Chapter 1: The Light at the End of the Tunnel
If you can see the light at the end of the tunnel,
you are looking the wrong way.
Chapter One provides the definitions and explanations of key concepts used throughout the book: "irresistible forces," "stalls," "stallbusting," "2,000 percent solutions," and the "irresistible growth enterprise." Understanding these concepts is essential for you to get the most benefit from the rest of the book. Building on these concepts, you will find out how to achieve the most outstanding growth and results for your organization, now and in the future.
Have you ever had your plans delayed or put on hold indefinitely by a change in your organization's operating environment? Perhaps fashion suddenly shifted, and few wanted the kinds of products or services you provide. Possibly the laws changed to make what you were planning to do no longer compliant. Or maybe raw material costs suddenly dropped for an old-fashioned version of what you make, and customers flocked to the now cheaper alternative. Maybe even a change in the weather meant that new winter coats weren't needed in December due to unusual warmth. If any of this sounds familiar, then you will benefit greatly from reading this book and acting on its lessons.
Shine the Light on Opportunities to Avoid Tunnel Vision
Most people are at least a little claustrophobic when they find themselves in a dark, confined space, like a tunnel. Whatever source of light first promises an escape route will attract attention, much as the flame attracts the moth. Similarly, people in tight circumstances due to factors beyond their control will often quickly take any way out that they see. In a business that is starved for cash, for example, this sense of urgency can mean committing to the first offer of funding rather than the best one.
If you look only at the proverbial "light at the end of the tunnel," you will often be making a mistake. The tunnel itself may be full of better opportunities, such as valuable minerals or other natural resources. You may also be better off inside than out due to danger from some natural force such as an avalanche. Be sure to always consider all of your options before reacting to the light at the end of the tunnel.
This book can help keep you from "looking the wrong way" by being a guiding light, like a powerful search light in a tunnel, that you can use in the find for the best and most enduring opportunities in the face of forces and trends beyond your control. By learning the lessons we offer here, you'll be able to spotlight the opportunities for anticipating those forces and trends and position yourself so that these forces work in your favor.
Let's consider, for example, how two organizations dealt with a powerful trend in electronic technology in different ways. One was proactive and successfully highlighted and utilized advantages from the trend. The other organization reactively focused on the light at the end of the tunnel, and found itself pummeled by the trend in a way that led to major losses.
Moore's Law states that semiconductor effectiveness will double every 18 months at a more or less constant price. Computer manufacturers have used this law for decades as an irresistible force that permits them to anticipate the technological changes needed to design their new machines. A new opportunity has been grasped in recent years by people who understand the law well. They expand its application beyond computer hardware to upset the competitive dynamics of other industries.
In the 1990s, Microsoft began offering an encyclopedia product named Encarta as part of a bundled package of software to computer manufacturers, or as an add-on to consumers for less than $100. In comparison, traditional encyclopedias cost many hundreds of dollars. Soon, Encarta was the best-selling encyclopedia in the world, and it was wildly profitable because its sales grew rapidly while its production costs were very low. The original version of Encarta was based on a printed encyclopedia sold in retail stores, so development costs were low, and creating electronic copies was almost costless.
By choosing the electronic form for this product, Microsoft ensured that it would continue to have the irresistible force of Moore's Law on its side as it competed with traditionally printed encyclopedias. Improved semiconductors will lower the price of personal computers, which, in turn, will increase the size of the market. A larger personal computer market means more chances to sell electronic encyclopedias. In addition, better semiconductors will make it faster and easier to use electronic encyclopedias, so more people will want to have and use them. A larger electronic encyclopedia market will reduce the development and production costs of each electronic encyclopedia sold. Finally, as the market leader, Microsoft will get almost all of the benefit from the technological trend because computer manufacturers are unlikely to offer more than one electronic encyclopedia as part of their preloaded software packages. This product is an example of a 2,000 percent solution because Microsoft achieved more than 20 times the growth and profitability that a traditional new entrant into the encyclopedia business would have experienced.
Now consider the reactions of printed encyclopedia publishers. They also developed electronic encyclopedias, but, not wanting to displace their printed offerings, generally charged higher prices than Microsoft did for their electronic versions. Caught in an almost-always lose and seldom-win situation, their sales and profits naturally declined. Had they preempted Microsoft's Encarta strategy, the traditional encyclopedia publishers could also have been wildly profitable by selling two highly differentiated product lines. Most of the profits would have come from the low-end electronic product, which could then have helped to make up for the loss of sales and profits from the high-end printed products. Not having adopted this strategy is an example of "stalled" thinking, or seeing the world in a constant way while in the midst of dynamic change.
