Fighting back against supercompetitors

Excerpted from Transcompetition, by Harvey Robbins & Michael Finley, McGraw-Hill/Business Week Books, 1998

(c) by Harvey Robbins & Michael Finley

A recent news story described how surrounding communities rise to take down brutes in their midst. A man named John Harper, Jr. was the scourge of Spring Valley, California. Though he lived with his parents -- which suggests something about delayed development in bullies right there -- Harper spent much of his time antagonizing people in the San Diego suburb. He deliberately tailgated drivers and tried to run them off the road. He picked fights with people, threw rocks at them, and threatened to burn their homes down. One of his victims, a retired Navy commander named John Palm, begged authorities to do something about Harper. But the justice system was too clogged to cope with the man besides wagging a finger at him. On November 28, 1995, an enraged Palm cornered Harper and emptied two ammunition clips into him.

During the trial, the Brute Cycle kicked into high gear. Neighbor after neighbor spoke up in defense of Palm's action. The jury found Palm guilty and sentenced him to 15 years in prison. But the judge threw out the verdict, claiming that Harper was a "jerk," and brought about his own death, and reduced Palm's conviction to manslaughter.

Bullies like Harper are everywhere. They may share a cubicle with you, or they run the entire company. The business media tend to glorify the managerial sociopathy, handing the most egregious offenders mock-villainous nicknames like "Chainsaw Al." We all admire an executive with will, much as people in other times admired dictators who got the trains to run on time (never mind who had to be pushed onto the tracks). They have what we wish we had, an instinct to kill and get what we most want.

Two things we overlook in our admiration:

1. Most of these people would still be vicious even if there were no defensible objective guiding their actions.

2. The simple, brutal philosophy of terror is useless in achieving any long-term goal.

Richard Nixon and The Pepsi Gambit

There are two psychological side effects of the Brute Cycle. The first is the Brute's diversion into paranoia and obsessive-compulsiveness, and the "defactualization" or reshaping of truth that occurs.

Brutes may appear indifferent to the suffering they cause, but in fact they are always processing the consequences of their own behavior, and they respond by becoming afraid of retaliation, which diverts their attention away from production and toward defense, and the formation of a story that legitimizes their behavior.

Way back in 1972, Ken (One-Minute Manager) Blanchard suggested a peculiar disconnect occurred whenever workers compete against one another. The very things about competition that bring a team together against outside opponents tend to corrode its internal cohesiveness:

While competition and the responses it generates may be very useful to a group in making it more effective and achievement-motivated, the same factors which improve intragroup effectiveness may have negative consequences for intergroup effectivenessY.

When win/lose confrontations occur between two groups or teams, even though there eventually is a winner, Blanched said, the loser is not convinced that he lost, and intergroup tension increases rather than diminishes:

If the win is clear-cut, the winner often loses his edge, becomes complacent, and is less interested in goal accomplishment. The loser in this case often develops internal conflict while trying to discover the cause of the loss or someone to blame. If reevaluation takes place, however, the group may reorganize and become more cohesive and effective....

During such competition, Blanchard said, paranoia and obsession kick in. Each group starts seeing the other as the enemy and distorts its own perceptions of reality, seeing themselves as virtuous and the other group as the sum of all badness. Hostility toward the other group increases, while communication decreases. Soon it is no trouble at all, maintaining a fever pitch of animosity toward the other group. Forget ever setting the record straight at that point. If the groups are made to talk face to face, it is a charade. Neither side really listens to the other -- they hear only those cues that support their side's arguments.

The classic example of a bullying business team going bonkers involved the Pentagon Papers revealing the brutal disrergard for the truth about Vietnam during the Johnson and Nixon administrations.

The people in the White House and Pentagon had become so abusive in their withholding of information that they lost all connection with reality. Historian Hannah Arendt comes down hard on the paranoid mystique that developed in high places. Without the relatively free flow of information in the U.S., the truth would still not be known about these men.

I am not sure that the evils of bureaucracy suffice as an explanation, though they certainly facilitated this defactualization. At any rate, the relation, or, rather, nonrelation, between facts and decision, between the intelligence community and the civilian and military services, is perhaps the most momentous, and certainly the best-guarded, secret that the Pentagon Papers revealed....

In the Pentagon Papers we are confronted with people who did their utmost to win the minds of the people, that is, to manipulate them; but since they labored in a free country, where all kinds of information are available, they never really succeeded. Because of their relatively high position in government, they were better shielded against this public information, which told the more or less factual truth, than were those whom they tried to convince and of whom they were likely to think in terms of mere audiences, "silent majorities," who were supposed to watch the scenarists' productions...

