined him in that grassy area. When he yelled to them to join him, they thought he was crazy. They had never seen such a tactic. They ran for the ridge instead, and most of them did not survive.

Where did Dodge come up with this tactic? He came to an intuitive decision. No such technique had ever been used by any smokejumper. He invented it on the spot. This tragic situation highlights one of the challenges associated with intuitive decision-making. People often don't understand your thought process when you make a "gut" decision, and thus they may be unlikely to follow your lead. Leaders must take great care to explain the rationale for all their decisions, but especially those that did not involve formal analysis.

In this case, Dodge didn't even have time to explain his thinking. Thus, he needed his crew members to believe deeply in him, but they did not. He had not built the rapport and credibility with his team necessary to elicit their buy-in at this critical moment. In short, leaders need to build a reservoir of trust within their team, long before they make critical choices for which they want buy-in and cooperation.

Friday, November 13, 2009

Mann Gulch Fire

Sad news today of death of 98 year old Earl Cooley, airborne supervisor at tragic Mann Gulch forest fire of 1949. 12 smokejumpers died at that fire. Norman Maclean wrote an amazing book about that event: Young Men and Fire (1992). I wrote a Harvard case study about the fire to teach important lessons about decision making and team dynamics. I also wrote about the fire in my first book: Why Great Leaders Don't Take Yes For an Answer. The fire has so many leadership lessons. Michael Useem of Wharton also has documented some key lessons from this case. Wag Dodge led that crew that day in 1949, and while he may have exhibited sone leadership flaws, his survival is an interesting and amazing story of the power of intuition.

The Funny Case for Better Economics Education

Thursday, November 12, 2009

Vertical Integration at Samsung

The Wall Street Journal has a good article today about Samsung's vertical integration strategy. By vertical integration, I mean that Samsung produces consumer electronics items, as well as many components that go into such products.

Vertical integration, of course, does pose some risks. Let's identify three key risks. First, the firm finds itself competing with its customers and/or suppliers. The article states that, "About one-third of Samsung's revenue comes from companies that compete with it in producing the TVs, cellphones, computers, printers and cameras where it gets the rest of its money." Second, vertical integration can create dulled incentives. In other words, if you produce your own components, then a high level of "guaranteed internally generated revenue" may cause the component production unit to be less efficient than it should be. Finally, vertical integration can lead to wasted time and effort associated with internal transfer price battles.

The article suggests that Samsung does face some challenges associated with competing with key customers. However, it also suggests that Samsung mitigates all three of these risks by forcing each of its businesses to clearly demonstrate that it can compete successfully in the external market. Internal and external competition seems to be key to Samsung's culture and strategy. According to the article: "People look at our businesses and see vertical integration. It really isn't," says David Steel, a Samsung senior vice president and marketing strategist. "It's a portfolio of component businesses and consumer-product businesses and, within that, we don't compromise on the idea that each business is charged with its own success." Of course, it is vertical integration, but what Mr. Steel is saying is that they treat each business as a stand-alone entity that must show it can compete effectively... no guarantees that a component production unit will be able to operate at capacity simply because the company could use all those components in finished products. The components unit must prove it's doing a better job than external players that could be suppliers to the finished product divisions at Samsung.

Wednesday, November 11, 2009

The Search for Talent: Lessons from the Wildcat Offense!

In the National Football League last year, the Miami Dolphins launched an innovative new offensive strategy called the Wildcat. The strategy was highly unorthodox, involving a series of formations more typical of a college team. Many coaches described it as a gimmick. However, the Dolphins enjoyed remarkable success with the strategy. They achieved an amazing turnaround after a dismal prior season. By the midpoint of this season, many NFL teams have adopted a version of the Wildcat offense. Many new variations of the offense have been invented along the way. More and more people have acknowledged that this strategy is not a gimmick.

The interesting thing is that this formation provides an opportunity to utilize the talents of players once shunned by the NFL. For many years, college quarterbacks who could run the ball effectively, but who were not traditional drop-back passers, did not achieve success in the NFL. Many did not get selected by NFL teams. Or, in many cases, NFL teams tried to force running quarterbacks to transform themselves into traditional passers, which most could not do successfully.