Like Microsoft with its Encarta product, the irresistible growth enterprise seeks to illuminate the benefits of powerful trends beyond its control by overcoming stalled thinking and creating 2,000 percent solutions. In this chapter, you will learn more about these important concepts as a springboard for becoming adept at applying them in your organization.
Irresistible Forces and Their Benefits: Head Winds and Crosswinds Become Tailwinds
To illustrate what an irresistible force is, imagine that you are planning to take a plane trip around the world. If you think about the jet stream, a powerful wind that flows generally from west to east at flight altitudes, you will have identified an irresistible force that will have a large impact on your journey. If you travel from west to east, the jet stream will be a tailwind and help you forward. If you travel from east to west, it will be a head wind and slow you down. Of course, if you travel from south to north, the jet stream will also delay your journey somewhat by pushing you off course and forcing you to fight off some of its effects as a crosswind.
The existence of the international date line can similarly affect your travels. When you go from west to east, you will gain a day when you cross that line. Traveling in the other direction, you will lose a day instead. So, for a trip around the world, careful alignment with the two irresistible forces of the wind and date conventions can save you more than two calendar days and a lot of time in the air.
Despite these substantial advantages, many people will choose to travel from east to west because airlines tend to schedule these longer flights during the daytime while making the shorter west to east flights at night. The desire to avoid the "red-eye" flights will make these travelers miss the opportunity to save lots of time. By focusing on the end of the tunnel, the airline schedules, they are blind to the opportunities of doing the trip in the fastest way.
While the term "irresistible force" conjures up images of overwhelming power - like the jet stream, a tornado or an earthquake - that often suggest conflict or annihilation, it can also mean something that is so alluring that we are drawn to it despite our will. In the Odyssey, for example, Odysseus had to be bound to the mast of his ship so that he could resist the songs of sirens as he sailed past their island. In this book, an irresistible force can have either attribute. It can be so strong that it overwhelms you physically, as in a force of nature, or it can be so attractive that it is hard to resist psychologically, as in a temporarily low interest rate that leads you to borrow excessively.
In business, irresistible forces are powerful trends that can significantly affect the direction of your enterprise. Such forces abound. Customer needs and the circumstances that create those needs, costs that are hard to control, government regulation, taxes, trends in the development of technology, globalization, the weather, physical limits, and human behavior are some examples. An irresistible force is simply anything that is mostly beyond the control of you and your organization in influencing your business.
As an example, consider a company that provides accessories for sport utility vehicles (SUVs). When the demand for SUVs is high, the accessory manufacturer is busy trying to make enough products to keep up with the demand. As newer and better models of SUV come out, the demand for accessories shifts in new and unpredictable ways. Similarly, when SUVs lose their popularity - because of higher insurance premiums, revelations of overhyped safety or capability for driving in snow, decreased family size, or objections to airborne emissions - the accessory maker has a hard time selling accessories even if they are vastly improved and offered at a low price. Thus, the accessory business can be buffeted by irresistible forces in different directions and in unpredictable ways, going rapidly from enormous growth to potential free-fall.
What Is a Stall? If It Was Good Enough for Grandma, Let's Not Leave Well Enough Alone
All enterprises are subject to many and potentially changeable forces. Unfortunately, the powers that be in many organizations convince themselves that the status quo will remain in place forever. They create a business model that keeps them focused on fine tuning their current state of affairs. All that is well and good, until the irresistible forces shift in such a way that they encourage your customer to sit instead with your toughest competitor.
Such a shift is inevitable in most businesses if for no other reason than demographics. People change their consumption patterns as they age, and the numbers of people in various age groups changes as well. Such changes have meant, for example, that the latest needs of baby boomers have driven the U.S. economy in fundamental ways since the 1950s and will continue to do so for quite some time.
Remember the diaper services that did so well in the late 1940s? Freshly laundered cloth diapers were delivered to the home and soiled diapers were sent out to be washed. That business was eventually subjected to many irresistible forces that changed its profitability. As women began to work outside the home in increasing numbers and better birth control allowed for increased family planning, births declined and fewer diapers were needed. By the time the first baby boomers were having children, disposable diapers were introduced and quickly became the rage. Diaper services saw their business disappear into the sewers and landfills of America. They became victims of a "stall," a complacent frame of mind and way of thinking resulting in bad organizational habits that impede progress and the achievement of an enterprise's full success potential.
