It is not over until you actually cross the finish line

I wanted a quick break the other day.  I looked up exciting match races, and the first hit on YouTube was the finale to the 2007 America’s Cup: Alinghi v. Team New Zealand, Race 7 with Alinghi up 4-2 in a best of nine series.

I fondly remember watching that race live.  I “happened” to be “working” from home that day.  Alinghi was slightly faster and had slightly more point, but Team NZ got a lead early in the race and was doing their best to use tactical positioning to preserve a narrow lead.  Team NZ made a critical error mid-way through the race, gave up the lead, and drew a penalty turn that they would owe sometime before the finish.  Ever the competitors, heading downwind on the final leg, they hung in there.  You never know.

Ray Davies, tactician onboard Team NZ, noticed it first.  He saw a 90deg wind shift coming and the wind starting to die.  I have queued up the race to the key point, so you can watch it yourself.  

Ray mobilized his crew: get the jib hooked up and prepare to drop the spinnaker.  The commentators did not recognize the wind shift at first; they thought Team NZ was going to do their penalty turn early (essentially conceding the race).  The shift came in, and Team NZ was ready.  The wind caught Alinghi so off-guard, they ended up breaking their spinnaker pole.  Alinghi was scrambling, secure the pole, drop the now useless spinnaker, get a jib hooked up… must have felt like hours.  I started yelling at the screen, thinking how could they mess up like that?!  Meanwhile, Team NZ passed Alinghi and built up a lead; big enough that it seemed possible to do their penalty turn and win the race – but barely.  By this point, I was apparently making so much noise that my roommates came to check on me; thinking I was injured or something.

All Team NZ had to do was get to the finish line, make their penalty maneuver (which would kill their boatspeed), and cross the line.  Meanwhile, Alinghi had recovered, and was heading to the finish line with as much speed as possible.  Then I noticed Team NZ started their turn early… I was yelling at the TV – “No no, don’t rush it! You’re gonna blow this opportunity!” and other colorful words that I will not use here.  This could be a potentially disastrous mistake (explained in the appendix).  Just how much speed and distance did Alinghi have to the finish line?  How quickly could Team NZ recover from the penalty turn and cross the line… My rooomates told me to shut up; I replied with more profanity.  This was going to be a race determined by inches or milliseconds.  I would hate to have been the person calling the finish line, but there it was… Alinghi just squeaked out the win.  I heard similar profanity from Team NZ’s boat when they realized what had happened.

I honestly feel bad for Team NZ.  Losing a race that closely is awful.  Psychologically it is sometimes easier to lose with a bigger margin; you know you did not have a chance.  To lose by milliseconds, well you can think of hundreds of examples where you could improve that little bit.

Even if Team NZ had won that race, Alinghi was the faster boat; it is likely she still would have won the cup.  That said, wow, did it make for one of the most exciting finishes in America’s Cup history.

Both teams made key mistakes in the closing minutes that could/should not have happened.   Alinghi had no plan B.  Team NZ did not remain calm right at the end.  Both are key lessons for both sailing and business!

No Plan B

Alinghi was resting comfortably with their lead, heading to the finish.  Not sure if Brad Butterworth just missed the wind shift, or just started picturing hosting the Cup too early.  In either case, he was not preparing the team for any eventualities that might occur.  There was no jib in place, no Plan B for anything else to occur.  Given how close the finale was, this mistake could very well have decided things. The lesson here both is to expect the unexpected.  

In business, how many times have you tried to make a sale; everything seems to be going well, all for it to fall apart at the last minute.  You did not expect a competitor to come in with a competing bid.  Similarly, you are going live with a major website like “Obamacare,” only to have major requirement changes thrown at you with two weeks until launch – and you had not expected anything like that.  The lesson is to have responses to potential problems, knowing what to do if things go wrong.  Having a plan saves time, and increases the likelihood for success (or the knowledge to extend things if needed).

Remaining calm at the end

Team NZ, maybe from nerves, started their penalty too early.  Knowing the maneuver would kill all of their boat speed, they needed to execute it as close as possible to the line.  They rushed, did not follow a tested gameplan, and lost because of it.  (More details on the mistake itself in the appendix below.)

I know I am guilty of having done this in my career.  I remember once developing a major new piece of software.  We were a day away from launching it to customers, and a tester identifies a show-stopping issue.  I knew how to fix the issue - it was a quick code change.  What we should have done next was run a good number of tests in that module to ensure that change unknowingly did not break anything else.  In the interests of time, we did not; we just tested the piece I fixed.  We deviated from proper release procedures.  Had that fix I put in caused other issues, well, we would have looked quite foolish.  In this case, we got lucky, all was ok, but we should not have done it. 

