For use: Friday, Month 00, 2000 and thereafter

Future Shoes: "Yugoslavia's Hour"

by Michael Finley

The present moment in Yugoslavia, as election results remain hidden from view, is one of exquisite tension, both there and around the world. Why? Tyranny happens routinely in this world. Milosovic, though terrible, is merely one of scores of potentates making a mockery of democratic rule.

The reason this moment is perilous is because it is the only moment Yugoslavia, with the world's help, will have to make itself right, and it is therefore terrifying. What if Yugoslavs themselves lose heart? What if worldwide support buckles, as it did in Tienanmen Square?

Three years ago, Harvey Robbins and I published TRANSCOMPETITION, our study of bullies and what to do about them. As Yugoslavia sweats out its hour of fear, we reprint it here for your edification.

 

The unbearable cost of winning

From Transcompetition: Moving Beyond Competition and Collaboration, by Harvey Robbins & Michael Finley (McGraw-Hill)

 

The dreary aspect of pure collaboration is that when it occurs, it tends to last a long time, like the Dark Ages. The redeeming aspect of its opposite, pure competition, is that it is often over almost as soon as it begins. Supercompetitive people and organizations, those who revel in the brute delight of winning, can count the hours their victories will last.

Pyrrhus, a king of 4th century BC Albania, was widely acknowledged to be a brilliant military strategist, but he was unable to capitalize on his victories, because they always came at too high a cost. His campaigns in Italy and Greece were triumphs in terms of crushing the enemy, but he lost so many men and resources in them that the vanquished enemies simply ignored his demand for terms. He could never maintain what he won. Thus his name comes down to us as the father of the ruinous, or "phyrric," victory.

And so it is with the unthinking competitive drive. Left to itself, it seeks to win at whatever cost. A company like AT&T in the 1960s will knock all other companies aside in its rush to success, until it is brought down to earth, in this case by Judge Harold Greene. IBM in the 1980s, the consummate marketing company of the era, was done in by the little people it thought nothing of -- the chipmakers and operating system companies that supplied parts for its neglected microcomputer lines.

More often than not, brutal victory comes back and bites you, preventing winners from enjoying their winnings. Tyrants do not endure, because there is no collaborative weight counterbalancing their regimes, and because mere "strongmen" are seldom able to ensure peaceful succession.

Bullies in the marketplace tend to cause their enemies to unite and defeat them. This comeuppance, which we call The Brute Cycle, always seems to take supercompeters by surprise. They expect, reasonably enough, that if you beat a challenger, they learn they are your inferior and should not come around except with head bowed. This generally works in the short term, so the order of competition ("I win, you lose and you like it") is logical and acceptable to all.

But in the longer term, and especially in a democratic culture with free flow of information, bully rules don't play well. The social ethic of equal opportunity holds that one can be whatever one sets one's mind to. The business ethic of continuous improvement holds that nothing is better forever -- thus there is no ordained ruling class. If a Brute kicks sand on your face, why, you bulk up, learn tae kwan do, and go alter the hierarchy Chuck Norris-style.

Because of this cycle, traditional winning is often a prelude to losing. Winning in a way that humiliates and angers your competitor almost guarantees that your turn to lose will come next.

The Brute Cycle explains why the bigger and meaner you are, the harder and earlier you fall, why species at the top of the food chain appear most often on the endangered list. Mussolini^[1] wound up hanging upside down in a square in Milan. Hotelier Leona Helmsley^[2] wound up making beds at a women's penitentiary in upstate New York. In the same way, companies that deliberately throw inside tend to get knocked down when it is their turn at bat.

The compleat Brute organization is a criminal entity, taking every shortcut and walking over everyone, exhibiting zero social conscience and maximum cruelty. The irony is that its very brutish nature, and its confidence of its superiority, is what hastens its demise.

The Brute Cycle is not something that "happens" to bullies. It is what people whom the bully had bullied do back to the bully. It is the only defense people have had against aggression and exploitation. It involves three steps that organizations and individuals have followed unconsciously since the days of Phyrrus:

                                      ƒ  Exchange. This is the information stage, in which victims make contact with one another and with potential allies and exchange information. They decide on a strategy for dealing with the bully. If possible, they extend a peace offering to the bully if he cuts it out.

                                      ƒ  Encircle. This is the stage in which victims and allies move together to surround the bully. They link arms and focus attention on the predator and keep it focused on him until the behavior changes.

                                      ƒ  Exact. This is the action stage, in which victims and allies compel the bully to negotiate or concede. If the bully refuses, he stays encircled forever.

The "3E's" worked sporadically in ancient times. Information flow was usually inadequate to really encircle a predator. In modern times, though, information has been more readily available. Boycotts, in which a group not only stops buying a product but urges others not to buy it, either, use the 3Es. Whistle-blowing, the act of exchanging information about the misdeeds occurring on one's own side, never succeeded in other centuries, works in ours.

