Urlocker On Disruption

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Guest post by Zack Urlocker

As you may have noticed, my onDisruption blog posts have become less frequent lately as I'm busy with other projects.  I will continue to post the occasional article and provide updates to past stories, but these will be less frequent than before.  For newcomers to the site, here's a list of some of the most popular postings on the site. 

If you're new to disruption this is a good way to start thinking about your own disruptive strategy.  And note that while some of these are classic technology disruptions, many leverage other forms of disruption, whether in distribution, packaging etc. 

So don't fall into the classic Silicon Valley view that disruption is only about new, faster, more complex technology.  Sometimes it's just the opposite. And while disruption is a good model, it's not the only strategy for success.  Apple's iPhone is only marginally disruptive, but its still a huge hit for the comapny.  But when disruption works, the gains can be impressive.  And the benefits accrue not only to the company, but to the careers of the individuals who make it happen and to investors who spot the trend early.

• Dealing with Information Overload
• iPhone a Hit, But Not Disruptive
• Disruption Investing: Picking the Next Apple, Not Vonage
• Who Killed the Record Industry?
• Microsoft Dismisses Google Apps as Inferior
• Are You A Sitting Duck?
• Management Lessons From Rock Guitar Wars
• XBox Guitar Hero Melts Face Off Old School Rockers
• Nintendo Wii Smacks Microsoft, Sony
• Heinken Disrupting the Beer Industry

As you formulate your own disruption strategy focus on the basics:

• What problem are you solving?
• How can you do it better than existing solutions?
• Who is underserved by the incumbents and what are the unmet needs?
• How can you deliver a "good enough" solution to a narrow but growing audience?

Let me know your thoughts on these and other articles.  I hope they will inspire to you let a thousand disruptive flowers bloom.

Zack Urlocker is a software executive and regular blogger on open source technology at TheOpenForce and InfoWorld and about music at GuitarVibe.

Classic Disruption: Why Wal-Mart's Movie Plan Will Fail

Update Dec. 29, 2007:

Wal-Mart shut down its video download service.

Original Post Nov. 29, 2006:

Wal-Mart joins the battle for online videos in a disturbingly familiar way.

In the worst kind of compromise, Wal-Mart is cramming the new thing, movie dowloads, into the old business model, retail store purchases. To download a movie at home, you have to buy a movie at the store, at least to start, according to the Wall Street Journal:

The service represents a sort of halfway solution: The giant retailer will require customers to buy a DVD before providing them a "feature sticker" with instructions on how to buy downloads.

As Wal-Mart explained in the NY Times, it wants to maintain the old:

“We feel like it is really important that the DVD business stays healthy and stays quite central to consumers’ lives,” said Kevin Swint, a divisional merchandising manager at Wal-Mart.

Cramming seldom works for disruptive innovation because it compromises on what consumers want and it restricts the growth potential of the new innovation. Whenever you see an incumbent supplier adopt a new innovation but in a way that severely restrict or impairs its use in order to preserve the old and expensive cost structure, you've got cramming. Look for words like 'hybrid', or 'best of both world's' as warning signs.

Microsoft's early efforts in WebTV and portable devices would be examples of cramming the PC operating system business model in places where it did not fit. Note the absence of success despite years of effort and huge expenditures.

In the case of video downloads, Wal-Mart's new competitors that are not in the business of operating  retail stores would see no reason to restrict themselves with such compromises.

BitTorrent, a pirate download site which today announced legit content deals with Fox, Paramount and several other studios, and Apple Computer, which dominates the download music business, for example, won't worry about maintaining sales at retail outlets the way Wal-Mart does.

For examples of cramming, consider these:

• No record company created a simple buck-a-song download service because they could not see a way to do this without hurting their retail sales. (Apple, free of this worry, succeeded despite the fact that its biggest competitors were free pirate sites like Napster.)
• Nokia crammed wireless email, web, fax relay, phone, SMS and applications into the doomed Nokia 9000 Communicator, a brick of a phone that did nothing well and sold poorly in the early days of wireless e-mail;
• Every major newspaper publisher created online websites that replicated their old business onto the web. Very few have achieved any success.

