Playing Hardball in a Competitive Environment

An Interview with George Stalk, author of Hardball: Are You Playing to Play or Playing to Win?

George Stalk is a Senior Vice President at Boston Consulting Group, a company he joined in 1978. He's cowritten the critically acclaimed books Competing Against Time and Kaisha: The Japanese Corporation, and his newest book Hardball. He's been published extensively in numerous business publications, including the Harvard Business Review, where he has won the McKinsey Award for the best article.

He holds a B.S. in engineering mechanics from the University of Michigan, an M.S. in aeronautics and astronautics from the Massachusetts Institute of Technology, and an M.B.A. from Harvard Business School.

What kind of excuses do leaders have for playing softball?
A lot of people like to believe that the world is a “balanced scorecard,” to cop that phrase. People like to believe there’s a balance between what’s good for customers, good for employees, good for shareholders, good for suppliers, and good for society. If everyone had a respect for balance, the world would be a wonderful place. It would be some kind of utopia. But in our world, people win and people lose. It’s a reality. In Hardball, we try to get people to face up to that reality.

Most business people understand this reality, actually. The question is whether they can get the organization they are a part of to understand it. Is leadership on the same page? If you believe your company is missing opportunities to create an unassailable competitive advantage, you’ve got to make a judgement about, “Is this the right place to be working?” If you know how to do it better than your manager does, then it’s probably time to move on.

What about an industry or situation where cooperation with a competitor is essential, such as trade associations or tourism destinations, for example.
I don’t have a definitive answer for that because cooperative exercises are always compromises. The reason a hotel owner has to cooperate with others is that he can’t own every hotel in the city and can’t control the whole destination experience. So it forces one to compromise. That’s tough because you have to be very schizophrenic in that situation. You are pulled back and forth between doing what is right for your business and doing what is right for the group. So cooperative agreements are compromises and have to be approached very carefully, with the understanding that we will want to help the group effort succeed, but we also have to make ourselves succeed.

I never was a big fan of joint ventures, in all the years I was in Asia. There are too many big compromises. I was never a fan of “coopetition.”

There was an article in the paper recently about “a joint venture between BMW, GM, and Daimler-Chrysler to develop hybrid cars “in order to challenge Japanese manufacturers.” What a joke—they’re not challenging anyone, they’re scrambling! Wrap whatever mantle of cooperation around that you want but it’s a compromise, because none of them can do it themselves. Why pretend?

The business media is focusing a lot of attention on this idea of the dead middle; with consumer-focused companies, only the high end and low end are growing and the middle is a tough place to be. How does this affect how companies compete?
The markets are definitely splitting. The high end luxury business is developing and the low end is developing. Consumers are buying more from the bottom to save money so they can spend it at the top, for items that they can’t quite afford. Nieman-Marcus and Dollar General are fine, but Federated and Sears are in trouble. They’ve got to scramble because their customer bases are leaving.

It’s not just retailers. It’s Ford, Volkswagen, and GM. Maytag is in the middle. Whirlpool is in the middle but they’re scrambling to move to the top and the bottom. Their KitchenAid brand is now the top super-premium brand, not Sub-zero like everyone thinks. Whirlpool saw this coming and got moving. Others are just now figuring it out.

When we interviewed influence expert Robert Cialdini, he taked about how employees react more to a potential loss than a potential gain. How to you motivate an entire organization to play to win?  
In a section called The Hardball Mindset, we talk about two things. First, make sure the organization is focused on the heart of the matter. Does leadership know what the heart of the matter is? Does the leadership influence the organization to make sure the heart of the matter dominates the agenda? Softball companies allow other companies to dominate the agenda.

Number two is to get the organization in a turnaround mindset. That’s easier when you are losing money. Companies that are awash in red ink should, in theory at least, be receptive to change. Some companies are losing money hand over fist and it’s still hard to get them to change. But it is easier turning around unsuccessful companies. If people start to whine and moan and defer making changes, the group as a whole usually has far less patience for that.

