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Is Your Strategy About Winning, Or About Maximizing Success?

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Is your company’s strategic objective to win? Or is your company’s strategic objective to maximize success?

‘Wait,’ you say. ‘Which is supposed to be better? And don’t you get one if you get the other? And why are you annoying me with these semantic quibbles anyway?’

Well, I think they may be semantic, but they’re real differences too. And no, if you get one, you don’t necessarily get the other. And yes, one is better than the other.

Let me explain.

Maximizing Success is Better than Winning

In the 2008 Summer Olympics, Jamaican Usain Bolt broke his own world record to win the gold medal in the 100-meter run. He did it while slowing down at the end, to celebrate.

Bolt won, but didn’t maximize his success (intentionally? He later broke the record again). Which suggests winning isn’t everything.  The corporate version of holding back might be sandbagging, managing earnings, putting some cushion in the bank. Not necessarily a bad thing, though it could be.

But earnings smoothing is not nearly as big an issue as refusing to collaborate. The US auto industry, steeped as it was in the au courant teachings of competitive strategy, saw itself as competing with the UAW, with its suppliers, and probably with its dealers.

By contrast, Japanese automakers collaborated with their supply chain. And we all know who won that particular showdown.
It’s hard to prove causality here, though BCG partner Phillip Evans, who has written on collaboration, may be able to make the case. I believe it on principle. It’s simple. The entire lesson of the industrial revolution was that scale matters. He who gets scale wins.

Managing Scale is the New Scale

The thing is, “scale” used to be implicitly defined in regional and national terms. It no longer is. We’re facing a new industrial revolution where ‘scale’ happens globally.  And when you need to outsource things radically and globally, it soon comes down not to who can cut the most deals, but who can manage them.

When you’re dealing with 500 suppliers in a few countries, and your competitors are doing the same, that’s one scenario.  But add a few zeros to the number of supplier/partners you’re working with; make it dozens of countries, not to mention digital and in-transit locations, and the complexity gets quick fast.

The old way of doing things—winning—was based on solitary, siloed, vertically managed, so-called ‘industries’ of a small number of similar organizations. They ‘competed.’ He who won had the biggest market share, lowest costs, and highest profits. And the most success.

The new way of doing things—maximizing success—is based on amorphous (and morphing) agglomerations of supply chains, each similar in some ways and different in others, often competing in one area and collaborating in another. They don’t form neat ‘industries’ anymore. If they waste their time ‘competing’ with everyone, they will lose ground to other agglomerations who are far better at collaborating.

Playing together nicely in the sandbox is the new KSF. Hardball is out; team volleyball and pickup basketball are in. Jack Welch’s old term ‘boundarylessness’ is achieving new meaning—maybe GE thinks it still ends at the corporate boundary of GE, but other firms are applying it beyond the legal ‘firewall.’

Caution: competing is hazardous to your economic health. Even winning probably messed up your chance to achieve still-greater success by collaboration.

Teams always were capable of more than Lone Rangers; now the stakes are even higher.

 

We’ve All Caught the Detroit Disease

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Ward’s Automotive was for decades a major US auto industry trade publication. Each year, Ward’s published a yearbook, with a one-page market share table near the center.

Each year the book detailed share stats for not just GM, but Chevrolet, and within Chevy, Impalas and BelAirs. Plymouths, Dodges, Ramblers—all got detailed at the model level.

Except for one line.

Imports.

From the late 50s until the late 80s, the industry lumped together Rolls Royces and Volkswagens and Toyotas in one simple category. Imports.

Not until the late 80s—when “imports” finally exceeded 25% of the US market—did they get broken out. Last week, BusinessWeek reported that GM’s US market share was at 22.6% A reversal of fortune (in 1963, GM had 51% of the US market).

Over the years, Detroit came up with dozens of excuses. They blamed “deathtrap” used cars (whose only real threat, of course, was to prices of new cars). Roger Smith blamed technology. Detroit blamed fashion quirks in California. It blamed excise taxes. It blamed Japan, Inc.

As recently as May 8, 2005 (on George Stephanopoulos’ ABC News show), none other than Jack Welch blamed labor—high health care costs, “negotiated at a time of no competition”—and argued for a break. Welch conveniently forgets who negotiated all those contracts—Detroit. Without a gun to its head.

The truth is, Detroit had—and still has—an American disease. It has a few key symptoms:

• Belief that we are the biggest, standalone market—immune from global competition—and that the Big 3 had dominant market share

• Belief that GNP growth drives auto sales, that growth means growth in market share, and that buyers are price-driven

• Belief that, in the immortal words of Lee Iacocca, brought back a few years ago from the taxidermist to re-appear on TV, “the most important thing is—the deal!”

The Japanese in particular always believed it was a global market, far bigger than the US, and that they—including Toyota—were small players on a global stage. For them it was always about growth, not share. And for them, price was not something you jacked up with leader models and white-walls and radios—it was something you set low, for growth, and built in all the quality you could, until you earned the right to sell at higher price points. It was not "the deal"—it was, profoundly, the relationship.

They were—oh, what’s the word?—right.

So, perhaps we should go outside Detroit? Maybe tap the American zeitgeist and come up with—private equity, and an industry outsider!

And so we have Bob Nardelli, late of Home Depot fame, coming in as CEO of Chrysler for Cerberus Capital, Chrysler’s new private equity owner. According to Newsweek, Detroit insiders say they expect Cerberus to shake up the moribund American auto industry. Private equity has a lot going for it—but long-term thinking tends not to be part of it. Industry expertise isn’t all bad—and Nardelli has none of it. Pardon my scepticism in this case—I don’t see this ending well.

True, Detroit is easy to pick on. But you’d think the rest of US industry would catch a clue.

On Wall Street, a new phrase was invented only a few years ago—IBGYBG. I’ll be gone, you’ll be gone—so let’s do the deal and let the suckers pay for it.

Now consumers are suckered into no-income second mortgages (“hey they wouldn’t lend me the money if they didn’t think I could pay it back, right?”) which are then sliced and diced and tranched and resold and leveraged and omigosh, looks like a credit crisis! The spirit of Iacocca lives.

In Bentonville, they learned the volume lesson, but not the price/quality lesson. WalMart is teaching a nation that anything worth having is worth having at half the price and one third the quality so you can get more things worth having—to replace yesterday’s list. Planned obsolescence lives.

In Washington, the courage to face long-term financial issues is in short supply, and the belief that we stand alone—politically, militarily, culturally—is the reverse.

We’ve ended up with: here-now, cheaper by the dozen, do the transaction, no money down, quarterly earnings—and get your buyout package just before you default on the schnooks’ pension plans.

We’ve learned well from Detroit—the wrong lessons.

Update: "We”ve All Caught the Detroit Disease" is a featured post at the the Huffington Post.  Trust Matters readers may want to check out the discussion there as well.