On 21st October, 1805, off the coast of Cape Trafalgar, Spain; the Royal Navy commanded by Admiral Horatio Nelson was facing off the combined fleet of French and Spanish navies. Commanding a fleet of 27 ships, Lord Nelson was up against 33 Spanish-French fleet commanded by the French Admiral Pierre-Charles Villeneuve. The French Admiral had a 6 ship advantage which, in those days, practically determined the outcome of naval engagement.
The naval battle formation of that time involved the opposing fleets lining up against each other in a close parallel formation and then striking each other with cannon fire followed by hand to hand combat until one side was clearly defeated. Admiral Villeneuve, following the established norm, organized the Spanish-French fleet into a ragged line formation. However, Lord Nelson deviated from the conventional naval orthodoxy and attacked the combined French-Spanish fleets orthogonally instead of lining up along side. Lord Nelson easily breached through the French defenses and inflicted a devastating defeat to the combined fleet.
The battle of Trafalgar was one of the most decisive battles in the history of Naval warfare. England’s victory in this battle established it as unfettered sea power for the next 100 years. While the strategy and technique used in this battle has been studied by military strategists, the learning from this decisive battle can be equally applied to the corporate strategy as well.
In today’s business environment, the advantages of the well managed firms that have been around for many years can be compared to that of the Franch-Spanish fleets. However, the established giant’s might and dominance are being threatened by newly minted upstarts. These new generation of companies fueled by easy capital, global talent and access to sophisticated and unlimited computing power are going against the traditional orthodoxy that defined the success of the entrenched firms. These companies are introducing innovative new products and services faster, better and sometimes cheaper than the incumbents. Take for example, Uber, a firm that was established only in 2009 and went operational in 2011. It is threatening the traditional taxi service industry which has been operating ever since the first model-T rolled out of production lines over a 100 years ago.
Taxi operations is one service industry where status quo reigns supreme. Investments in technology made by established taxi services have been marginal resulting only in incremental changes. Rigid pricing structure and poor customer experience and satisfaction has become the norm. The competitiveness was limited to non customer value creating aspects like who gets to drive a cab etc. In NYC, for example,medallions that gave the driving rights wereauctioned for millions. The inward looking industry did not focus on things that mattered like better customer service, better use of technology or adopting flexible pricing strategies. Uber changed all that! Founded with a vision of providing great customer experience, the company leveraged mobile technology to deliver exceptional service, convenience and information. Uber also innovated by adopting a market driven pricing strategy based on demand and supply. The entrenched taxi service companies while having resources were stifled by conventional orthodoxy in spite of being aware of technological changes happening all around them. They were unwilling to make the change or move fast enough to adapt to the new reality.
In conclusion it is very important for business leaders not to get caught up in the web of conventional orthodoxy because the Lord Nelsons of today are far more ruthless, fast and agile. These nimble competitors not bound by the traditional rules and are bringing newer ideas to the market faster, better and cheaper. The leaders of the established firms must not be afraid to pull a “nelson” on their own business or product lines in order to survive and thrive. They need to embracethe idea of cannibalizing their product lines or to turn the existing business model upside down if necessary. If they are unwilling or unable to do it, the nimbler competitors unconstrained by conventions will come along and destroy the firm transforming the business model inside out. While the real battle of Trafalgar ended with emphatic victory for England, in this new flattened global stage the battles continues ….