Business As War

In Clausewitz's terms, the era of "set-piece" competition is over. We have entered the era of total competition. No matter your industry, company, or nationality, there is a battle-ready competitor somewhere who is busy thinking how to beat you. There are no safe havens.

Yet the hard truth, for all the talk of new paradigms, reengineering, and organizational learning, is that most executives in most companies are still equipped to fight the last war. Their strategic assumptions, management structures, information systems, and training programs are geared to a competitive battlefield that no longer exists. The rules of engagement have changed. Strategic mind-sets have not.

In the life-or-death quest for strategic change, business has much to learn from war. Both are about the same thing: succeeding in competition. Even more basic, both can be distilled to four words: informed choice/timely action. The key objective in competition - whether business or war - is to improve your organization's performance along these dimensions:

• To generate better information than your rivals do
• To analyze that information and make sound choices
• To make those choices quickly
• To convert strategic choices into decisive action

Together they represent informed choice/timely action.

Why Companies Fail

It's no secret why companies fail. The failure starts at the top. CEOs and their senior executives know the problems; in fact, in the privacy of their offices, they'll volunteer them to you.

"We have the information in the company. But we don't seem to get it to the right place."

"We get the information to the right place. But then we can't seem to make the choices we should."

"We're okay at choosing what to do, but we're too damned slow. By the time we pull the trigger, the target's moved."

"We know what needs to happen. But we never seem to execute. I never see action."

For some companies, the list of symptoms includes bad habits that slowly erode performance: rivalries in the executive suite, endless turf consciousness, resource struggles between business units. In short, functional boundaries drive a wedge between managers who should be on the same side but who act like the Army, Navy, and Marines competing to see who leads the invasion. In these cases you hear sentiments like, "We can't pull together, we're always pulling separately. There's too much internal friction around here."

In every struggling large company I've seen, the symptoms are the same. It's all just a matter of where it hurts worse.

Why Companies Fail, Part 2

It's no secret why companies fail. They fail because over the last 20 years they have been taught to fail. Think of it as Joe Stalin Visits Corporate America: "We have a five-year plan. The five-year plan is in a three-ring binder. The three-ring binder is on a shelf in the CEO's office. The five-year plan sets goals. We will meet or exceed those goals."

In this all-too-familiar model, the pieces of the company and the pieces of the strategy are broken down into separate elements. Line is separate from staff. Market research has nothing to do with product positioning. There's no connection between strategy and operations.

Companies then decompose pieces of their strategy into separate projects and assign them out to different people in different places - people who have never worked together, never even met each other. In fact, these people were hired, promoted, motivated, and rewarded in ways that trained them not to like each other, not to trust each other, not to help each other, not to speak to each other. They were trained not to work together.

In this respect, right through the Vietnam War, big companies and the military shared much the same approach to strategy. Both labored under institutional dynamics that virtually guaranteed competitive defeat. The terrible irony of Vietnam was that the United States won every battle but lost the war. Most military histories of the Vietnam War agree on the reason for defeat: the military had no unified strategic doctrine, no clear definition of victory.

American business had its Vietnam 10 years after the Pentagon did. In the 1980s, one company after another confronted agile domestic competitors and new global rivals. These "guerrillas" exposed the flaws of business-as-usual. Like the Pentagon, business learned its lesson the hard way. Now it must learn to change.