Globalization – The lion and the gazelle

The Question:

How fast does your business need to run?

The Background:

I’m trying to get desperately caught up on a very long reading list. Currently I’m on “The World is Flat”, by Thomas Friedman. If the name sounds familiar, it’s because he also does a weekly OpEd piece in the NY Times.

Anyway, the book is about how different innovations such as outsourcing, supply change management, and internet uploading are creating an explosion in globalization. In addition he gives ideas on how individuals and businesses can join the globalization wave.

The passage below is one of my favorites so far.

“On December 11, 2001, China was officially admitted into the World Trade Organization. A few days later, Jack Perkowski, the chairman and CEO of ASIMCO Technologies, posted the following African proverb on his factory floor:”

“Every morning in Africa, a gazelle wakes up.

It knows it must run faster than the fastest lion or it will be killed.

Every morning a lion wakes up.

It knows it must outrun the slowest gazelle or it will starve to death.

It doesn’t matter whether you are a lion or a gazelle.

When the sun comes up, you better start running.”

The Discussion:

The extension to the business world is fairly obvious, but I really want to focus on one line in particular:

“It doesn’t matter whether you are a lion or a gazelle.”

In the animal kingdom, a gazelle is a gazelle and a lion is a lion. They are naturally aware of their status as either the hunter or the hunted in the natural food chain. In either case, this status never changes over the lifetime of the animal.

Can that natural awareness be extrapolated into the business world? Clearly the answer is no. Businesses cannot statically identify as predator or prey, because it can dramatically change over even the smallest portions of their lifespan. Merrill Lynch was founded in 1914, making the total lifespan of the investment bank nearly 100 years old. During the far majority of its life, Merrill was a predator. It became a well regarded international investment bank through both organic growth and several major acquisitions. Merrill was clearly the lion during its rise to prominence.

Then in the recent period of no more than one year, approximately 1% of its lifespan, Merrill transformed into a gazelle. Not just any gazelle though, a slow one. After significant write downs totaling over $50 billion in the past year , Merrill sought to protect for the little value they had left by selling to Bank of America.

Both the ASIMCO and Merrill Lynch examples both show that even historically prosperous and profitable companies must recognize they are prey as well. ASIMCO must survive a new invading species (China) while Merrill needed to survive a harsh and dramatic change in their environment (financial crisis). Both of these examples suggest that every given business is not a lion or a gazelle, but a combination of the two.

The Conclusion:

So in the end, how fast does your business need to run in order to survive? Based on our assumption that businesses are both the lion and the gazelle, they must achieve the following:

• As a lion, the business must be more competitive and successful than the weakest businesses in its industry. This will allow the business to acquire new customers and continue to grow.
• As a gazelle, the business must be more competitive and successful than all competitors trying to take away its own customers and market position.

Both of these conditions seem fairly straightforward, but there’s one extra twist we must consider from our extrapolation. We are assuming that EVERY business takes the traits of both a lion and a gazelle. The implication of this is that every other competitor is our prey (because we’re a lion) AND we are the prey of every other competitor (because we are a gazelle). That means that in order to grow, we only have to be faster than one other competitor. However if we want to avoid getting eaten ourselves, we have to be faster than EVERY COMPETITOR. In the end, the only way to ensure your business survives to see another morning is to be the fastest one out there. The business world is not nearly as forgiving as the natural one.

The Nutshell:

Only the fastest business will survive in the long run, so start running.