The Flier

In the last entry, I wrote the following: “you cannot beat your competition by simply following them, nor can you win by doing the wrong thing.” The latter is a very questionable and debatable statement. Without getting too philosophical, doing the “right” or “wrong” thing is in the eye of the observer. Simply put, what is “right?” What you consider right may be wrong to someone else and vice versa. It can be tricky to figure out which choice to take, let alone when to take it! This article provides a perspective on how to make the decision.

Sailing

Put yourself in this situation: You are in a race with 10 other boats, everyone is heading towards the finish line on the left side of the course, and you are in last place. In this situation, there is little risk in going to the right side of the course because you have nothing to lose. Sailors call this move “the flier” and it is an easy call to make in this situation.

Now how about the same situation, except, you are in third place instead of last place. This is a far tougher decision to make. Generally, staying with the competition will likely yield a finish in the same position, third (or close to it). However, if you goal is first place without question, is it worth taking the flier? Are you ok with a third? This is not as clear of a decision as in the first situation.

It ultimately comes down to balancing three questions: 1) Where am I relative to this race’s goal & the competition? 2) Big picture, where do I need to finish for success (do I have to finish first in this race to win the overall regatta)? 3) Knowing what I know now, what is the likelihood of success in abandoning the current strategy?

One could call it a risk vs. reward calculation; however, I frown on that because it misrepresents “reward” in not taking the current position or big picture into consideration. In addition, risk vs. reward plays up the desperation sailors can feel in the heat of the competition, which is precisely what the sailor needs to avoid when considering his or her options.

Again, I wish I could build a blueprint on when to do what in a sailboat race. Every race is different; every situation requires independent consideration. Experience with the racecourse, competition, and conditions help the sailor in this balance. Unfortunately, the past does not equal the future. (It would be so much easier if that were true!)

Business

Sailors have a line that they would “rather be lucky than good.” Napoleon, when told the virtues of a new General, skill in battle and so on, he would ask "that's all very well, but is he lucky?" Why the quotes about luck? Academic research (apologies but I cannot find the reference at this time) shows that luck and information play almost equal parts in a corporate strategy (if memory serves, it is a 53/47 split). Think about that for a moment… no matter how well prepared you are, about half of the success you may incur comes purely on chance.

Take, for instance, Tyco’s “Tickle Me Elmo” toy from 1996. It was by no means a revolutionary toy. It became the fad of the Christmas season; stores sold out in October. In rare instances, people paid over $1,000 for the toy when it sold for about $30 retail. No one, including Tyco*, and a certain toy store employee at the time (me), could predict the toy’s incredible success. In this case, Tyco took a bit of a chance with a new toy (not even a radical departure or a “flier”) and won big. * - I am merely guessing that Tyco did not predict that kind of success; had they, I suspect they would have increased the price to match demand or had more available to cover the rush.

Alternatively, consider the case of Sony with its Playstation 3. It followed the “traditional” video console development track…Sony made an evolutionary jump with its core systems, providing much faster math/graphic calculations, allowed the unit to read blu-ray disks (a tie to its video distribution division), added a hard drive… in-line with the Microsoft Xbox 360, the main competition at the time. This development track was the “proper” or “safe” move, except Sony overlooked the competitor Nintendo. Nintendo focused on a different demographic, targeting a younger and less realistic-seeking audience. Sony (and Microsoft) missed the appeal of Nintendo’s new controller that allows users to interact in a completely new way with their video games (e.g., they can swing a tennis racket or a golf club naturally and the system recognizes those motions). More than just Nintendo’s target audience liked the controller. Now Nintendo is in the lead of the demographic Sony coveted (and thought it locked). A “flier” on Nintendo’s part achieved an amazing victory.

Combining Sailing and Business

In business, ‘Critical Mass’ says that the greater the lead or command of a market, the harder it is for a competitor to take your direct customers (e.g., eBay). In sailing, with a large lead, you would need to make many severe mistakes for following competition to pass.

