Monday, January 14, 2008

Strategic Planning Analogy #146: Keep on Truckin’

Once upon a time, there was a rapidly growing business that needed to expand its trucking capacity quickly. Therefore, its head of transportation called three different trucking firms to see if they could help. He told all three of them that the first company to get a truck to his warehouse would get the contract for all of this new ongoing business.

The gentleman at the first trucking company was delighted to get the call. “That’s wonderful news,” he said. “I could use the cash. I’ve just started looking for some new customers. My business has really been slow lately. Of course some of that could be because maintenance problems on my old fleet caused a couple of my trucks to drive off the road and crash into a ditch. Without those trucks, I can’t make deliveries. However, as soon as I can convince the banks to loan me some money and get the trucks out of the ditch and get them repaired, I’ll send them to your warehouse.”

The woman at the second trucking company had a different response to the call. “Business was pretty good last quarter,” she said, “so I locked up all the trucks and sent the drivers off for a long vacation. It might take me awhile to find a driver.”

This head of the second trucking company was not too concerned about getting the business, because she was expecting in a couple of weeks for an old client to renew his large contract. What she didn’t know was that at that very moment the banks were foreclosing on that client and putting him out of business.

When the third trucking company got the call, the owner said, “No problem. Although we’re keeping busy, I’ve already got a driver on the road looking for additional business. I just need to redirect his route slightly, and he’ll be at your place in no time.

Guess who got the business?

Future growth can often come from a different place than where current business is coming from. It could be a new product, a new service, a new customer, a new business model, and so on. In the story, the new growth for the trucking firms could come from this new potential customer.

All three companies took a different approach to future growth.

The first firm waited until it was at a crisis point before looking for growth. It didn’t start looking for new business until the old business had already gone away and put him in a financial pinch. It was his own fault that he was in a crisis, because he had mismanaged maintenance until his old trucks no longer functioned properly. It’s hard to be a growing trucking company without working trucks.

Worse yet, since his business was still in shambles, he couldn’t absorb any growth. Until he could fix his maintenance issues and repair his trucks, he was going to continue to lose more of his current business and not be able to attract new business. He waited until the cash ran out before fixing the problem, and he can’t fix the problem without cash.

The second firm wasn’t even looking for growth. The owner was so confident that the old business would continue that she locked up the resources. She had extra capacity of trucks and drivers which could have been used for new business, but she didn’t apply them to look for growth. Unfortunately, old business does not last forever, and she would soon learn that the old business was going away, leaving her with nothing.

The third firm was proactively looking for growth while the business was still doing well. Because he was doing well, he could afford to have someone out looking for growth. And since he had someone already out there and prepared for future business, it was a simple matter to quickly absorb that growth.

In the business world, companies tend to fall into one of three categories, similar to these three companies. Either they:

1) Wait until the model is broken before seeking growth.

2) Assume that the old model will last forever, so they do not worry about looking elsewhere for growth. (Of course, no business model lasts forever. Therefore eventually that model will break and then these people move to category #1.)

3) Start looking for the business model of the future while the current model is still strong enough to support the cost of the search.

Similar to the story, it is typically the third type of company which is in the best position to take advantage of future opportunities when they appear. As the old saying goes, “It is easier to steer a moving semi-truck than one that is standing still.” The third company had its trucks moving, so it could more easily steer them towards the future.

The dual principles here are that:

1) The first one to lock up the future usually wins; and
2) If you want to be the first to find the future, you have to be out there actively looking for it today.

These principles are briefly outlined below:

1) The first one to lock up the future usually wins
Much has been written by Al Ries and Jack Trout about the importance of being the first to lock up the next big thing in the minds of the customer. The first firm to lock up the future becomes the brand most associated with the future. It therefore becomes the brand which gets the largest share of the customers looking for that next big thing. The first firm to own the next big thing also gets to define what it is and how the business model works. And guess what, they define it in a way which most benefits themselves.

By contrast. the imitators, the followers, the me-too’s and the laggards rarely get as much credit for their actions into the new arena. That credit has already been given to the leader. And guess what, most people would rather associate themselves with winners and leaders than with followers. Therefore, the one who wins the space first has a great advantage.

2) If you want to be the first to find the future, you have to be out there actively looking for it today.
This leads to the second principle. If you want to be the first to own the future, you have to be looking for it before it comes to pass. If you wait until it becomes a reality, then you are—by definition—not first.

Even if the current business model is still working well, that is no excuse for not looking ahead. As pointed out in a previous blog, the current business model tends to become obsolete a lot faster than we think (see “The Room is Smaller Than You Think”). Therefore, one cannot just sit back and relax, counting on the current momentum to carry you through.

Just as the current model tends to fall apart faster than one thinks, the time to replace the model tends to take longer than one thinks. In a recent article by Booz-Allen (“A Blueprint for Strategic Leadership”, 1/10/2008), the authors claim that it typically takes a company five to seven years to reposition or transform itself. Therefore, if you want a smooth transition, from a successful current business model to a successful future business model, you need a five to seven year head start on making the transition.

As we saw in our story, the first two trucking firms did not start looking in advance. The first firm waited until the old model was broken. At that point, its cash flow was not strong enough to sustain the time it would take to transform it fleet. The second firm had fallen into the trap of thinking it had more time with the old model than it really did, so it wasted resources which it could have been effectively applied to seeking the future.

It was the third firm which was successful. While still doing well in the old model, it was diverting some of its profits to finding the new model. It had no idea at the time where the new business would come from, but it was devoting an effort to seek it. This gave it the ability to both discover and reach the future first.

It takes time and money to reach the future. Waiting to act takes away your time and often allows your company to fall into a weaker financial position. As a result, someone else will get there first and reap the benefits instead of you.

All business models eventually fail. If you do not want your company to fail along with the business model, then you need to proactively be seeking the next big thing while the current model is still strong enough to support you during the transition period.

Louis Pasteur one said that “Chance favors the prepared mind.” It may appear from the outside that the one who successfully finds the future first was just lucky. But in reality, it is not mere luck. It is the one who is preparing by proactively seeking the future now who usually finds it first.

It’s hard to find things when you are not looking. If you are busy looking, you will find things you didn’t even know existed. Keep your semi moving forward and you will see where to turn.

No comments:

Post a Comment