In our view, even successful companies need to be in turnaround mode. If you are a successful company that is not in turnaround mode, either a competitor is going to take away business or people from you or these days—with the low cost of getting money—someone will buy you. In turnaround mode, there’s not a lot of room for failure.

If the rank and file employees are not motivated to win, does that show a lack of focus in the leadership?
The temptation to be distracted is more of a threat than a lack of focus. There’s a long list of things that are allowed to distract me in my life, but I never allow those things to take over more than 20 percent of my time.

In a company, diversity, women’s initiatives, pro bono activities, community service and the like are all important and good things, but they can’t distract from the heart of the matter, which is where 80 percent of the effort should be going. We can afford to do all the other things because we are really focused on the 80 percent and are doing that well. Organizations get easily distracted. Frankly, business books themselves are one of the leading contributors to distractions. Some book says it’s time go out and hug your customers and then suddenly eveyone’s hugging customers. Corporate governance is another huge distraction—a regulated distraction. It’s taking up an inordinate amount of time, whether we like it or not. We just have to deal with it.

Big companies often seem to miss or dismiss anomolies in the marketplace. How can they do a better job?
There’s a personal benefit executives gain by talking with their customers and talking with their competitors’ customers. Or seeing how their customers shop. Don’t have a secretary go buy your stuff. Going out there and trying to be a customer.

What you often see is that people make personal adjustments to the business systems that are imposed upon them. The adjustments are anomolies. They present opportunities. It’s very hard to find anomolies sitting in a corner office or staying at headquarters. The anomolies don’t show up there; by the time they reach there, they’ve been filtered, or have died out. People in the office are concentrated on getting the job done, as opposed to following the exceptions.

Where does intensity stop and being a workaholic begin? Entreprenurial leaders such as Ted Turner, Larry Ellison, Richard Branson—they are successful but they have always had a real life outside the office.
Interesting examples, because those guys very much live their business. They live life with a high level of intensity. When people hear the word “hardball” they sometimes think about lying, or cheating, or pounding competitors with overwhelming force. But overwhelming force strategies are rarely successful and that’s not something we recommend. Very often the indirect attack makes a lot more sense. When you get down to personal habits, there’s no need to tightly link playing hardball with being a workaholic, or being overly intense, or aggressive. Some of the most interesting hardball players are not aggressive people, personally. But in business, watch out! They are playing a very tight game and are watching you the competitor closely.

How do hardball leaders decide what to focus on and where to concentrate their execution efforts, with so much advice floating around on what is important in business?
I would observe that when people talks about what works and doesn’t work, they often stop short of saying “and the success is demonstrated in the results.” We did this project for Jack Welch—I worked for him six years as a consultant—where he was mightily resisting this idea of Six Sigma and continuous improvement. The reason was that all the companies that were being touted as the poster children of that movement were seeing pretty mediocre results. So what we did was focus on companies that had continuous improvement to actually make a difference in their results. Once he saw results—boom! It was like we had flipped a switch. Then he couldn’t get enough of it and implemented it almost to a fault.

They became so good at it people started to ask, “Have they gone too far?” As Ted Leavitt at Harvard said, “Too much of anything good will kill you.”

What advice would you give to MBA students?
The notion of being in turnaround mode applies to an individual as well as a company. MBA graduates should approach this phase of their career as a turnaround opportunity. Constantly be looking at whether they are focusing on the heart of the matter issues. Finding options when we we encounter obstacles. Staying away from “maybe,” and realizing that failure can’t be tolerated. They need to hold themselves to that.

The added dimension today is China. Many people want to be on the fast track, but the fast track for a lot of companies is China right now. If you can’t go there—and go for three or four years—because of a spouse’s job or whatever, then you probably are not going to be on the fast track with that company. 

Young MBAs are still quite valuable and the degree helps you drive through the clutter to some extent. But companies and consulting firms are not blanket-hiring MBAs. People really have to perform. There are no real training programs anymore and no guaranteed odds. You have to make it happen yourself by outperforming.

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Interview conducted in November, 2005 by Tim Leffel, managing editor.

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