Foot In Mouth: 43 Quotes From Big Corporate Execs Who Laughed Off Disruption When It Hit
Article & Image Credit: Shared on CB Insights September 2018. This is not Salt Flats original content.
With the iPhone as a glaring example, and stretching through Amazon and e-commerce and more recently blockchain and bitcoin, many innovations have initially been met with derision by big company CEOs. History often proved them wrong.
Sometimes disruption is staring you right in the face and you can’t help but look the other way. That’s doubly true when you’re the head of a legacy business desperate to stay relevant.
Small players have historically changed the business landscape when the older guys aren’t aware enough or nimble enough to respond. Here are some examples of big CEOs and executives who minimized disruptive threats when they appeared. When asked about these smaller players at the time (and even now) some companies have remained woefully dismissive.
1. THE IPHONE AND IPOD
Perhaps the most glaring example of the tendency to dismiss innovative new players was when Apple’s iPhone hit the market in 2007. It was the first example of a smart mobile phone.
Onlookers were unsure what this device would compete with: Would it hurt mobile phone makers like Nokia or developers of handheld planners like Palm, who were also trying to enter into the phone space?
At the time, both companies refused to admit the threat. Here’s Palm’s CEO:
“We’ve learned and struggled for a few years here figuring out how to make a decent phone … PC guys are not going to just figure this out,” said then-Palm CEO Ed Colligan in 2006, after news that Apple was developing a phone. “They’re not going to just walk in.”
Here’s the head of strategy at Nokia:
“The development of mobile phones will follow a similar path to that followed by PCs,” said Nokia’s Chief Strategy Officer Anssi Vanjoki, in a German interview (translated through Google Translate). “Even with the Mac, Apple attracted a lot of attention at first, but they have remained a niche manufacturer. That will be their role in mobile phones as well.”
Microsoft CEO Steve Ballmer had this to say about the iPhone’s lack of a physical keyboard:
“500 dollars? Fully subsidized? With a plan? I said that is the most expensive phone in the world. And it doesn’t appeal to business customers because it doesn’t have a keyboard. Which makes it not a very good email machine.”
RIM’s co-CEO, Jim Balsillie, wrote off the iPhone almost completely:
“It’s kind of one more entrant into an already very busy space with lots of choice for consumers … But in terms of a sort of a sea-change for BlackBerry, I would think that’s overstating it.”
Of course, let’s not forget that phone manufacturers had been wrongly dismissive of Apple before. Here’s Motorola’s CEO on the iPod:
“Screw the Nano. What the hell does the Nano do? Who listens to 1,000 songs?” said Motorola CEO Ed Zander, speaking at a conference in 2006.
Even Apple founder Steve Jobs voiced hesitations about variations on the original iPhone, arguing that phones with larger screens would never catch on:
“You can’t get your hand around it,” Jobs said when Samsung and Google came out with phones larger than the 3.5” original iPhone. “No one’s going to buy that.”
Now, the iPhone X, released November 2017, is a full inch taller than its original iPhone predecessor. The iPhone X also features Apple’s biggest phone screen, measuring 5.8” on the diagonal — 66% larger than the first iPhone.
Perhaps more than any other internet company, Amazon has embodied internet-based challenges to traditional business and commerce. From the moment it began shipping books and threatening brick-and-mortar book chains, CEO Jeff Bezos has set his sights on transforming industries with Amazon’s customer focus and obsession with efficiency and logistics. But also from the beginning, Amazon has been underestimated by incumbents.
Here’s IBM’s chairman minimizing how Amazon might transform retail and internet sales all the way back in 1999.
“Amazon.com is a very interesting retail concept, but wait till you see what Wal-Mart is gearing up to do,” he said [IBM Chairman, Louis V. Gerstner Jr.]. Mr. Gerstner noted that last year IBM’s Internet sales were five times greater than Amazon’s. Mr. Gerstner boasted that IBM “is already generating more revenue, and certainly more profit, than all of the top Internet companies combined.”
More recently, on a March 2016 earnings call, FedEx Executive VP Mike Glenn minimized the impact of Amazon’s decision to lease aircraft and buy its own trucks to get into the logistics and shipping business.
“While recent stories and reports of a new entity competing with the three major carriers in the United States grabs headlines, the reality is it would be a daunting task requiring tens of billions of dollars in capital and years to build sufficient scale and density to replicate existing networks like FedEx,” [Mike] Glenn said.
In August 2017, as news built around the wave of retail bankruptcies and the “retail apocalypse,” Footlocker’s CEO and chairman Richard Johnson claimed on an earnings call he wasn’t worried about vendors going directly to Amazon to sell expensive sneakers.
