However, this environment didn’t foster innovation, with a notable exception being the Tucker Corporation in the late 1940s, which developed many automotive innovations. The innovative Tucker car called for a rear engine; a low-RPM, 589-cubic inch engine with hydraulic valves instead of a camshaft, fuel-injection, direct-drive torque converters on each rear wheel (instead of a transmission); disc brakes; the location of all instruments within the diameter and reach of the steering wheel; a padded dashboard; self-sealing tubeless tires; independent, springless suspension; a chassis that protected occupants in a side impact; a roll bar within the roof; a laminated windshield designed to pop out during an accident; and a center “cyclops” headlight, which would turn when steering at angles greater than 10 degrees to improve visibility around corners during night driving.
Unfortunately, the Securities and Exchange Commission (SEC) investigated Tucker Corporation amid concerns about investments. Although the jury reached a verdict of “not guilty” on all counts for all accused, by the time the investigation and the trial were completed, the Tucker Corporation—without a factory, buried in debt, and faced with numerous lawsuits from Tucker dealers angry about the production delays—was no more. Perhaps you’ve seen the movie, Tucker: The Man and His Dream starring Jeff Bridges. (As an aside, the US attorney named Otto Kerner Jr., who had aggressively pursued the Tucker Corporation, was later convicted on 17 counts of bribery, conspiracy, perjury, and related charges for stock fraud in 1974. He was the first federal appellate judge in history to be jailed.)
In any event, the oligopoly continued until the foreign automakers entered the US and global market with a new competitive (zero-sum) attitude. They came to conquer and they acted as disrupters. The old business models might have assumed reasonably fair competition, but the new competition didn’t play by the old rules. The US auto industry was vulnerable with poor products and a lack of innovations. Furthermore, the US product quality was weak. The onslaught of aggressive competition resulted in a drop in sales that shook the foundations of the US auto industry for decades.
It was a difficult period for Detroit, but after decades of turmoil and improvements, the US automobile manufacturers are once again building vehicles with world-class product innovation and quality.
The Cutting Edge of Innovation
It’s not just cars and trucks that are operating within a continually changing market. Even something as seemingly staid as razor blades have experienced continuous innovation over the past 20 years. Gillette pours massive amounts of time and money into product research and development (R&D), and its frequent new product launches are major campaigns involving hundreds of millions of dollars.
As soon as a competitor is about to introduce a new product, Gillette introduces something better. Each shaving system generation was about more blades. The single blade was replaced with dual blades, which was replaced by three blades. Then four and now … yes, five blades! At some point, this approach is going to reach the point of diminishing returns—after all, you can only shave so close before it comes to cosmetic surgery.
So, where do you go from there? For Gillette, the marketing strategy will change from closeness of the shave to one of safety, comfort, and confidence. Gillette will keep the branding consistent—“the best a man can get”; but the changing strategy will move toward safety, convenience, and a subscription service (convenience) that will provide replacement cartridges.
Property and Casualty Insurance
Even the insurance industry is constantly evolving. Every several years, over the past 20 years, there has a been shift from one competing position to another in the interest of gaining market share. As a quick overview, the first objective for the insurance companies was to make sure they made money and could make necessary payments. That involved the traditional work of risk analysis, balance sheet management, etc.
Then the insurance industry shifted to a focus on delivering service and a variety of products. That involved expanding availability of agents and speedy claims processing. Then the industry shifted to a focus on bundling programs. Then the industry moved to value pricing and worked to meet these cost constraints by consolidating and adding technology and automation to the back room. As we’re all aware, from the ubiquitous little GEICO Gecko and Flo with Progressive Insurance, insurance companies have been focused on their brands, direct selling to consumers, and marketing to small niches.
Ten Strategic Lessons
D’Aveni argues that globalization and technology have negated the long-held business strategies of finding a sustainable competitive advantage and competing by positioning your company’s strength against a competitor’s weakness. He explains that today’s world requires stringing together a series of temporary competitive advantages. He’s studied this for decades, examined dozens of industries, and given strategic advice to numerous companies and governments.
Here are the 10 strategic lessons D’Aveni has learned over the past three decades.
Globalization and technology (and to a lesser extent policy) have created a hypercompetitve world.
The speed of change continues to increase dramatically.
Business success will not be achieved with the old business strategies requiring long-term competitive advantages, nor by solely positioning strengths against a competitor’s weaknesses.
Products will battle frequently for market share. Competitors will win by executing on a temporary advantage, and then executing on another temporary advantage, and so on.
Business victories will be achieved by a series of temporary advantages strung together in a sequence.
In a world competing on temporary advantages, the fierceness of competition goes way up.
The watchword of the future is disruption. The disruptive players will win the competition.
The availability of technology as a dynamic now favors offensive strategy versus defensive.
Strategy is about timing and speed of maneuvering.
