STRATEGY FOCUS

On Einstein, Newton and Satchel Paige

EINSTEIN

"…[W]e are led to the…conclusion that the mass of a body is a measure of its energy content…"
"[A body's energy of motion increases its apparent mass…]"

from Annalen der Physik, and as paraphrased by Nigel Calder in Einstein's Universe

"Science is a wonderful thing if one does not have to earn one's living at it."

http://www.eaze.net/~kelly/gekelly/einstein.html (19 May 2000)

NEWTON

"Every body continues in its state of rest, or of uniform motion…unless it is compelled to change…by forces impressed upon it…"
"The change of motion is proportional to the [magnitude of the] force impressed; and is made in the direction…in which the force is impressed."
"To every action there is always opposed an equal reaction…"

from Philosophiae Naturalis Principia Mathematica

SATCHEL PAIGE

"Age is a case of mind over matter. If you don't mind, it don't matter."
"Don't look back. Somebody might be gaining on you."

on "How to Stay Young" http://baseball.collegeinsider.com/century_paige.htm (29 Dec. 1999)

NEW AND OLD COME TOGETHER

Looking back, the Time Warner/AOL merger announcement was a watershed moment within the Internet revolution. The old world of energy from physical mass joined forces with the new world of energy from high speed.

Each needed the strengths of the other. Massive Time Warner acknowledged that it had to alter its direction and accelerate change. "Smaller" AOL saw that securing new revenue sources meant converting some speed into mass (content, brands, Time Warner's cable network).

THE OLD WORLD FIGHTS BACK

Time Warner has realized that it had to imbed the Internet in its corporate soul. Other old-world giants are making similar transformations.

  • Merrill Lynch announces aggressive initiatives to overhaul itself from one end to the other. With assets unmatched in financial services, CEO David Komansky commits to "turning the world upside down…"
  • Wal-Mart, Macy's, and CVS commit to new web initiatives. As e-tailing stocks plummet the retail world sees the power of linking online companies with the old world's assets and profit-making cultures.
  • Pillsbury, Kellogg, and General Mills announce investments in Webvan, an unprofitable online grocer.
  • Webvan's CEO senses the power shift to models based on physical assets, management depth and traditional profits.
  • Jack Welch suggests the dot-com craze is about nothing more than people "trying...to jump into the middle between the supplier and the customer." Noting GE's immense resources, he vows that no one will do that to GE.
  • In her crusade to reinvent Hewlett-Packard, CEO Carly Fiorina challenges employees to expand equipment and e-services businesses in the internet world. She notes HP has the assets to be "almost unbeatable."


BACK TO REAL WORLD QUESTIONS

The financial community is reverting back to familiar questions. Are customers willing to pay a price exceeding total costs, and do it more than once? "No" answers usually mean success is unlikely.

  • Peapod, Inc., another online grocer, loses its CEO as refinancing efforts collapse. With a flawed business model and no clear path to profitability, Peapod seeks an offline acquirer.
  • The stock of Red Hat, Inc. plummets amid widening losses. With too few potential customers apparently willing to abandon Windows, Red Hot looks for a stronger partner.
  • E-tailer Value America receives a going-concern opinion while new management struggles to develop a plausible strategy. It had taken awhile for the folly of no inventory, no fulfillment, no research and inadequate systems to overtake the founder's empty salesmanship.
  • With losses exceeding revenue, Silicon Alley's iVillage reportedly seeks deals from anywhere as the COO and CFO resign amidst crippling employee turnover.
  • Various sources chronicle more than a dozen high-profile dot-coms that are no longer defying gravity. The common lesson is that a sustainable business requires more than a website, some technology, and an initial infusion of cash.
  • Another net backlash begins as disenchanted employees start leaving dot-com employers, many returning to their former old-world companies. Some cite voids in fundamentals as reasons for their counter-defections.
  • Other leading net companies, including Yahoo, announce investments in physical assets and old-world brand-building strategies.


THE MYTHICAL E IN STRATEGY

In their strategies for net-age dominance, Welch and Fiorina emphasize old-world fundamentals as critical to success:
  1. strategy (customer relationships, quality and service, brand and product development, research, facilities, cost management) and
  2. organization (accountability, innovation, values and heritage, people development). To have an e-strategy, one must have a strategy.


LUFTHANSA

Lufthansa's customers were clamoring for a new service model, made possible by the airline's strong brand, existing service reputation, talented infrastructure, and advances in digital technology.

A team of marketing, customer service and IT experts redesigned the customer travel management process, extending it beyond payment processing to encompass travel planning, routing and scheduling, new service development, and information sharing. The result was more hands-on customer control of the relationship process.

Successful execution would require a unique organizational strategy, deriving its energy from both the mass of the old and the speed of the new without excessive resistance from traditional customer service functions. Management chose to spin-off the new entity into a separate company with a venture capital partner. Einstein and Newton would have understood completely.

ENVIROQUALITY ASSOCIATES

A roll-up of seven companies in the environmental services industry, newly-named EnviroQuality Associates was poised to serve industrial and commercial customers through a dozen facilities and a formidable sales force. The CEO believed greater mass and stronger finances would mean operating efficiencies and lower client transaction costs, better capacity utilization, greater market coverage, cross-selling synergy and talent depth.

Initially the "Integration Team" began discussing possible e-commerce strategies only to have trouble perceiving opportunities through a common lens. Despite the greater physical assets, the new entity lacked a "corporate soul" – no shared history nor value system, no common definitions of success nor practices, no agreed-upon ways to share experiences and transfer knowledge. EQA quickly turned its e-business attention to building an intranet to strengthen the Company's human capital. Focused on case sharing, historical data analysis, standards creation, tracking formats, customer database consolidation, technical and leadership training and overall communication, the process itself spawned a new culture, with little resistance from the old.

