Friday, July 27, 2012

5 Reasons NOT to Use the Olympics for Business Lessons

A lot of people in the world will begin devoting some of their focus and attention towards London as the Olympic games begin this week. My wife and I have our own particular favorites – Gymnastics, Swimming, Archery, and Rowing among them.
There is a lot we can learn from Olympic athletes. For example, in the prior Treasury Café series on the “Power of 10,000 Hours” we examined the need to devote serious focus and time practicing if we want to achieve excellence in our field. Over the next several weeks we will see plenty of examples of the results of these efforts. The Olympic competitor is certainly a role model in this regard.
However, we are also at risk of taking home lessons during these games that are not applicable to our organizations for the following reasons.

It Ain’t So Simple
The definitive results that games and sports provide is naturally appealing to us. Given a set of rules and structure, people compete and at the end we are able to determine an undisputed winner - Runner A’s time was 1:42:05, and Runner B’s was 1:42:06, so A wins.
Yet, we must remember that this is an artificial construct that has been established precisely so that there can be an objective determination of a winner.
In real life business is not so simple. There is neither a definitive structure nor a standard set of rules everyone follows. Company A operates internationally while Company B pursues a local niche strategy. Company A operates according to Brazilian law while Company B is subject to Hong Kong’s. The practice of business is quite different in the Middle East than it is in the United States.
Determining who a “winner” is in business is also not clear or definitive. There is no single metric that determines success like there is in the 100m backstroke, where whoever reaches the button first wins.
What metric should we choose to determine a business winner? All of the following are defendable choices: Market Share, Return on Invested Capital, Total Shareholder Return, Year Over Year Earnings Growth or Same Store Sales, Leadership Development. And the fact is that all of them are important.

More Than One Can Win
In the Olympics, there is only one spot on the podium for a gold medal winner.
Given the variability in metrics that can be employed, we can have a situation where Company A is the winner in ROIC, while Company B is the winner in year over year Sales Growth. Who gets the gold?
The fact is that each company operates in accordance with its strategy, and the success of their efforts need to be compared to that more than to any other firm. Consider the soft drink industry – Coke wins on market share, yet Pepsi operates a successful diversified portfolio that includes the dominant Frito-Lay snack line, so they might win on comprehensiveness. And while they would not medal on sales or market share, Jones Soda is still considered a successful company by many. They are all winners in their own way.
Business is as much about partnership and relationships as it is about competitiveness. It is not just being the first to cross the finish line. Sure we want to sell more products and services than our rivals, yet that may not prevent us from operating a joint-venture with them to exploit opportunities in a new market or industry segment.
In fact, we often attempt to pursue strategies that create win-win outcomes. The customer gets value and the company gets value. Talented employees enjoy working at our firm and our firm is happy to have the talent they’ve got. The M&A deal is structured in a way that both buyer and seller derive something extra from creating a larger pie. In many industries the players exhibit a large amount of cooperative behavior (e.g. airline pricing, cereals).

Nobody Has All “A” Players
The composition of an Olympic team is the culmination of an elaborate screening process. There are local competitions, regionals, and nationals that an athlete must clear to make it on the team. The folks going to London are the crème de la crème.
Yet, back here at the office, we are faced with the fact that our teams are composed of A players, B players, and C players. How best to organize and lead a team in this environment is going to be very different than an Olympic team.
Talent management is a hot topic these days, and it seems everybody wants to populate their ranks with A-players who can be developed into great leaders so our business will live long and prosper. Yet, it is a myth to think we are ever going to have a company full of them.
The fact is we need some of the other types as well. We need B-players who will perform adequately in any number of tasks and be happy to do so, and be willing to stick around even if they didn't get that last promotion. We need specialists with deep expertise in relevant domains, even if they never aspire to leadership roles.
Jeffery Immelt became CEO of GE after a 3-way succession race. The other two folks went on to become CEO’s somewhere else. A-player talent has a tendency to disperse.

There is No Ending
After several weeks, the Olympic games will be completed. We can tally up the medal count and see which country got the most golds, silvers, and bronzes. We will recount the exciting finishes, and begin to think about the next round of games (which should have been in Chicago!).
In business, life goes on. We do not have the luxury of operating for a few weeks every 4 years and spend the rest of the time doing something else while training. Day in and day out the “beer needs to get delivered” and the “sausage has to get made”.
A manager faces a dilemma that the Olympic athlete does not – the trade-off between short-term and long-term. Manager A may direct his efforts towards increasing the current year’s sales for a number of good reasons, and all their resources are directed towards this objective. Manager B, on the other hand, carves out 20% of their team’s time for development activities, projects, and other items that will pay-off in the future, at the cost of lowering this year’s numbers. Both may be correct decisions in their different contexts.
So while Olympians can expend all their effort during August, a business does not have that luxury, because we hope to be around in September as well, and we need to manage with respect to that eventuality.

It’s All About the Future
In the Olympics, the medals are the prize of the competition. The athlete gets the gold, and keeps that medal above the fireplace, locked away in a box, gives it to their parents, etc. and can have it forever. The books are updated to reflect the winners, and these will live in infamy. There will only be 1 marathon winner in 2012, and that fact will not change when it is 2112.
In the business world successes are not so permanent. The fact is, by the time we have determined that we were successful and won our gold-medal (however we chose to measure this feat), it doesn’t really matter because we are already focused on operating in the next year, where success needs to come again…and again….and again.
General Motors had the highest revenues in 1990. Does that mean investors are flocking to them because they “medaled” in their race? No? Why not? Because we do not care how they did, we care about what they are going to do.
Wal-Mart had the highest revenues in 2011, surely this is still relevant? Not really…we want to know what 2012 and beyond is looking like.
It is a “what have you done for me lately” world, and a business always has its eye on that. The goal today is to remain relevant tomorrow - by the time the results for the current race are announced, they really are irrelevant.

Key Takeaways
The Olympic games are fun to watch, and to witness top performers operating at their peak is a pleasure, yet if we are not careful we can infer more than we should as it applies to our daily lives. Make sure you take home the right lessons.
Questions
·         What lessons can you think of that might be unproductive to learn from the Olympic games?

Add to the discussion with your thoughts, comments, questions and feedback! Please share Treasury Café with others. Thank you!

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