Strategies that fail because the CEO's ego gets in the way.

Is your ego writing strategy cheques that your business can’t cash?

When bees decide to relocate their colony, approximately half the bees scatter in all directions search for new sites. (The rest remain and continue working the existing site.)

When they return, the signal the attractiveness of the sites they found by the intensity of the buzzing. More bee ‘scouts’ then visit the ones that are deemed to be the most attractive and then return to the site and communicate in the same way.

The process iterates.

At some point critical mass is reached – a group consensus of sorts – and the hive relocates en masse.

The business equivalent of this can be seen in corporate strategy. (The following description is based on an article by ED Beinhocker of McKinsey.)

At the world’s largest technology trade show of the time (Comdex 1998) there were a range of tech powerhouses strutting their stuff:

  • Apple Computer >>> the brilliantly graphical Macintosh operating system.
  • AT&T, Hewlett-Packard, and Sun Microsystems à graphical versions of the UNIX operating system.
  • IBM >>> the new OS/2, an operating system said to combine DOS compatibility with the power of UNIX and the Mac’s ease of use.

While most booths focused on a single blockbuster technology, Microsoft’s booth was a mish-mash of technologies including:

  • the second version of its much delayed and highly criticized Windows system, which had as yet gained little market share,
  • the latest release of DOS,
  • OS/2, which it had developed with IBM,
  •  major new releases of Word, Excel, and other applications that ran on Apple’s Mac; and
  • SCO UNIX, a PC-compatible version of the UNIX operating system, developed by a company that had a marketing agreement with Microsoft.

Columnists wrote that Microsoft was adrift, that its chairman and chief operating officer, Bill Gates, had no strategy. Although the outcome of this story is now well-known, at the time it wasn’t obvious which operating system would win.

In the face of this uncertainty, Microsoft followed the only robust strategy: betting on every horse.

Most retail businesses are in the process of responding to significant changes in the retail landscape. Very important strategic decisions are being made right now committing the organisation and its resources to a certain course of action.

If you have not done so, please read the following:

There are recent articles on skeuomorphism, the retail war and finally, one on the omni-channel pipedream. There are many other supporting philosophies and arguments for this approach, but space constraints don’t permit a full discussion, so let me simply jump straight to a conclusion and recommendations:

Organisations tend to want to take big bets on strategy - mostly because CEOs are archetypical alpha males with matching egos. It looks spectacular when it comes off, but it usually fails. (E.g. mergers and acquisitions fail 70%-90% of the time.)

Anticipating possible counter-arguments and comments suffice to say that:

1. Even though companies have limited resources and must prioritise, taking multiple small bets is a (more) viable option.

2. Adopting this approach has nothing to do with diversification – which may or may not be a good idea – and a business can still stick to its knitting and take multiple smaller ‘bets’ on their future. (Let’s face it, the outcome of a strategy is no more certain than any other gamble…)

Food for thought as we start thinking about taking a break.

Go the revolution…

Dennis Price

Training, Technology & Tactics for the Retail Revolution

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