I'm not sure how many of you remember the name Roberto Goizueta. He was President and Chairman-CEO of Coca-Cola from 1980 onwards till his death in 1996. He was the one who took Coke to dizzying heights; he grew the market shares by 3,500% during his tenure. He actually came into the US as a Cuban immigrant as a little boy. His father got him about 100 shares of Coke at that time and told him, "You always have to work for something you own." And that was his journey into Coca-Cola as a young man. And he rose to become President and CEO.
Some wonderful stories have come out of his life, especially some of the quotes that he made. Talking of mistakes, he said, "The moment avoiding failure becomes your motivation, you're down the path of inactivity. You stumble only if you're moving."
On establishing credibility – "State your expectations. Meet your expectations. Repeat."
On integrity – "The cynics will tell you that the good you do today will be forgotten tomorrow. I say, do it anyway."
One of the more interesting stories that come out about his astuteness was when he was talking to his marketing people about taking on Pepsi, and Pepsi had come in at that time. Everyone was zeroing in on trying to dislodge Pepsi and compete with them. The story goes that Roberto decided to stop competing against Pepsi and instead to compete against the situation of the 0.1% growth. One day he asked his executives, "Tell me, what's the average fluid intake of Americans per day?" He was told that it was 14 ounces. Then he asked the question, "What's Coke's share of that 14 ounces?" and the answer was 2 ounces. Roberto said, "That's our strategy! We need to go after a larger share of that market. The remaining 12 ounces is what we need to go after. The competition isn't Pepsi. It's the water, the tea, the coffee, the milk and the fruit juices that made up the remaining 12 ounces. Every time the public reaches for something to drink, they should reach for a coke." That's how Coke put up vending machines at every street corner and sales took a quantum jump and the rest is history. Pepsi has never quite caught up with Coke since.
When you look at that strategy, you see that he realized that he had to move differently to be able to stay ahead of competition. He needed to think differently, think strategically. And instead of competing against the rival, he started competing against the competition. Therefore he was able to perform far better.
Michael Porter wrote an article way back in 1979 that has become the benchmark for all kinds of strategic thinking. He called it – The Five Forces of Strategy. These impinge upon how you think about increasing profitability in any area of business around the world. He said, "These are the five forces that you have:
1. Rivalry Among Existing Competitors.
2. Threat of New Entrants.
3. Bargaining Power of Suppliers.
4. Bargaining Power of Buyers.
5. Threat of Substitute Products or Services.
In a recent interview with the Managing Editor of Harvard Business Review, he gave an example of the airline industry and how these five forces of strategy work. He said, "Take the airline industry and see. As you think about strategy, you naturally think about rivalry among existing competitors.
· Who are the other airlines in the fray that are trying to get my share of the market?
· What is the threat of new entrants? Despite the airline industry being at the bottom of the poll in terms of profitability, there are still new entrants that keep coming and trying to bite into that market share.
· The bargaining power of suppliers to try and get new aircrafts, engines, the interiors – how much of bargaining power do they have as they look around and try to get a bite into your profitability and try to make money out of you?
· The bargaining power of the buyer – people who want to fly have a plethora of airlines to choose from. They can choose different routes, they can mix and match airlines and all of this, eats into the profitability of an airline.
· The threat of substitute products or services – what is that threat? People could take the train, drive to a particular place or take the bus. All of these can reduce the profitability of the airline.
These five forces of strategy have stayed for almost 30 years and will continue to stay, because it's a hallmark in terms of thinking that Michael Porter put together in 1979. But that works together even now when you look at what you want to do in your company, in the job responsibility that you have. What kind of strategy do you have?
Roberto Goizueta hit that fifth part – the threat of substitute products or services. He said, "Let's not look at competition. Instead, let's look at the larger field." If we take the analogy of the airlines, it would be: Let's look at the people who take the trains, buses and cars and try and get them to use the airline. In other words, increase the area that we can tap into or the pool that we can go fishing in. That's what Goizueta did. He said, "Look at the 14 ounces. Only 2 ounces belong to us. Let's go after the 12 ounces."
How important it is for us to think strategically! To be able to think outside the box, to be able to look at what we are doing and say, "Somehow, if I'm to think strategically, I need to be able to look at these forces and see how I can make them play for me."
Southwest did that when they attacked the rivalry among existing airlines. "How do we get a heads-up with all the airlines?" They came up with a strategy that said: All bags fly free. They went against the grain of all airlines that said that even the checked-in bags were going to be charged. People started moving to Southwest. That's what strategic thinking is all about.
I was reading this article by Roger Martin, 'The Big Lie of Strategic Planning.' He says, "Strategic planning – somehow those two words cannot go together. When we think strategic, we think out of the box; when we think planning, we think putting it into neat little boxes that will somehow work. And yet, strategy has to do with making you a little uncomfortable and apprehensive. True strategy is about placing bets and making hard choices. The objective is not to eliminate risk, but to increase the odds of success."
I like that! To be able to think strategically, there must be a little bit of discomfort, a little bit of apprehension, a little bit of excitement that you are going into uncertain territories. That's the only way that good strategy will begin to work. So it's not about strategic planning; it's more about strategic thinking. We need to be able to think differently, think out of the box, go against the grain.
I wonder whether some of us need to do that. In our companies and jobs, have we got into a rut? Are we beginning to feel that nothing seems to be working? Maybe today you need to push your chair back from the desk, put your hands behind your head and think – how do I think strategically about what I'm called to do in my company? Have I got into a rut? Am I thinking about competition rather than changing situations? How can I think out of the box? How can I think strategically? Even beyond that, maybe even about your own life. Are you in a rut? In every situation, are you just doing things by rote? Do you need to think strategically about yourself?
I am throwing that out for us to think about today. Let's think strategically about our work, our businesses, our areas of influence. Let us also think strategically about our lives, about where we are and what we need to be doing.
Let me pray with you. Almighty God, as You look at us, You know the places that we ought to be in, the things that we ought to be doing. If perchance today, we are not where we ought to be, we are caught in a rut, we are looking through lenses that we have seen through for years and years, Lord, we invite You to change those lenses. We invite You to stimulate our thinking so that we can think differently. And for each of these precious ones on this call I pray for divine wisdom (wisdom that comes only from You) to fuel us to think strategically, both in terms of our workplaces and of ourselves. We ask this prayer, Lord Jesus, in Your name. Amen.
• Robert Goizueta story, ncr.mae.ufl.edu/funstuff/Teamwork.ppt
• Michael Porter, "The Five Competitive Forces that Shape Strategy." http://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy/ar/1
• Roger Martin, "The Big Lie of Strategic Planning." http://hbr.org/2014/01/the-big-lie-of-strategic-planning/ar/pr
• Goizueta quotes on "mistakes," "credibility" & "integrity." http://beginnersinvest.about.com/od/foundersandmanagers/ss/robertogoizueta.htm?p=1
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