This week, one of the big names in the DFW area, AMR, filed for bankruptcy. AMR is the parent company of American Airlines. The management team is trying to spin this as a business decision, but ultimately this is a major failure of leadership, and the wrong people are going to pay the price for it.
Adam Hartung has an excellent write-up over at Forbes outlining how this is a major failure on the part of the AMR management team. I can sum up the failure in even fewer words: AMR was not playing to win, they were playing not to lose.
Playing not to lose is, unfortunately, the typical death spiral today of our corporate giants. Instead of wow’ing customers and delivering outstanding products customer want to pay for, they hunker down and try to squeeze as much cost savings as they can out of their current, failed strategies. They think they can survive until better times if they just save a few more pennies. Unfortunately, this doesn’t happen. Cost cutting without innovation is a race to the bottom. You can’t out cost-cut your competitors, so you’re just racing to see who fails last. The game becomes about not losing, even though you really do lose.
Top companies play to win. I’m sure Apple controls costs, but their first priority is to delight their customers. You don’t see Apple trying to undercut Samsung and Dell to stay relavent. They build a product people want to buy, and as a consequence, can set the price point where they want, and not worry about the competitors.
Being in IT, it is incredibly easy to tell when a company isn’t playing to win. The first sign is usually having a bean counter in the IT management chain. Bean counters are usually 100% about not losing, instead of winning. Robert Crandall at AMR was a bean counter. He was proud he saved $700K for the company by not putting olives in the salad. Yet he was completely oblivious to how all those small cuts affected his company’s brand and destroyed customer loyalty, costing him 100x what he thought he saved.
The second sign you’re company is only playing not to lose is when you hear IT management start talking about “running IT like a business”. This means your senior managers failed to run the business like a business, and now they’re just looking to trim corners to stay alive. Unless you’re in the IT business, you can’t run IT like a business. IT is cost center. Can IT implement a chargeback model and increase billable hours to the business? Or increase rates? Maybe even increase production support costs and start charging per deployment to create extra revenue? Of course not! You would only be a paper profit center, robbing from Peter to pay Paul while having a zero-sum impact on the company’s bottom line.
So “running IT like a business,” when IT is a cost center, is a fancy way of saying “we’re going to cut costs in IT to try and hide our inability to run the business like a business.” It means they’re playing not to lose. But you can’t win by playing not to lose.