Measure against the best
Measure yourself against the best
By Roopen Roy Mar 17 2015
If you are constantly judging your performance against your own past, there is a danger that you will reinforce your complacency. Let us say you are #5 in the stack of your competitors and you are growing at 10 per cent per annum. Because of general expansion of the market and better operating practices, you begin to grow at 15 per cent.
This is a remarkable performance judged by your past track record. But you have not benchmarked yourself against the leaders. Let us assume the #1 and #2 players in the competitive set are 3X and 2X of your size. Even if you are growing at 15 per cent and the competition is growing at 14 per cent, your higher growth rate means little. The gap is not really narrowing in absolute terms because of the divergence in starting baselines.
Take the case of China and India. Indian politicians are ecstatic that India has surpassed the rate of growth of China. But China’s GDP is already a multiple of India’s. According to a study by Wall Street Journal, if both grow in line with their official growth projections — China at 7 per cent and India at 8.5 per cent, India’s GDP will exceed that of China’s only in 2093 — which is 78 years from now.
But the WSJ analysis paints an alternative scenario: “Let’s dream bigger, though. If you assume that India was at last able to push its gross domestic product expansion up to an average of 10 per cent a year and meanwhile China’s mature economy settled down to an average of around 5 per cent a year, then it would only take 23 years for the South Asian nation to overtake its eastern rival.”
Companies which have an insular culture celebrate success based on current performance compared with the past. But measuring yourself against the best helps you to take bold bets and set audacious goals. Once you set audacious goals, you will realise that they cannot be attained by fishing better in the same waters. You have to rethink your strategy: i.e. to fish in different waters and acquire new fishing rights.
A key piece of strategic planning is a rigorous analysis of competitors. While one should be confident to compete and win against competitors, only too often CEOs disparage their competition and ignore their strength to their own peril. In some companies, CEOs are surrounded by sycophants who run down the achievement of competitors and provide anecdotes and selective data to applaud the performance of their own company. Being proud of your company’s achievements and celebrating its successes are a positive part of the company’s culture. However, belittling competition or a failure to perform objective and rigorous competitor analysis can be a sure recipe for remaining behind.
Sometimes the competitor who will trump you is often not detected by your radar. I will illustrate this with an anecdote. In 2001, I had the privilege of being part of a group which was advising the CEO of a global PC company. The group consisted of partners of three different consulting companies.
The CEO posed the following question to all of us: “Tell me which of my competitors has the best chance of destroying my business?” The partner of strategy firm A had come prepared. He presented a SWOT analysis of the company, described the changing technology landscape, the consolidation taking place in the industry (a mega-merger had just happened) and predicted a winner. Not only did he predict the winner (which was not the company that invited us), but he also explained why.
Firm B’s partner disagreed with firm A and made a presentation which pleased the CEO. He suggested that if our host CEO did certain things right, his company would emerge as the undisputed leader.
I was the tail-ender. I told the CEO the story of King Kansa from our mythology. The prediction was that Kansa would be slayed by an unknown one growing up in Gokula who turned out to be Lord Krishna. So my challenge was whether there was a competitor who was not on the chart? The management team said all credible competitors were on the chart. I continued my challenge by asking them if there was a cost leader they had missed? Have they ignored an emerging leader in a growing geography?Have they perhaps forgotten a company that was growing faster? Someone who was growing in Gokula and you could not find because you were looking in the wrong places?
It was then that the name of a Chinese company called Legend popped up. This company was growing fastest in China. It had a poor brand, low quality image, little access to global R&D and local management. Therefore, they were ignored.
Back in 2001, I did not have the foggiest notion of the dramatic events that were to follow. In April 2003, Legend publicly announced its new name, Lenovo — a portmanteu of ‘le’ (from Legend) and ‘novo’, Latin for new. By the end of 2003, Lenovo had spent a total of 200 million RMB on rebranding. The company acquired IBM’s personal computer business in 2005. It hired William Amelio as its CEO from Dell and set up its R&D centre in Raleigh, North Carolina. The rest as they say is history. According to the latest IDC report, Lenovo holds on firmly to its top position among PC vendors.
Leadership requires vision, humility and courage. While celebrating success, true leaders never lose touch with reality. They set bold goals and set targets to win. They constantly look for creativity and innovation. They create organisations that learn and improvise. They know that in the real world of business, your aim is not to win by benchmarking against your past. You want to use your past success as a foundation to snatch victory from the present and the unknown competitors of the future.
(The writer is the Managing Director of Deloitte Consulting, India)