**Other Views**
Harvard Prof. Clayton Christensen is the pioneer on disruptive innovation and he outlines why  cramming fails in this Working Knowledge paper.

The Disruption Group's site lists the benefits of disruptive strategy including higher-value to customers, new revenue streams and sustainable high return on equity. 

Mathew Ingram says the BitTorrent deal is not important because there is no BitTorrent network to speak of.

GoodMorningSiliconValley says the transition from pirate site to legit business is a difficult one.

TechCrunch says BitTorrent raised $25M bringing its total capital to $34M. The company's big challenge is to stay on the right side of copyright owners.

SeekingAlpha says Apple will eclipse BitTorrent and Wal-Mart's efforts.

Don't bet on BitTorrent, says Andrew Chen. After nine months of trying to commercialize a download service based on BitTorrent, he says it's too complicated for mainstream consumers and it doesn't provide the instant gratification they want.

Heineken: Disrupting a Commodity Business

This week, guest columnist Zack Urlocker combines two of our favorite topics: disruption and beer! 

Most of the time when people talk about disruption they focus on  high-tech companies: Google, RIM and others.  Certainly these companies have used technology innovation to disrupt their markets and solve new problems.  But sometimes disruption is about improving the experience, accessibility or convenience of a product through distribution or delivery, such as NetFlix did in the DVD rental business.

Changes in distribution or delivery can in turn can unlock new uses and expand the market; especially if the changes are difficult or expensive for competitors to copy.  Part of NetFlix's success is no doubt because they got a very long lead ahead of rival Blockbuster which did not recognize the convenience introduced by using the post office as a delivery channel and did not want to undermine its core business.

In this example, we'll look at one of my favorite products: beer.  Heineken competes in one of the most commoditized and conservative markets around.  But instead of trying to innovate based on a new flavor or new style of brewing, Heineken focused on creating a packaging system that provides a better customer experience and likely increases consumption.

What is the Heineken DraughtKeg?  From the consumer perspective, it's 1.33 gal (5 liters) of premium draft imported beer at a cost per serving that's just slightly more than a typical twelve-pack.  That gets you around 14 12 oz servings, depending on how much foam you like. The price is just under $20.

What makes the DraughtKeg unique is that, as its name implies, it's real draft beer from a keg, only scaled down for convenience.  Testers report that it tastes fresher than bottled beer, which is due to the way it is dispensed via CO2 cartridge --just like draft beer in bars.  But unlike a normal 70 pound keg, you can get it at your local store without a pickup truck and a team of guys.  The mini-keg weighs around 12 pounds (5.5 kg) and is fresh for 30 days after it's opened.  So the Heineken DraughtKeg provide a  keg taste experience without all the hassle and without the need to consume the entire keg in one sitting. (Though you can if you want.)   No doubt the DraughtKeg will be featured at many home parties in the fall.  It's perfect for watching a game on TV, an office party, or any other social occasion.  The DraughtKeg has some novelty, which in itself add to the fun. 

Development of the DraughtKeg took Heineken nearly 10 years and it cost them more than $15 million dollars to build a new production line.  Because Heineken is selling a premium beer, the added fixed costs can be ammortized over the price of the beer at about a penny an ounce compared to bottled beer.  This 8-9% the cost increase is not negligeable to consumers, but it is well within the reach of the premium beer drinkers Heineken is targeting.  This turns out to be an important part of Heineken's strategy: it's not competing at the low-end of the market.  As a result, Heineken is unlikely to be challenged by a low-end Budweiser Keg.  The margins at the low-end are too thin to support this type of a delivery system. 

Features or Convenience?  If you're in a business that is increasingly being commoditized you might be tempted to try to come up with new features (or in this case, flavors) to stand out.  But in a commodity market, that may be the wrong strategy, especially if the product has already surpassed the quality expectations of most customers.

The DraughtKeg is not a new trendy style or flavor of beer.  In fact, it's the same Heineken beer they've been brewing for more than 100 years.  What's new here is the packaging and the delivery system.  In other words, they improved the experience in how their commodity is delivered to the consumer. 

