247: How Not to Grow. Know Yourself. Halfaampieskraal.

Dear friends

It’s good to be back. I hope you’re well.

The Pulitzer Prize winners were announced this week. As always, I am reaching for my credit card whilst dreaming of a trust fund which would allow me to spend more time reading. Here’s a good overview.

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/strategy
In 1989, William Avery became CEO of packaging company, Crown Cork and Seal. In the preceding decade, the company’s growth had slowed. In addition, their competitive advantage rested on the ability to switch quickly from producing one item to another. Their customers often needed unique pack sizes or a quick turnaround. Crown had evolved the capabilities to meet those needs. New materials (PET) made that easier and cheaper than with glass and metal, eroding their traditional advantage.

To address the growth challenge, Avery recruited senior dealmakers with investment banking experience and launched a program of acquisitions.

By 1997, they had done twenty acquisitions, becoming the world’s largest container manufacturer, predicting that their size would allow them to bolster cost control capabilities.

Strategy guru, Richard Rumelt, comments wryly, “No one mentioned the awkward fact that Crown’s traditional competence had been flexibility and short runs, not cost control”.

Between 1998 and 2001, Crown’s stock price dropped from $55 to $5. It was $20 in 1989 when Avery took over.

During the ‘slow growth’ 1980s, sales did indeed tick along at a modest 3.1%. They also delivered a respectable 15.3% profit margin. Focus on core capabilities created efficacy and efficiency.

Crown’s superior performance had rested on a carefully designed strategy meeting customers ‘ needs for flexible, short-run, time-sensitive production. In other words, where customers were often prepared to pay a premium.

Yes, they manufactured using glass and metal and yes, PET’s arrival had reduced their advantage, but flexibility, innovation, customer responsiveness these were their core capabilities.  

Strategy is a capabilities game.

Acquisitions took Crown into whole new capability areas, areas in which they had no experience, and to make matters worse left decades of specialist experience to languish and erode.

Rumelt concludes, “The proposition that growth itself creates value is so deeply entrenched in the rhetoric of business that it has become an article of almost unquestioned faith that growth is a good thing… But unless you can buy companies for less than they are worth, or unless you are specially positioned to add more value to the target than anyone else can, no value is created by such an expansion… Healthy growth is not engineered. It is the outcome of growing demand for special capabilities or of expanded or extended capabilities. It is the outcome of a firm having superior products and skills. It is the reward for successful innovation, cleverness, efficiency and creativity”.

I feel for Avery. Hindsight turns us all into geniuses. He needed to grow the business. Technological advances were disrupting it. Change was needed.

It’s a mistake we could all make. We deliver service or product X. They do the same. It makes sense to buy them.

Four questions help. What are our core capabilities? Which of them are currently valued by customers and will be in the future? How can we do strengthen those capabilities? Which of our existing capabilities must be retained, amplified and used as we chart this new path?

(You can read more insights from Richard Rumelt here).

//self
We encounter similar dilemmas in our personal lives. We want to grow. We need change. Change is forced on us. The world presents all sorts of compelling options. Without a rigorous understanding of our core capabilities, we too can waste resources.  

The temptation is to throw forward, to look outward. To ask who could I be and what does the world want? Important questions, yet without foundation, potentially fatally flawed.

It is more powerful, more sustainable to start by asking questions of your past.

When, where and with whom have I been the best version of myself? In what moments, have I been most energised? When have I been celebrated? For doing what?

Take care. The answers to those questions may be obscured by visions of who we think we ought to be. But you know when you loved being celebrated, and when you didn’t. Pay attention.

Explore beneath the surface of the actions. What are the capabilities that enable you to thrive in those moments?

The actions, the success, the enjoyment are all expressions of a deeper you. Take time to meet that person. Understand who they are.

///soul
Last week, we drove out of the Cape Peninsula, headed towards the Overberg. It is autumn in the Cape. Winter’s rains have not yet conjured an infinity of greens from the soil. And so, as one descends Sir Lowry’s Pass into the farmlands beyond the Hottentots Holland Mountains, the land is all browns and greys. You could squint and convince yourself that you see coppers, golds and silk. You’d be lying. The beauty of this time of year rests only in the memory of what you know will soon come.

We were driving in search of once commonplace luxuries. Silence. Darkness. Birdsong. Gifts of the planet destroyed in humanity’s pursuit of more. Gifts that today only exist in small pockets. Halfaampieskraal is one of those places.

It returns you to an older time, a time of deeper knowing and then adds the luxury of gentle care and the finest food. Proprietor Jan-Georg Solms has created a place that restores the soul.

Marlette Scheltema, the kitchen’s magus, and so much more, gifts each afternoon with a sweet treat. On our first day, a simple Swiss roll floated more than sponged. I ate whilst watching the retired border collie watching a chubby ginger watching the border collie, one eager to herd, the other determined to convey that the desire was ill-conceived, and any attempt would be poorly received. Another day, a baklava cake whose sweetness had to be matched with dry bubbles. I don’t eat cake. Ever.

Breakfasts and dinners were delights. Cardamon-dusted yoghurt. Grilled pineapple with a cinnamon and star anise syrup. Lamb pies blessed with shiraz jelly. Pea risotto with a squeeze of lemon. Baked cob subtly zinging with a caperberry leaf salsa. A traditional bobotie made impossibly richer by lamb mince. It is that part of the world.

The first morning started with a pre-dawn knock at the door. The border collie. The sky was light, the sun not yet up. The previous night’s light rain gathered in silver puddles. As I sat with him, dozens of blue cranes flew from their night’s resting place to nearby fields. Their vocalisations filled the air as the sun crept above the horizon.

I spent a while trying to describe their sound and gave up. You can listen here. I can tell you this, the next morning, the desire to bathe in that sound again meant the collie found me cupping my coffee for warmth. He nudged me until I relented and scratched his head whilst I waited for the symphony to start.

There are only about 25,000 Blue Cranes left in the world, about half are found in the Cape Overberg.

(You can see more Halfaampieskraal here).   

All the best
 
Karl
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