When Icons choke...

“Even if Sir Alex Ferguson had been handed the job of replacing Sir Alex Ferguson, he would have failed” – BBC Sport.

In spite of having played over 200 Premier League matches since the departure of its legendary leader, Man-U has been struggling in the past six years and has already changed its manager four times , without much to show in results. And while Moyes might have been an unfortunate fall guy who landed a dream job without the right resume and made a mess of stepping into a great man’s shoes, his successors – LVG and Mourinho were not pushovers by any stretch of imagination. And yet, they both floundered in their short shelf lives that saw the patience of stake holders and fans dry up before they could deliver.

Though not comparable by any means , but Man U’s battle to remain relevant and try to reclaim its glory, reminds us of a number of monoliths in the business world who have been choking during the past decade, cluelessly churning portfolios and leadership benches in a bid to play catch up and earn a nod from the activist investors on their boards. Something definitely seems to have changed dramatically in the business world, going by the way yesteryear Industrial Goliaths are going through an unfortunate patch. Let us dig a little deep and explore what really changed -

1. The world changed ( they didn’t ) – As is said about Man U under Ferguson’s era, while the game and the world changed around it, Man U refused to change, perhaps wary of upsetting the winning formula, and largely riding on one man’s might . How often we see this in the world of business when companies refuse to change their core strategy when it comes to products, target markets or even people practices. During the Welch decades at GE, GE Capital had exploded into a giant whose international investments ranged from insurance to aircraft leasing to mortgages, giving GE a sharp advantage when the financial sector was the fastest-growing part of a fast-growing U.S. economy, its market capitalization growing from $14 billion in 1981 to > $400 billion during Mr.Welch’s tenure as the boss. And while Mr.Jeff Immelt made a visible attempt to turn GE back to its industrial roots, under him too - GE Capital kept growing . Its earnings hit the roof as it bought credit card companies, subprime lenders and even commercial real estate, venturing farther and farther away from the core. But GE, with a pool of leadership talent that was the envy of corporate America, didn’t blink, and assumed that its young stars will manage whatever portfolio you throw at them. And then, 2008 came along.

[(An optimist’s addendum ) - To quote excerpts from Laura Rittenhouse’s recent article in Forbes ( March’19) - GE perhaps forgot the words of its legendary ex-CEO ( Welch) : “Yesterday’s newspaper clippings wrap today’s fish.” It had possibly grown insular and forgotten their primary responsibility: to nurture an accountability culture that balances and meets the expectations of customers, owners, employees, suppliers and partners, and communities. Having said that, when one reads through Mr. Larry Culp’s letter to shareholders, it clearly shows how things are changing at GE. Of course, a company as big as GE has a robust communications team which is responsible (along with the CEO) for the content in the shareholder letter. My assessment of GE’s 2019 letter is that about 24% of it is pure Larry Culp – his words, thought and heart; 35% of the letter reveals some integration between the old and new GE cultures; and 51% of it reads like the old GE. Since Culp was made CEO just six months ago, this analysis shows remarkable progress. These stats suggest that GE’s culture was ripe for change and that Culp is building a culture that is inclusive, accountable, humble, respectful and where people “call things by their proper name”. Culp calls out two critical priorities in his letter: 1) to improve GE’s financial position; and 2) to strengthen GE’s businesses, starting with Power ”. So yayy..GE seems to be making a comeback ! :) ]

2. The future changed – Sir Alex enjoyed 26 years at the helm. Jack Welch had 20. Long runways for leaders used to be good for business, as they provided the necessary track for them to draw a future. This was okay till the time when the future was a mere upgraded extension of the past. In a world where the past is officially over and the future is decoupled from the past as well as the present , stability at the top can well be a bane because it will only breed flab and bring down agility in leadership when it comes to responding to dizzy changes. In a world where holding a hammer, pushing a button or any human activity from the past industrial era that is learnable from pre-existing information, is being taken over by (more efficient) algorithms, we are in the midst of an age where an inorganic computer can bypass decades of formal training of a workforce and render it redundant overnight . Under such uncertain acceleration, any shelf life of a top guy beyond 2 years is dangerous, because frankly, in a world spinning to the velocity of Moore’s law, you just cannot predict, leave alone plan, beyond the next 24 months, without making the Gods laugh.

3. The model ( abruptly) changed – Politically, the American model won the cold war because unlike the totalitarian Russia which believed in micromanaging through over-surveillance, but didn’t quite have the technology to process large scale data back then, America had a more liberal hands-off approach. In the business world, as markets opened up during the past few decades ,competitive constraints in a globalized world forced most western conglomerates to adapt low-cost labor models from developing countries and which gradually broke the HQ theme for most companies as they created miniatures of themselves across regions. However in this day and age of AI where data ownership will determine market supremacy, a centralized data repository makes more sense because it will yield stronger algorithms with more data. And while the new age behemoths like Facebook and Google have stepped into this conversation early on, making cases for data centralization on the pretext of protecting interests of customers in autocratic regimes, their larger incentive is obviously commercial. The older lot, with conventional assets and sunk cost investments across continents over many decades, have been hesitant to pull back, rendering them clumsy and out of balance.

