Bold, confident, visionary leaders who take their businesses in new directions are widely admired and sought after.
Isn’t that a key part of strategy and leadership?
Yes, but: when confidence balloons into the belief that a good manager can win in any situation, the business is headed for trouble.
Such super-managers, as I call them, are so sure of their will and skill to succeed that they can’t see what they don’t know, and refuse to accept that some forces are beyond their control. Their most common mistake is to underestimate the limitations on opportunities in many industries.
No fewer than ten major consumer product companies over the past several decades thought they could move into the furniture business and make money. All failed. With very few exceptions, airlines have dashed the hopes of numberless CEOs who thought they could do better in an inherently tough game.
The myth is perpetuated every time somebody actually succeeds against the odds of difficult industry forces. Sometimes, even in the toughest lines of business, there is a plan that works. Individual firms on occasion have not only achieved great success in industries where most others have failed, they’ve even changed the basic competitive context of the industries.
Such stories receive inordinate attention in business book and media, and managers are often quick to bring them up: Starbuck’s revolution in the coffee hour business. Southwest’s triumphs in discount airlines. IKEA’s high profits in the unattractive furniture industry.
But none of these strategies appeared out of the blue from the unfettered minds of super-managers. They came from a deep comprehension of the industries involved and the conditions at work in them. Herb Kelleher discovered a way to exploit a hole in the fare and route structures of established competitors. Starbucks succeeded not simply by brewing better coffee and creating an attractive coffee house experience, but by gaining scale and building the unique corporate skills needed to replicate that experience not tens or hundreds by thousands of times.
IKEA has grown profitably for more than half a century in its industry of heartbreaks because its founder, Ingvar Kamprad, saw a vast unfilled demand for stylish, low-cost furniture and developed innovative systems for producing and marketing it. That’s not a cavalier disregard for industry forces: It’s surgical precision.
These leaders didn’t imagine that they could do anything or everything. Instead, they developed strategies that overcame industry forces by adding new value to old games. And they could only do this because they had a clear sense of their business’s added value in those contexts—and the distinctions that would set them apart from all other companies. Nothing is more important to a company’s survival and success than a difference that matters in an industry. Every concept of strategy, from positioning and differentiation to sustainable competitive advantage, flows from it.
There are few more dramatic examples than Apple. Steve Jobs and Steve Wozniak launched the company with the aim of creating what Jobs came to call “insanely great technology” –sophisticated, user-friendly and beautifully designed. In the nascent PC market, the strategy worked brilliantly, but as Microsoft’s operating system became widespread, an industry standard developed and customers cared more about compatibility, application software, and low cost hardware. Clinging to its original purpose, Apple was nearly bankrupted by ferocious industry forces and a difference that no longer mattered to customers. It was only when Jobs returned and reinvented the firm in a host of new industries –a change so sweeping that the company dropped the word “computer” from its name—that the company again rose to the top.
Distinctive purpose is what enables you to build a coherent system of value creation, the sine qua non of a successful strategy. But it can’t be sprinkled on like fairy dust. Defining and executing a purpose requires a leader whose boldness and vision is grounded in deep familiarity with an industry, who has wrestled with a company’s difference that matters, and built a carefully honed system of interlinked parts that work toward one end.
It’s not a job for a drive-by manager.