How Not To Run a Business – The Sheep Strategy


As I read this post about the "herd mentality," I couldn't stop thinking about how it applies to running a business. In the post, Stephen Dubner writes about how he regularly waited in line for a crowded bus, only to realize that walking to the next bus stop (which is visible from the first one) cut his wait and allowed him to sit with his daughter, instead of stand during the ride.

Once we hit upon this solution, we haven't boarded a single bus at Point A. We get to sit; we get to listen to the iPod together (we both love Lily Allen, and I don't worry so much about the fresh parts since Lily's British accent renders them nearly indecipherable for Anya); we don't arrive with a smushed lunch.

But what I can't figure out is why no other bus passengers at Point A do what we do. To anyone standing at Point A morning after morning, the conditions there are plainly bad. The conditions at Point B are clearly better since a) Point B is close enough to see with the naked eye and b) the buses that arrive at Point A from Point B often have room on them, although only for the first 10 or 20 passengers trying to board at Point A.

Personally, I am happy that more people at Point A don't go to Point B (which would make me have to consider boarding at Point C), but I don't understand why this is so.

There's a saying on Wall Street that no one ever got fired buying IBM. It's probably true. If you do what everyone else does, you share the pain of failure. That's why business strategy is such a "me too" game. "We do what they do, only a little better (cheaper, faster, whatever)." That's how some companies do strategy.

Take web tv as an example. It's a hot market, and I'm not knocking it – I think it has huge potential (hint hint – watch this blog…) but some mainstream companies are pouring money into it just to say they have a web show division. Listen to them talk for 2 minutes and you realize they are doing it out of fear – out of the desire not to miss the boat. I know because I heard some of them speak at SXSW. It was like a chorus of "me too, me too." But many of them are doing it wrong.

Here's the thing – web shows aren't for big budgets. Producing them like tv shows is a sure way to lose money. Yet, that's what some of these companies do.

Strategy is built on strengths. Me-Too strategy rarely works because your strengths aren't the same as those of your competitors. If they are, you should build new strengths.

Following the herd is a sure way to mediocrity. If that is what you're going for, then ignore this post. Otherwise, don't let the safety of the herd make you too comfortable.