4. The rules changed – Uber doesn’t own cars, Airbnb doesn’t buy or maintain property, Facebook doesn’t need to do inventory management and Google doesn’t need to resolve factory or labor issues. In other words, Silicon valley doesn’t need to have Silicon in order to be valuable. In contrast, the industrial big boys from the last century still need to manage their quarterly numbers by walking the tight rope of lean manufacturing, complex supply chains, LDs & other penalties, political uncertainty and regulatory hiccups . So if you are ( say) a bullish turbine manufacturer and you beef up your inventory in a quarter, one lost deal can force you to liquidate your piled up stock in the red during the next quarter, possibly also claiming a few senior management heads in the process. In contrast, if your organization is a platform like Facebook, a maneuvered spike in video viewership on a particular quarter can fetch you your numbers & get your stock soaring. On the contrary , if you were a garment manufacturer who had outsourced his manufacturing to a low cost Bangladesh or a Sri Lanka twenty years ago, and reaped the benefits of your move, you might suddenly find your business disrupted, thanks the advent of 3D printing technology that would push your once-cool strategy into the history books.

5. The game changed – As the world collided with the technological supernova during the past decade, ‘going digital’ went from being a feel-good coffee break chat to a scramble for survival. The problem was – developing and selling software is not the same as selling industrial hardware, especially so if you were an industrial conglomerate deeply invested across sub-segments like manufacturing, energy, mining or Oil & Gas, because the digital transformation in each of these Eco systems followed different norms and most conventional big boys tried to do it the old school way – buy one platform, deploy it across your businesses and start collecting the spoils in a quarterly rhythm, a plan which simply doesn’t fly. To make matters worse, they were trying to compete with lean and industry-agnostic startups who had negligible rules to follow and who had the luxury to fail fast & course correct, and also with the pioneers of this new world – the Microsofts & The Googles of the world who had an exponential technological advantage and a clear strategy to maximize collection of the available data into their clouds. So while the business line leadership in the large industrial corporations stuck to their belief systems of meeting quarters at any cost , their new Digital cousins didn’t care about quarters as much as they cared about positioning their platform by constant change and upgradation. The result was a constant push-pull between numbers and product alignment, which was terrible for business.

6. The narrative changed – If you too belong to the cusp generation that co-existed with the (as it seems today) pre-historic Industrial age & the contemporary information age, you might have, at some point in time, sighed in despair at all the ‘Managese’ jargon at the workplace. The 90s saw a sharp rise in B-School enrolment queues, with bright youngsters opting for a MBA in anticipation of short circuiting themselves up the ladder. Unfortunately, apart from buying you an interview worth $100,000 of loan money, the MBA didn’t add much value to what these candidates could have brought to the table anyway. The flipside however was the rise of Power Point torture and a ton of metrices in most large organizations, that was used to capture & review otherwise routine work from different, often unnecessary angles , thus eroding the good old common sense way of solving problems & moving on quickly. In the 90s and through the 2000s, many of these Power Point crusaders made their way into important positions of large corporations without ever getting their hands dirty. And when thrown suddenly into the Armageddon against new competitors in a new world where clarity became the new cool ( and where meandering PPTs were tossed into the recycle bin) , these erstwhile stars fell flat on their faces as they tried to bullshit their way in a new sport they had never bothered to learn, assuming their purple patches to be permanent.

7. The customer & competition changed – The liberal discourse of the 20th century argued that the customer was always right because of his free will. In the age of AI where your Google Map literally maps you, where your Amazon kindle reads you while you read it and where your Facebook activity throws up an algorithm that knows you better than you know yourself, we can no longer say if the customer is right anymore, or rather – even what is right anymore. But yes, whether he is right or wrong, the customer of today isn’t starved for options. Till a decade ago, as a Western conglomerate, you could wrestle your way into the marketplace and earn a fat premium by selling IP guarded technology to a group of loyal customers who were ‘always right’. And you actually had the arrogance of dumping your end-of-lifecycle products into emerging markets and milk them for another decade. However, with the customer base moving out of America and Western Europe into other parts of the world in the past twenty years, the traditional bigwigs have completely lost the plot. On one hand, they are bleeding in a hyper-competitive marketspace and on the other hand, they are losing their technological edge speedily, either by way of lapses in IP protection, or sometimes by being ousted by a better state-of-the-art technology coming from indigenous competition.

8. The Politicians didn’t – Reflecting on Donald Trump’s election rallies in 2016 , Yuval Noah Hahari quips that Trump kept alerting Americans that the Mexicans and the Chinese would come to take their jobs, but not for once did he try to scare them by saying that AI will take their jobs, and that – instead of proposing a wall with Mexico, he should have proposed a wall around California. But jokes aside, the problem with our modern political discourse is that it is attempting to retrace footsteps of human society to some utopian past where things will be perfect again (“Let’s make America Great again !”, “Let’s build that temple now ”, “Let’s build in heavy taxes on imported goods”, so on). As Harari further says, "We are operating in a global ecology, but with a local nationalist mindset". Unfortunately for large multinational organizations with deep roots around the globe, they cannot decouple themselves from the political narrative so easily, and hence need to tug along, whether it is adapting to political sanctions and losing significant markets, or continuing to run environmentally hostile businesses as long as the political leadership insists that it doesn’t believe in climate change. 

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My Sunday blogpost (28/04/19)

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