Suppose the owner of a diaper service recognized the irresistible forces of the changing demographics and the disposable diaper? He could capitalize on the disposable diaper trend by providing the convenience of both disposing of and delivering the bulky items. And if he touted ecologically appropriate disposal, wouldn't his service appeal to even those consumers otherwise inclined to buy and dispose of the diapers themselves who care about conservation?
For the enterprise to achieve irresistible growth it is necessary that it recognize and overcome the stalls that delay positive action in dealing with irresistible forces.
What Is Stallbusting? Rethink Your Position
Before Muhammad Ali (born Cassius Clay) entered the arena, heavyweight fighting was usually a brawl in which two fighters unmercifully pounded each other until one fell bloodied, bruised, and battered to the canvas for the ten count. But Ali, acting on the realization that getting near a hard-hitting heavyweight fighter in the ring is a dangerous thing to do, changed the sport forever. He got into top shape aerobically and danced all around his opponents. He could quickly reach in and flick a punch, and then retreat before the other fighter could react. In fact, the late counterpunch that caught only air helped Ali by tiring out his opponent. Ali's motto was: "Float like a butterfly, sting like a bee."
With his strategy of being outside the range of the irresistible force of the other fighter's fists, Ali is a classic example of taking a stallbusting approach: using conscious thought to challenge old habits. He realized that getting hit didn't make you a successful boxer, that success could be achieved by being constantly on the move to be where you could hit but not be hit.
Similarly, consider the prospects for a poor artist at the beginning of the twentieth century. The avant garde styles were changing from Impressionism to Expressionism, while traditional collectors ignored both in favor of polished realism. Clearly, tastes would range from the classic to the most avant garde in the rest of the century. How could an unknown succeed?
Viewed in this light, the career of Pablo Picasso shows that he was a champion stallbuster, as well as one of the century's great artists. He was a master of technique who easily succeeded with any style and genre he chose, producing works in virtually every known style in almost every major medium. In addition, he added his own inventions, such as Cubism and collage. Consequently, there was always a type of Picasso to appeal to almost everyone, and his lifetime income was many times larger than those of his contemporaries were. By using a stallbusting approach to the changing art milieu, he found a 2,000 percent solution to being an outstanding artist who was well appreciated and well paid during his lifetime.
What Is a 2,000 Percent Solution? Drive the Windmills with Your Mind
Most organizations see their plans and preferred ways of operating as unchangeable best ways to do something. This attitude is like having a windmill that is fixed to face in only one direction. When the wind blows in just that direction, the windmill generates lots of energy. When the wind blows in any other direction, the windmill is idle. The person who figured out how to make a windmill that turned on its axis so it would always be facing the wind came up with a 2,000 percent solution. Such a windmill generates maximum energy over all 360 degrees of the compass, rather than only over a range of 15 degrees or so. As a result, with a wind blowing randomly from all directions, it creates 20 times more power than a fixed-facing windmill. The beauty of such a solution is that it makes a virtue of uncertainty rather than taking the risk of a narrow view of where the wind will come from in the future.
A 2,000 percent solution can be a way to do something that provides 20 times or more benefit from the same or similar level of resources (such as a pivoting windmill) than when applying the usual or 100 percent solution (a fixed-facing windmill). It can also be a way to do something 20 times faster to get the same benefit from the same or similar level of resources. A pivoting windmill also exemplifies this feature because it will generate the same amount of power as the fixed-facing windmill in less than 5 percent of the time in locations where the wind blows randomly from all directions.
In some situations you can have 2,000 percent solutions that provide improved methods and increased speed simultaneously for a combined 4,000,000 percent benefits (2,000 percent times 2,000 percent equals 4,000,000 percent). This circumstance is most likely to occur when having the benefits sooner is worth vastly more than having the same benefits stretched out over time. It occurs routinely when the benefits of one 2,000 percent solution produce skill, time, and resources to add other 2,000 percent solutions in other areas of practice. This transferred advantage means that time and resources are constantly being used more efficiently across the whole organization.
For simplicity, in this book we refer to any solution that has at least 20 times the benefit or speed of a current conventional solution as a 2,000 percent solution, even if the benefits are much greater than that. And when irresistible forces are in play, the benefits are likely to bloom way beyond the 2,000 percent level because those forces create enormous momentum for the first organization that responds appropriately, leaving other organizations in the dust.*
Consider Amazon.com and its pioneering entry into selling books and music on the Internet. Shortly after going public inception and within months of being started, the company had achieved a market capitalization for its stock that was far larger than that of all its conventional competitors combined. As a result, the company was able to pay for even faster development of its position on the Internet, which made its future growth and profit potential expand much sooner as well. While it was still losing money on each book sold, Amazon.com stock sold for a multiple of more than 20 times the total price of each book the company sold. This high stock price was used indirectly to allow the company access to vast resources for the book business and to enter other electronic commerce markets. Now that's stallbusting your way to a 2,000 percent solution involving irresistible forces!
