Business Strategy Plan For Success Fashion Institute Of Technology Why Do Large Enterprises Incur So Much Unneeded Waste?

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Why Do Large Enterprises Incur So Much Unneeded Waste?

When the Soviet Union fell in the early 1990s and Boris Yeltsin’s government began to promote democracy and cooperation with their former Cold War enemies, primarily the United States: we discovered much that was amazing and instructive. It soon became clear that our decades of fear and competition with the communist titan were based on wrong assumptions. Russia was actually a third world country with a first world army. Aggressive? Yes. Dangerous? Yes. Warlord? Yes. But the rivalry was really a one-sided contest between Russia’s bloated, poor, creaking, stifled centrally planned system and America’s ever-evolving, dynamic, rich, energetic model that took full advantage of the benefits of a free and capitalist system.

This disparity in resources and real strength, now so obvious, raises an interesting question: How did the Soviet Union deceive the Western democracies into believing that they had the capacity to potentially control the world? Studying the history of the Cold War is an interesting exercise. The opening of old Soviet records reveals much that contradicts the widespread thought of the time. Distilled, the Communists perfected a form of hyper-public relations (propaganda) designed to instill fear in their own population while instilling fear and compliance in the satellite states they maintained and occupied under military might. Russia’s Western enemies were constantly forced to respond to threats, accusations and bullying. Yes, the Russians were classic schoolyard bullies!

The Potemkin-type steps and guises the Russians took on to appear bigger, tougher and more capable than their reality was a very clever strategy. The ability to appear bigger than you are is a time-tested strategy. It’s a strategy I’ve used for myself and for many clients to position products, inventions and small businesses for maximum leverage in campaigns to outwit and confuse much larger competitors.

Why do larger companies, countries and companies allow themselves to be bullied and outmaneuvered by smaller or weaker enemies? How did the oppressed Russians fool the all-powerful US and its allies for decades? How can small businesses and entrepreneurs manipulate markets and large corporations to respond to perceived but unproven rumors or reality?

I believe the answer to these questions is contained in the very elements that emerge after successful businesses mature. Success and maturity typically shrink the invention. Energy and ambition are not so highly valued. The entrepreneurial spirit can create fear in large organizations. Profit, cash and donations dampen the need to be inventive. Waste is often tolerated after success. Why? Because urgency and leverage are often mitigated when companies get fat and happy.

How did Coca-Cola miss the bottled water business opportunity in the first place? How did the US miss the obvious signs of ultimate Soviet implosions? Why has WalMart, 30 years ago a start-up, displaced Montgomery Ward, WT Grant, Woolworth, Kresge and many other established retailers? Why was FEMA so incompetent during Hurricane Katrina, while FedEx, Home Depot, and WalMart were so much more successful in providing timely service and aid? In every business category, we see young, energetic market leaders who have leapfrogged mature but are emerging with older competitors.

The Soviet Union was very competitive with the United States in the race to outer space. Using inferior equipment, the most basic technology and primitive logistics, the Russians nevertheless maintained an active space program. The US space program was blessed with amazing levels of funding, pristine facilities, and a military/industrial/scientific support complex unlike any other in the world. Still, they were more than competitive despite the huge disadvantages the Soviets faced. They had to be. They had no margin for error or waste.

A perfect metaphor for the difference between fat, happy and wasteful and lean, creative and thrifty is the evolution of the space pen. The simple act of writing in the zero-gravity atmosphere of outer space was actually quite a challenge. The National Aeronautic and Space Association (NASA) attempted to perfect such a writing instrument without success. Contracts to develop and produce such a tool were let out on several occasions. However, none of the prototypes offered could withstand the effects of gravity, extreme propulsion and weightlessness, all of which occurred inside the closed environment of the space capsule. Millions of dollars were spent in the pursuit of a custom space-specific writing instrument.

When the Soviet Union fell and the two countries began space cooperation, an interesting discovery was made. American scientists asked their Soviet colleagues what they used to write in space. The Soviet response: “A #2 pencil”. The Soviets did not have millions of rubles to waste. They returned to a simple common sense response to a basic need. Americans were able to spend millions pursuing an obtuse technical solution to these simplest of problems simply because they could. The money, though wasted, was of little importance in the vast financial schemes and to NASA and the federal government.

This small example is not unusual or an aberration. Waste is a problem whenever big, lead-footed companies are confronted by smaller, hungrier, more nimble adversaries. This is the natural advantage of the entrepreneur. The space pen model is repeated every day as entrepreneurs rush to fill voids left or unnoticed by large, successful companies.

My consulting firm, Duquesa Marketing, Inc. works every day with entrepreneurs to adapt the strategies needed to nimbly overcome the effects of size and maturity. The successful entrepreneur sees the No. 2 lead pencil as an obvious answer to the problem of butt pens. Seeking and achieving simple solutions to real or perceived problems is why there will always be a successful inventor class.

Contact Geoff Ficke, gficke@msn.com, tel. 407 260 1127, to discuss this article or any entrepreneurial case of interest.

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