I’ve seen many organizations lose their way because of a failure to know what they were about. My study of failed mergers and acquisitions carries that as a basic theme. To know what your firm is about is to be able to answer crisply questions about mission, vision, values, strategy and positioning—perhaps the most common of such questions is, “What business are you in?”
I’m least impressed with answers that have to do with things (such as “plastics” as the father said to Dustin Hoffman in The Graduate.) Rather, the best answers have to do with activities.
An exemplar of the good kind of answers is William H. Neukom, who served as the lead lawyer for Microsoft for 24 years, and then as CEO of the San Francisco Giants for three years. The other day, I heard him explain the business that the Giants are in. He could have simply said, “baseball.” Instead, he offered the following:
· We are in the entertainment business. We compete with any other way that people spend discretionary time.
· We are in the talent management business. Recruiting, developing, and measuring talent are crucial to our success.
· We are in the education business. Baseball is a very subtle game. Those who understand the subtleties of the game are in it for life.
· We are in the customer service business. We have to offer a safe, comfortable, and welcoming venue.
· We are in the community service business. Baseball can’t be about a few millionaires playing ball down on a diamond; we have to reach out to the community and help even the marginalized people in society to engage with our sport.
· We are stewards of a quasi-public trust. Our constituents are our colleagues, our customers, our fans, and our communities.
And I suspect that given more time, he could extend the list further.
Neukom’s definition of the Giants’ “business” illustrates the sheer complexity of that enterprise: the Giants must be good at many things, not just one thing; the Giants serve many different stakeholders; and the elements of the “business” form a system that support one another—neglect one and the others will suffer.
This definition of the Giants’ business reminded me of a classic article, by Ted Levitt, written in 1960. He asked why railroads stagnated in mid-20th Century:
The railroads did not stop growing because the need for passenger and freight transportation declined. That grew. The railroads are in trouble today not because that need was filled by others (cars, trucks, airplanes, and even telephones) but because it was not filled by the railroads themselves. They let others take customers away from them because they assumed themselves to be in the railroad business rather than in the transportation business. The reason they defined their industry incorrectly was that they were railroad oriented instead of transportation oriented; they were product oriented instead of customer oriented….
…the entire corporation must be viewed as a customer-creating and customer-satisfying organism. Management must think of itself not as producing products but as providing customer-creating value satisfactions. It must push this idea (and everything it means and requires) into every nook and cranny of the organization. It has to do this continuously and with the kind of flair that excites and stimulates the people in it.
Today, the view of business leaders like Bill Neukom expands the sphere of value creation beyond customers to include all the stakeholders of the firm. Neukom’s reply to “what business are you in” is a foundational lesson for enterprise leaders: think deeply about whom you serve, and how. Like the Giants, healthy enterprises probably need to be good at many things, not just one thing; they serve many different stakeholders; and the elements of their service form a mutually-supportive system that support one another. But Neukom and Levitt would probably agree on the primacy of defining one’s “business.” Get that right, and other good things follow.