Organizational Velocity

Turbocharge Your Business to Stay Ahead of the Curve

Alan Amling

• Publisher: Business Expert Press
• Year: 2022
• ISBN:
  9781637422052
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

If you're not operating with Organizational Velocity, you're getting lapped and don't even realize it.

Business as usual? Established organizations are being disrupted as nimble upstarts cross long-established competitive moats with increasing ease. The status quo needs to be blown up.

In Organizational Velocity, veteran UPS executive Alan Amling distills five years of research and three decades on the front lines of Corporate America to reveal a fundamental truth…

Moving at the speed of change is a choice, not a circumstance.

Companies from Amazon to Shaw Industries stay ahead of the curve by operating with Organizational Velocity, a rapid learning paradigm empowering organizations to create persistent advantage.

Amling shows how companies get in their own way and provides pragmatic insights from industrial, digital, and military leaders to break through organizational friction and thrive in disruption.

Organizational Velocity is for current and aspiring executives seeing the disruption at their doorstep but not knowing how to break through the cloud of uncertainty. So, dog-ear the pages and create a company built to stay ahead of the curve.

CHAPTER 1

Do You Want to Live?

The relevant question is not simply what shall we do tomorrow, but rather what shall we do today in order to get ready for tomorrow.

—Peter Drucker

Royal Joh. Enschede was founded in 1703 in the Netherlands as a printer of books and manuscripts. A century later, they were the exclusive printer of Dutch Central Banknotes. Eventually, they became a security printer of notes and stamps for several countries around the world, just as early signs of disruption were peering over the horizon. The Euro was introduced in 1999, and e-mail was slowly reducing the need for stamps. Royal Joh. Enschede knew they needed to change, but pride and pedigree had made them complacent. They stuck their head in the sand and suffered a steep and predictable decline in business. To save itself from bankruptcy, the company was sold to an investment firm in 2014. In 2016, they stopped printing banknotes and were forced to lay off a “significant” number of employees.¹

This result was predictable; yet, it caught them by surprise. Their past success had blinded management to the requirements for future success. Current examples, such as Blockbuster, Kodak, and Blackberry, point to the same underlying reason. All these companies were disrupted because they were smart and knew their business, not because they weren’t.² It’s an ironic flaw reinforced by childhood experience: if a particular action is rewarded, we should do it again and again. That works as long as nothing in your external environment changes. The rinse and repeat strategy only changes if you discover a better way to earn the same reward or if the person judging your action changes.

Truth Bomb: Companies get disrupted because their management is smart, not because they aren’t.

Consider the classic case of disruption put forth by Clayton Christensen in 1997. He described a process whereby a simpler, more affordable product or service takes root at the bottom of a market. While the incumbent focuses on higher margins at the top end of the market, the upstart hones their offering, eventually saturating the low end of the market and moving upstream to displace established competitors. This has become a well-established pattern that intelligent managers at great companies still ignore.

The Case of Big Brown

As a long-time UPS shareholder, I benefit from the company’s success. When UPS announced a new CEO on March 12, 2020, as the COVID-19 pandemic spread across the United States, I was expectantly optimistic. Carol Tomé seemed like a brilliant choice. She was the first CEO in UPS history who did not grow up in the famously promote-fromwithin company, although she had been a board member for many years while a CFO at Home Depot. Her first earnings call was a breath of fresh air. She talked about her vision, the need for more diversity, and revamping the archaic decision-making processes that had slowed down the company for years. I began to question whether I had retired from UPS too early!

“UPS will be better, not bigger,” she said.

The slogan seemed strategic: UPS would “sweat the assets” and focus on the higher-margin verticals, such as health care and small-to midsized businesses. She almost immediately raised rates as capacity tightened with the pandemic-driven increase in demand for e-commerce deliveries. She slashed capital expenditures and sold off a low-margin trucking business. Wall Street cheered, and UPS stock soared to an all-time high. I joined in the celebration.

But, I also cringed. Beneath the surface of her words lay the seeds of disruption: “Better, not bigger” and “sweat the assets” translate, roughly, to reduced investment and a focus on the highest return areas. On the surface, her language makes sense, but it’s not the path of a Forever Company, which makes decisions beyond its quarterly earnings and the tenure of its current leadership.

The risk of a “better, not bigger” strategy was familiar. This was the classic “Innovator’s Dilemma” outlined by Christensen in 1997. The “dilemma” is whether incumbents focus on existing high-margin segments that are a good match with current capabilities or invest in new capabilities required to capture an emerging, lower-margin part of the market. Christensen’s book features the infamous case study of mini-mills disrupting U.S. Steel in the 1970s. Fifty years later, a similar scenario is playing out in the package delivery business. Table 1.1 shows a side-by-side comparison of strategic moves by U.S. Steel in the 1970s and UPS in 2020 and early 2021.

The convergence of broadband, GPS, ubiquitous smartphones, and artificial intelligence allowed Uber to launch an online ride-hailing service in 2009. Online food delivery companies like UberEATS and DoorDash soon followed. While pizza delivery had been in place for years, this new technology-enabled model allowed businesses to tap into a ready supply of delivery vehicles and drivers on an ad hoc basis. It was revolutionary. Deliveries were made within an hour, but they were also haphazard and low margin. Profitability was an aspiration.