This means that in both business and sailing, the stronger the lead, the more likely the competition is to take “fliers.” When applying the three sailing questions, the competition cannot follow. Who knows, they just may get lucky.

In both sailing and business, the lead can change almost instantly, no lead is insurmountable. Never rest on your current position alone while in the lead; always be examining the competition for who is attacking you next and prepare for it.

Deciding when to take a “flier” is of course risky. There are many instances when the move fails. Sometimes internal factors cause the failure, such as if the crew or employees are not ready for the change (another article of its own). By following the three questions, the firm or boat should be in no worse condition in the big picture than where they started.

The Crossing, Part 1

I thought I would start by explaining the title of the blog… the Tack or Cross decision.

Sailing

Imagine two cars at a four-way intersection next to one another. Each driver knows where he or she is going and crosses one another by yielding, turning, or going straight to their destination. Simple.

This is not as simple in sailboat racing because both boats have the same destination. Boats will impede others so they can finish ahead. There is no better time to impede another boat then when you are right next to them.

When boats cross one another, each boat makes a choice if they want to keep going straight (cross the other boat), turn to follow the other boat (tack), or perhaps force the other boat to turn (could mean either a tack or a cross). In making their choice, a sailor makes a quick assessment:

• Where is the opponent going?
• Why are they going there?
• Do I want to follow them that way?
• Do I want to keep going my present course?
• Can I force them to go the wrong way?

In the midst of answering these questions, one must consider the following: you cannot beat your competition by simply following them, nor can you win by doing the wrong thing.

A sailor can come to a quick conclusion on how to handle the crossing by using this framework. This framework allows them to focus on the decision at hand; to ask themselves these, and only these questions, so that other factors do not cloud the decision process. He or she may not make the right choice; it is a game after all. With time and experience, the better the sailor becomes at making these decisions.

Business

Now shift your focus from boats to companies. A manager or firm constantly comes into contact or “crosses” the competition with new products, services, and offerings. They make many decisions and they, much like the sailor, can get easily bogged down with extraneous information.

Here is a real example of a business crossing: imagine that you are Motorola. You will unveil your new product, the Razr², in eight weeks. Suddenly you hear that Apple released a new product, the iPhone. The iPhone has a revolutionary touch screen that is not on the Razr². The iPhone is an instant success. Motorola now could ask themselves some difficult questions:

• Does Motorola want to follow Apple and add a touch screen?
• Should it continue with the release, believing that the Razr²’s features differ from the iPhone and that it will be successful on its own?
• Can Motorola discredit the iPhone by demonstrating its lack of 3G and other features?

If you notice, the questions that Motorola could consider are similar to the questions considered by the sailboat racer in a crossing. A crossing can cause a lot of indecision and second-guessing for some firms or cultures. By applying the framework, a company in this situation can quickly devise a plan on how to react and not go astray from the decision at hand.

Combining Sailing and Business

To me, a sailor's racecourse and the marketplace are the same. Therefore, for business, the framework applies to more than just this real-world situation... As Newton said, objects remain in motion until acted upon by an outside force. This framework applies to most decisions where an outside force affects your current course, whether in sailing or in business. Any manager or sailor can use these framework (even if modified) to focus only on only what they need to make the decision.

Some of you may be thinking that decisions are not this simple, that some decisions require larger considerations. While I agree, I believe that in the majority of decisions, we tend to add complexity to where it is unwarranted. However, certain crossings do require consideration of the big picture. I plan to discuss those types of decisions in part two of this thread, to come later.

The Beginning

I believe that sailboat racing provides frameworks and strategies to handle a myriad of business problems. I created this blog to prove just that.

I write this for everyone in the business world. Even if you are an experienced manager, this blog may shed new light on an existing topic. However, management is an art, not a science. You will not see many “how to” statements, rather it is upon you, the reader, to understand the topic and apply it in your own way.

Do not worry if you have no knowledge of sailboat racing. You will not need it.

I hope you enjoy it.

-Mike