There is a joke in project management:  The first 90% of a project takes 90% of the expected time.  The last 10% takes 90% of time as well!  Curveballs, issues, etc. are easy to fix at the onset of a project.  The closer you get to finishing, the harder it is to recover from mistakes.  Having a plan to recover, and executing it, could make the difference between success and failure.

Appendix – The details behind the Team NZ mistake

This is a “simple” time-on-distance problem from grade school.  Say you have to travel 100yds.  If you travel 90yds at 10yds/sec, and the final 10yds at half speed (5yds/sec), that equals 11sec to travel the distance (9sec + 2sec).  If instead you slow down earlier, and only travel 80yds at the faster speed, then 20yds at the slower speed, obviously it will take you longer than 11sec to travel the entire distance.  (In this example, you would travel the distance in 12sec instead of 11sec, 8sec + 4sec.)

What Team NZ should have done is get as close as they could to the finish line, with full speed.  Once they commence the penalty turn, they would lose speed.  Any distance made after the penalty would occur with little to no speed.  

There is a rule in match racing that the mast must be on the racecourse side of the line when executing a penalty.  That should have been the plan, turn when right near that point, but they were nowhere near that.  The video does not lie!

The devil was in the details; had Ray Davies waited even 3 seconds more to do the turn, I know they would have won the race – as they lost by milliseconds.

Short term benefits vs. Long Term Results

For those that do not know much about sailing, a regatta is an aggregate of individual races, akin to golf.  You need to be consistent throughout all races to win the regatta; it is (normally) not one single race that gets you the trophy.  Even if the final race decides the regatta, consistency got you to that point.  If you are doing well in a regatta, with every crossing (see previous posts), every decision, you cannot be sucked into thinking about just *this* race.  You need to do what is best for the long term.  If that means giving up the first place in a particular race, to ensure your key competition does not advance on you, then that is what you have to do.

I remembered this concept a few days ago in the news.  On 5-Feb-2014, CVS Caremark announced that it would no longer sell tobacco products in its stores.  The following morning, I happened to hear Jim Cramer from CNBC talking about the decision.  He disagreed with it, saying that a corporation’s only focus should be on profits.  While I appreciate that a business’ fundamental priority is to generate a return for its stakeholders, there are many paths to do so.  I do not believe that a strict focus on short-term results helps corporations in the long term.

It reminded me of the days when Target was being downgraded in the market because it offered its employees medical insurance and benefits, while Wal-Mart did not.  Analysts asked Target to get their SG&A costs in line with Wal-Mart, and Target refused.  “What’s wrong with offering our employees benefits?”  In this case, Target bet that its move would improve morale, decrease turnover, attract better candidates, and more.  This would in turn lead to increase productivity and therefore would overcome the hit to SG&A.  At first, analysts disagreed.  Eventually unions and governments filed lawsuits against Wal-Mart, and only then did the market react and “allow” Target some leeway to do so.  However, it was only the expensive threat of litigation that convinced analysts to adjust.

I would like to think that Target was correct in the first place: without the threat of litigation, Target would recover the hit to SG&A several times over by productivity.  The problem is that analysts do not account for that kind of intangibles well in their models.  It is simply about the numbers.  If management believe, yes, they’ll take a hit in the short term, and in the long run the benefits will come through in the earnings; well, there’s no way to account for that today.

Another tangent is companies “going green,” and other Corporate Social Responsibility (CSR) efforts.  It may take firms significant capital to move to a “Green” workplace; equipment and facilities that is more expensive than “non-green,” training to be more “green,” and much more.  Ultimately, reducing something like paper consumption might decrease costs, and therefore improve the bottom line.  There is also though the intangible marketing, whereby a consumer might choose a slightly more expensive product in favor of one that does not perform CSR.  

In the above examples, benefits and CSR, both are short-term costs that may/could boost the bottom line in the end.  Mike, what does this have to do with CVS Caremark’s move?  Glad you asked!  The analogy holds true here.  

Yes, in the short run, there will be decreased revenues from tobacco products.  I would argue that the margins on such products are not likely very high, given taxes and competition for such commodity products.  Being fair, it is possible that it will increase the total customer “basket,” that is a customer goes to the store looking for a smoke, and remembers they need milk or something else.  I can tell you as a non-smoker, I go to CVS quite often as it is; I cannot see this being a significant hit.

There is another aspect; CVS Caremark is making it harder for their employees, and their customers to smoke.  The dangers from smoking are now transparent for all; there is no debating it.  By this move, CVS Caremark is taking the very long-term view that they are increasing the medical costs for their employees, and potentially increasing the longevity of its customers.  That, plus the CSR benefits, for not contributing to the growing national concern.

Therefore, Mr. Cramer and other analysts, with all do respects, while I agree with a focus on profits, I do not agree that you must sacrifice all else for the short term.  A balance of short term and longer-term initiatives is key.

I believe that is what CVS Caremark is doing here: giving up the win in this race, to win the regatta.