What's the lesson here? Companies often make the same mistake that the NFL did for years with these college quarterbacks who did not fit the usual professional archetype. Firms search for talent that fits their way of doing things, and they try to force people who have unique talents to try to adapt to fit the company's system. They seek conformity. Of course, we should primarily focus on finding talent that fits our company's strategy and culture. However, at times, companies need to be open to the idea of adapting their way of doing business to take advantage of the unique talents of employees. Rather than asking employees to change, sometimes firms need to change. They need to find new ways to utilize the great talent that they have available.

Tuesday, November 10, 2009

The Kleenex Story: Unintended Use

The history of Kleenex tissue offers an important lesson. Here's the story. Kimberly Clark launched its Kleenex tissue products in 1924. At the time, the company targeted adult females and marketed the product as a means of removing make-up. The first magazine ad ran in the Ladies Home Journal with the tag line: "the new secret of keeping a pretty skin as used by famous movie stars."

Several years after the launch, Kimberly-Clark's head researcher began using the tissues to blow his nose due to hay fever. He wanted the marketing folks to advertise the product for this use as well. They resisted at first. Around this same time, many customers also were using the Kleenex tissue in place of their handkerchiefs. Kimberly Clark learned about this unexpected customer behavior. Finally, in 1930, Kimberly Clark ran two ads at the same time. One focused on blowing your nose, while the other emphasized make-up removal. They evaluated customer response. More readers responded that they used the tissue to blow their nose. Ad campaigns changed, sales took off, and the rest is history.

What's the lesson of the story? Companies need to be mindful that customers may use their products in unexpected ways. Perhaps most importantly, firms must resist the temptation to dismiss this unanticipated customer behavior. The customers may, in fact, be telling you something incredibly important, if only you keep an open mind. Give Kimberly Clark credit for coming around in time, and investigating this unexpected behavior. As a result, they created one of the most successful brands of the 20th century.

Monday, November 09, 2009

Whole Foods: Gathering Customer Feedback

On Saturday, I spent an hour or so shopping at my local Whole Foods. About halfway through my shopping trip, a Whole Foods associate greeted me, told me she was seeking feedback from customers, and then asked me if I had anything that I'd like to share with her about my experience at Whole Foods. She mentioned that it could be anything at all... about products, service, items they don't offer that they should, etc. She expressed interest in my response, asked a number of follow-up questions, and thanked me for my input.

This brief interaction struck me because she did not have a predetermined agenda, list of survey questions, or interview protocol. She made it very clear that she was open to any and all ideas, input, suggestions, critiques, etc. Her openness struck me as the exact opposite of so much customer research today at many firms. Far too many companies ask their customers leading questions, though often inadvertently. As a result, they come to erroneous conclusions based upon their market research. The Whole Foods associate clearly was trying to avoid affecting my response with any bias whatsoever.

Psychologist Elizabeth Loftus has done some remarkable research demonstrating the power of leading questions. For instance, in one wonderful experiment, she showed subjects video of an automobile accident. She asked half the students, “How fast was the white sports car going when it passed the barn while traveling along the country road?” In fact, the video showed no barn along the street. The other half received the same question, except without mention of the barn. Loftus then asked all the students, “Did you see a barn?” Roughly six times as many students in the first group than in the second indicated that they had seen a barn in the video!

Saturday, November 07, 2009

Subway: Overcoming Headquarters Bias

This Business Week story explains the origins of Subway's incredibly successful "$5 foot long" marketing campaign. Brand managers at corporate headquarters did not concoct the campaign. The idea did not originate on Madison Avenue. Instead, it began with a promotion launched by a small Miami-based franchisee named Stuart Frankel. Other local franchisees latched onto the idea, after seeing how profitable the strategy had become for Stuart Frankel. Frankel and his peers had some convincing to do though. It took awhile, but they finally did persuade corporate to adopt the concept for the entire chain.

Interestingly, this campaign does not represent the first such innovation from the front lines at Subway. The famous "Subway diet" campaign featuring Jared Fogle emerged form the field as well! A fellow student wrote about Fogle's unique Subway diet, and Men's Health magazine wrote an article about him later. Soon, a local Chicago-area franchisee noticed the story, and he began trying to convince corporate headquarters to adopt Jared's story as the centerpiece of an advertising campaign. Again, the idea met resistance from corporate, but after regional success in the Midwest, franchisees finally convinced headquarters that the idea had tremendous merit.

These two stories both illustrate the power of harnessing creativity and innovation at the front lines of organizations, where local knowledge resides. At the front lines, employees interact with customers every day, and they often generate new ideas that could serve consumers better.