And since they did not change the proven Heineken recipe they reduced one of the key risks in consumer marketing that customers would not like the change.  Of course, there is still risk in any consumer product changes, but not as much as, say, introducing a New Coke recipe or launching the Zima malt beverage.  Both those moves cost their companies many millions of dollars in losses.

According to Forbes, the Heineken DraughtKeg provides the company not only with added revenues (estimated $300 million) but also better shelf space from retailers due to the higher margins.  So it looks like this move will payoff for Heineken and help them stand out in a crowded market.

Questions to consider:

• Are there barriers your customers have in accessing or using your product?
• Can you improve the convenience and accessibility in such a way that customers will use more of it?
• Are there new uses for your product beyond the mainstream that can provide opportunities for growth?
• Are there ways you can stand out in the market without changing the product itself?

The Heineken commercial below clearly illustrates some of the perils of home-kegging before the DraughtKeg.

Zack Urlocker is a software executive and regular blogger on open source technology at TheOpenForce and InfoWorld and about music at GuitarVibe. 

** Other Sources **

Forbes has a good article "The Keg That Scored" on the development of the DraughtKeg and the engineers behind it.

Established Magazines Sink But New Titles Bubble Up

The game has changed for publishers of business magazines, as described in today's Wall Street Journal.  The old days of selling (or giving away) subscriptions to well-heeled executives and  piling on the ads for cars and financial services no longer seem to work.

Witness the declining ads at top-tier magazines like BusinessWeek and Fortune, as well as the thinning ranks of relatively younger titles with the demise of Business 2.0 and periodic reports of financial strain at Red Herring (again.)

Here are some of the warning signs of disruption that the Journal observes:

• Established management playbook fails
• Established suppliers continue to improve their product by old standards (redesigns and reorgs)
• New entrants with strange business models make inroads (Internet)
• New competitor takes share and is dismissed as 'inferior' (Conde Nast's Portfolio magazine)

Out With the Old...

I happened to be reading Warren Buffett's latest annual letter to shareholders yesterday and his comments on newspapers, including the Buffalo News, which his company owns, seemed relevant to magazine publishers:

"Eventually eroding fundamentals will overwhelm managerial brilliance.  And fundamentals are definitely eroding in the newspaper industry, a trend that has caused the profits of our Buffalo News to decline. The skid will almost certainly continue.

Almost all newspaper owners realize that they are constantly losing ground in the battle for eyeballs. Simply put, if cable and satellite broadcasting, as well as the internet, had come along first, newspapers as we know them probably would never have existed. However, the economic potential of a newspaper internet site – given the many alternative sources of information and entertainment that are free and only a click away – is at best a small fraction of that existing in the past for a print newspaper facing no competition... the days of lush profits from our newspaper are over."

And In With the New...
Of course not all magazines are dying. And there are occasionally startups that show a path to a new emerging market.

Muslim Girl, published by ExecuGo Media strikes me as a new disruptive medium because:

• It reaches a new market that was previously deemed unimportant to mainstream media: 400,000-500,000 Muslim girls in North America
• It is global in its appeal
• There is a worldwide shortage of popular media content directed at Muslims

One though: Disruptive products typically need disruptive distribution channels to establish themselves. The reason:Muslim Girl will struggle for space on news stands and will not initially be able to lure mainstream advertisers away from Seventeen, CosmoGirl and other established titles. Muslim Girl looks great in print and on the web, but wouldn't a mobile version on cell phones appeal to hundreds of thousands of teenage Muslim girls? Teenage girls and cellphones go together well. 

WSJ: Wal-Mart Disrupted?

The Wall Street Journal ran an eye-opening front page that explored the demise of Walmart (full story).  It's a great read and the major points are:

• Consumers are changing: Price may matter less
• Quality may matter more
• Big consumer goods suppliers are turning away from Wal-Mart
• Growth at competing stores is outpacing Wal-Mart

And from an investor's point of view, two clear warning signs:

• The stock has collapsed in the past five years
• There's more downside

Is Wal-Mart being disrupted? Clearly the company has continued to play the same game in a changing environment. And the results have not come through. Here are a few questions for retailers to consider:

• Is it time for a "Buy USA" retailer that supports domestic suppliers over cheaper, usually Chinese-made goods?
• Are there signs that consumers are ready to move in that direction?
• DId your view change following the Chinese-made recalls this year?

