Where Einstein Meets Edison

Plan B

Plan B

Mar 18, 2011

What is the difference between strategy and tactics?  Age old question.  Usually strategy is what you said was your plan after you blundered and lucked your way to a win.

I was never more aware of this than the recent IPO for A123 Systems, a new age battery company that a few of us backed nine years ago.  The original idea: build lithium ion batteries for cell phones and laptops.  Who wouldn’t want a cell phone that you charged once a week or a laptop that you charged once a month?  That was the strategy and our mission statement boldly said just that.  Strategy says “pick where you want to be in 5 years, then pick where you should be in Year 4, Year 3,etc” – in other words, work backwards.  Tactics, on the other hand, say “Be opportunistic, try a few things and go with what works.  If it is successful, you can call it strategy later and have the Harvard Business School write a case about how  brilliant you were”.

Which was exactly what happened with A123 Systems.  The original investment was $15 Million and was raised from Desh Deshpande (Cascade, Sycamore Networks), Northbridge Ventures (Sonus Networks), and us (Yankee).  The early directors meetings were Chemistry 101 where the founders (Yet Ming Chang, Bart Riley, Rick Fulop) talked incessently about how to dope lithium ion to give it more power and faster recharge.  In truth, we had nothing else to talk about – we didn’t have any customers.  Two additional investors then came on  board (Paul Jacobs of Qualcom and Mathew Growney of Motorola) so we were poised to attack – laptops were gobbling power and cell phones were turning into laptops.  One problem: the technical hurdles were not so easy to fix. The original technology we liscensed from MIT was world class so there really wasn’t anything else to do but keep a lid on spending and hope for technology breakthroughs. 

Then, we found the first customer – Black and Decker.  The batteries seemed to work well with cordless drills – instead of waiting 4 hours to recharge you could do it in 20 minutes.  After that came BMW, GM, GE, Gillette, the Department of Energy, the electrical energy industry – and tons of money. Today, the investors look like geniuses because we invested in “alternative energy” before it was cool.  Really, we did nothing of the sort; we invested in an academic paper in material science that was attempting to take a process and turn it into a product – but, trust me, we will never tell the casewriter from the Harvard Business School that.

Years ago, American Hospital Supply was a distributor of hospital supplies and they had a very demanding customer – a purchasing agent at Stanford Medical Hospital who would call 8 -10 times a day inquiring about availability, pricing, delivery. He was so much a pain that eventually American Hospital Supply’s regional manager said, “Could we give him a terminal, let him check our inventory and would that shut him up?”

It did, but the real genius was the person who figured out that every hospital had the same problem and if they made the system industrial strength they could change the industry.
Tactics beget Strategy. Tactics without strategy is just the noise you make before you fail. Strategy without Tactics are just forms of self abuse.

From a CIO’s perspective, strategy sounds so nice but often we inherit a set of circumstances that are suboptimal. When that happens, remember American Hospital Supply  – a mere distributor – who so upset the status quo that it sent shivers down the spine at Johnson & Johnson and the rest of the hospital supply industry.  Eventually, the Department of Justice sued American Hospital Supply for so dominating the industry – which is the America’s version of granting knighthood.

I look forward to A123’s defense of a monopoly suit some day.

That’s our Plan B.

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