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To Win, Avoid Losing
“It is a bad plan that admits of no
Winning – what it is as well as how it looks and feels -- is firmly implanted in our consciousness.
Images of arms raised in victory, the index finger pointed to signal Number One, the Churchillian V, the arm pump that is Tiger Woods’ signature – all these visual cues can be called up in a New York minute. The trappings of business success are also easy to visualize: fancy cars, servants, luxury homes and the private jets of the rich and famous. All rich metaphorical ground.
The opposite of winning is losing, a not-so hallowed ground filled with images of dejection, regret and disappointment. A sad place to reside. Coveted by none. Don’t go there, friend.
Most companies, and individuals, choose the first option – winning – and plan for it with varying degrees of passion and skill.
But since there generally is only one winner at a time, maybe a better strategy would be to have a conscious goal not to lose. Quite a different approach, but one worth considering in business and in life.
Are these risks totally necessary without a safety net?
What do we mean by strategizing not to lose? Two things, essentially. First, avoid making mistakes and, second, have an approach to business and to life that enables you to be prepared for those missteps you inevitably take, those decisions that go awry.
How many times have we heard the story that the losing team fell short because of mistakes. Sometimes just one miscue, one shanked iron, one hanging curveball, one missed tackle. It is possible to play a strong game but still be beaten by a stronger opponent. But then, clearly the front office was mistaken in fielding a team they thought could compete at the highest level. Because the point stands: by and large, in every victory the loser makes more mistakes.
So avoiding mistakes is the first critical element. Make none, or fewer than your competition, and you will likely win. And while we’re on the subject, excess is almost always a mistake. We have the hangover memories to prove it. Moderation in habit and lifestyle has never proven to be a losing tactic.
The second critical element is the one most often overlooked. Excessive commitment to a chosen path is also a mistake that can be fatal . . . to your business, your wallet and your career, to say nothing about the bruises your ego will take and the loss of peer respect.
If in business a decision is required to invest or not invest, to take one direction or another, then we suggest that you hedge the bet. Make your decision, by all means, but hedge the fact that you could be wrong and buy some insurance by placing a smaller, competing bet that will underwrite the potential loss if it turns out you are wrong.
Examples of where such wisdom might have made a huge difference are legion.
Choices are inevitable but read all the signs constantly
Take IBM, AT&T and the birth of the Internet for instance. Suppose that, instead of simply turning down the opportunity to invest at the outset in the late 1960s, those corporate icons had acted differently. Oh, they could have still made the same decision as they did to stay on their past successful tracks. But what if they had invested a little money in the Internet, just in case they were wrong. What if, instead of scrambling to catch up to the WWW world, they were actually leading it?
Take Intel, for another instance. When Gordon Moore and Robert Noyce were still operating in a garage, dozens of potential backers said no to their request for seed money. Suppose all the wise people who turned down the opportunity had instead invested a little money to hedge the possibility that integrated circuitry might just be the future of computers and almost everything else.
When Alexander Graham Bell tried to convince Western Union to invest in the telephone company, suppose the telegraphers had taken a minority position in his company, instead of sticking to their proven knitting. What would have happened?
If an opportunity is presented and the decision is to turn it down, shouldn’t the next question be, "How do we hedge the possibility that we may be wrong?"
Looking upward may take you places
When products are designed, they are designed to work. But what if they don't? Is the failure hard or soft? Many times, if the possibility of breakdown is considered, then a soft failure can be designed in so that the user has some functionality left. The telephone system, for example, has many features, but in the case of trouble, the goal is to fail to dial tone. If the computer chip controlling your power steering shuts down, the failure is not quite so soft because the manual steering you are left with is not geared. A hard failure indeed.
Success, too, can be fraught with mistakes. There are many cases of companies that, when launching a new price plan or advertising campaign, make the mistake of not backing their own decision with sufficient inventory in the right place at the right time to satisfy the potential demand.
In the end, what we’re talking about is the need to have a thoroughly thought-out back-up plan that provides for both success and error. It’s one of the best ways to avoid losing.
Another way is to have failsafe points within the decision process, just as aircraft pilots do as they start the takeoff run. If a pilot does not reach a predetermined speed at a given point on the runway, then takeoff is a no-go because the risks mount exponentially. In that context, when we start the design or production of a product or service, do we have failsafe points measured in time, quality levels or sales activity?
Or do we stay with the plan, watch the money evaporate and the window of time close?
Many mistakes lie not necessarily in the basic decision but in staying with the strategy even after it becomes obvious that it is wrong. Yet people, and the companies they populate, continue to do it.
Xerox has often been cited as a company that missed the boat on a number of occasions, even though they had all the pieces in place to be a real player in something other than photocopying. Xerox created one of the premier R&D facilities in the world in the middle of Silicon Valley.
They invested heavily in the development of a series of products under the project called "Office of the Future" – little products like the computer mouse, the Ethernet, the graphical user software that spawned WYSIWYG, and the high level computer language that eventually evolved into the operating systems for Apple and Microsoft. Then they walked away.
It's easy, too easy, to question that decision in the light of our perfect hindsight. But that shouldn’t stop us from learning from the case. Why did they not hedge the decision by taking minority equity positions with the companies and people that they spun out? Why wouldn’t we use the Xerox experience as an opportunity to try a new strategy, to avoid losing.
I won — the other cars broke down
The strategy applies to individuals as well. Companies are constantly hiring new executives to manage their assets. The newspapers are full of "retirements", "pursuing other interests", “health or family reasons" as the senior guard changes. But what happens? When a new executive is recruited, is there a period of indoctrination, training? Are special processes put in place to ensure smooth transitions and objective evaluations? Is there an understanding of the characteristics of the "failsafe point" with the more senior management or even the board of directors? In the majority of cases none of this is done, but to hedge the bet (which any new hire is) would it not be prudent to work out a planned process and to set the criteria for success up front? We think so.
In developing the corporate business plan and getting it approved, is there a recovery or acceleration plan in place if revenues fall short of expectations or if sales exceed the plan. In the recent decline in high-tech company profits, it appears that 1) the falling revenue catches management by surprise even within a quarter (shame on them) and 2) falling revenue has an even more pronounced effect on profits, meaning that expenses had been geared up to much higher revenues and not controlled for down spikes.
We’re not the first to observe that shareholders and share prices have no sense of humor about this. Does management think world markets or economics are so predictable that a single-point plan suffices?
As we said at the outset there is usually only one winner. And one of the strategic secrets to gaining the plum is to limit your losses.
In the end, the concept of designing in hedges is not cowardice or lack of confidence. It is simple prudence. And in fact, in a very real sense, it requires more than normal amounts of courage. For it involves admitting you made a mistake.
Many more articles in Insight & Commentary in The CEO Refresher Archives