**Other sources**
Not everyone agrees that Wal-Mart is so easily undone.

SeekingAlpha has a good take with commentary.

Careers: Should You Pack Your Parachute?

Following his recent article "Are You A Sitting Duck?" guest columnist Zack Urlocker shows the steps you should take to improve your own position if your company is being disrupted.

Just because it's time to pack your parachute doesn't mean you should jump immediately.  But you may need to at some point.  Let's face it, it's a heckuva lot more fun to be a disruptor than to get disrupted. 

Five years ago, back when I was in the enterprise software business, I saw a repeated pattern whereby customers would go for the least complex solution using open source technology.  Customers would readily admit that the open source solutions weren't as good as the commercial products we were trying to sell.  But they still made their choice.  I realized that there were several key trends in the software industry that were likely to wreak havoc on the old model of selling expensive perpetual licenses.  (And let's be clear, it was a good model for 20 years!)  The new trends were:

• Open source software
• Hosted software as a service
• Distributed and offshore development

And even back then it was clear that the force of these trends would be unstoppable.  Some companies would succeed and some would fail, but it seemed obvious that it was better to be competing with the force of change on my side. 

While it's clear that jumping to a new disruptive company has its risk, there's also risk in staying with an old line business model.  You don't want to be the last person selling IBM Selectric typewriters, no matter how good you are at the job.  At some point, if you stay too long in the old world, you fail on the basic IQ test and are considered damaged goods.  Many times I've seen hiring managers pass over the resumes of candidates that were in companies that were considered to be "the walking dead."  You may think that 15 years loyalty to a company will impress a new employer, but not if its because you were asleep at the wheel. 

And even if you don't leave your current position, you can be more valuable if you've got an awareness and understanding of what the disruptors are doing and how you can apply some of those techniques in your existing company. 

Here's a set of steps you can take to improve your situation:

• Make sure you're up-to-date with your skills. In many cases, disruption is based on a significant shift in the market place.  That could be a technology shift or a change in market dynamics or distribution.  The most important thing you need to do is make sure you have a real understanding of the underlying changes.  You can't just be an buzzword compliant either.  You need to have hands-on experience with the new way of doing business, even if it's on a limited basis outside of your main duties.  In new industries no one expects you to be an expert, but they won't necessarily pay senior level salaries for someone with old school experience either.  If there are courses or workshops available to help you learn the new skills, sign up.  Even if your company doesn't foot the bill.  After all, it's your career, not theirs.
• Get involved in the disruptive projects in your current company.  Many incumbents will experiment with disruption.  They may kickoff a skunk works project or some kind of business partnership, licensing or reseller deal to get them in the game.  Make sure you're a part of these efforts so you can get some exposure. By being open to trying new things, you may be able to help your company maintain its revenues by starting a new disruptive business inside the organization.  Don't expect a lot of others outside the new group to go out of their way to help you.  You may even view you as unwelcome competition.  The likelihood of a disruptive business coming out of a large incumbent is not thigh, but you'll at least get some exposure that can be helpful.  But make sure it's real action, not just a task force to study what disruptive firms are doing.
• Start disrupting -- even if you aren't getting paid for it. If there's no sign of disruption going on in your company, it may be time to suggest to your boss that you kick something off.  Don't expect that you'll get a cushy budget to make things happen.  In fact, be prepared to do this on top of your current assignments and within your existing budget.  And if you still can't get the approval to do it on company time, all the more reason to start doing it on your own.  If you're in publishing get involved with new media.  If you're in software, start experimenting with open source software like the LAMP stack (Linux / Apache / MySQL / PHP).  Don't try to boil the ocean and change everything in your company.  Rather, figure out how to take small, incremental steps that can help build momentum and experience in new areas. 
• Build a new network. Most likely your old contacts are going to be in the same situation you're in: trying to come up to speed in a new skills while putting on a brave face.  While you don't need to abandon your old contacts, you will need to develop new ones.  Get out to the conferences and seminars and start building bridges.  Meet people from the disruptive firms.  Understand what's going well and why.  Don't be critical or defensive.  And don't tell them why they've got it wrong or why they will fail.  Ask lots of questions and you'll likely learn some ideas that will help make your current company more successful or may be useful down the road.  If there are panel sessions on conferences that mix the old and the new, get involved.
• Learn it, teach it, write about it.  Even if you don't have the opportunity to take part in new disruptive efforts in your current position, you will need to demonstrate to others that you grok the new model.  One way to do this is to explain the new model to others.  You could become "the disruptive guy" inside your organization by helping explain to others.  You don't want to be a zealot or naysayer about how your current model is broken, but if you can give input to others in the organization, that's a great way to build experience and credibility. 
• Do your homework before you jump. If you've developed an in-depth understanding of the changes that are taking place in your industry and you've got some visibility outside your organization, sooner or later you'll be in a position where you can cross over to the disruptive side. But don't just jump to the first opportunity.  Make sure you evaluate carefully the risk in any new venture.  You'll want to have a good understanding of their finances, existing customer base, as well as actual and projected growth.  Talk to their customers, the management. These elements will help you get a feel for what stage the industry is in and whether the apparently disruptive play is really taking hold in the market.  Most candidates will spend a lot of time negotiating compensation and trying to hold out for their "old school" salaries and bonuses.  In my view, much of that is misguided.  The biggest determinant in your overall compensation will be based on performance incentives (options, bonuses) that depend on whether the new business is successful.  So you are better off spending time to assess the risk level of the firm rather than worrying exclusively about your compensation.   