“We do not believe our vendors selling product directly on Amazon is an imminent threat. There is no indication that any of our vendors intend to sell premium athletic product, $100-plus sneakers that we offer, directly via that sort of distribution channel.”
In January 2018, Amazon launched its automated cashier-less Amazon Go store in Seattle. The store leverages technology like machine vision, AI, and sensor technology to allow customers to shop without checking out at a register: shoppers are simply automatically charged for their items via the Amazon Go app.
Following the opening of the Amazon Go store, Saks Fifth Avenue president Marc Matrick announced he was unconcerned about the threat automation poses to traditional brick-and-mortar establishments:
“When you think about the online versus the offline experience, we don’t need AI in our stores,” he said on CNBC. “We have ‘I’. We have living, breathing, 4,500 style advisors in our stores.”
In June 2018 Amazon beat out Walmart, which was also interested, to purchase PillPack for nearly $1B. PillPack allows users to buy medications online in pre-made doses. The reported ~$1B valuation for PillPack made the deal Amazon’s fourth-largest acquisition at the time, following its purchases of grocery chain Whole Foods, Wi-Fi-enabled doorbell Ring, and shoe retailer Zappos.
In wake of the news, pharmacy providers Walgreens, CVS Health, and Rite Aid collectively lost $11B in stock the day of the announcement.
When Walgreens CEO Stefano Pessina heard of the deal he said he’s “not particularly worried” about the PillPack deal. “You see,” he said, “the pharmacy world is much more complex than just delivering certain pills or certain packages.”
3. CLOUD SOFTWARE
Way back before most enterprise software solutions were cloud-based, Salesforce was offering a new and different kind of CRM product. While it made waves early on, legacy software companies didn’t think too highly of the product.
“Microsoft will roll [Salesforce] over,” Thomas Siebel of Siebel Systems flatly told Bloomberg in 2003. “They get Zambonied.”
Execs have also said they’re not worried about Amazon Web Services (AWS), a cloud services platform that users can leverage to build their own apps. In October 2017, Oracle CEO Mark Hurd went on record to discuss his company’s cloud infrastructure offerings.
“I don’t really worry so much about [AWS], to be very blunt with you,” Hurd told CNBC. “We need to worry about ourselves. We’re in a great position.”
4. NETFLIX/VIDEO STREAMING
Video streaming service Netflix launched as a potential threat to Blockbuster with its DVD mailing service. Not only did it kill the video renting industry, it now has its eyes set on broadcast television. And leaders in both industries were reluctant to admit that Netflix was a real threat.
“Neither RedBox nor Netflix are even on the radar screen in terms of competition,” said Blockbuster CEO Jim Keyes, speaking to the Motley Fool in 2008. “It’s more Wal-Mart and Apple.”
Here’s Time Warner’s CEO:
“It’s a little bit like, is the Albanian army going to take over the world? I don’t think so,” said Time Warner CEO Jeffrey L Bewkes, when asked in 2010 what he thought about the company’s push toward licensed content.
Even more recently, traditional TV executives have tried to minimize the risk.
“The notion that [companies like Netflix] are replacing broadcast TV may not be quite accurate,” said Alan Wurtzel, NBCU president of research and media development, as he presented ratings of popular shows from streaming companies earlier this month. “I think we need a little bit of perspective when we talk about the impact of Netflix.”
Movie theater chain execs have also tried to sound brave in the face of the Netflix threat. Here’s Cinemark’s CEO on a February 2016 earnings call.
“We don’t have any concern there,” said Mark Zoradi, Cinemark CEO. “Netflix is a great service, it’s a great in-home service. They’ve had other movies. Netflix is very much a television network and not unlike what HBO and Showtime have done for years, they have some original product that goes out there. So it’s not playing in theaters, it’s playing on Netflix and we hope they have great success with it but I don’t see it as an issue relative to the theatrical business. It’s not one really that we talk about.”
And in September 2018, AT&T CEO Randall Stephenson seemed to disregard a history of Netflix proving critics wrong. At a conference, he implied that Netflix was a low-budget player that could not compare to its fancier competitor: HBO
“I think of Netflix kind of as the Walmart of [subscription video on demand], HBO is kind of Tiffany’s,” Stephenson said. “It’s a very premium, high-end brand for premium content.”
Stephenson doubled down on the statement later in his comments. “HBO is a very unique brand and a very unique property. And I really – I mean what I said, it is the Tiffany’s of media and entertainment.”