The 3Es are not a game, and they are seldom pleasant. They are never assured of success. But they are the primary transcompetitive tool for dealing with supercompetitors.

 

There is a force that can contend with outlaw competitiveness on a global scale, but it is not the United Nations, and it is not the World Bank. It is the informed power of a watching world that has learned to identify cheaters and bullies early on, and is taking steps to Exchange information among themselves, Encircle the offending party, and Expose the misbehavior.

Three examples that have flitted throughout the pages of this book are Nike, Coke and Pepsi Colas, and Microsoft. We picked these companies because each, at a formative moment, did something sneaky or unworthy to get started. These are great revealing little stories, like George Washington chopping down the cherry tree in reverse:

                                      ƒ  Nike paid $35 to Carolyn Watson, a graduate student at the University of Oregon, for the "swoosh" design that they have plastered the planet with. She never made another dime from it.

                                      ƒ  Coke and Pepsi laced their original secret formula with actual cocaine, and billed the beverages as health products.

                                      ƒ  And Microsoft, needing some kind of operating system to sell to IBM along with their own BASIC language, paid $50,000 for a young product called QDOS, which became MS-DOS, which became the baseline product driving the PC revolution.

None of these acts was illegal, but they are all smarmy, and suggest what these companies will do to compete. But there's more.

First, you have to love Nike; we do. Their brand of supercompetitiveness is so naked they are the Yosemite Sams of business -- loud, obnoxious and obvious. They extol the glory of winning in their mission statement, their ads, their sales practices, their supplier relationships, and their corporate behavior. When Nike goes over the top for supercompetition, they are just being themselves.

But the whole world is watching. The Internet boasts several Nike watchdogs groups, monitoring everything from plant conditions in Vietnam to labor disputes in Beaverton, Oregon.

It's unthinkable that Nike, as charged with the fire of battle as its CEO Phil Knight is, will change its ways any time soon. But every move they make is under the watchful eyes of people like Thuyen Nguyen, of Nike Watch, and international group of people who plain hate Nike's values and practices. Outspoken East Timorian Nobel prize winner Jose Ramos-Horta led another anti-Nike group, proclaiming the company an enemy of civilization:

"Companies like Nike should be viewed as enemies, in the same manner we view armies and governments that perpetrate human rights violations. What is the difference between the behavior of Nike in Indonesia and elsewhere, and the Japanese imperial army during WWII?^[3]

The amount of damage Nike can do is circumscribed by the attention the company draws. Fifty years ago, you could make a billion people mad and there was nothing they could do to you (think Ma Bell, or Soviet food lines). In the information age, knowledge makes might, and people can resist.

The best evidence that even fierce Nike can be made sensitive can be found in the headlines. In June of 1997 Nike made peace with Muslims who were offended because the logo on a new shoe resembled the word "Allah" in Arabic. The play on words was distressing to Muslims because the shoes Awad told the news conference that having the name of Allah on shoes is particularly disrespectful because, used properly, the shoes "get dirty, muddy and sweaty," which is tantamount to sacrilege.

Read, and ask yourself if this sounds like the Nike we have come to know and love:

Under the written agreement between Nike and the Council on American-Islamic Relations, Nike will apologize to Muslims and recall shoes with the logo. In exchange, the council will urge Muslims worldwide not to boycott Nike products.

"We wanted to reinstate confidence in our community that whenever they see something offensive, there could be something done about it," said Nihad Awad, the Islamic council's executive director.

He said his group would have called for a global boycott of Nike products, especially in affluent Muslim communities in the Middle East and Asia, had the two sides failed to reach a settlement.

"From the outset we have sought to avoid any offense to Muslims," said Nike spokesman Roy Agostino. "We have, through this process, developed a deeper understanding of Islamic concerns and Islamic issues and ... have opened up a broader dialogue with members of the Islamic community."^[4]

Lo, how the mighty are fallen. This announcement was issued the day before the floor manager of the Vietnamese factory that forced women to run until they collapsed, as punishment for not wearing the right shoes. Nike was so encircled by Nguyen's group that it hired former U.N. ambassador Andrew Young to conduct an inquiry into Nike practices in Asia.

 

In Coke and Pepsi we have two products that pledged, back when there were no global companies, to become global companies. Coke led the way, pledging when the company went public in 1919 not to stop until it was possible to purchase a bottle of Coke in any village in any country anywhere in the world, 195 nations in all. Pepsi was the first American consumer product in the Soviet Union, and it is the leading seller in India and South America. The people of Guam are the world's biggest Pepsi lovers, quaffing 512 cans per person per year.^[5]

To make good on these commitments, it, the companies invented saturation marketing. Pepsi invented the radio jingle. Coke took the form to its greatest heights with the global anthem "I'd Like to Teach the World to Sing" in the 1960s.

