The best form of defense is attack.
Clausewitz
Nobody ever won a war by hunkering down and staying on the defensive. At most, one can avoid losing, but that is not a very favourable outcome. You need an offensive mindset. Offense is about gaining and keeping the initiative. It’s as much a state of mind as a physical reality. The attacker has the choice of time and place to make his moves and that confers a marked advantage.
Lee Iacocca took the helm of Chrysler Corporation in the late 70s after the US government saved the company. He had to do something symbolic to go back on the offensive. Despite market research that showed little interest in a convertible, he ordered his engineers to cut the roof off a New Yorker and to make a prototype convertible he could drive around. The reaction from onlookers was immediate and very positive, so he decided to go ahead with a new line of convertibles, thereby reinvigorating those brands and the reputation of the company. The highly successful introduction of the minivan, a category buster that combined the size of the station wagon with the comfort and space of a van, all on a car chassis, followed this. It was so successful that imitations started pouring out of the competition. Unfortunately, Chrysler was not able to sustain this level of innovation over time and has declined almost to oblivion.
So, how do you gain and keep the initiative in business?
Stay on the move. The natural movement is toward a deterioration of competitive position. For instance, a breakthrough product will eventually have imitators and become merely distinctive within the pack. By extension, a product that is distinctive or merely competitive will eventually become uncompetitive. Products and services must be constantly updated to stay ahead of the competition. This requires energy, resolve, and initiative, qualities that are crucial to maintaining a winning and offensive mindset.
Maintain your freedom of action. Freedom of action is the ability to reorient your forces to take advantage of a fleeting opportunity or to react to a move by the competition. In practice, this requires substantial financial reserves or the ability to down tools in one area and tool up quickly in another. I’m convinced this is why all the technology leaders (Apple, Intel, Microsoft, Google) maintain huge cash reserves. They want to stay at the forefront of their respective markets so they purposely keep large reserves to move fast.
Go where the enemy isn’t. Wee Willie Keeler, one of the most prolific hitters in baseball, attributed his success to his ability to “hit ’em where they ain’t.” In other words, he got a lot of base hits because he was able to hit the ball where there were no fielders. As demonstrated by Clayton Christensen in his influential book The Innovator’s Dilemma, disruptive products and services are usually cobbled together from existing technologies and processes. They require little in the way of capital outlays, but fail to attract established firms because the margins are much lower than in established markets. Only new entrants tend to find these markets attractive, because they don’t need major investments to get into the business and the applications are typically less stringent than the higher margin applications that the incumbents cater to. In other words, success comes from going where there is no competition.
Get there first. The best way to do this is to break up or redefine categories and expectations. Apple has raised this to an art form: all-in-one computers (iMac), iPod, iTunes, iPhone, App Store, and now the iPad. Another good illustration is provided with Bombardier Aerospace. The company practically invented the regional jet, a smaller commuter jet that took advantage of the airlines’ trend to hub-and-spoke service. They have maintained their advance in that segment since the beginning and are trying a repeat over longer haul routes with the introduction of the C Series, a new category between regional jets and small jetliners such as the 737 and A320.
Pit strengths against weaknesses. Strengths and weaknesses create the greatest vulnerabilities in companies and consequently provide great opportunities for competitors. This is why, for instance, high price fashion boutiques can continue to exist in the face of massive price competition by high volume retailers. The latter can’t provide cachet, attentive service, and cutting edge fashion statements so the boutiques use their unique strength, small size and personal service, to stay relevant and competitive.
Move fast. Don’t wait for perfection and don’t dither. Introduce a new product or service when it’s 80 percent ready and then upgrade it constantly. For the longest time, Microsoft Windows was considered an inferior operating system (some would contend it still is). But that didn’t stop the company from completely dominating the PC market. I believe they were successful because they were extremely fast in getting the product to market, even though it was far from perfect. They would then fix it and upgrade it. Had they waited for perfection, they never would have grown to the almost complete market domination they had in the late 90s.
Use defence wisely. Once you’ve gained an advantage, you can go on the defensive temporarily to consolidate your advance or to buy time. We will cover this in more detail in next month’s newsletter.
© 2010 Richard Martin. Reproduction and redistribution are permitted with proper attribution.