Tuesday, March 13, 2007

Keep an Eye on the Ball

As I said in an earlier blog, I know a lot of Vince Lombardi stories after having lived in Green Bay for 10 years. Vince Lombardi was a firm believer in discipline and in mastering the fundamental basics of football. He used to say that his definition of a great football team is one which executes the fundamentals so flawlessly that even if the opposition knows exactly what play you are going to run, they cannot stop you.

There was a time when one of his teams did not seem to share in Lombardi’s passion for mastering the fundamentals. After a particularly bad game in which the team did a poor job of executing the basics, Vince Lombardi decided that the team needed to relearn the fundamentals of the game. Therefore, he ordered everyone to show up the next day for a lecture and practice session in the fundamentals of football.

The next day, Vince Lombardi gathered the team around him so that he could lecture them. He started off by placing his hand up in the air so that everyone could see what he was holding. Then he started his lecture by saying, “For those of you that don’t know it, this, my friends, is a football.”

Just as great football teams continuously spend time mastering the basic fundamentals of the game, so must businesses. Basic fundamentals like pleasing the customer and following through when others are depending on you never go out of style. Sometimes, however, we can get so caught up in the razzle-dazzle of our strategy that we can forget to execute on the basic fundamentals of business. Just having a great strategy is not enough. You have to deliver what the strategy promises every single day.

Sometimes a football player can get so caught up in doing their little part that they can forget the big picture and lose site of where the football is. At the end of the day, if you don’t know where the football is, you cannot win games. The team needs to keep their eyes on the ball.

The same is true for businesses. You need to keep an eye focused on the basic fundamentals of your business in order to win.

In yesterday’s blog I made reference to the need for balance between personalization and standardization. Then we talked about the importance of personalizing your strategy around your unique capabilities. Today we will talk about the other half of that balance—the need to get the standard fundamentals of business executed properly.

I can best illustrate this principle with another story. I know a retired professor who used to hold the Kresge Chair of Retailing at the University of Michigan School of Business. Because of his position in holding the Kresge Chair of Retailing, he got to spend time over the years with the executives at K Mart.

Back in the late 1980s and early 1990s, K Mart was run by a gentleman by the name of Joseph Antonini. Joseph Antonini was a smart fellow who understood what was going on at K Mart and developed a pretty good strategy for the situation. At the time, K Mart was still very profitable and creating lots of cash flow. But Antonini knew that as more Wal-Marts invaded K Mart turf, that cash flow would eventually start to vaporize. Therefore, he devised a two-step plan.

1) First, put a little money back into the K Mart stores to freshen up the image, so that they would continue to put out cash for a little longer length of time.

2) Take the remaining money and invest in a portfolio of all of the new and exciting growth retailers who were building various kinds of specialty superstores. Antonini was busy on this front. Some of his diversifications included:

- Builders Square Home Improvement Centers (like Home Depot)
- Pace Membership Warehouse (like Costco)
- Borders Books (like Barnes and Noble)
- Sports Authority (Sporting Goods Superstore)
- PayLess Drugs (Drug Store Superstore)
- K Mart Supercenters (like Wal-Mart supercenters)

The rationale behind the strategy was that about the time K Mart would stop being a cash cow, these other formats would be strong and take their place. Antonini saw real estate development as one of K Mart’s core competencies, so he figured he could quickly grow these concepts into large chains and end up with a strong a portfolio of the next great retail concepts.

In theory, the strategy sounded fine. In reality, it was a disaster. The diversifications languished under K Mart management, and the refurbishment of the K Mart stores was executed poorly.

Eventually, Antonini confided to my professor friend that he had no problems coming up with great strategies, but he couldn’t find anyone in the K Mart organization competent enough to bring them to life. In other words, the strategies were fine, but the organization was inept at the basic execution of retail fundamentals. Without attention to the basic details of running a strong business, the strategy died a horrible death.

Was Antonini wrong in his vision of a small refurbishment program for K Mart? Well, he was correct in assessing the fact that Wal-Mart would eventually strangle K Mart’s cash flow. He was correct in not betting it all on a costly remake of the chain, for K Mart would never outlast Wal-Mart. But putting a little money in to provide a little more payback for the diversification sounded sensible.

Was Antonini wrong in his diversification vision? Well, other companies made a fortune building chains in the same formats he diversified into. Home Depot and Lowes are huge successes in home improvement centers. Barnes & Nobel is doing well, and so is Borders, once it was freed from K Mart management. There are successful sports superstores out there as well. So Antonini was not wrong in seeing the potential in these formats.

What killed K Mart was the fact that it was out of balance. It had found the “right” strategy, unique for its position and real estate skill set. However, it had failed miserably on developing the standardized tools for successful execution of retail formats. K Mart had taken its eyes off the ball and could no longer execute the fundamentals.

There were rumors that K Mart had gotten fat and lazy during its glory years of the 1960s and 1970s and had forgotten how to be a lean, mean retail fighting machine. It had fallen into the trap of believing that just because it built stores in the right format, that it would automatically be successful. No, you still have to excel in the fundamentals, every day. Just “showing up” is not good enough. You have to be ready to play at a high level.

This principle is true in football and true for businesses as well. Just because a team won the Superbowl last year does not mean that they “have arrived” and can slack off the following year. The basic execution of blocking and tackling that Lombardi stressed in the 1960s is still important today. You can never get sloppy on these fundamentals and stay on top.

Now some people make the mistake in believing that because getting the fundamentals right is so important, that the only thing they concentrate on is getting the fundamentals right. Doing so gets you just as out of balance as what happened to K Mart, only in a different way. The problem is that situations change. Consumers change, technology changes, economies change, government regulations change, competition changes, and so on. Eventually enough change occurs in the environment that a once successful strategy will no longer be appropriate.

ALL STRATEGIES EVENTUALLY FAIL. If you do not modify your strategy and adapt to the changes, YOU will eventually fail. You may have perfected the execution of your particular strategy, but if the strategy becomes obsolete, it really doesn’t matter. That is why you need a balance between getting the basics right (standardization) and modifying your strategy so that your capabilities are uniquely in tune with an important part of the changing realities (personalization).

So to be successful, it helps to keep one eye on the ball of the game you are currently playing (as referenced in today’s blog) and one eye looking in your refrigerator to see what new dish you can create for the next strategic challenge (yesterday’s blog topic).

A “great” strategy poorly executed is really not a very good strategy at all. The business world is too competitive. Someone else will adopt a similar strategy and out-execute your business, leaving you at a loss. Getting the big picture strategy right is only part of the goal. You still have to do the little details well.

At the same time, just doing the little details well is not good enough either. There needs to be an ever evolving big picture strategy to ensure that you are excelling at things that are still relevant in the marketplace.

When a person loses their balance, they tend to fall down. When a company loses its balance, it can also fall down…and it probably won’t be a gentle landing.

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