I recently stumbled onto an analysis published last summer, and I re-read it. Had I read it more closely at the time, I might have changed my stock portfolio, but apparently it didn’t resonate with me as significant at the time. It certainly does now, because it leaps directly from the business pages of our newspapers every morning.
These days, the only thing more unpredictable than the weather is the state of the economy. Banking, insurance, housing, airlines and travel, autos, and heavy manufacturing are all in deep trouble as capital markets crash, credit tightens and consumer spending plunges and unemployment rises. Even darlings of the internet like Yahoo are struggling for survival as challenges swirl.
And yet, yesterday HP announced a healthy profit, beating last year’s performance, and posted a positive outlook for next quarter. Both Southwest and Netflix also delivered performance that beat analyst’s estimates.
So what goes? How is it that some businesses manage to survive, while many of their competitors and peers struggle --- or even totter on the brink of disaster? Smarter minds attribute it to not only management, but a new logic of competition itself.
First, high-performing companies understand that it’s not enough to be “pretty good at everything” anymore. An enterprise must be the “most of something”: the most exclusive, the most affordable, the most responsive, the most friendly. When I was in business school in the late sixties, we were taught to be focused on positioning companies in the in the middle of the road—because that’s where all the customers were. But now, in an age of hyper-competition, micro-markets, and non-stop innovation, you’ll surely be run over if you are in the middle of the road. Just look at General Motors today, begging before congress for another chance to survive. With or without a bail out, I don’t know. They are firmly stuck in the middle of the road.
Second, high-performance companies understand that in an era of great turmoil, the best strategy is to stick with what you believe in…and are already good at. On the surface, this concept almost seems in conflict with the first point, because “business thinkers” love to criticize corporations for resisting change. Truth in fact, the problem with big companies is that all they do is change. They lurch from one “Blue Ocean” idea to the next, shoveling wheelbarrows of cash from one consulting firm to the next in an effort to “re-invent themselves” when in reality they need to focus on the basics and become better at what they do best already.
Legendary management guru Jim Collins puts it best: “The signature of mediocrity is not an unwillingness to change. The signature of mediocrity is chronic inconsistency.”
There’s a third element that helps to explain extraordinary performance in these extraordinarily difficult times. Each of these companies connects with its customers based not just on price and features, but on identity and emotion. They have become virtually irreplaceable in the eyes of their customers. Can your customers live without you? Because if they can, they probably will.
The current business turbulence will undoubtedly cause most companies to seek a “correction” in their strategy. Make sure yours starts at the roots---with your customers---and not at the top with the latest “board initiative of the week.”
“Success usually comes to those who are too busy to be looking for it."
- Henry David Thoreau, author