What Business Are You In? (Does Anyone Actually Know?)
Geoff Smith's Blog
Posted On May 30, 2016
A friend of mine, who enjoys driving me crazy, sent along a business column a few days ago. It was by a big time European consultant named Rudi Plettinx. Rudi suggested that every leader, each day when he shaves, should ask the question ‘What business am I in?’ (He did say women CEO’s should do it while applying their makeup, but I’m not bailing this guy out.) And he cites no less an authority for this regimen than the great business guru Peter Drucker - so of course there is no arguing with him. The anecdote Rudi cites is the much quoted tale of Drucker challenging legendary GM CEO Alfred Sloan, apparently setting Mr. Sloan straight by instructing automotive engineer that he was, in fact, in the customer service business.
This kind of writing drives me bonkers. It’s unhelpful. The woman who cuts my hair is in the customer service business. We’re ALL in the customer service business, but few of us have the skills to run a major automobile company. And a leader of Alfred Sloan’s mountainous capabilities would certainly have thought about what kept his customers happy. I realize that Mr. Plettinx was just giving an example, but is having my own personal strategic debate every single morning, while I’m trying to shave no less, likely to accomplish anything more than loosening my already fragile grip on things?
Four years before EllisDon was founded, another construction company was formed in Korea, called Hyundai. EllisDon was disciplined; we know what business we’re in. But Hyundai was all confused. In the seventies, they started building ships, then in the eighties they strayed into semiconductors. By 2000 they were into automobiles, financial services and chemicals, had 200,000 employees and revenues of US$90 billion. What business were they in? When explaining to new employees why EllisDon doesn’t have a Mission Statement, I tell the story of investigating a home heating company for the house I was building around 2002. It turned out that the company had been in business for two hundred years, having started in Holland as a cannonball manufacturer. What’s that all about?
But even all that stuff was back when things were simpler. Before technology and IT upended every business model in the world. If you are certain you know what your business will look like in five years, you are merely delusional. At least one of the major car companies is no longer confident that they will be manufacturing cars within five years. They are trying to figure it out; they only thing they know is that they don’t know. Nobody saw Uber coming of course, and I thought AirBNB was a colossally stupid idea. Last week, I was talking to a very smart architect; I think he’s around forty. He described himself as a dinosaur. EllisDon’s customers are all facing the same great unknown, so we obviously can’t ask them what they will want from us. IT companies are invading traditional businesses, and traditional businesses (including ours) are hiring software programmers. It’s chaos out there!
Pretend you’re a bank CEO. In a slow growth economy, your business model is being hollowed out from above by ApplePay, and from below by an onslaught of two bit ‘FinTech’ apps that are hijacking your services revenue, all propelled by the next stage of IT called ‘Block Chain’ that you are powerless to stop. What business are you in now, my friend? Or take Nokia, once a great company. The much publicized statement by their tearful CEO Stephen Elop, as they sold out to Microsoft - ‘We didn’t do anything wrong, we just lost’ - likely hit every self-aware business leader like a steak knife in the forehead.
We are in the business of being in business. Of seizing opportunities. Of finding out what our present and future clients want the moment they want it, or preferably earlier (sometimes, people need to be convinced). We don’t change our strategy looking into a shaving mirror. We change it when somebody says they need something, or when we hear something, or when we try out some new brilliant idea and it actually works. Fast, fluid, flexible. And if Peter Drucker were alive today, I think he’d agree. But he’s not, so we are on our own, and it’s a different world.
So all you business consultants and advisors, give us not these simplistic bromides. Forget about what worked last year, or in your career, or in theory. If you want to help, I would cite the late, great Harrison McCain’s semi-sacrilegious line: Get thee behind me Satan, and help push!
Thanks for reading.