The only way to a decisive victory—to trounce the competition—is to overwhelm the competitor’s strength.*
* Here’s something the old business rules don’t mention: the truly decisive victory comes when “strength overwhelms strength,” not when strength is used against a competitor’s weakness. Using the tennis match as an example, D’Aveni explains “The goal is to run the other player ragged, tucker him out, and then hit the ball straight at him, so he realizes he can never win against you, and encourage him to go home with the goal of learning to play baseball.”
Questions for Your Organization
Given the changing strategies necessary to compete in today’s world, here are some questions for your organization.
How have the wants of your market changed? How do you anticipate them changing over the next 5 to 10 years?
What technologies, services, or other offerings from other industries could add value to your products?
What can you do to better understand your customers’ wants? When is the last time you asked your top 20 customers, “Tell us what you want” (taking copious notes)?
What are the primary benefits of your offering? What are the marginal benefits your offering provides? (according to the customers).
Is your company working on new offerings that really matter? Have you stopped work on offerings that don’t?
What does your product development process look like? What can be done to reduce the timeline?
How could you change the basis of competition?
What are the sequence of product disruptions you’re going to introduce?
How can you best bring those disruptions to market?
What are the market positioning shifts you’re going to introduce?
When considering the above, remember, the world is transforming before your eyes. The rapid change is taking place because hypercompetition is driven thru globalization and technology. It’s not a bad world, but it is a disruptive world, where ongoing innovation and fierce competition are the new norm. If you don�
��t drive change and compete fiercely, a competitor of yours will.
The good news is that you have the opportunity to make things better, to improve your organization and its products and services, to continuously innovate, to compete, and to lead the way.
No Bad Deals: Essential Negotiation Skills to Increase Effectiveness
I had the opportunity to meet Linda Ginzel, a clinical professor of managerial psychology at the University of Chicago Booth School of Business. Linda specialized in leadership development, organization behavior, and negotiation skills and was in New York City to lead a session on negotiation for One Day University.
At a fundamental level, it’s been said that we are negotiating, any time two or more people divide resources or solve a problem—and most negotiations contain aspects of both competition and cooperation. Professor Ginzel explained that while people tend to default into a competitive position during the negotiation, the most economically desirable situation is to first “enlarge the pie” by creating joint gains. That is accomplished by cooperation.
Professor Ginzel’s talk on negotiation was an eye-opener, anchored around an actual negotiation exercise that involved the approximately 300 attendees pairing off into groups of two. Each pairing consisted of an “A” and a “B” participant, each of whom had their own point schedule for negotiating a hypothetical annual corporate meeting that involved five issues for agreement: destination, accommodations, number of scheduled speakers, length of stay, and season. Each issue had five options (for example, there were five different destination options: Los Angeles, New Orleans, Atlanta, Santa Fe, Orlando), and each option was worth different points for each of the two participants (Los Angeles might be worth 4,000 points for person “A” and 0 points for person “B”), and while you knew the point assignments for your options, the information was not shared with the other party.
The intended objective was to reach an agreement with your negotiation partner on the five issues (while keeping the point schedule confidential). If each person could not come up with at least 2,000 points, it was assumed that an outside party would be hired (if this were a real-world exercise) to do the negotiation. Within about 15 minutes, each side reached agreement on the five issues and were then able to compare their negotiated points. Typically, each person negotiated generally between 3,000 and 6,000 points.
Here’s the interesting part, Professor Ginzel asked each two-person pairing to add their points together, which was a way of quantifying the total value of the negotiated deal. As in the example above, pairings typically totaled approximately 9,000 points, though some teams were considerably lower and others higher. In fact, there were some pairings whose totals were about 13,000 points—meaning they created considerably more overall value. Those pairings cooperatively enlarged the overall pie through dialogue, by avoiding sequentially moving down the list of five issues (“Let’s settle the city first.”), and by exploring ways to create value.
The 300 attendees were mostly seasoned executives; nonetheless, the large room was buzzing with the newly learned insights to creating value. Everybody knew the exercise was to reach agreement on the five issues. Yet judging by the clamor and discussion following the results, it’s safe to say the vast majority of people never even thought about maximizing the total valuation while they were negotiating.
Here then are the six essential negotiation skills to increase effectiveness.
Prepare, prepare, prepare.
Solid preparation is key. Gather as much information as you can about yourself and your counterparty. Identify issues, prioritize interests, and discuss best- and worst-case scenarios. Identify a list of questions to research.
Focus on interests, not positions.
Build trust, share, and assess priorities. Ask lots of questions about interests, and listen carefully. Provide information, avoid unilateral concessions, and ask for reciprocity. Once we are willing and able to share information strategically with the goal of understanding underlying interests, we can make mutually beneficial trade-offs rather than splitting the difference. Use compromise as a last resort, not as a goal.
