Cargo Cult Strategy

During World War II, natives on Pacific islands saw something most unusual. Strange men appeared, cleared long strips of land and built structures decorated with flags. Some of these men wore large cups over their ears, while others waved sticks and, almost magically, machines appeared from the sky carrying valuable cargo.

After the war ended, the men left and the supplies stopped coming. Some of the natives formed cargo cults which copied many of the the rituals the soldiers performed. They marched in formation, wore cups over their ears and waved sticks around. Alas, no airplanes ever came.

Clearly, the idea was patently absurd. Anybody who thinks that waving sticks will cause airplanes to appear is missing some basic principles about how air travel works. Yet many modern executives also believe by mimicking the tactics of others they will somehow achieve the same results. These “cargo cult strategists” don’t do much better than the islanders.

How Siri Got Left Behind

In a recent column, longtime tech journalist Walt Mossberg complained about the ineptness of Apple’s Siri personal assistant. “So why does Siri seem so dumb?” he asked. “Why are its talents so limited? Why does it stumble so often? When was the last time Siri delighted you with a satisfying and surprising answer or action?”

Mossberg seems not only exasperated, but surprised. He shouldn’t be. The truth is that Apple thrives in engineering and product design, not developing cutting edge technology. It lacks the skills and resources of firms like IBM, Google, Microsoft and Facebook, who lead in artificial intelligence. It also has cultural constraints that make it difficult to compete in emerging areas.

While Apple is famously secretive, the firms that thrive in AI take a decidedly more open approach. IBM recently formed a Cognitive Horizons Network to collaborate with top academic institutions. Google open-sourced its library of machine learning tools, TensorFlow. The top AI companies also regularly publish their research openly.Despite its recent decision to publish its research, it’s hard to imagine Apple matching the same level of openness Google, IBM and others.

To get access to the most talented scientists and cutting edge research, you need to take a collaborative approach. For Apple, which built its business surprising competitors with “next big thing” products, that’s a tall order. The big question about Siri isn’t why Apple is failing, but why it is competing at all. It would probably be better off finding a partner to work with.

Why Blockbuster Really Failed

By 2004, it was obvious that Blockbuster was in trouble. Netflix, a fledgling startup that eschewed retail stores in favor of mailing movie rentals to its customers, was quickly gaining ground. Clearly, Blockbuster CEO John Antioco and his team needed to do something quickly to respond to the disruptive threat.

So they formulated a strategy to meet the challenge head on. Blockbuster created an interactive unit that built a sleek website and abandoned the late fees that annoyed its customers. It also launched a new product offer, called Total Access, that gave customers the convenience of renting by mail a movie and then returning it to a retail location.

Before Blockbuster was gaining ground, but other problems soon surfaced. Its franchisees worried the online business would cut into their sales, while investors balked at the heavy costs of building the online platform and eliminating the late fees. In the end, Antioco was fired and the new CEO abandoned his strategy. The firm went bankrupt in 2010.

The executives at Blockbuster understood the Netflix threat and built a viable strategy to compete. What they did not understand was that, unlike Netflix, they were not a startup. They had investors who expected consistent profits and franchisee partners that depended on revenues for their incomes. That was the part of the Netflix model they couldn’t replicate.

IBM Is Not A Lean Startup (And Probably Never Will Be)

IBM created and then dominated the machine tabulating industry, but was outfoxed by Remington Rand, which built the first commercial digital computer, Univac. Then it completely missed out on the minicomputer revolution while firms like DEC, Wang and others prospered. After IBM created the PC revolution, Compaq and others went on lead it.

Remington Rand, DEC, Wang and Compaq all have two things in common. They all were leaner and faster than IBM and they are all out of business today. IBM, meanwhile, remains the big, slow company it always has been and earned $15 billion on $80 billion in revenues last year.

One reason that IBM continues to thrive, despite the inevitable ups and downs, is that it knows what it is. It is not lean nor is it fast. It is not always even particularly smart. Like most companies, it has made some foolish mistakes. What is does have is deep client relationships and a Research division that has more Nobel Prizes than most countries.

Today, IBM does not directly compete with companies like Google, Apple or Facebook in areas like search, mobile or social networks. Rather, it’s betting its future on cognitive computing, It is also investing in new computing architectures, like quantum computing and neuromorphic chips. These are all areas where it has considerable advantages.

Unlike Apple and Blockbuster, IBM follows a strategy that is built to fit its unique capabilities and culture.

Understanding Strategy, Capabilities And Culture

Every organization can benefit by learning about the best practices of others. Certainly, Apple needs to find a way to compete in a new cognitive era that advances in artificial intelligence are bringing to the fore. Blockbuster’s management team was smart to borrow tactics from Netflix. IBM should try to be as agile as it possibly can.

Yet at the same time, we also must accept certain realities. Apple does not have the organizational culture in place to explore scientific horizons. It never has. Blockbuster, as a public company with thousands of investors and franchisee partners, had limitations that Netflix didn’t. IBM, with nearly 400,000 employees, will never be as nimble as a startup.

It makes no sense to build an airfield, without learning how to build machines that can fly first. In much the same way, you can’t expect to adopt the strategies and tactics of another organization and enjoy the same success, without building the capabilities and culture that will make those tactics effective.

In Good Strategy / Bad Strategy, Richard Rumelt wrote that good strategy “brings relative strength to bear against relative weakness” and that’s undoubtedly true. Yet far too many managers today are merely adopting the strategies that someone else made successful. They are, essentially, cargo cult strategists.

– Greg