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December 10, 2001—Bathtub View of Strategy

Bathtub With A View. Just this week in Dallas I met a chap who's going to put a hot tub on his roof. That seems about right. Relaxing, apart from the madding crowd, with a lucid, clear view of a very confusing world.

Back in the 1960's, before Esalen Institute and pyschobabble took over the place, Big Sur Hot Springs (a.k.a. Slate's Hot Springs) offered you a wash in hot springs overlooking the Pacific Rim. In those days, you'd haul in a six pack of beer, pick up a fresh-baked loaf of bread from an extremely pretty blonde at the restaurant, and then capture an unparalleled view of the Pacific blanketed by strands of fog and sunlight. With this global, decidedly un-California view and such pervasive relaxation, you could solve any problem mankind could offer. It was simply the best way to come up with a strategy.

Blind Alleys. At the moment, lots of strategic notions are being bruited about, none of which originate in clear heads with a clear view. Somebody has been drinking bathtub gin. "Skate to Where the Money Will Be," by Clayton Christensen and company (Harvard Business Review, November 2001) simply tells you that you've got to get there first -- but that organizations may not know where there is. In other words, it is a complicated restatement of the obvious that should not have been printed. It won't get your anywhere, but it won't hurt you.

Probably the next mania in the outsourcing arena will. You will remember that companies aplenty in the 1990s, at a terrific risk, let the consultants re-make their information technology departments. This was equivalent to the airlines and the airports outsourcing their security arrangements. Mega-mistake.

Now we learn that companies are giving away more vitals, particularly their personnel functions. See "Out of the Back Room," Economist, December 1, 2001, p. -56. Watch out. The truth is that the moment companies outsource a function is the exact time when that very thing is strategically crucial and should be held close to the breast. Just as IT should not have been outsourced ten years ago when it was the heart of every company, people-management should not be palmed off today. It should be the essence of every corporate conversation, done inside.

The Power of a Deep Bench. The fact is the world is strategically confused right now, so the way to get through the mess is to put together a team with depth and breadth.

Last week we attended the annual meeting of InterSouth Partners, a regional venture capital firm in the Research Triangle. The central difference between InterSouth 2001 and InterSouth 1996, when we first began to look at this firm, is the length of its bench. There's more horsepower there by a long shot, and it is this, as much as the excellent returns that it has generated or its technology focus, that should generate comfort for its investors. People-power is the defining characteristic of top professional firms and, increasingly, of all types of companies in a service-intensive world. Of course, nobody spends the time or money on people that this truth implies. The more's the pity, since people-building is the ultimate winning strategy.

Horses in the Stable. Right now, we would conclude, strategy is about a hot tub on the roof and lots of horses in the stable. We are not looking for "first-mover advantage" or "core processes." We want to know you can move on a dime -- that you can perceive sudden, catastrophic moves in markets and environments and regroup as fast as the moves happen. Because you have a view and lots of racehorses.

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