Of Cell Phones, Maps and Mental Models: Why Doing What Was Right Is Sometimes WrongPublished: August 20, 2008 in Knowledge@Wharton
Why don't we see the truck racing toward us, or the treasure of gold beneath our feet? Are these just invisible events? In this excerpt from the book, It Starts with One: Changing Individuals Changes Organizations, authors J. Stewart Black and Hal B. Gregersen offer examples from the mobile phone industry and from the Spanish exploration of America in the 16th century to explain why organizations and individuals fail to see the need for change. "Why do we fail to see the need for change?" the authors ask. Their answer: "Fundamentally, we fail to see because we are blinded by the light of what we already see."
Just imagine. You are relaxing on the beach; the sun is shining; its rays shimmering off the ocean waves as they lazily break on the shore. A cooling breeze occasionally rustles the palm trees. You are in this idyllic spot because you've done it the old-fashioned way -- you've earned it. You've worked hard; you've been smart. Your company is touted in the press as one of the most admired. You are the market leader in what is expected to be one of the largest consumer market products ever -- the cell phone. At its unveiling, your StarTac phone instantly becomes the phone to own. You are Motorola.
You are doing the right thing and doing it well. This was the case for Motorola into the early nineties. Its analog phones were the phones to own, and Motorola dominated the industry with a global market share of more than 30% at its peak.
But then the environment shifted -- radically. First, a new digital technology for mobile phones came along. However, early on it was not clear how superior it would be. In addition, the new digital technology would require literally billions of dollars of infrastructure investment. Most U.S. carriers, such as Sprint and Verizon, did not seem to want to make this investment, and it would make little sense to produce a phone that would not work on the carriers' systems. Perhaps this is why none of the other U.S. mobile phone makers leaped in this new digital direction at first. Although European carriers did seem as though they would embrace the new technology, any individual country such as Germany or France paled in comparison to the market size of the United States, so why worry about what the Europeans might do?
The second shift involved the emergence of a new competitor. Although the new competitor was pushing the new technology, to many this seemed more an act of desperation than foresight. The company had just been through a serious internal leadership shake-up, including the suicide of its CEO in 1990. The new CEO installed in 1992, Jorma Olilla, was a former banker and certainly not a technologist. So what if he was making some noise about focusing on mobile communication, which represented less than 2% of Nokia's total revenue at the time. The vast majority of its revenue came from forest products, and it had been that way for more than 100 years. The company also excelled at making rubber boots for fishermen. So what in the world could it know about high tech? To top it off, the new competitor was based somewhere in frozen Finland, a country with a total population less than the city of Chicago. Besides, no one was really sure how to pronounce the company's name -- Nokia. Was it Nó-kia (with the emphasis on the "No") or No-kiá (with the emphasis on the "kia")?
The result? Motorola's first reaction was to flat-out deny that this new competitor or technology was anything to worry about.
But then Nokia's revenue increased four-fold from $2.1 billion in 1993 to $8.7 billion in 1997. All of Europe adopted a common digital standard that allowed people to use mobile phones virtually anywhere in the region. This convenience drove even greater demand. In the meantime, the fragmented U.S. standards meant that one phone would not necessarily work in every state, which caused a dampening effect on growth. Nokia also decided to emphasize brand and brand management as much as technology. It focused on seemingly innocent items like making the user interface intuitive (such as a green key for "send" and red for "end call") and consistent across all its models. In 1998, just six years after it decided to push into the global mobile phone market, Nokia moved from not even being in the race to taking over the No. 1 position and passed Motorola in terms of units sold globally.
What did Motorola do? Oddly, it put even more investment and effort into analog phones. It did what it knew how to do -- what it was good at doing -- and it did it even more intensely than before.
Well, we all know what happened after that. In just six short years (between 1998 and 2003), Motorola's global share of mobile phones plummeted by more than 50%. During this same period, Nokia, virtually unknown in the U.S. in the early nineties (or most of the rest of the world for that matter) gathered steam to become one of the top ten recognized brands in the world behind the likes of Coca-Cola and McDonald's. In 2001, with a market share of around 35%, Nokia's profit share (i.e., share of all money made in the industry) was nearly 70%. So while one in every three phones sold were Nokia phones, seven in every ten dollars (euro, yen, markka, etc.) in profits went to Nokia. That's right: Nokia's "profit share" doubled their "market share."
