03 Nov Why Some Companies Just WIN
I’m guessing that in the past 8 months I’ve managed to set some kind of personal record. After decades of airline travel, COVID has effectively grounded me.
Oh, there have been a great many benefits, believe me. The nature of my consulting practice tends to lend itself to a lot of the issues of the day – the power of leadership, strategic execution, crisis management, and the importance of open and transparent communication – to name just a few.
But my interactions with clients, for the most part, are conducted virtually.
Besides fast forwarding me into more Zoom, Microsoft Team, Skype, Zoho, and Go To meetings than I ever planned to join in my life – it’s also afforded me a better glimpse of the world outside my very own front door. And that has been a revelation.
My little office looks out on a quiet street – I’ve enjoyed watching the neighbors and the kids and life in general flow by when I’m at work. I have to frankly admit I was uniquely oblivious to the nature of my neighborhood.
On any given day it seems commerce has its place here too. The delivery trucks start early – and they continue into the evening.
I expected them to be the traditional – the U.S. Postal Service…followed closely by FedEx and UPS of course. What I didn’t appreciate was the fourth entry – which seems to be everywhere these days.
There’s a story there – one that I find myself sharing from time to time with some of my clients.
Once upon a time a young college student submitted a paper for his undergraduate Economics class – it was a novel proposal, one that suggested the package delivery business could be rewritten. His professor was unimpressed – he graded the paper with a “C” and his feedback implied that, though creative, Fred Smith’s business model was totally unrealistic.
Fred differed – and it was only 6 years later that FedEx was born. It was an immediate failure – hemorrhaging millions. The idea of a wheel and spoke approach for small packages was relatively sound – though it would need some tweaking.
The strategy around that idea, on the other hand, was questionable.
FedEx’s message to the masses – “We have planes, trains, and automobiles” – didn’t resonate. It spoke to the capacity of the company – it didn’t address the larger issue of need for the business consumer.
FedEx eventually set the wheels in motion – streamlining their execution and their strategy and so, “When it absolutely, positively has to be there overnight” was born.
FedEx was to become the poster child for executional efficiency – and their 99.8% on time delivery so greatly surpassed the US Post Office that they became the largest carrier in the world.
“FedEx it” became the generic phrase for overnight delivery.
And then world changed – disruptive technology, in the form of computers and email – suddenly made the need for businesses to send documents far less important. At the same time, technology created the first wave of virtual shoppers – meaning the ground shipment of packages exploded.
Not surprisingly, FedEx pivoted…again. They purchased Kinko’s – establishing the perfect venue for people and businesses to drop packages – quickly responding to a market that was changing. Even their tagline shifted.
“The world on time”
The largest air cargo company built a new strategy – a metropolitan focused business to business model with a personal shopper dimension that would surely stand the test of time.
Until Amazon came along.
Amazon’s meteoric rise quickly made them FedEx’s largest customer – somewhere close to a billion dollars in annual revenue. FedEx was forced to rethink a strategy focused on air cargo. Point to point deliveries – a market segment that had largely been conceded to UPS and the US Postal Service – became much more mission critical.
But it wasn’t quite as simple as “more trucks and more planes”. Armed with the leverage of size, Amazon could negotiate rates with FedEx that other customers couldn’t – margins began to shrink.
At the same time Amazon introduced an even more important factor – they put their own delivery trucks on the ground – that fourth entry I mentioned earlier. By 2018 half of Amazon’s deliveries were by their own network of vehicles.
In effect, FedEx was slowly being squeezed out of play. From a strategic standpoint, they could continue to negotiate with a client that was working behind the scenes to make them obsolete – or they could forge a new path.
Which takes me to the insight that rolls down my sleepy little street every day.
Strategy is as much about what we choose NOT to do as it is what we choose TO do. That’s something few leaders factor as well as we should. It’s too easy to focus on investing more resources in the right activities that we believe will drive competitive advantage – and darn tough to take the time in considering investing less resources in the wrong activities.
Warren Buffett is credited with saying that, “Successful people say no…to almost everything.”
I’m guessing Fred Smith considered the “power of no” carefully – just before FedEx dropped Amazon as a client.
Walked away from a billion dollars of annual revenue – shifting their attention to other vendors like Target and Walmart.
A bold move? Ah, yeah…but from a strategy genius who has built a company famed for constantly assessing their competition, their customer base, the market, and yes, themselves.
Strategies, I’ve learned, fail for a number of reasons.
- Most often it’s because the strategy isn’t a strategy at all – instead it’s a long list of aspirations, goals, or hopes.
- Second, because it doesn’t firmly establish the lane the company will compete in.
- And finally, it’s because, once established, companies poorly execute it.
But there are always a few companies like FedEx and Amazon who manage to do all three extraordinarily well. And keep their eyes constantly focused on the horizon – their feet firmly planted in today.
I think I’m going to keep my eyes on the street out front – watch this quiet battle of the titans unfold.
I have a feeling that it’s going to be a case study for the ages.