Probably because of their high station and their astounding self-assurance, they were so convinced of overwhelming success, not on the battlefield, but in the public-relations arena, and so certain of their psychological premises about the unlimited possibilities in manipulating people, that they anticipated general belief and victory in the battle for people's minds.

And since they lived in a defactualized world anyway, they did not find it difficult to pay no more attention to the fact that their audience refused to be convinced than to other facts.

No ivory tower of the scholars has ever better prepared the mind for ignoring the facts of life than did the various think tanks for the scholars and the reputation of the White House for the President's advisers. In this atmosphere, defeat was less feared than admitting defeat.

The second psychological side effect of Brute behavior is a kind of guilt. Our favorite illustration of the guilt phase involves two friends of ours who happen to be identical twins, Jim and John Thornton. Not all twins are competitive, but these two were supercompetitive as kids, ferocious in their determination that neither would achieve the smallest advantage over the other. While growing up in relative affluence, they behaved as if every substance were in critically short supply. That being the case, even the sharing of a bottle of Pepsi became an opportunity for Brute behavior.

They would pour and repour until the two glasses were equal to the satisfaction of both boys. They even devised a "fake swallowing" gambit to take advantage of one another. Both boys would appear to drain their cans. But one would save a last mouthful and dribble it back into his glass, to sample and savor for the next hour or so, to get the other's goat. No way could spit-out Pepsi be as good-tasting as the flush of victory over one's DNA-mate.

Their entire boyhood was consumed with the need to beat one another, and out of it they perceived a cycle. When one twin won, two things happened: the twin who lost was enraged and brought fresh rage to the act of retaliation, and the twin who won felt guilty about it and therefore let his guard down just a bit. Result: a continuous cycle of competition, fired by defactualization, then weakened by guilt. Winning could only be a momentary pleasure, because guilt immediately wiped it out and set in motion the victor's replacement by the vanquished, which never lasted long, either.

So what were they fighting for? Was cola precious enough to justify that level of perniciousness? What scarcity could account for the energy of their infighting? Parental approval? (Their parents were by all accounts loving and generous people.) Identity within their own twinhood?

The truth is that they were both natural-born supercompeters, and nature had given them to each other as foils.

Brute behavior in the marketplace

The Brute cycle is as repetitious a story in the marketplace as it is in the jungle. It is repeated over and over again, between grocery stores, between professional groups, within consumer product categories, and between nations.

Commodore and Leading Edge were major computer companies in the 1980s, and they sold millions of computers by hard-balling everyone: suppliers, distributors, and customers alike. Everyone was afraid of these companies because of their ruthlessness, their unwillingness to take prisoners.

But eventually both companies came crashing down, due at least in part to the ferocity of their competitiveness. In the case of Leading Edge, stores frustrated with Leading Edge's indifference to customer complaints refused to stock their computers any more. In the case of Commodore, suppliers rose up in revolt against the company's savage style of supplier relations.

Killing the competition

The sure sign of a Brute company is how it behaves when up against someone smaller than it.

Consider the notorious McLibel case that hypnotized British readers through eleven months of 1996 and 1997. In the longest trial in English history, a pair of unemployed, lawyerless vegetarians held off powerful McDonalds in a battle for the hearts, minds, and arterial passages of the United Kingdom.

Former postman Dave Morris and bar worker Helen Steel circulated brochures outside London restaurants condemning the chain in just about every way -- labor relations, environmental practices, cruelty to animals, false advertising and the nutritional merits of their hamburgers.

McDonalds, seeking to head off attacks by other "publicity seekers," sued the two for libel. The verdict, a partial victory for the restaurant chain, was of the Phyrric sort -- an award of $94,000. The trial is said to have cost McDonalds $16 million.

The brute cycle is on naked display in electoral politics. Politicians are told by their handlers that unless they "go negative" against their competitors, they will certainly lose. So the mud flies, and the defactualization accumulates. By the time voters cast their ballot, the reputations of both candidates are in tatters, and voters are no longer even interested in the issues or the candidates' stands -- they are too disgusted with the process. The ability of the winner to govern effectively is thus severely compromised -- a classic pyrrhic victory.

Win today, lose tomorrow. It is a cycle that can only be broken by redefining interests so that heads no longer crash into one another, and organizations master a kinder, gentler, longer-term kind of winning.

Belling the Bullies

The relative magic of
exchange, encircle, and exact

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:

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

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?

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."

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.

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.

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, 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.

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