Critics later pointed out that Wal-Mart is a much bigger business than Tiffany’s. We’ll see who has the last laugh.
In the next few years, Airbnb could overtake major hotel chains in total guest bookings, according to a Barclays report noted in Quartz, but hotels are still reluctant to speak openly about the Airbnb threat.
“Our guests don’t want the Airbnb feel and scent,” said Christopher Norton, EVP of global product and operations at the Four Seasons, speaking to Fast Company a couple of years ago. He went on to explain that his customers expect a “level of service that is different, more sophisticated, detailed, and skillful.”
“We have not seen a direct effect [from Airbnb] in any of our hotels … We don’t feel it’s having any impact on our results or that it has hit our radar as of yet,” said Richard Jones, senior VP and COO of Hospitality Ventures Management Group, in 2014.
Companies like Wealthfront and Betterment believe their computer algorithms will be better at investing customers’ money than personal financial advisers. But some finance professionals are not believers.
“[Wealth management] services require educated, credentialed, experienced advisors acting as fiduciaries on behalf of clients and actively engaged in a relationship with them,” said Jim Maurer, director of personal finance at Buckingham and The BAM Alliance, writing in an op-ed in CNBC, and he concludes, “I don’t see their services as competing with comprehensive wealth management.”
In a March 2016 note, Citigroup’s fintech analysts said robo-advisors may be all well and good, but that they won’t work for the wealthy clients that are the bread-and-butter of the big bank-wealth management industry.
“We see the advent of robo-advice as an example of automation improving the productivity of traditional investment advisers, and not a situation where there is significant risk of job substitution,” Citi analysts led by Ronit Ghose wrote in their report. “Higher net worth or more sophisticated investors will, in our view, always demand face-to-face advice.”
The Apple Watch was released last year, and it’s still unclear whether or not it will become mainstream. All the same, wearables are more and more looking like they will have an impact on the traditional watch industry.
The Apple watch is an interesting toy, but not a revolution,” said Swatch executive Nick Hayek Jr., speaking to a Swiss newspaper.
Hayek was also quoted as saying in The Guardian that he doesn’t believe in a watch company handling healthcare data.
“I personally don’t want my blood pressure and blood sugar values stored in the cloud, or on servers in Silicon Valley … I cannot accept the responsibility of whether my device warns a customer in time before a heart attack.”
8. THE CONNECTED CAR/TESLA
Google and Apple are exploring driverless car technologies. Carmakers, however, haven’t been so sure tech companies taking the automotive reigns is the future.
“If there were a rumour that Mercedes or Daimler planned to start building smartphones then they (Apple) would not be sleepless at night, said Daimler head Dieter Zetsche, speaking to Motoring.com.au last year. “And the same applies to me.”
Porsche’s CEO was more blunt:
“An iPhone belongs in your pocket, not on the road,” said Porsche CEO Oliver Blume said.
Jaguar Land Rover:
“We don’t consider customers cargo,” said Jaguar’s head of R&D, Wolfgang Epple, in 2015. “We don’t want to build a robot that delivers the cargo from A to B.”
“I think somebody is kind of trying to cough up a hairball here,” said former General Motors CEO Dan Akerson, when asked about the possibility that Apple was developing its own car. “A lot of people who don’t ever operate in [the car manufacturing industry] don’t understand and have a tendency to underestimate.”
General Motors, of course, later hopped on the autonomous vehicle bandwagon in a big way. And even when they talk about autonomous vehicles, big auto is keen to dismiss the work of newer competitors such as Tesla, which was founded as a software-driven, electrical vehicle company from the start.
“It gives you the impression that it’s doing more than it is,” said Trent Victor, senior technical leader of crash avoidance at Volvo, in an interview with The Verge. “[Tesla’s Autopilot] is more of an unsupervised wannabe.” In other words, Tesla is creating a semi-autonomous car that appears to be autonomous.”
Bitcoin has had its share of troubles — including the Mt. Gox scandal, price volatility, and an increasing concentration of mining activity in China — but even with these challenges it’s still the leading decentralized currency and has spawned financial industry interest in applications of its underlying blockchain ledger tech.
JPMorgan CEO Jamie Dimon opined plainly in late 2015 that bitcoin would not survive:
“This is my personal opinion, there will be no real, non-controlled currency in the world,” said Dimon. “There is no government that’s going to put up with it for long … there will be no currency that gets around government controls.”
Dimon was at it again two years later on September 12, 2017, criticizing bitcoin and calling it a fraud.
“It’s worse than tulip bulbs,” Dimon said of bitcoin. “It won’t end well. Someone is going to get killed. Currencies have legal support. It will blow up.”