Zack Urlocker is a software executive and regular blogger on open source technology at TheOpenForce and InfoWorld and about music at GuitarVibe. 

Disruptive Media: Newspaper Redesign

Many major newspapers across the U.S. and Canada have redesigned in the past year to freshen up their look. It's part of the ongoing battle to win back readers or at least to offset declines vs. the Internet and other news sources.

But can an underdog newspaper redesign itself to be more disruptive?

The National Post, out of Toronto, is aiming to do something different with its new design launched this week:

• Narrower page
• larger typeface, larger line spaces
• Shorter stories, more pull-out sidebars
• More specific investment angles on business stories
• Unusual vertical masthead

Some early reaction has been favorable, but to many readers, the new design seems like pretty mild stuff and not nearly as radical as the way insiders see it.

Seismic changes may indeed be what an underdog newspaper needs. But this goes beyond mere design and goes to the function of the newspaper as well.

A few months ago, I did an informal survey of Canadian investment professionals and it was clear that the National Post and its business section, the Financial Post, was less relevant to this group than it had once been. Also there was an increased perception that the newspaper was a pale imitation of its larger competitor,  the Globe and Mail.

Clearly, a more disruptive approach is necessary, but has the Post been focussed enough in its new undertaking?

Experience in disruption show that the newspaper can achieve great growth and deliver high value to customers if it focuses on any these attributes:

• solve important new problems for customers that they can't solve today
• increased accessibility
• increased customization

To the extent that the National Post helps readers solve problems, and is more accessible, it will succeed.  Even a relatively small change, such as if the business section were to focus entirely on buy/sell ideas for stocks, would clearly differentiate the newspaper and help solve important, frequent problems for readers interested in investing.

What problems do readers need to solve that they can't solve today?  Newspaper publishers (and most managers in any industry) don't normally think this way.

How far can a newspaper go with this? Here are four somewhat crazy ideas for new businesses, some of which lend themselves more towards new web services than printed pages:

1. Community-focused Medical Information: Help families find reliable, competent family doctors, specialists and physiotherapists. A Canadian version of www.RevolutionHealth.com
2. Family-focused Local Entertainment Services: Help busy mothers plan their days with activities suitable for toddlers through to tweens. An extension to informal “mommy blogs,” but created to be more consistent so that the service can be relied upon daily.
3. Rate my Broker: Help baby-boomer investors find reliable, trustworthy local stock brokers and financial planners. An investment version of www.RateMyProfessors.com
4. Desi Family Network: Help Asian families continue to hold multi-generational ties by sharing entertainment, social and family information.

