War and Management. Case 2

Therefore, we continue to discuss management case studies in WW2.

Story #2. "Proper Investment Allocation"

The problem with the goal of "conquering the world" is that it is not set with a “SMART" approach, no matter how amusing it may sound.

And when the goal is not properly defined, there is a severe misalignment with priorities, or rather, the absence of them.

Before the war, Germany, thinking about world domination, built two battleships: "Bismarck" and "Tirpitz." The Reich spent almost half a billion marks on them in total.

The workhorse of the Wehrmacht, the PZ-IV tank, cost about 100,000 marks. Of course, translating battleships into tanks is not entirely accurate, but it's a question of capital expenditure allocation. Instead of the hypothetical 5000 tanks (I remind you that for the invasion of the USSR, the Germans were able to assemble only about 3500/3800 vehicles, 80% of which were much, much weaker/cheaper than the PZ-IV), they built two huge floating iron giants.

What was the fate of these great ships, in which so much budget was invested?

"Bismarck" sailed for a total of 9 (nine) days from the moment it went on a campaign. And in battle, it served its country for a total of 3 (three) days.

On May 18th, along with the cruiser "Prince Oygens," it set sail from the port. On May 24th, the Battle of the Danish Strait took place, where the English heavy cruiser "Hood" was lost due to a torpedo fire. This was like throwing a stone into a hornet's nest.

The British reaction was immediate: several combat formations, including aircraft carriers and several battleships, were dispatched to search for the culprits. More heavy cruisers and smaller ships eventually caught up with the "Bismarck" and sank it to death after a few hours of the collective attack.

Several years of construction, ~200 million marks, tens of thousands of tons of deficit steel, numerous high-tech equipment, and 2’000 professionals, which also took years to prepare, were all lost in the three days of battle.

The fate of the "Tirpitz" was even more interesting. Although the "Bismarck's" sister ship lasted much longer, what kind of "life" was it? After the British sank the "Bismarck" (and before that, the cruiser "Admiral Graf Spee," which was driven to Uruguay), the German command thought "Whoa, we have such a cool and EXPENSIVE ship that is capable of doing great things, we must use it very carefully."

You are aware of the German ordnung. Carefully - in a literal sense. In 3 years of impeccable service, the "Tirpitz" did not make a single shot at enemy ships.

Throughout the war, the battleship either participated in minor local operations or was hiding/being repaired in ports/fjords. The British conducted a total of 14 operations against it. The "Tirpitz" was attacked by controlled submarines with bombs, torpedoes, bombers, mini-submarines, and so on. Finally, on November 12, 1944, the Lancaster squadron bombed it with special heavy bombs, sinking it in Troms? Bay.

The Norwegian government still uses pieces of metal from the battleship in repair works. Years of construction, ~200 million marks, tens of thousands of tons of deficit steel, numerous high-tech equipment, and 950 people went to the sea bottom without ever firing at the enemy.

This is not the end of the story of ineffective capital investments.

At the outbreak of the war, Germany had approximately 50 submarines. This number was not substantial enough for those who aimed to establish global dominance. Hence, the requirement for a larger fleet was evident.

One submarine was valued at 5.5 million marks. A total of 1100 submarines were constructed during the war. This amount translates to 40,000 to 50,000 tanks. The fate of these submarines was miserable.

Out of the 1100 submarines that were constructed, fewer than 900 participated in battles. The UK and the US sank approximately 800 of these submarines. 4 billion Reichsmarks were lost at the bottom of the Atlantic.

Surprisingly, in the summer of 1944, the German defense against the invasion of the Western Allies and Soviet tank hordes from the east was compromised. The beautiful sailors in their sensual black uniforms and shorts were insufficient in the defense of cities and forts. They managed to hold on for some time, but the outcome was inevitable.

Moral.

A corporation cannot be strong everywhere, no matter how attractive some new directions may seem. Without focus, there is no advantage. Trying to be smart and strong everywhere will result in losing everywhere. There will always be someone stronger in a specific area.

If the business is undergoing digital transformation, it is not wise to consider broad expansion, for example. Conversely, if you open five new logistics centers at once, restrain your enthusiasm in developing fun things like "digital predictive models" and other bullsh*t.

To fight with Her Majesty's fleet, obviously one needs to have more than two battleships (and sway over each one), you need 10. But don’t attack the USSR then, and if one ought to attack the USSR, then don't build submarines. And by starting a fight with everyone immediately (or creating challenges in all business aspects), prepare yourself to accept poison in the office, reflecting on how to retrieve billions of capital expenditures from the sea floor.

However, all dictators repeat these mistakes.