Tuesday 29 September 2009

Roll over and die

What do you do when a new competitor enters the market? Or a new technology appears on the horizon? Buy it? Copy it? Beat it? What’s the strategy?

Many are listed and debated in business books and MBA classes. One isn’t: Do nothing.

In 9 cases out of 10, the threat would probably self-destruct. In the one case that it’d destroy you, you may be better off committing suicide (not literally, of course). 

Because you may lose if you tried to fight. Even if you won, you may bleed so much during the fight, that the victory would be quite hollow. Also, your margins post-victory may be far thinner than those before the threat appeared.

But don’t you owe it to your shareholders to fight? Not necessarily, if you can convince them that the immortal corporation is nothing but a counterproductive marketing myth to sell shares. (“You will make money eventually. And if you don’t, your grandchildren surely will.”)

Sounds silly. It did to me, until I read what Sir AJP Taylor said about Beneš’s surrender of Czechoslovakia after the Munich Pact. Taylor said (I am quoting from memory), Czechoslovakia lost relatively few people during WW2. States which didn’t surrender, lost far more many.

I just looked up the figures in Wikipedia (not the best of sources, but in cases like this, no source is likely to be reliable). USSR lost 1 in 7; Greece lost 1 in 9, Yugoslavia, 1 in 15… Czechoslovakia 1 in 44. My guess is that most of that came from the Quisling Slovak Republic.

Perhaps surrender shameful in the history of a people. But why should it be shameful in business?

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