**Other sources**

Newspaper Next is a joint undertaking of the American Press Institute and Innosight, Clayton Christensen's management consulting firm, to help revitalize the newspaper industry.  Their industry report is available for download.

Some thoughts on newspaper redesign from BrassTacks Design. Highlights: Focus; Admit shorter is better; Innovate like you mean it.

Like all potentially disruptive innovations, redesigns are risky because they can alienate current customers. Here are some scary charts on newspapers which have seen circulation declines accelerate after redesign from newsdesigner.com, a blog that tracks major newspaper redesigns.

FYI: On Disruption, a newspaper column on disruptive innovation, appears in the Financial Post. Archive of articles.  

Disruptive Media: Harvesting the Great TV Back-Catalog

The New York Times has an interesting story today about one of the few growth segments in big media: TV series on DVD.

"Although DVD sales are down this year, television series on disc have fared better than other categories. Sales of complete seasons are a rare bright spot, registering actual growth."

Let's think about this from a customer's persective.  What 'job' is the consumer trying to accomplish by purchasing these boxed sets of DVDs?

• Bring me up to date on a TV show I just discovered
• Let me watch a favorite show at my convenience
• Let me get to know a character or series better

The key issues seem to be that DVD boxed sets are more convenient, more flexible than broadcast TV and allow a deeper level of interaction. 

Here's are two questions for broadcasters, publishers and other media executives: Are there other ways that media companies can build more convenience and flexibility into their product offerings? Does the Simpsons movie, which grossed $500M in two months, fit some of these elements?

Also note how these boxed sets are sometimes sold through Starbucks and other non-traditional channels. Disruptive products typically need disruptive channels to be successful.

**Other Sources**
NPR carried a segment on how mp3 downloads has created a new business tapping into record back-catalogs (4:04min)  .

Simpsonize me: Create your own Simpsons character from a photograph.

Or is this just the long tail phenomena made famous by Wired Magazine's Chris Anderson? 

Long tail data doubtful according to WSJ columnist Lee Gomes.

TV screens get busier with more ads... and TV downloads rule at NBC; two related  NY Times articles.

Careers: Are You A Sitting Duck? 13 Unlucky Questions to Ponder

Most of the articles and resources at The Disruption Group focus on corporate strategy and ways to use competitive disruption to grow your company. But what about your own career strategy?  What should you do if your company appears to be a target of disruption?  Guest columnist Zack Urlocker shows how to know if your company is being disrupted and what you should do about it to save your career.

Whenever I think about companies being disrupted I can't help but recall Michael Bedard's iconic poster from the early '80s "Sitting Duck." It says it all. 

There you are, a hard working employee, doing your job and next thing you know someone's taking shots at you.  The sad thing is most employees never really take notice or what's going on until it's too late. 

Of course, from the outside, it's a whole lot easier to be objective.  Most people outside of the music industry would not now consider a career in the record industry.  And the magazine publishing and newspaper industries have been in trouble for years.  Enterprise software?  Outside of hosted on-demand offerings, it's not exactly a barn-burner.  All of these sectors have seen seismic changes due in large part to the disruptive effect of the Internet.  But would you recognize such changes in your own industry? 