Same-day delivery of fast food was a business that UPS and other incumbents had no interest in. It didn’t fit UPS’s efficient route-based network, and paying gig-workers for delivery would be an uphill battle with the Teamsters Union representing UPS drivers. UPS made the logical choice. They focused on current customers who placed a high value on an efficient global network and were willing to pay more for it.

Fast forward to 2020. E-commerce spikes, outstripping UPS delivery capacity. Retailers increasingly use their stores to fulfill online orders with deliveries that don’t need the celebrated national networks of UPS, FedEx, or the U.S. Post Office. Options proliferate in every locality, from contractors to gig workers, for local pickup with local delivery. Upstarts like Postmates and DoorDash, which already had a solution for local delivery, rushed in to fill the void and expand their market. Subsequently, Uber purchased Postmates for $2.7 billion in July 2020. A few months later, DoorDash went public, valuing the company at $72 billion.

Table 1.1 U.S. Steel and UPS: Similar paths?

Characteristic	U.S. Steel circa 1980’s	U.S. Circa 2020/2021
Incumbents move up-market, abandoning the low-end of the market	Focused on higher margin flat rolled steel and ceded the low margin rebar business to the upstart mini-mills led by nucor	Focused on higher margin healthcare, international, and small/mid-size (e.g. SMB) segments, limited low-margin ecommerce shipments, and ignored emergence of low-margin same-day delivery market
Smaller companies with fewer resources and lower quality product enter market at low end	Nucor, chaparral, florida steel corporation, georgetown steel, connors steel, north start steel–rebar was the entry point	Doordash, postmates (bought by uber), instacart, grubhub, point pickup, gopuff–fast food/Grocery was the entry point
Incumbent invests in upgrading current processes to improve efficiency, cuts work-force	Reduced labor hour per ton of steel from 9 hours in 1980 to 3 hours in 1991 and reduced their work-force about 75% during the same period	Invested over $15 billion in their smat logistics network, executed “fastest ground ever” initiative, offered voluntary buyout packages to thousands of non-operating managers.
Sell or close lower margin business units	Closed part or all of 20 obsolete factories in 1983.	Ups sold low margin ups freight division to tforce freight in 2021.
Competitor moves upmarket	Mini-mill nucor begins producing high margin flat rolled steel in 1989.	Doordash began delivering ecommerce purchases For walmart, macy’s, petsmart, CVS and wal-Greens in 2020.
Mainstream customers start adoping the entrants’ offerings in volume	By 1980 nucor owned 90% of the rebar market and about 30% of the market for rods, bars, and angle irons. Nucor overtook U.S. Steel in total steel production in 2014 and never looked back.	?

Meanwhile, as part of its “better, not bigger” strategy, UPS reduced capital expenditures and focused on improving service for high margin albeit slower-growing segments like international and health care while actively shunning some faster-growing but lower-margin e-commerce segments. Delivery capacity was constrained, shipping rates increased, and the rapidly growing same-day local delivery market was ignored.

The disruption was on.

The ostensibly strategic decision to leave the lower-margin business to the startups and the also-rans seemed to be logical, even brilliant. The market value of UPS nearly doubled in the new CEO’s first year. But in this case, the logical thing to do may turn out to be the wrong thing. Recent history is replete with stories of companies abandoning lower-margin products and businesses and aggressive startups happily filling the void. The new entrants continually innovate their business models and processes to stay profitable in a low-margin market. Eventually, these upstarts saturate the low end of the market and move upmarket to displace the incumbents with a better value proposition. The pattern of disruptive innovation popularized by Christensen over 20 years ago has played out in dozens of industries, from entertainment and photography to print media and manufacturing. It is now prevalent in health care, education, financial services, and yes … package delivery. If the pattern is so well known, why does it continue? The answer lies in the motivations and mindsets of the leaders who wrestle with the innovator’s dilemma.

The question “Do you want to live?” is not merely rhetorical. It’s existential: “Am I, as a leader, willing to sacrifice the profitability of the company I lead today to increase its chances for survival in the future?”

If leaders don’t open themselves to the possibility of failure, they have to question their genuine commitment to live. If they are not willing to fight and lose some battles, they are not pressing hard enough. Successful organizations lose to win. In the losing comes the learning that moves the company one lesson closer to victory. Any leader ensconced in a relatively stable industry and who focuses on maximizing profit today at the expense of corporate longevity does not really aspire to live.

Truth Bomb: Successful organizations lose to win.

This book will make sense only if you want to lead your company to thrive beyond your tenure. Beyond next quarter. Beyond your next bonus. The Fourth Industrial Revolution technologies, such as artificial intelligence, the Internet of Things, and Additive Manufacturing, are all accelerat...

Table of contents

• Cover
• Half-Title Page
• Title Page
• Copyright
• Dedication
• Description
• Contents
• Testimonials
• In Gratitude
• Organizational Velocity Primer
• Introduction: Coming Soon Near You
• Chapter 1 Do You Want to Live?
• Chapter 2 The Thinking Problem
• Chapter 3 Unlocking Persistent Advantage
• Chapter 4 From Manager to Maestro
• Chapter 5 It’s Board, Not Bored
• Chapter 6 Extreme Trust
• Chapter 7 Be the Third Pig: Building an OV Organization
• Chapter 8 You Can’t Hug Data: Acting Through Supply Chain
• Chapter 9 How Shall You Then Live?
• Appendix I: Summary of Gold Nuggets
• Appendix II: Summary of Truth Bombs
• About the Author
• Index
• Add Page
• Backcover