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Posted: April 08, 2011

Is your business chess or checkers?

Simplify if you can

Todd Ordal

There is a scene in the movie Training Day-a great, but disturbing flick-where Denzel Washington schools a new police detective on the complexity of a situation and sums it up by saying, "This is Chess, it Ain't Checkers!" (That's not quite what he says, but in the words of Bob Haldeman from the Nixon Whitehouse, "Expletive Deleted".) Is your business chess or checkers?

Different businesses have different levels of complexity. Some have many moving parts and a very complex competitive environment with threats from direct competitors, substitute products, rapid product changes, new entrants, limited suppliers, powerful buyers and significant working capital needs. This is chess ... perhaps 3-dimensional chess in the dark! You have to play it well to even survive. It would be worthwhile asking how you might turn it into a game a checkers and eliminate some of the complexity.

I know of a consumer products company that had all of these characteristics. They were on the verge of death several times before they were finally sold. Only some very creative product development and financial fancy-footwork kept them afloat. A sale to a larger company was a good option as it eliminated some of the challenges listed above. You need Kings and Queens to play chess and they didn't have them.

Other businesses are much simpler. They require lots of hard work but have less complexity. They might be driven by a strong brand, natural resources, captive customer relationships, a monopolistic business environment or have significant barriers to entry. Their revenue stream is not constantly at risk from a new product entry. They do not have severe concentration issues (i.e. much of their revenue or supply coming from one source). They might have a negative cash conversion cycle (i.e. they are paid by their customers before they must pay their suppliers).

I've worked with several companies that have many of these characteristics, though not all. Their owners/CEOs sleep much easier. If you look at Warren Buffet's portfolio, you will find companies that look like this. How do you change from chess to checkers? Sometimes you can't without leaving your industry as it is currently defined. It likely requires dramatic change (e.g. new sales channel, new delivery mechanism, proprietary products, etc.).

From my experience, it is well worth the time to ask the right questions that might lead you to a better playing field, fewer headaches and higher profit. At the end of Training Day, Denzel Washington's character continues to play chess when in fact the game changed to checkers. He didn't see it, and he lost.

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Todd Ordal is President of Applied Strategy LLC. Todd helps CEOs achieve better financial results, become more effective leaders and sleep easier at night. He speaks, writes, consults and advises on issues of strategy and leadership. Todd is a former CEO and has led teams as large as 7,000. Follow Todd on Twitter here. You can also find Todd at http://www.appliedstrategy.info,  303-527-0417 or todd@appliedstrategy.info

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