Roger Martin: commitment

Transcript context

…It's interesting that these capabilities and even the management systems, which is step five, relate to your moat. Which is the thing you need to achieve, also, ideally is the thing that other people, it'll make it hard for them to do. Yep. So, you're exactly right. You can call if you want, how to win, moat, right? Definition of your moat. And so, capabilities and management systems are what both build and maintain the moat, and the maintaining is an important part because if you are the most successful, people are going to say, I want to do that too. But here's where there's this modern, unfortunately, bull shitty thing that says, oh, competitive advantage is fleeting in this modern hyper-competitive world, and you can't have long-term advantage anymore. And I just say, oh, I see. So, Four Seasons, I guess that isn't very long-term, that has only been 45 years now, since they... No, 35 years I should say. Don't exaggerate. Since they went to that strategy. Oh, and Tide. So, 77 years isn't a long time, I guess either, because they've been the number one detergent for 77 consecutive years. I guess you're right, it's fleeting. It's not. But what makes it fleeting is when you have one thing, and one thing only. So, let's say you build the biggest polyethylene plant in the world, near a good feedstock source, and you have the low cost position, what's somebody else going to do when they see how much money you make doing that? Build a polyethylene plant beside yours, twice the size, and then you're toast. Why? Because the competitive advantage was too simple. But at Four Seasons, you got to sell off all your hotels, you got to fire all the people involved in hotel development and everything, and actually, the people in the business like doing that, you have to essentially get rid of your entire staff, start from scratch, paying them more than you do now by far, giving them more career security, giving them more training, giving them better uniforms, whatever, spending 10 times as much hiring them, with the hopes that maybe someday you'll be able to produce the kind of services Four Seasons does. The competitors basically say, life's too short. Do they give up and die? No, there are other great chains, Mandarin Oriental, my wife loves staying in Mandarin Oriental, even more than Four Seasons often. But they've not said, we will replicate Four Seasons, they've said, we'll pick a different where, and a different how, and that's, in the end, what you want. Is rather than complete overlap, where you've got concentric circles of people picking the same where, you convince people to pick different wheres. That's why people sort of say, Roger, how to win, that's so impolitic, because you're producing losers, and then there's victims, and all that. There's oppressor and oppressive. It fits in the modern dialogue. And I say, no, what I want to do is encourage them to find someplace else to prosper, rather than smash on top of us. And so, if you have completely different capabilities and management systems, it'll encourage people to choose a different where to play, how to win. e else to prosper, rather than smash on top of us. And so, if you have completely different capabilities and management systems, it'll encourage people to choose a different where to play, how to win. If your capabilities and management systems are very similar to your competitors, and you're succeeding with your chosen where to play, how to win, what are they going to do? They're going to drive straight to your where to play and try to win exactly the same place and wreck your market for both of you. That's what you don't want. And the more complicated, in some sense... I shouldn't use complicated. The more nuanced and multifaceted your capabilities and management systems are, the more likely they're going to say life's too short. That's what everybody says about Southwest. So, if you're the only airline in the United States that's earning its cost of capital for 50 years, wouldn't you say, gee, I'd love to be like that? But what does it mean? Well, it means selling off most of your aircraft, so that you can have only one kind of aircraft, 737. Tearing up your entire root structure, your entire hub and spoke structure, and make it point to point. Changing your complete labor relations strategy, from fighting the unions to paying them a lot, as long as they're highly flexible. People think Southwest is non-union, it's not unionized [inaudible 01:01:55], but they do different... You have to essentially fire all your travel agents, and convince your customers to book online, by themselves, to save more money. Life's too short, it's just too short. So, they try things like Continental Light, or Ted, that do half the things that Southwest does, and then you're what? A crappy Southwest. So, to me, that's the ultimate. The ultimate is, it's like the ultimate weapon is the one you never use. The ultimate way to compete to win is to never actually be forced to compete.…

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