The Boiled Frog Phenomenon

Published at Philippine Daily Inquirer November 12, 2001

Boiled Frog Phenomenon? Huh? Who wants to boil frogs anyway? Actually, nobody does. However, if your company is anything like the boiled frog, then your cooked! The BOILED FROG PHENOMENON: If you place a frog in normal temperature water, then gradually bring the water to boil; our dear old frog will just continue to enjoy his boiling Jacuzzi until he’s cooked and dead. This boiled frog phenomenon is becoming a commonplace occurrence in our daily lives. Companies are insensitive to changing environment, much as the boiled frog failed to notice the gradual increase in water temperature. The dot com BOOM-BUST is a perfect example. Bloated dot com companies failed to notice shrinking markets – boiled frog

 

The Global Paradigms

The paradigms of today’s global economy centers on 3 basic precepts: Product leadership, Customer relations, and Operational excellence. It is imperative that companies provide the best offering in the global marketplace by excelling in a specific dimension of value.

Product Leadership

Product leadership companies push performance boundaries to the limit. They offer their customers the best product, period. Price is never an issue. They constantly reinvent themselves; they focus of product development and Market dominance. As such they are always NO.1. Competitors exist by giving a semblance of catching up with product leaders. But they never will, because by the time they catch up, the product leader changes the rules of the game. Product leaders have two teams: one team prolongs product life with upgrades and value-added features, while the other team generates the waves of next generation products. Intel is the paragon of Product leadership; guided and strongly adherent to Moore’s Law. Gordon Moore, co-founder of Intel, predicted in 1964 that the performance of the microprocessor chip would double every 18 months. So far, he’s right! When the 486 chip was just entering the market in 1989, a new team was already developing the 5th generation chip – the Pentium. Another team was likewise at work on the 7th generation Processor, the P-7. If product leaders do not outdo themselves, somebody else will!

Customer Relations

Companies whose value standard is Customer relations develop an intimate knowledge of the customer’s needs and make a commitment to providing a total solution. These companies have only one master: the customer. Thus, their critical objective is Share of Client. And their worse failure is not to lose money but to lose a client. These companies build long-term relationships and as such, willingly walk away from business that might generate only short-term revenues. Customer-intimate companies continually deepen their customer’s dependence on them. An example is a story of Four Season Hotel doorman who went beyond the call of duty when he found a briefcase of guest who had already checked out. Thinking it contained important documents; the doorman rushed to the airport, took the next shuttle and delivered the briefcase to the astonished guest. The message: do whatever it takes to please a client!

Operational Excellence

The proposition of Operationally excellent companies to their customers is: hassle-free service and low price. Ford Motor Co.’s Model T car is the epitome of an operationally excellent company. As Henry Ford puts it, “You may have any color you want, just as long as it’s black.” Their product has no frills and low priced. These companies do it one and only one way. Henry Ford is considered to be the father of operational excellence. He molded his automobile empire around a simple vision – efficient production. Ford’s business model focused on a single purpose: delivering an acceptable product at the lowest possible price. As efficiency increases, cost falls and the retail price of the Model T car fell from $850 to $290!

Threats: Sense to Nonsense

The boiled frog companies lose their leadership by complacency. The threat to Product leaders is turning SENSE into NON-SENSE. An example is Sony’s Betamax vs. JVC’s VHS. Sony was product leader; however, their Beta format was proprietary. JVC on the other hand freely licensed its VHS format to OEMs (Original Equipment Manufacturers) like RCA and Sanyo, while likewise developing their own recorders. Sometime afterwards Betamax was a boiled frog and Sony later was forced to abandon its beta format and licensed JVC’s VHS format. If you make your sensible product into non-sense, then you’re a boiled frog. Nabisco fooled around with their flagship product Oreo turning it into a non-sense mini Oreos, double stuffed Oreos, and large & small packed Oreos etc…. Loyal customers became confused. Then its competitor under priced Nabisco while using pure butter and 38 percent chocolate. Nabisco used vegetable shortening and only 24 percent chocolate. Customers noticed the difference; Oreo sales plummeted.

Threats: Knowledge to Ignorance

The threat to Customer-Intimate companies is turning knowledge of their client to ignorance. IBM was product leader during the years Thomas Watson was CEO, the 70’s to the 80’s, but by the 90’s it was playing catch-up to the likes of DELL, who was the pioneer of direct marketing and offered 24 Hour technical support; and Compaq, who early on mastered customer intimacy by cultivating a deep relationship with IT managers. The Big Blue was almost a Boiled frog. As the old adage goes, “its not what you know but what you don’t know that hurts you.”

Threats: Assets to Liabilities

Operationally excellent companies turn their assets into liability. GM, FORD and CHRYSLER all completely ignored TOYOTA who entered the less desirable low-end automobile market. Soon enough the American car companies noticed their sales being eaten away by Toyota and the other Japanese car companies. The Swiss luxury watch industry was likewise almost a boiled frog. Seiko and Citizen almost killed the Swiss watch industry. Ironically, it was Swatch who resurrected the Swiss industry by changing the rules of the game; setting a different standard between cheap and luxury watches.

Post-Mortem

These companies killed themselves or almost did, by not being able to sense the changes in their markets. Complacency can kill! In today’s competitive economy, companies cannot put themselves in hot water and not feel the change; they’d spend years healing their scalded skin or worst. They cannot afford to be as thick-skinned as frogs, insensitive to their clients needs, unwavering to environmental changes and ignorant to product innovation.

Market leadership depends on sensitivity and speed. Companies that sense changes and react to it with utmost urgency will ultimately be product leader. Remember, product leaders are always two steps ahead of their clients.

Now then, is your company a boiling frog? Are you able to sense the changes? Will you stay No.1 or are you killing yourself?