On December 2, 2008, Alan Mulally was behind the wheel of a “kiwi-green” Ford Escape. That morning, Ford announced it was selling its entire fleet of corporate jets. Now, the CEO was driving the 500-plus miles from Dearborn, Michigan, to Washington, DC. Accompanied by his press aide, two executives, and a security team, Mulally’s caravan sped across the industrial ruins of the American Rust Belt. The inconspicuous travelers stopped only for bathroom breaks, devouring the turkey salad sandwiches, potato chips, and soda, packed by Mulally’s secretary, as they went. Within 10 hours, the group arrived at Ford’s Washington headquarters.
For most of Richard Rumelt’s book Good Strategy, Bad Strategy, he talks about how a good strategy should have a single Guiding Policy. That contrasts with the case on the Wonderful Pistachio company, which Rumelt wraps up by saying:
I could see that Stewart’s approach to the nut business was a complex coordinated maneuver over a decade of time.
This has bothered me ever since I read it. Wonderful clearly did not have a single Guiding Policy. The book knows this. And yet, it never addresses how to compose complex strategies.
I resolved it for myself by breaking Wonderful’s strategy into three parts, according to the supply/demand/capital business triad. If you squint, each leg has its own strategy with a single Guiding Policy:
Capital: Wonderful initially bought pistachio fields (at the time, a niche crop) as a hedge against inflation. They had a massive scale advantages over existing producers. Their capital policy called for patience: pistachios fields take 7 years to mature. Smaller competitors couldn’t make investments that far into the future.
Supply: they created a policy to invest in vertical integration for processing, building on the scale advantage [I think, for example, they improved the consistency of pistachios that came out of the roasting process partially opened].
Demand: they were expert marketers who knew they could, in their words, “stimulate demand” for pistachios. The policy to stimulate demand came to fruition with a “Get Crackin’” marketing blitz featuring celebrities like Snoop Dogg. This worked and drastically grew the pistachio market.
All three strategies reinforce each other, meeting the “coherence” or “integration” heuristic that every strategy thinker talks about. Stimulating demand, perhaps the strategy’s foundation, ensured the capital and supply investments pay off.
So, my ears (metaphorically) perked up when I read the section on Mulalley’s “One Ford” plan, because it has this same structure:
On November 14, he officially laid out his “One Ford” plan:
Aggressively restructure to operate profitably at the current demand and changing model mix. [supply strategy]
Accelerate development of new products our customers want and value. [demand strategy]
Finance our plan and improve our balance sheet. [capital strategy]
Work together effectively as one team. [coherence check]
It’s trivial to say that, if supply/demand/capital completely describes business skill, then a good corporate strategy will address all three. But I’m watching for how frequently good strategies are explicitly segmented according to the triad (or not), and whether poor strategies fail to address one or more legs (or not).