What are the key ingredients for success in business? In my mind its defining effective strategy, having a sense for timing in execution, cohesion in a business culture, focused effort, and a bit of luck. But in the end, there is really one thing that separates successful and unsuccessful businesses: Leadership.
There are several successful leadership styles but there is a character trait most successful leaders share. They have the ability to constantly critique their own success and failures and adapt early. They are people who challenge the status quo routinely, constantly seeking improvement rather than living by rules of thumb and falling into routines and ruts.
You are a smart enough person if you run a business or manage a unit within a company. But if you can’t back away from day-to-day duties and get a grasp of the environment changing around you and then strategize for the long run, you might be in the wine business for the short run.
I recall sitting at my office in the early 1980’s, reading an analyst report on the company that was covered in the WSJ. In it, the analyst reasoned that with the personal computer taking flight, and given all the accompanying enhanced productivity gains we would see, soon we would all flock to leisure activities to fill up our newly discovered copious free time. As a result, we’d see companies like AMF and Voit take off.
- You can’t trust everything you read in print. Today with the deterioration of mainstream media and increase of internet opinion with no professional standards, its even more important to understand motive in writing a piece as well as the writers credentials in offering opinion. (…you think he had a position in AMF when he wrote that?)
- How important it is to take a 360 degree view of the world in the context of your business and predict changes. Without prediction, there is no contingency planning or an ability to size your business bets. The best changes are done thoughtfully, are time-bound, and done with conviction and purpose.
If you [read at all about the company], AMF was filled with smart enough people but they ignored or misread the world change around them then threw a gutter ball in executing strategy. Instead of focusing on their strength, they went on a diversification binge investing in building everything from ICBM missile silos, nuclear reactors, and computers, to Harley-Davidson motorcycles. They held on to their manufacturing instead of outsourcing and in the process ended up with far too many product lines to manage, costly and aging manufacturing plants in the US, and untenable union labor contracts that turned them into a loss generating proposition.
In the meantime, companies like Nike, Reebok and even Coleman threw strikes and built empires with their drilled down approach to their markets and their consumer’s behavior. AMF would have done a better job of surviving if they could have read the tea leaves on leisure activities a little better, moved away from a command and control management process, and embraced a culture of constant reflection and change. A great example of that was ironically Harley-Davidson (NYSE: [HOG]), a subsidiary of AMF.
After the LBO was concluded, despite a massive amount of debt in a very high interest rate environment, Harley-Davidson was able to double its market share in about six years. They did it by moving away from top-down management and instead of competing on price focused on quality, embracing Japanese manufacturing philosophies such as [Quality Circles].
They then established a user group of hard-core Harley lovers to gain their perspectives and feedback in manufacturing and design. Probably as much from financial need as a philosophical change, they adopted [Just in Time] manufacturing which led to stock outs on parts and delays in manufacturing. The consequence was lengthened delivery time for the bikes. But instead of becoming just one more nail in a coffin, the company improved communication with their suppliers and most important, their consumer base who adopted the delay as part of the improved focus on quality and craftsmanship.
There are similarities between what Harley dealt with and what the US Wine Business may be facing. As mentioned in prior blogs, I expect the US dollar to continue to strengthen over the Euro and other wine producing countries such as South Africa and Argentina. That will favor foreign imports, just like Harley found.
We can’t control changes in economies so how do we in the wine business apply this? First, we have to be better at reading market changes. That is in large part what we discuss in the SVB Annual State of the Wine Industry Report which is in process as we speak.
Second, take an unbiased look at the horizon. That is what I attempt to offer readers through SVB on Wine, and offer our clients with direct management presentations. But management teams have to want to have the discussions and ask hard questions about their own operations first. It is an issue of culture that at times can rebound off a leader’s ego. But there are ground-shaking changes going on under foot today, and business leaders and teams need to understand both how the change might impact your business and what new opportunities are available.
Last is learn from others. Like Harley, engage your clients. Understand them better. Work on improving your company’s CRM and data management. Then ask more curiosity questions of those who have gone before you. Your wine-making neighbors are more than accommodating in talking about the things they’ve learned the hard way.
Don’t stop there. Extend that to other industries. Take Harley as an example. That was a business that learned how to compete on quality, employ learning from other companies, and change their management focus to gain buy-in from employees. Its so easy to be a top-down manager. I’ve certainly made that mistake at times. But success is a team sport in business and that requires getting others around you to take ownership and see the rewards from stepping up and solving problems. Harley like the wine business became a luxury good instead of a commodity. How did they do that? Executing all the changes noted above and segmenting their customer base to recognize the core opportunity. You can find many other business philosophies that can be applied if you move out of your normal reading and conference going patterns.