Later in September 2017 Dimon also lashed out at the trend toward Initial Coin Offerings, whereby companies issue tokens, many of them based on the Ethereum blockchain, in order to fund blockchain-based products and applications. A few — such as Tezos, which raised $230M — have raised upwards of $200M.
We recently mapped over 100 companies that raised funds through ICOs. But Dimon wasn’t having any of it.
“It’s creating something out of nothing that to me is worth nothing,” he said. “It will end badly.”
Also in late September 2017, Ray Dalio, founder of hedge fund Bridgewater Associates, echoed Dimon’s comments.
“Bitcoin today — you can’t make much transactions in it. You can’t spend it very easily,” Dalio said on CNBC’s Squawk Box. “It’s not an effective storehold of wealth because it has volatility to it, unlike gold. Bitcoin is a highly speculative market. Bitcoin is a bubble.”
The executives made the comments at around a time when bitcoin dropped to sudden lows with bitcoin dropping close to a price of $3,000 per bitcoin. However, just a little over a week later, bitcoin was again over the $4,000-mark. Dimon’s comments also caused some head-scratching since it was reported some JPMorgan traders were buying bitcoin on behalf of clients as the price dipped.
10. NEW PROTEIN & MEATLESS MEAT
The increasing momentum behind the meatless food industry — featuring lab-grown meats, seafood substitutes, and insect protein — spells change for the $90B global meat market. Meat incumbents are facing a rising tide of challenges, in the form of new technology from alternative protein/meatless startups, ethically-focused consumers, and environmental concerns.
However, many leaders in the mainstream beef industry are unconcerned about potential disruption of the industry.
“We’ll see what the marketplace says, but we feel good about the growth of beef and the consumer’s confidence in our product,” said Pete McClymont, executive vice president at Nebraska Cattlemen.
Ann Marie Bosshamer, executive director of the Nebraska Beef Council, agrees:
“Our focus truly is letting the consumer know what a nutrient-dense food beef really is,” she said when interviewed about the impact meatless alternatives might have on Nebraska’s cattle industry.
11. THE PERSONAL COMPUTER
In what is perhaps the most famous failed CEO prediction, executives who built their careers on the mainframe and enterprise computers of the pre-PC era were dismissive of the central idea that they would become the bedrock for the success of Microsoft, Intel, and other PC tech giants: that every desk in an office would have a computer, and that every home would have one as well.
“There is no reason anyone would want a computer in their home,” said Ken Olsen, founder of Digital Equipment Corporation, 1977.
“I think there is a world market for maybe five computers,” said Thomas Watson, president of IBM, in 1943.
Steve Ballmer is one of tech’s most outspoken CEOs. Early on in Google’s ascendancy, he made his disdain for the search giant known, up to and including discounting its very status as a company.
“Google’s not a real company. It’s a house of cards.”
Stan Shih of Acer claimed that Apple’s foray into computers was an aberration and that the company would fail to make a niche for itself.
“Apple is like a mutant virus, escaping from the traditional structure of the PC industry, but the industry will still eventually build up immunity, thus further blocking this trend, and we believe the size of the non-Apple camp will exceed Apple’s, because this is how the industry normally evolves.”
14. MOBILE GAMING
Mobile gaming is another industry legacy execs didn’t see coming. While app hits like Angry Birds have become huge, for a long time companies like Nintendo — though aware of the app’s monumental rise — didn’t see any lasting value there and hesitated to get involved.
These mobile games are “candidly disposable from a consumer standpoint,” said Nintendo president Reggie Fils-Aime, speaking in 2011.
The Kindle was a bold bet for Amazon: from a start selling books, Bezos and the company apparently recognized the potential that ebooks had to offer. Making the ereaders in house was one of the best ways to assure that the burgeoning market could take off. Almost no one saw it coming, though. Not even the often-prescient Steve Jobs, who decried the venture.
“It doesn’t matter how good or bad the product is, the fact is that people don’t read anymore.”
16. THE TELEVISION
Daryl Zanuck, co-founder of 20th Century Fox thought that the TV itself wouldn’t catch on.
“Television won’t be able to hold onto any market it captures after the first six months. People will soon get tired of staring at a plywood box every night.”
17. THE TELEPHONE
This one is a real throwback, but in 1876, Western Union Telegraph company was offered the chance to purchase the patent on Alexander Graham Bell’s telephone. William Orton, President of Western Union, failed to see the value of the newly invented device.
“What use could this company make of an electrical toy?”
This is not Salt Flats original content. This article and image appeared in CB Insights in September 2018.