Look for trade-offs to create value.
Recognize that with many issues, joint gains are possible. Identify them. Differences are good in negotiations. Avoid sequential bargaining and single-issue offers. Keep all issues on the table for flexibility (perhaps use packaging options to help determine what’s important to the other party). When we find the relative differences, we can trade on these differences. To find integrative outcomes, think like a trader—not a traitor!
Enlarge the pie before dividing.
While we have a bias toward competition, most negotiations in life are mixed motive: they involve both competition (value claiming) and cooperation (value creating). Think creatively about putting new issues on the table; add side issues that benefit both parties. First, be cooperative to create value, and then competitive to claim value. You don’t want to end up with a big slice of a small pie.
Adapt your strategy to your counterparty’s style.
Be aware that different problem-solving modes are available to you: competition, collaboration, accommodation, cooperation, compromise, and avoidance. Rather than relying on your default conflict resolution approach, practice being flexible and expand your repertoire. Remember to switch strategies when lacking progress.
Practice conditional cooperation.
Be nice, but be clear that you will reciprocate competition with competition. Be forgiving (reciprocate cooperation). Don’t be envious (don’t compare your success relative to other players). Be clear (don’t be too clever). Remember that tactics for creating value, such as revealing information and clearly communicating interests, might leave you open to competitive behavior from the other party.
Wanting to learn more, I asked Professor Ginzel how often the opportunity exists in the real-world to increase the overall value of a deal. She explained that unless it is a one-shot, single-item negotiation, there typically is the opportunity to enlarge the pie for both parties. An example might be negotiating a new job, where the position description might describe a director of engineering, but the company might be fully amenable to the more senior title of vice president of engineering—and that would cost them no additional compensation and might actually elevate the perceived level of the position—thereby being an example of “creating value.”
Professor Ginzel explained that by adding issues that are valued differently by both parties, you increase the opportunity to make mutually beneficial trade (remember to “think like a trader”). In addition to things like job title, Professor Ginzel suggested other issues for consideration, such as vacation time, moving expenses, tuition reimbursement, six-month review, working from home, etc.
Given the scenario above, I asked Professor Ginzel if it was advisable to provide a general explanation to the other party at the start of the negotiation as to how you’re looking to increase the overall pie. My concern was that without an explanation of why it might be in everybody’s best interest to keep all issues on the table for flexibility, and explaining the concept of “increasing the pie”—the employer making the job offer might get the impression that the candidate is unable to commit to even the most basic elements of the offer—and thereby will be perceived as “flaky” or “difficult.”
Her answer made great sense to me, as she said that she wouldn’t feel the need to explain the strategy directly, and that doing so might in itself be perceived as “flaky” or “difficult.” Recalling the quote from Ralph Waldo Emerson, “Your actions speak so loudly, I can not hear what you are saying,” Professor Ginzel said she would allow her behavior during the negotiation (asking questions, understanding interests, thinking creatively, using reciprocity, etc.) to communicate her intention of being cooperative and flexible.
Professor Ginzel sees herself first and foremost as a teacher, and the session and subsequent conversations with her were educational and a real eye-opener. Yet, I wond
ered how this “value creation” business squares in the real rough and tumble world of business. We’ve heard the folklore of businesspeople being seemingly praised for their lopsided negotiation practices, where it wasn’t enough to close the deal, but that the winning party actually wanted the other party to lose.
Professor Ginzel explained, “Creating value is more of a common practice than popular stories about tough negotiators would have you believe. Remember that the definition of a successful negotiation in real life is repeat business and a good reputation (which helps you get that repeat business). If someone feels he/she has lost a negotiation, both parties have lost because of the reputation effect.”
The Only Four Ways You Can Ever Fail
I often think of the powerful words that Milton shouted into the wind on May 25, and I want those words to reverberate in my own head. Milton was 82 years old at the time, but I’m certain he yelled the words in a strong unwavering voice. A voice that carried the emotional mixture of joy, pride, wonder, and awe. And probably some fear and a bit of disbelief.
He shouted to be heard above the noise from the wind and the loud 12 horsepower, internal combustion engine straining right next to him. But mainly he shouted because of the pure exhilaration coursing through his being.
Milton Wright was the father of Orville and Wilbur, the famed American inventors and aviation pioneers who built, tested, and flew the first controlled “heavier-than-air flying machine” in 1903. It was just several years later, in 1910, that Milton shouted out the stirring words during the one and only time he ever flew.
If you get the chance, you should visit North Carolina and walk the grounds at Kill Devil Hills near Kitty Hawk. It’s where the brothers spent month after month, year after year—assembling, testing, crashing, repairing, making slow incremental progress before doing more assembling, testing, crashing, repairing. It was there where the brothers first flew, and where we grew wings. We added the third dimension to our world. It’s hallowed ground.
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