What Is an Irresistible Growth Enterprise? Not Just Survival, Success!
Have you ever watched a person use judo to defend against an attack from a larger, more powerful person? The judo user can employ the strength and of the attacker to make self-defense easier. If the attacker throws a punch, the judo defender may grab the wrist of the attacker's extended arm as it speeds forward and pull the attacker to the ground by tripping her or him at the same time. Of course, without the judo, the results could be quite different. Properly harnessed, irresistible forces (even threatening ones) can be used successfully to create irresistible growth for your enterprise.
In this book we generally refer to irresistible forces, stalls and stallbusting, and 2,000 percent solutions in connection with commercial business examples and problems. However the lessons we present are equally applicable to any other type of organization or group, from a charitable organization depending on volunteers and contributions, to government departments, to educational institutions. We chose the word "enterprise" to describe such organizations because it captures the sense of being proactive, energetic, and effective. We want you to think in those terms as you learn how to transform your organization into an irresistible growth enterprise.
An irresistible growth enterprise is simply any organization that can routinely utilize the momentum of irresistible forces as tailwinds for creating and implementing 2,000 percent solutions, thus assuring increased success in today's rapidly evolving business environment.
Using Microsoft as an example again, we can see how this company has often used irresistible forces to create advantages for itself in various areas of its business. One of the truisms of the computer business is that users are reluctant to change operating systems, because doing so requires changing the application programs that the user relies on. The difficulty of making that change usually more than offsets the total user benefits from a new operating system. In fact, loyalty to a computer operating system supplier is one of the strongest repeat buying patterns ever measured. Microsoft realized early on that becoming the standard for IBM's new personal computer would eventually make it the standard for computing. Since most people used IBM mainframe computers in the early stages of the personal computer industry, Microsoft did whatever it could to get the operating system business for the IBM PC. Most personal computers in large businesses were originally linked to uses in IBM mainframes, so the operating systems needed to be compatible. Thus, an IBM mainframe sale translated into a Microsoft operating system sale for all of the linked-use PCs in the same organization.
When IBM later introduced its OS/2 operating system for personal computers, Microsoft perceived the threat to its position and encouraged software applications writers to create products that would work only on its DOS operating system. As a result, IBM's OS/2 system never did very well due to a limited application library.
In another arena, many people preferred Apple's operating system, but wanted IBM-compatible equipment so they could work smoothly with IBM mainframes. Microsoft eventually created the Windows software to employ some of the best elements of Apple's software. The result was to further discourage computer users from buying Apple machines. The Windows software would still run all the old DOS applications software, so users had a dual incentive to upgrade with the Microsoft's product rather than switching to OS/2 or Apple.
On yet another front, when the Internet took off, Bill Gates realized that Microsoft had missed an important irresistible force. He quickly refocused the company to create a browser and online services, and the company was soon among the leaders in these areas as well. In this case, Metcalfe's Law came into play, which says that the more people who are in a community, the more valuable the community is to each person. With so many users already in Microsoft's community, the pull on new Internet-using customers to use Microsoft's browser and network is nearly overwhelming.
By aligning with irresistible forces, Microsoft was able to create large, profitable businesses. Then it was able to use those business strengths to make the establishment of the next alignment with other irresistible forces less costly, more easily achieved, and even more valuable. As a consequence, the company was able to go from being a start-up to the world's most valuable enterprise in about 25 years - a definitive irresistible growth enterprise.
Looking Ahead for the Opportunity
Regardless of the activities you are engaged in, creating an irresistible growth enterprise is an exceptional opportunity. Many people now see unlimited opportunities in establishing electronic commerce on the Internet. That area is very promising because there are so many irresistible forces to be harnessed, including rapid improvements in the technology, costs, speed, size of the markets, and valuations in the financial markets. Irresistible forces are moving strongly throughout almost every market, every activity, and every enterprise. The challenge is to identify, anticipate, adapt to, and create the irresistible forces; learn to align yourself with them in a flexibly effective way; and build the capability of the people you're working with for expanding the enterprise's ability to do these things. By doing so, you'll always be in a position to use the wind to your advantage.
* For more information on creating 2,000 percent solutions independent of using irresistible forces as a growth engine, please see The 2,000 Percent Solution (AMACOM Books, 1999) by the authors and their co-author, Robert Metz. Excerpts from that book are available at www.2000percentsolution.com.