But beyond the image of people holding hands is still the images of two elephants trampling the global grass. Both companies positioned themselves as the answer to countries experiencing problems guaranteeing potable water. Coke and Pepsi both were excoriated on 60 Minutes for their practice of demanding that stores allot a set percentage of shelf facings for their products. This is why, when you buy soda, 40 percent of the aisle is filled with Coke products, another 40 percent is filled with Pepsi products, and the remaining 20% of space is divided among twenty or so smaller companies. Stores must allot this percentage to do business with the two big companies.

These two Brute companies owned the mass marketing age lock, stock and barrel. Whole advertising campaigns have been based not on the benefits of the products, but on amusing wrinkles in the Coke/Pepsi positioning rivalry. There is the famous Pepsi commercial in which cola deliveries to a frat house and senior center are switched. The seniors get the Pepsi and party down, while the frat brothers drink Cola and rock gently on their front porches.

Funny, but guess what, global elephants -- people don't care about your rivalry. The knowledge age is unfriendly to corporate arrogance and indulgence. Formulas are easier to duplicate, and in an information the "masses" don't have to be asses. The two giants are seen increasingly as charging premium prices and twisting the arms of retail channels to purvey sugar water.

Copycat companies like Cott of Toronto, and retailers like Wal-Mart, with enough clout to say not to the cola companies shelving demands, have demonstrated that the flavors of Coke and Pepsi can be reproduced and even improved upon, and sold profitably for about two thirds the cost of the original brands. And why not, the new store brand colas have none of the global advertising budget to make up. Shoppers are buying the once-scorned, now-improved in-store brands by the vanload. Pepsi has started to fail its own taste tests. Coke loses out to RC Coca in blind taste tests 95 percent of the time.^[6]

What has happened is that competing retailers and customers have Exchanged information on the soft drink malaise, Encircled the competing giants, and Exacted from them concessions on their absurdly self-serving market positions. Increasingly, their endless competitive war with one another is seen worldwide as pointless.

Finally we have Microsoft. Never, not in the cases of John Rockefeller's Standard Oil, AT&T, United Fruit, or Liberian Freighters Unlimited, has an entire world mistrusted a single company the way the world mistrusts Microsoft. It is a suspicion that is out of proportion to the company's size: it is a $5 billion company in annual sales, compared to AT&T's $75 billion.

But people have memories they didn't use to have. Hardly an American over the age of seven is unaware of Chairman Bill Gates, the $36 billion man,^[7] or of Microsoft's conflictual status as developer of both operating systems (DOS and the many flavors of Windows) and the applications that run on these operating systems. The company's promotion of Windows 95 was the biggest single-product promotion in the history of the world. Microsoft, unlike AT&T, has momentum and ready cash. People see it not as it is today, but as what it is likely to become in ten years -- a bigger monopoly than AT&T ever was.

And so the company is under perpetual siege. At any moment there are over a hundred lawsuits pending against the company. It is the punching bag of every pundit with two pennies and a newsletter column to rub together. Regulators have nothing to lose by maintaining constant anti-trust vigilance. When Microsoft sought top acquire Intuit a few years ago, the deal was quashed because it gave Microsoft access to a bank. People flash-forwarded to a future in which all our checks said Microsoft in the lower left-hand corner, and shuddered.

Encircled and exposed, Microsoft feels the heat of the world, and pads softly through it, like a cat with a bell around its neck. Not neutered by a long shot, but apparent to everyone as a potential danger, that must be watched. John D. Rockefeller was never hemmed in as Bill Gates is.

How has Microsoft responded to this encircling? In the summer of 1997, when Apple was in trouble, and its CEO Gil Amelio turned out not to be the savior everyone had hoped, Apple looked in every direction for a white knight company to come sweep it up. There were so many companies that "made sense" as partners: Motorola, Sun, Oracle, and even IBM were discussed in the press.

But the company that actually put up money to keep Apple afloat was Microsoft, in one of the most stunning acts of corporate partnership ever. By all the known rules of competition, Micrtosoft would have been better off with the disappearance of the #2 maker of operating systems. And how easy it would have been for Microsoft to stand by and let Apple choke on its own problems.

Many are cynical of the partnership, and it is true that the $150 million that passed hands is chickenfeed in the larger scale of things. One joke that made the rounds went like this:

Q. What will the new Microsoft/Apple alliance be called?

A. Microsoft.

But even if Microsoft is playing a clever game of killing with kindness, it is a sign that the company is aware that people are watching, and as big as it is, it can no longer be insensitive to the eyes of the world.

 

 

 

Copyright (c) 2000 by Michael Finley