“Ok, so what should multinationals do?” asked my friend. I had just made the audacious claim that revolutionary warfare and Counter Insurgency (“COIN”) strategy contain important business lessons. Here’s why: modern warfare has fundamentally changed and so has business competition.
Before, it was mostly “symmetric”. P&G up against Unilever. L’Oréal versus Beiersdorf. BAT versus Imperial Tobacco. NATO versus the Warsaw Pact. All in all: similar type of organizations, promotion and reward policies, massive budgets, clearly drawn lines and a rather well-defined rulebook (style: “how to make great TV ads”).
Nowadays, a lot of competition is “asymmetric”. These newcomers are different from big multinationals: different cultures, small budgets (hence “asymmetry”), flexible organizations and maverick rules of the game.
In case you are not convinced: Start-up Juul took 75% of the US e-vapour market and outclassed “the big four” Tobacco giants. That start-up sold off a 35% stake to Altria for a whopping $12.8bn (plus a sweet $2bn extra to pay as bonus to employees).
Beiersdorf’s CEO announced volume pressure on key brand NIVEA because of niche brands eating into the franchise. These “niche” competitors now account for 40% of the European skin care market. Beiersdorf’s stock price promptly decreased by 10%.
Big food gets hit by bio and vegan products. Food entrepreneurs are creating massive disruption. Kraft Heinz just took a $15bn write down.
Beer companies face stiff competition from microbreweries and specialty brands. Craft beers already account for 23% of the total US market. Whilst growth rates recently slowed down, they are still better than the industry average.
“Digital!!!” Sure, it’s a critical enabler but it is not at the root of the insurgents’ success.
What drives their business is a CAUSE: better food, healthier drinks, fair trade, authenticity, a smoke free world, no animal testing.
Check out all successful insurgency movements: they always had a cause that created a movement (independence, re-union, equality,…).
How to respond?
1- You need a cause as well. More spending is not the answer.
It is said that generals always fight the previous war. That is incorrect. Generals and armies compete according to their doctrine. Corporations do exactly the same. For the US Army that doctrine was “firepower”. It served the free world well in WW2. But not in Vietnam, nor in the Iraq insurgency.
Equally, enhanced firepower in the shape of more GRP’s, TV spending and promotions is not a winning strategy. You need to either embrace the cause or find an alternative cause. A new doctrine is required.
Consumers want a different type of product and brand values that resonate with their own. Ultimately, it does come down to being in touch with consumers and culture.
One can do an acquisition, i.e. buy the cause. But that is not without risk because consumers might see it as selling out. It’s important to ensure that the cause does not lose all credibility. One way might be to keep the acquired brand at arm’s length and to give enough freedom.
Elysian Brewing Company's original brewpub in Seattle faced trouble as soon as the sale to the world's largest beer company, Anheuser-Busch InBev, was announced. People bought beers and dumped them on the floor. Then they stalked out the door and into the city's Capitol Hill neighborhood in search of a real craft beer from a real craft brewery: a locally owned one that hadn't "sold out".
Also, there is always the risk that the acquired brand quickly gets forced into the mould with most of the acquired employees resigning.
2- Agility is critical. You cannot win without a learning organization.
The key feature is learning agility. The world is VUCA (Volatile, Uncertain, Complex and Ambiguous). As a result, your knowledge base loses relevance faster than in the past. Digital does speed things up. You must “learn to learn”. Other aspects of agility include the ability to come up with new ideas, effectiveness across cultures and self-awareness (i.e. do others rate you as you rate yourself?)
The entire organization needs learning agility if they do not want to be left behind in the dust by smaller, nimbler competitors.
Massive simplification across the board and LEAN principles (value, value stream, flow, pull, and perfection) are also valuable. One of the critical ones is to empower the frontline. Regretfully, some multinationals have gone the exact opposite way, introducing Byzantine matrix structures (where all have the right to say no, but nobody has the right to say yes) and a love affair with centralization in the name of productivity.
3- It’s tough: build the resilience of the organization.
T.E. Lawrence (“of Arabia” fame) said that any counter strategy is like “eating soup with a knife”. In other words, it can be long and hard.
The organization hence needs to build resilience. Do remember that enthusiasm is easy to create, but staying in power is not. Interestingly, a cause is the key driver of determination. It is important to work purpose, energy and anti-heuristics to stiffen resilience.
4- Embrace the mavericks.
In big corporations, being called a maverick is often the kiss of death. Labels range from rebel, disloyal, “does not believe in what we do” to “a horse for a course” (meaning: “we can never trust this person to run an important piece of the business”).
This is based on a misunderstanding: mavericks do not disagree because they have a “difficult” personality, nor are they any the less loyal. They argue against a given course because they think the plan is not good enough, or because they passionately believe there is a viable alternative.
It’s good to hear them out: they might have a point. They provide “diversity of the mind”. Consider also that they have the courage to speak up (whereas many others save their dissent for ad-hoc meetings behind your back, next to the coffee machine).
Important note: arguing and doubt are acceptable at planning level. However, once a decision is made and one moves into execution, the chain of command must be respected. Then it’s all systems go.
An interesting anecdote: COIN (counterinsurgency theory) was not taught much in the past. Those who wanted to learn about COIN during the 2003 Iraq insurgency had to make do with a couple of books only. One of the key sources was … a French novel from 1960: “The Centurions” by Jean Lartéguy.
What if one of your reports said that your strategy was wrong and that a far better answer to the business issue was to be found in a French novel?