Why Competitive Advantage is about Profits not Winning. Winning is Not the End Game. Its a bad analogy for business.
"It’s a winner!" the CEO yelled out, "This investment is going to be winner. It's the last inning and we just hit a home run! Growth in a new market is just a signature away!"
Everyone in the room turned to everyone else and then robotically joined in the excitement albeit a little sheepishly because they all had questions. But at the same time they all wanted to be winners. (Don’t we all?)
At the end of the client session, I turned to the CEO and said “Winning is a good analogy to rally the troops but I invite you to replace the word winner with profitable.”
He looked at me and said “You always have to ask THESE questions or have these types of comments” don’t you.
Well let’s examine the thinking behind this; why Winning is not the end game, profitability is.
Why Winning is not the Key
Too often, we see companies searching for bigger-is-better opportunities. True enough growth, size, scale and capabilities through acquisitions all factor into the decision, but it must be based on profitability. Sustain that profitability specificity.
Winning sets up a false and harmful perspective that if you aren’t number 1 or the biggest then somehow in business you have lost.
Consider this graph – who among these competitors is the Winner?
The better question for them and your company – is who is taking home the most profits, building hard to replicate capabilities and is sustainable – a least for the near term.
The fact is we need competitors, dual source agreements and thorns in our side to make business what it is. A process of continually satisfying customers' needs and positioning our resources and capabilities in such a way that they add to how we differentiate ourselves – become unique and value and profitable. Not winners.
All the companies listed are some version of Winners – but it's better to set your business up, your executive team mindset up, and your employees to be profitable – not winners.
You can use the terms as you like – but size, share, EPS and being the #1 something really don’t help your business unless you are profitable.
5 “you need to know the answer to” Questions to Consider:
- Do we really know our Operating Income / EBITDA numbers by Product and Market Segment? (GP doesn’t count)
- Do we use this data to drive our decisions – in the board- room, lunch room and sales room?
- Are we ingraining a profitability mindset into our culture vs a bigger is better and we #1 mentality?
- Do we know why our customers buy or don’t buy from us? ( not the internal dialogue but actually asking them)
- Are you setting up and making critical investments for the future based on sustainable profitability or winning?
If you don’t know or are unsure of the answers to these questions – you might be trumpeting the winner slogan and not even realize it.
Winning is fun, profitability is more fun – as it creates a sustainable business that allows a broader range of decisions and investments to be confidently made by the CEO and Executive team.
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