If only the story ended here, but, it doesn't. While Nokia was busy taking over the world and dethroning Motorola, a company that wasn't even making mobile phones when Nokia's CEO, Jorma Olilla, took over in 1992, quietly began to move in 1998 just as Nokia was overtaking Motorola with nearly 40 million total units sold to Motorola's nearly 35 million. The company was Samsung, and in 1998 it held a mere 2.7% of the global world market and sold just 4.7 million phones. However, even this number failed to capture Nokia's attention because Samsung sold most of its phones at home in Korea. As a consequence, no one, and certainly not Nokia in 1998, predicted Samsung would rise to challenge Motorola for the No. 2 spot in the world among mobile phone makers by 2006.
No one saw Samsung coming, including Nokia, until it was a bit too late. Samsung's real surge started in 2002. While other manufacturers dismissed a new capability of putting small but low-quality cameras in phones, Samsung put into action the old saying: "A picture is worth a thousand words." Samsung executives grasped that people did not want phones to replace cameras but simply wanted an additional, more information-rich means of mobile communication with friends and family. And so in six startling years, Samsung raced from selling a mere 21 million phones in 2000 to 104 million in 2005, and its global market share nearly tripled from 5% to 13%!
In every case, shareholders paid a dear price for the failure to see the need to change. As Motorola was blindsided by the surge of Nokia, Motorola shareholders saw their value drop by 50% between 1997 and the end of 2002. During the same period, Nokia shareholders watched their value increase by 300%. Likewise, as Nokia was stunned by the explosion of Samsung onto the world mobile phone stage, between 2002 and the end of 2005, Nokia shareholders gasped as the value of their stock drop by 26%. During this same period, Samsung shareholders grinned as they saw the value of their shares soar by 216%.
How this three-way battle will shake out is anyone's guess. In 2006, both Nokia and a revitalized Motorola pushed ahead and placed a bit more distance between themselves and Samsung. However, it will be interesting to see how well they've learned their lessons or whether all three will be blindsided by Apple, which announced its new iPhone on January 9, 2007. We make no predictions, but odds are that past success will cause someone to miss something critical relative to needed changes to sustain success in the future.
Blinded by the Light
It is no brilliant statement to say that if you do not see the need to change, you will not change. Everyone knows this. But if everyone knows this, why do so many change initiatives fail to break through this first barrier? Stated simply, we fail at breaking through this first barrier of change not because we don't know it is there but because we underestimate its strength. We underestimate its strength because we fail to take the time or effort to understand fully its nature.
So why don't we see the truck racing toward us, or the treasure of gold beneath our feet? Why could Motorola not see the threat of Nokia? Why did Nokia miss the rise of Samsung? Were these just invisible events? Were they simply impossible for anyone to see? These might seem like silly questions, but if a particular demand for change were invisible, then we could hardly blame ourselves or someone else for not seeing it. But in most cases, the need for change is visible -- if only we would see it. Again, why do we fail to see the need for change? Fundamentally, we fail to see because we are blinded by the light of what we already see.
To explain, let's return to Motorola. (By the way, we do not mean to pick on Motorola. They do not stand alone by any means in missing a significant threat or opportunity. At different points in time, firms such as AT&T, Black & Decker, Caterpillar, IBM, Kmart, Lucent, Merrill Lynch, Sony, Xerox, and others have not seen the need to change as early as they might have and have paid the price -- as have their shareholders.) Still, while Motorola is not the only firm to miss an important threat or opportunity, the threats and opportunities Motorola faced were hardly invisible. Yet Motorola still did not see, recognize, or acknowledge them until after the cost of waiting was significant. Instead, Motorola first denied the threat and then worked harder at what it knew how to do well.
So why do we deny? When we see evidence that a strategy, structure, technology, or product was right in the past but now is wrong, why do we ignore and deny the evidence?
Remember, we fail to see the need for change because we are blinded by the light of what we already see. Virtually every major personal or company change rarely occurs in isolation but contains a context, a history. In virtually every case, individuals or companies were doing the right thing and doing it well before something in the environment changed. Just as the previous right thing did not come from out of the blue, neither did our ability to do it well. Our ability to do the old right thing well developed over time. Likewise, the maps we used to guide our actions were developed and reinforced by success over time. With success these mental maps came to guide our behaviors as concretely as physical maps guide the steps we take on a wilderness trek. Our mental maps tell us where to go and how to get there.
Island of California
[There exists] a map of the island of California. Many people, when they first see it, think it is a futuristic map of the state after a huge earthquake -- what Californians refer to as the "great quake to come." The map is actually quite old.
