Clickalong 5-2

EXAMPLES OF DEFENDERS, PROSPECTORS, ANALYZERS, & REACTORS

Scholars Raymond E. Miles and Charles C. Snow suggest that organizations adapt one of four positions when responding to environmental uncertainty. They become defenders, prospectors, analyzers, or reactors.[i]

Defenders—“Let’s Stick with What We Do Best, Avoid Other Involvements”

Often defenders are old-line successful enterprises—such as Harley-Davidson motorcycles or Brooks Brothers clothiers—which have a narrow focus. They do not tend to seek opportunities outside their present markets. They devote most of their attention to making refinements in their existing operations. An example of a defender is Pepsi-Cola.

Pepsi had become so accustomed to being beaten by Coca-Cola in most markets that at the time Roger Enrico, 54, became PepsiCo’s new CEO in 1997 employees were “confused and demoralized,” according to report.[ii] Within the U.S., Coke sells one can of cola for every one sold by Pepsi; outside the U.S., it outsells Pepsi 5 to 1.

Enrico decided to restructure the company so that it could compete more effectively. First, he sold off the fast-food chains owned by PepsiCo—Pizza Hut, Taco Bell, and Kentucky Fried Chicken—because cost of building new restaurants had become burdensome. Then he spun off the Pepsi-Cola bottling operation into an independent public company (as Coke had years before), leaving Pepsi with the more profitable business of making and selling cola concentrate, not the more capital-intensive business of bottling and distributing the stuff. With the extra cash, Pepsi could now focus on fountain soda sales, where Coke has had a near monopoly, and on vending machines, which it had ignored for years.

The company also launched the Pepsi One diet drink as competition with Diet Coke. It acquired Tropicana, the orange-juice king, to boost its clout with retailers. And it began leveraging its snack subsidiary, Frito-Lay, as a way of combining snacks and sodas in displays in food and convenience stores.

The biggest challenge was overseas, where Coke made $3.5 billion in 1995 whereas Pepsi had lost $652 million. Enrico and his top managers began rebuilding Pepsi-Cola International to make the operation more consistent and accountable.

Prospectors—“Let’s Create Our Own Opportunities, Not Wait for Things to Happen”

Prospectors don’t just wait for things to happen. Like 19th-century gold miners, these companies are “prospecting” for new ideas and new ways of doing things. The continual product and market innovation has a price: such companies may suffer a loss of efficiency. Nevertheless, their ongoing focus on change can put fear in the hearts of competitors. An example of a prospector is the Walt Disney Co.

In 1958, the Big Three television networks—ABC, CBS, NBC—had combined Nielsen ratings (which measure viewers watching) of 61%. By 1998, battered by competition from new networks, cable rivals, the VCR, the Internet, and other so-called “new media,” their ratings had dropped to only 26%. Observers now wonder if network television can even survive.

Wrestling with this trend is Michael Eisner, CEO of the Walt Disney Co., which had acquired ABC in 1996, only to see it plunge from an almost $400 million profit to a $100 million loss four years later. “The world has changed,” he said. “We can’t continue losing all this money.”[iii]

Disney, however, may be in the best position to reinvent the industry. Not only does it own cable channels like ESPN and Lifetime and production studios like Touchstone, which produces ABC’s “Sports Night” and “Home Improvement.” It also has Internet properties.

Its most interesting asset, however, may be the Imagineers, a research lab full of brainy, creative people who are paid to invent the future. The Imagineers’ project code-named Tele-fusion simulates all kinds of possible experiences that we might someday see.

“You can print from the TV screen everything from an ad to an invitation to a soap-opera wedding, call up a segment from ‘20/20’ archives, purchase the script of a TV movie, be linked to relevant Web sites—all seamlessly,” says a Newsweek account. “You can silence a sports announcer but keep the stadium noise, or tune in a single coach. And if you really don’t have a life, try the buddy cam: from miles away, a buddy watching the same show as you appears live in your video window—as you do in his—so you can chat and watch TV together.”[iv]

Analyzers—“Let Others Take the Risks of Innovating & We’ll Imitate What Works Best “

An example of an analyzer is computer chip maker Advanced Micro Devices (AMD), which keeps a close eye on the market leader, Intel.

“The success and reputation of Advanced Micro Devices Inc.,” says San Jose Mercury News reporter Tom Quinlan, “has rested since 1982 on how well and how profitably it could copy the computer chip designs of [San Jose] cross-town rival Intel Corp.”[v]

We’ve become accustomed to seeing those personal computer ads stamped with “Intel Inside,” but Intel is only the most famous (and dominant) maker of the tiny microprocessors, or chips, that are the brains of PCs. At one time, 12 companies signed agreements with Intel to build chip clones, or copies, based on Intel’s design. Of the original 12, only Advanced Micro Devices (AMD) still competes directly with Intel.

How well has this imitative strategy worked? The answer is that in the early 1980s AMD was roughly comparable in size to Intel. Today, however, Intel grosses more than $26 billion a year—one of the most profitable companies in the world—whereas AMD is only a $2 billion company. Every time AMD seemed poised for greatness, it stumbled, mainly because of manufacturing problems and the alleged inability of flamboyant CEO Jerry Sanders (who favors designer suits, year-round limo service, and a Hollywood lifestyle) to stay focused on details.

Despite Sanders’s faults, he recognized that AMD could no longer go on cloning—that is, be an analyzer—that it had to develop its own processor designs. After acquiring the necessary personnel and expertise, AMD announced the K7 in 1999, the first PC microprocessor to depart significantly from Intel’s product line. The K7 is designed to outperform Intel’s current Pentium III chips.

Now AMD must deal with two questions. Can it avoid the execution problems that have plagued it in the past? And will customers be able to look past its brand image as an Intel clone maker and accept it as an innovator? ((UPDATE))

Said one financial analyst, “This is a real bet-the-company decision on their part.”

Reactors—“Let’s Wait Until There’s a Crisis, Then We’ll React”

Whereas the prospector is aggressive and proactive, the reactor is the opposite—passive and reactive. Reactors make adjustments only when finally forced to by environmental pressures. In the worst cases, they are so incapable of responding fast enough that they suffer massive sales losses and are even driven out of business. An example of a reactor was Coleco.

It needs to be said that the toy industry is one of the most volatile industries there is. In the blink of an eye, it seems, a hot fad can suddenly turn cold. Depending on your age, you may or may not remember the sensation that the Cabbage Patch Kids caused in 1985. In that year, these dolls were the best-selling toy on the market. But after the manufacturer, Coleco Industries, introduced the dolls, it became complacent and failed to create any new toys worth mentioning. The result: Coleco went bankrupt in 1988.[vi]


[i] R. E. Miles and C. C. Snow, Organizational Strategy, Structure, and Process (New York: McGraw-Hill, 1978).

[ii] F. Gibney Jr., “Pepsi Gets Back in the Game,” Time, April 26, 1999, pp. 44–45.

[iii] M. Eisner, quoted in J. L. Roberts, “Out of the Box,” Newsweek, April 26, 1999, pp. 41–45.

[iv] Roberts, 1999.

[v] T. Quinlan, “AMD Tries Life by Its Own Devices,” San Jose Mercury News,

[vi] B. Costello, “Make Money by Thinking the Unthinkable,” The Futurist, May 1999, pp. 30–34.