In this week’s US print edition of The Economist (May 4-10, 2019) there is a short and intriguing article. It is the Buttonwood article, titled “The Eternal Quest to find Companies that have a lasting Competitive Edge.” The article very succinctly highlights how difficult it is for investors to pick winners; those firms in a market that will out compete others to create profits that lead to a higher share price. Warren Buffett, the Oracle of Omaha no less, is held up as a picker of winners, who from time to time, also picks losers. Thankfully for his shareholders and partners, he seems to pick winners more than losers.
But the article calls out a fundamental question every one of us faces, and I include CEOs, CIOs and CDOs. While financial investors like Mr. Buffett seek to find companies that will return a winning hand for their investment, the managers and leaders of those same firms are doing the exact same thing. Investors are trying to find the next big winner; the managers and leaders of those firms are all trying to change/transform their organization into a winner. The question is, what defines winning and greatness? What provides a lasting competitive edge?
Leaders and managers seek strategies to win in the markets they operate. Mr. Buffett and his peers seek to locate those managers who have a winning strategy defined, or defensible. Yet since Mr. Buffett May back a losing horse from time to time, so managers and leaders of such horses in their race may also lose. It is a vexing challenge.
“Read all those management books,” I hear you say. “I have,” I retort. The problem with our long history of management and leadership books is that almost all case studies of winning companies over the years prove to be weak points some years later. A firm that is held up as a winner in one decade is a loser in the next. Sometimes it takes less than a decade. The list of companies in the S&P 500 changes over time, and is yet another proxy for the shifting sands of success and dominance. We might think today that Amazon, Facebook and Google will remain forever dominant, but history teaches us that despite facts to the contrary, their demise is presumably already baked in. We can’t see it, and perhaps neither can they.
I am reminded of two of my favorite old management books: Only the Paranoid Survive, by Andy Grove of Intel, and Scuttle Your Ships before Advancing, by Richard Luecke. The first book taught me that there is no winning strategy. The best chance for being successful was to be as ready, more ready, than the next guy; to move when needed. When you are paranoid enough about the future, you remain on your toes, forever watching. The second book taught me that when you decide to act, you have the vision defined and you need to take the team with you, you need to get their attention. As such the leader has to convince the team that we are ‘all in’ and there is no turning back. Those two perspectives, paranoia and passion, are for me two awesome traits that might stave of defeat and loss, though they may not be sufficient to reward success.
So what else might history teach us? What other tea leaves are there for the reading? The ‘in’ thing these days is agility and nimbleness. It is not about the accuracy of a decision; moreover it is the capability to move at the right moment. So timing and agility seems more valuable than hard thought-through reasoned plans. Strategy is not captured in an expensive 200 page glossary; strategy is “learning by doing”, as noted by Mercedes own Toto Wolff.
So despite the rhetoric, and in spite of investor tips on the next big thing, will your company “win” in its designated market? Will your agency delivery on its mission or exceed its goals? It remains a really hard question to answer and there are too few certainties. Again this year we are surveying organizations to understand where they spend their money, where they see a return/value, and what the range, mix and level of spend and return is. Maybe this year we can unearth some pearls of wisdom. Then again, I might just research the firms Mr. Buffett invests in.