For centuries, Europeans were captivated by legends of distant islands with unimaginable wealth. In 1541, Hernán Cortés and a group of adventurers set sail from Spain to discover such an island. Cortés sailed across the Atlantic, portaged through Mexico, and then set sail again up the Strait of California, more commonly known today as the Gulf of Baja. Eventually, his provisions ran low, his crew grew nervous, and he was forced to turn back. To better understand this, it may be helpful to remember that the Gulf of Baja (also called the Sea of Cortez) is nearly 1,000 miles or more than 1600 kilometers long, and the sailing is slow because the winds between two mainlands, modern-day Mexico and the Baja peninsula, stay weak and inconsistent.
For Cortés, failure was unacceptable, and so with a little wishful thinking he created a success. To the east was land and to the west was land; to the north and south, water. Cortés reached a perfectly logical conclusion: he was in search of an island, and an island he had found -- La Isla de California. Cortés returned to Spain and reported to the king and queen exactly what they wanted to hear (and what he wanted to believe): California is an island.
Shortly after Cortés's discovery, another expedition was launched to confirm his claim. This one traveled far up along the Pacific coast, past present-day San Francisco. This overly ambitious expedition also ran low on supplies, and by the time they reached the Mendocino River on northern California's coast, the crew was stricken with scurvy. With no inclination to dispute Cortés and no absolute evidence that he was wrong, they concluded that the Mendocino River was really a strait separating the northern part of the island of California from the rest of the continent.
Just imagine if you had this map and landed in what is present-day eastern Texas along the Gulf of Mexico. Your objective is to travel overland and reach the island of California. What would you need to take with you? Boats, of course. You would have to haul boats more than 2,500 kilometers (more than 1,500 miles) across what are present-day Texas, New Mexico, and the deserts of Arizona, only to discover that California was not an island. In fact, several expeditions after Cortés provided clear proof that California was not an island. Still, how long did this map of the Island of California persist? One hundred years? One hundred and fifty years? No, this cartographic myth persisted throughout Europe for more than two centuries, until in 1745 a royal proclamation from Spain finally declared: "California is not an island." (Keep in mind this was just a few years before the American colonies declared independence.)
Why did it take so long for this map to change? Once the belief that California was an island had been established, reports from later explorers were filtered to fit the existing map; anything contradictory was labeled false or impossible. For all the king knew, the map worked quite well. Why should he throw it away? Similarly, for Motorola, analog phones had worked quite well for a long time. Black, clam-shell phones with little thought about consistent brand characteristics or easy user interface provided a successful map for more than a decade. Why should Motorola throw away this great map?
Again, this phenomenon is not restricted to companies, nor is it a disease that only infects senior executives. It can and does happen in all sizes of firms and at all levels of positions. To appreciate this we only have to think of some individual examples.
Consider the transition from individual contributor to manager of individual contributors. Managers consistently tell us it is one of the most difficult. Why? Simplified, as an individual contributor you get things done by doing them yourself. If you are a salesperson, you get the sale by going out and making the pitch and closing the deal yourself. Over time, you establish a personalized set of maps for navigating this individual contributor territory. However, as a sales team manager, you must transition from doing things yourself to getting them done through others; you must change from motivating yourself to motivating others. Because the situation has changed (you've been promoted), what was clearly the right thing before (i.e., doing things yourself) has become the wrong thing, but you are still very good at doing it.
Or consider someone who was very successful at conveying subtle hints and cues in his communication and thereby never risking open embarrassment to anyone in public with whom he might disagree. This individual was known as a master communicator in his native Japan. He had years of success in Tokyo and developed an intricate, first-rate map for guiding his communication effectively. His map also led him to determine that those who demonstrated less tact and sophistication were untrustworthy with sensitive issues or assignments. This individual was subsequently transferred to an attractive new position a few kilometers to the south -- Melbourne. Sadly, his carefully constructed, well tested communication map did not work so well in Australia. While he worked hard at communicating with great sensitivity and subtlety, "locals" perceived him as not being direct and therefore untrustworthy. In turn, while the locals "said what they meant and meaning what they said," as they thought they should do, he viewed them as insensitive to others' feelings and a bit immature and self-centered in their communication. Not surprisingly, the assignment did not go well. Yet, this individual manager was slow to see that what was once very right was now very wrong. He was slow to see that a serious personal change was needed if he were to continue to succeed in this new and different environment.
Thus, the first and critical point about why we fail to see the need for change stems from the fact that we stand blinded by the light of successful past mental maps. The longer these maps have worked, the more it makes sense to hold on to them and the more difficult it is to see beyond them to recognize the need for changing them. This applies not only to companies and macro issues like strategies or technology, but also to individuals and issues as small as how to communicate or provide feedback to someone.