STRATEGY, ORGANIZATION AND TECHNOLOGY

"Digital technology" has joined "strategy" and "organization" as essential elements to all new-world strategy development. Often technology is the easiest, with organization almost always the most difficult. Consider a few implications, not all of which are new.

  • The CEO (not CIO) must drive strategy in the Internet age. Digital science alone is neither unique nor likely to create sustainable competitive advantage.
  • However, do not mistake dot-com failures to mean that the Internet per se is not an irreversible force to be reckoned with. To someone at rest, the mass (thus energy) of a body moving at very high speed appears to be increasing while distance is shrinking. Watching from the grandstand is no place to be.
  • Change doesn't happen by itself. At best, the "status quo" happens. More likely, silent drift is followed by rapid deterioration, all caused by outside forces controlled by others.
  • Forceful leadership is critical to moving a massive organization in a new direction quickly. What makes GE so special is Welch's understanding that GE's mass only represents "rest" energy, unless he can deal with Isaac Newton. Hence his comment to Fortune, "[W]hen we turn, we know how to go..."
  • Newton's third law says it is natural for something to "be gaining on you" all the time. So, "not looking back" really means taking responsibility for one's own destiny. It's about not being paralyzed by the past and being proactive about the future.
  • At the same time, this doesn't mean turning one's back on what is good about the past. Hewlett-Packard's new promotional campaign looks forward by harkening back to the company's legendary "garage inventor" origins.
  • "Thinking young" has always been a part of transformational leadership, no matter what the century. At age 84, a reflective Isaac Newton likened his contributions to those of a small boy playing at the seashore.


PERSONS OF THE CENTURIES

In naming Einstein and Newton "Person[s] of the Century" (20th and 17th, respectively) Time noted the transcendental impact of each's discoveries. Whether it's that the capacity to do work is interchangeable with mass, or that exceptionally high speeds change one's perception of mass, distance and time, or that it takes force to change something, or the familiar "for every action there is an equal and opposite reaction" – the implications extend well beyond physics and mathematics.

And then there is Satchel Paige. The child-like showman named a "Top 100 Athlete[s] of the Century" (#63) by ESPN, his legacy includes longevity, the will to press ahead despite obstacles, and the ability to back his words with performance.

In an era obsessed with technology, speed and stock prices, an equal and opposite reaction is to occasionally reflect back upon timeless lessons from larger-than-life people. Think of "E, N and SP."

The EQA vignette is a fictionalized adaptation of a real situation.

Norelli & Company thanks its alliance partner Dr. Böhmer, Uhrig & Partner of Frankfurt, Germany for the material for the "Lufthansa" vignette.


REFERENCES

Anders, George. "Several Food Companies to Join Webvan In Online Grocery-Marketing Effort." The Wall Street Journal 25 Jan. 2000: B4.

"Back in the Real World." The Economist 21 August 1999: 13.

Byrne, John A. "The Fall of a Dot-Com." Business Week 1 May 2000: 150-160.

Calder, Nigel. Einstein's Universe: Relativity Made Plain – the Amazing Achievement of Albert Einstein and What It Means Today. New York: Crown Publishers, Inc. 1979.

Christianson, Gale E. In the Presence of the Creator: Isaac Newton and His Times. New York: The Free Press, 1984.

Clark, Ronald W. Einstein: The Life and Times. New York: The World Publishing Company, 1971.

Conlin, Michelle. "Give Me That Old-Time Economy." Business Week 24 April 2000: 99-104.

Golden, Frederic. "Person of the Century." Time 31 Dec. 1999: 62-65.

Green, Heather, et al. "The Dot-Coms are Falling to Earth: Investors are Fleeing Consumer Companies." Business Week 17 April 2000: 48-49.

Levin, Gerald. "The Market Age Begins." The Wall Street Journal 12 Jan. 2000: A22.

Little, Darnell. "Peapod is in a Pickle: The Online Grocer May be the First of Many E-tailers to Falter." Business Week 3 April 2000: 41.

Morrow, Lance. "The Millennium: 17th Century - Isaac Newton." Time 31 Dec. 1999: 174-179.

Nathans Spiro, Leah. "Merrill's-Battle." Business Week 15 Nov. 1999: 256-268.

"Red Hat's Red-Hot Shares Doff Their Sky-High Prices." Business North Carolina May 2000: 12.

Schlender, Brent. "The Odd Couple." Fortune 1 May 2000: 106-126.

"The Big Leap." The Economist 15 Jan. 2000: 17-18.

"The Net Gets Real." The Economist 15 Jan. 2000: 22-24.

"Wake-up Call for HP." Technology Review May-June 2000: 94-100.

Weintraub, Arlene. "Dot-Coms Get Physical: To Build Their Brands, E-tailers Are Venturing Off the Web." Business Week 22 May 2000: 110-113.

Wingfield, Nick, and Lublin, Joann S. "Losing Money, Staff, iVillage Ponders Future." The Wall Street Journal 1 May 2000: B1, B10.


Orchids & Steam Shovels Part II

Orchids & Steam Shovels Part I

Entropy

At the Speed of Light

On Einstein, Newton and Satchel Paige

New Centuries, Mighty Dreams

Exceptions and Expectations

The Morning After

New Paths...
Worn Paths

Old Values in a
New Era

Procrastination and Consequences
Part I

Procrastination and Consequences
Part II

All in the Family
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