“If you want something new, you have to stop doing something old.”Peter Drucker
The final chapter of my book is called the Coconut Trap and begins as follows. “Many years ago, indigenous tribes used a clever technique to catch monkeys. They hollowed out a coconut and placed some fruit inside. Next, they would hang the coconut on a tree frequented by monkeys. In time, a monkey would come to investigate. The monkey would squeeze its hand into the coconut to grasp the bounty. In making a fist to grab the fruit, the monkey was trapped. His clenched fist no longer passed through the small opening. Even when faced with approaching captors, which could spell death or imprisonment, he maintained his grip. All he has to do was let go and letting go would mean freedom.
This week’s Thursday thought is about letting go of assets before they have run their course. It is inspired by the latest episode of the Innovation Show with the author of “Quit: The Power of Knowing When to Walk Away by Annie Duke” (links below). Serendipitously it is also influenced by a great friend of The Innovation Show, who joined us in person this week in Dublin, Rita McGrath.
In “The End of Competitive Advantage“, Rita shares the great example of Verizon, led at the time by Ivan Seidenberg. Seidenberg proactively jettisoned decaying parts of its business – when they were still profitable – to seek out new opportunities. Rita tells us, “The company shed slow-growth units (even those with solid cash flows), such as phone directories. In their place—and using the cash these spun-off businesses yielded—Verizon has made massive investments in such new areas as fibre optic service technology to enable it to compete with cable companies in offering television and internet services. Seidenberg did what many companies fail to do: make aggressive investments in the company’s future while the core business was still generating substantial cash.”
Dropping coconuts aligns with what Rita calls Transient Advantage, that competitive advantages are often short-lived. Dropping coconuts means a focus on innovation strategies that continually build new advantages and in turn, hold these new-found advantages loosely.
As Annie Duke tells us in episode 403 (link below), “When it comes to quitting, the most painful thing to quit is who you are.” Therefore, transient advantage must be applied to your identity as a business. In “Undisruptable”, I share the great example of FujiFilm, a master of Reinvention. In the year 2000, photographic products delivered 60% of Fujifilm’s sales and 70% of its profit. Within a decade, digital cameras destroyed that business. In 2012, Kodak filed for bankruptcy but Fujifilm continues to go from strength to strength. How did Fujifilm succeed? They let go of the fruit, they clung loosely to their identity.
Fujifilm appointed Shigetaka Komori as CEO at their most vulnerable point in history. After multiple rounds of cost-cutting, plant closures and redundancies, Komori knew he could not cost-cut the company into the future. Instead, Fujifilm chose to reinvent. To do so meant letting go of the product that made Fujifilm, well Fujifilm.
Realising its strength in chemical compounds and nanotechnology, Fuji systematically sought to apply previously built capabilities in novel ways. Through these efforts, today, the organisation enjoys successful ventures in healthcare, life sciences, pharmaceuticals, regenerative medicine, and even a Covid-19 vaccine. While they still maintain a small footprint in business areas related to their legacy products such as digital cameras, instant photo systems and digital recording equipment, that only accounts for minor revenues. Thanks to their ability to drop the coconut, even before Kodak filed for bankruptcy in 2012, Fujifilm enjoyed diversified annual revenues of over $20 billion with only a minor contribution coming from photographic products.
The lyrics from the single “Hold On Loosely” by 38 Special come to mind, “Hold on loosely but don’t let go. If you cling too tightly, you’re gonna lose control.”
I leave you with a question this week, what coconut are you clinging to? A business model? A mental model? A grudge? An identity?
THANKS FOR READING