Here's a checklist of 13 unlucky questions to consider:

1. Is your company consistently unprofitable?  A failure to generate profits is the first and most significant sign that a company is in trouble.  While there are times when companies will run unprofitably as they invest enter new markets, in most other cases, lack of profitability indicates a more fundamental problem in strategy or execution.
2. Has revenue growth stalled or even declined?  To most investors, if you're growing at more than 20% a year, you're considered a growth company. In tech stocks, it's not uncommon to see growth that is 40 - 100% per year.  If your company used to be growing and is now flat, watch out. This was the biggest warning sign I saw when I was at software maker Borland in the late-90s and it caused me to write up a checklist similar to this one to benchmark our turnaround. Guess what? We failed the checklist and I was saw similar troubles across the sector.
3. Is everyone in your market having trouble?  If your company is the only one suffering, that's one issue. And it may be fixable with changes in leadership, product strategy or better execution.  But if all or most of your competitors are also suffering, then it's an indicator that the entire market is in trouble and likely being disrupted. 
4. Do people routinely say "Are they still around?" when you tell them where you work? This sounds tongue in cheek, but its a sign that your company may have become irrelevant.  Similarly, if industry analysts and editors frequently write about the demise of your industry, they may be closer to the truth than you realize.  When Marc Benioff, CEO of Salesforce.com declared the "End of Software" few people took him seriously.  But if you worked at Siebel or PeopleSoft or dozens of other traditional enterprise software companies, you probably should have.  Similarly if the "death pools" predicting the demise of magazines have been scarily accurate.  These social indicators draw on the wisdom of crowds and can be more accurate than you might think. 
5. Is there high turnover in the executive ranks?  While some turnover at the executive level is normal, if you've had three CEOs in as many years, or if your exec staff have all left "to spend time wiht family" those are red flags.  When Ed Zander retired from Sun it was along side several other high-profile departures. While bad execs get fired, good execs leave if they don't see a financial upside.  Since most executives have stock that vests over a 4 year period, it's not just about short term prospects either. If your company has a problem retaining executive talent, it may mean they believe the situation is unfixable for several years. 
6. Is your company strategy zig-zagging every six months to catch some new wave? That could be a sign that the core business is in freefall and management is distracted looking for the next big thing. Consider the tenure of Carly Fiorina when she was CEO at HP. She was out promoting a strategy based on multi-media convergence, big screen TVs and iPods.  Naturally she was out at CES and Davos hobnobbing with the likes of Gwen Stefani, Sherly Crow and Matt Damon.  So who was minding the store?  Oh yeah, no one.  But when she got sacked, she took a severance package with her worth a minimum of $21 million.  If your job gets cut, you'll be lucky to get a couple of extra weeks paid.  Good CEOs focus on operational excellence and strategy; not gimicks. 
7. Are you losing deals to competitors that are a fraction of your size?  Often new entrants to the market are much smaller and their products have far less functionality, but they do enough to get the job done.  If your company is losing deals to companies that weren't even on the radar a couple of years ago, that could be a sign that the market is changing rapidly. 
8. Do customers complain that your products are too complex? That may indicate that your product has become overkill.  The next step is if customers sideline your products only for existing implementations and start using simpler solutions for new projects.
9. Is your company half pregnant? Sometimes companies that are disrupted will try to show that they too can play the disruption game.  They may launch a high-falutin' project or acquire a small startup to show that they too can be nimble and responsive.  Media companies were among the first to create web sites, but they never figure out how to make money with them.  And lots of enterprise companies introduced on-demand offerings, but none had the kind of focus Salesforce.com brought to the table.  If the CEO refers to your company as being "like the largest startup ever" with hundreds of millions of dollars in the bank, he's omitting a few key points.  Like the fact that your company is proabably too bloated to compete with hungry startups and that the corporate culture kills innovation. 
10. Is your company a bottom-feeder? Larry Ellison joked about CA years back by saying "Every healthy ecosystem needs a bottom-feeder."  While that's true, you don't necessarily want to work for a company that keeps acquiring companies and stripping out the costs.  You can prop up a share price for quite a while with revenue through acquisitions, but unless there are significant prospects for growth, it's not much of a strategy for the long haul. 
11. Is your company obsessed with cost cutting?  You can't cost-cut your way to growth. So when companies are focused only on reducing expenses it may indicate a lack of attention on growing revenues.  Pay particular attention to short-term cost-cutting measures that hurt long-term prospects.  Elimination of employee benefits and training programs are particularly bad signs. 
12. Have layoffs become a regular occurance?  While regular performance appraisals and even dismissals to cut "dead wood" are healthy, you should be wary of companies that are routinely engaged in layoffs.  And again, if the same is happening at other companies in your space, it's double wammy. It means that if you are laid off, your prospects at finding a new job are going to be slim.
13. Are you hoping for an acquisition to be your savior? Sometimes employees will think that if things really go poorly the worst case scenario is that the company will be acquired. This is like waiting for a knight in shining armor.  While acquisitions can be good for shareholders, they are no picnic. If you're in Finance, Sales, Marketing, HR or other "non core" areas, your position is a good candidate for elimination if there is an acquisition. 