What's the challenge? I describe it as headquarters bias. In too many instances, the corporate office simply thinks they know better than the field employees (sort of like the intellectuals and politicians in Washington always think they know better than the average citizen). Give Subway credit for not allowing the initial "headquarters bias" to completely shut down these ideas. After initially resisting, they recognized the value of the ideas and spread them throughout the chain's locations.

Friday, November 06, 2009

Can You Twitter Your Brand Promise?

Check out this blog post by David Hill. He describes a terrific idea that he learned about during presentation by Marc Gobe, author of Emotional Branding. Gobe asks the question: Can you Twitter your brand promise? In other words, are you able to provide a clear and incredibly concise explanation of your pledge to your customers? Twitter allows 140 characters. Can your firm's brand promise be described in less than 140 characters?

Let's demonstrate the concept. Consider Federal Express. What is the company's brand promise? "Absolutely, positively overnight." - 33 characters! That's just beautiful. Not only is the promise concise, but it is completely accurate and very clear. In short, Federal Express has a proven track record of delivering on this promise; it's not just words.

How about Target? "Expect more, pay less." 22 characters! We all understand precisely what this means too. Target meets the test.

One last terrific example. What about Ritz Carlton? "Ladies and gentlemen serving ladies and gentlemen." 50 characters! They pass with flying colors. Anyone who has stayed at a Ritz Carlton knows that they deliver on this promise; it's not just rhetoric.

So now it's time for you to try to Twitter your firm's brand promise. Can you do it? Remember... not only must you be clear and concise, as well as accurate... you have to avoid creating a generic phrase that could apply to a host of rivals. You need to outline a promise that truly stands out from the crowd.

Thursday, November 05, 2009

The GM-Opel Decision

The recent decision by General Motors to reverse course on its proposed sale of Opel to Canadian auto supplier Magna raises some interesting questions about the role of a Board of Directors. On the one hand, we desire more effective and vigilant boards who spend time learning a business and monitoring the decisions of senior executives. However, we have to recognize that boards can lose their objectivity if they begin making corporate strategy. In other words, most people believe that boards have an important role monitoring and controlling management behavior. However, if the board begins to become the primary decision-making body regarding the strategic direction of the firm, then you must ask: Who is monitoring and controlling the board? What if decisions don't work out and performance lags? Who is responsible? It becomes difficult for the board to hold management accountable if they have actually made all the key decisions, sometimes by overruling management. I'm not suggesting that the GM Board was incorrect necessarily in overturning Henderson's Opel decision. I'm simply arguing that the board must take great care not to blur responsibilities so much that no one is actually left conducting unbiased governance and control activities.

Monday, November 02, 2009

Disney's Return to Hand-Drawn Animation

The Wall Street Journal reports today on the upcoming December debut of Disney's newest animated feature film: The Princess and the Frog. The film's box office results should be interesting to track, given that it represents a return to hand-drawn animation - something that Disney has not done for six years.

In recent years, Disney had tried to emulate Pixar's success using computer-generated animation. However, the company did achieve the results that it had hoped for movies such as Brother Bear. Then, Disney acquired Pixar, and the company asked Pixar's leaders - John Lasseter and Ed Catmull - to oversee Disney Animation. Now, in an ironic twist, Lasseter and Catmull have endorsed this return to hand-drawn animation. Lasseter explained in this excerpt from the article:

But from Mr. Lasseter's point of view, the real problem wasn't Disney's animation techniques—it was more fundamental elements like characters and plot. "I've never understood why the studios were saying people don't want to see hand-drawn animation," Mr. Lasseter said at a fan convention earlier this year. "What people don't want to watch is a bad movie."

I love this quote. It demonstrates a keen understanding of what really drove Pixar's success and what has troubled Disney for the past decade or so. Lasseter understands that Pixar's success does not hinge on its computer animation techniques. After all, that strategic capability, to a large extent, is imitable. Therefore, even if it was a big contributor to Pixar's early success, it does not lend itself to the establishment of sustainable competitive advantage. Pixar's enduring success, instead, depends upon their ability to develop interesting, funny, engaging story lines. It's plot, not graphics, that primarily brings kids and their parents to the theaters. People love a great story, and no amount of fantastic computer-generated imagery can make up for a terrible plot. That ability to develop incredibly engaging plots also is far less imitable than the computer animation technology. Thus, it's a far more valuable strategic capability.