Why do big companies incur so much unnecessary waste?
When the Soviet Union fell in the early 1990s and Boris Yeltsin’s government began to promote democracy and cooperation with its former Cold War enemies, primarily the United States, we discovered many surprising and instructive things. It quickly became clear that our decades of fear and competition with the communist titan were based on faulty assumptions. Russia was actually a third world country with a first world army. Aggressive? Yes. Dangerous? Yes. Belligerent? Yes. But, the rivalry was really a one-sided competition between Russia’s heavy, poor, creaky, and stifling centrally planned system and America’s ever-evolving, dynamic, rich, and energetic model that fully utilizes the benefits of a free and capitalist.
This disparity in resources and actual strength, now so obvious, raises an interesting question: How did the Soviet Union fool Western democracies into thinking they had the ability to potentially control the world? Studying the history of the cold war is an interesting exercise. The opening of the old Soviet records reveals so much that it contradicts the widely believed thoughts of that time. Distilled, the communists perfected a type of hyper-public relations (propaganda) designed to instill fear in their own population while engendering fear and conformity in the satellite states they held and occupied under military force. Russia’s Western enemies were continually forced to react to threats, accusations and harassment. Yes, the Russians were classic schoolyard bullies!
The Potemkin-like steps and disguises that the Russians undertook to appear bigger, tougher, and more capable than their reality was a very clever strategy. The ability to appear bigger than you are is a time-tested strategy. It’s a strategy I’ve used for myself and many clients in positioning products, inventions, and small businesses for maximum leverage in campaigns to mislead and confuse much larger competitors.
Why are larger companies, countries and corporations allowing themselves to be intimidated and maneuvered by smaller or weaker enemies? How did the oppressed Russians deceive the almighty United States and its allies for decades? How can small businesses and entrepreneurs manipulate markets and large corporations into reacting to a perceived but unproven rumor or reality?
I believe the answer to these questions is contained in the very elements that occur after successful companies mature. Success and maturity often hinder invention. Energy and ambition are not so appreciated. The entrepreneurial spirit can create fear within large organizations. Profits, cash, and donations dim the urge to be inventive. Waste is often tolerated after success occurs. Why? Because urgency and leverage often dull as companies get fat and happy.
How did Coca-Cola initially miss out on the bottled water business opportunity? How did the United States miss the obvious signs of the latest Soviet implosions? Why did WalMart, a start-up 30 years ago, supplant Montgomery Ward, WT Grant, Woolworth, Kresge and many other entrenched retailers? Why was FEMA so incompetent during Hurricane Katrina, while FedEx, Home Depot, and WalMart were so much more successful in providing timely assistance and services? In every business category we see energetic young market leaders who have outperformed mature but shaky older competitors.
The Soviet Union was very competitive with the United States in the race for outer space. Using inferior equipment, the most basic technology, and primitive logistics, the Russians nonetheless maintained an active space program. The US space program was blessed with staggering levels of funding, pristine facilities, and a military/industrial/scientific support complex unlike any other in the world. However, despite the enormous disadvantages the Soviets faced, they were more than competitive. They had to be. They had no margin for error or waste.
A perfect metaphor for the difference between fat, happy, and spendthrift, and thin, creative, and thrifty is the development of the space pen. The simple act of writing in the zero gravity atmosphere of outer space was actually quite a challenge. The National Aeronautics and Space Association (NASA) tried to perfect such a writing utensil without success. On several occasions contracts were signed to develop and produce such an implement. However, none of the prototypes offered could withstand the effects of gravity, extreme propulsion and weightlessness that occur within the closed environment of the space capsule. Millions of dollars were spent searching for a specific writing instrument for the personalized space.
When the Soviet Union fell and the two countries began space collaboration, an interesting discovery was made. American scientists asked their Soviet counterparts what they used to write in space. The Soviet response: “A #2 lead pencil.” The Soviets did not have millions of rubles to waste. They returned to a simple common sense response to a basic need. The Americans were able to spend millions to find an obtuse technical solution to this very simple problem because they just could. The money, though wasted, was of little consequence in the huge financial machinations of NASA and the federal government.
This small example is neither unusual nor an aberration. Waste is a problem any time big, lead-footed companies take on smaller, hungrier and more agile adversaries. This is the natural advantage of the entrepreneur. The space pen model is repeated every day as the entrepreneur rushes to fill the gaps left or unnoticed by successful big companies.
My consulting firm, Duquesa Marketing, Inc. works every day with entrepreneurs to customize the strategies needed to quickly overcome size and maturity effects. The successful entrepreneur sees the #2 lead pencil as an obvious answer to the space pen problem. Seeking and achieving simple solutions to real or perceived problems is the reason there will always be a successful class of inventors.
Contact Geoff Ficke, [email protected], tel. 407 260 1127, to discuss this article or a business matter of interest.