While you should not panic if one or two of the items above conditions are true, these may be symptomatic of bigger issues.  These are warning signs.

Consider using these questions as a score card that you check a few times a year.  And if more than half are true, it may be time to pack your parachute.

Whatever you do, don't jump without a plan.  I'll cover that topic in the next post.

Zack Urlocker is a software executive and regular blogger on open source technology at TheOpenForce and InfoWorld and about music at GuitarVibe. 

** Other Sources **

Podcasts: Career Coach Alan Kearns, author of Get The Right Job Right Now, has a series of career-oriented podcasts. 

Podcast 2: The Cranky Middle Manager (website, mp3 download 31 min) looks at how middle managers can execute disruptive innovation without damaging their careers.

Fortune magazine writes about how the Washington Post is responding to disruption.  The bottom line: If CEO Donald Graham can't figure this out, no one can.  The good news for the Post is they've hedged their strategy. While  competitors were doubling down by buying money-losing newspapers in order to gain share, the Post investing in and acquired companies with far greater growth prospects.  I'm amazed that more companies that are disrupted don't do what the Post has done to reinvent themselves and get out of dying businesses.

More of Michael Bedard's art is is featured in his book Sitting Ducks.  Examples of his work are also available on line at his blog.

*Update* More Than You Know: Book Reviews, Podcasts

Our interview with author Michael Mauboussin last October proved popular. To introduce readers to Mauboussin's new book, More Than You Know: Finding Financial Wisdom in Unconventional Places  (NEW: Expanded and Updated 2007 Edition) Here are several resources:

**New Update: Podcast interview with Author Michael Mauboussin on NPR's Science Friday show Aug. 17, 2007, 16:49 min. (Download mp3, Science Friday website.)

**Best Business Books of the Year, BusinessWeek: "Finally, a fun read that draws insights from a wide range of scholarly disciplines."

Book Excerpt: Chapter 1: Be The House

Not Book Excerpts, But Close:
On Streaks: Perception, Probability, and Skill, from the Consilient Observer, Mauboussin's newsletter at CSFB, Vol. 2, Issue 8, April 2003.
The Janitor's Dream: Why Listening to Individuals Can Be Hazardous to Your Wealth, from the Consilient Observer, Vol.1, Issue 18, June 2002.

Podcasts and broadcast interviews:

• Good: NPR's Money Matters show (4:37): A quick hit.
• Better: WrittenVoices.com in either WMA or MP3 format (16:39)
• Best: The Invisible Hand Podcast Episode 21 (41:00): A thoughtful and thorough interview by Chris Gondek, who brings an investment and management point of view to draw out a good discussion with the author.

Book Reviews:
BusinessWeek: **** "The Good: Draws investing wisdom from many disciplines, from cognitive science to fractal math. The Bad: Brief essay chapters at times allow for too little discussion of complex matters.The Bottom Line: Its insights sparkle--and it's even a fun read.

Bloomberg News: "Mauboussin is at his best when exploring investment psychology. Humans, like zebras dodging lions, have innate physiological responses to threats: Our blood pressure rises; our short-term memory improves... As an adjunct professor at Columbia Business School, Mauboussin maintains an academic aloofness throughout. Nowhere do we learn how Legg Mason might have applied these highbrow concepts to the gritty business of buying and selling."

Other info:

• Author interview by Columbia University press
  
• Author interview by The Motley Fool
  
• Book description and table of contents by the Global Investor Bookshop
• Expectations Investing Mauboussin's first book, with Alfred Rappaport. A related website includes excerpts.