What does football have to do with companies and their stock market performance? Everything, according to Dutch Holland, co-author of Red Zone Management: Changing the Rules for Pivotal Times.


Dutch Holland
Author,
Red Zone Management

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The economic travails and ongoing terrorist attacks have put businesses into what Holland, CEO of management consulting firm Holland & Davis, calls the "red zone," the term in football for when a team gets within 20 yards of the end zone. And with this challenge comes a golden opportunity for companies to outsmart their competitors, outpace the market and improve their bottom lines, he says.

Here, Holland explains how companies must adjust their strategies when they're closing in on the final legs of a business strategy change or are facing extraordinary challenges, just as football teams do when they get into the red zone. In addition, the author says, that's exactly when a smart and aggressive football team brings in the heavy guns. In the business world, the red zone calls for what essentially amounts to "the C Team": the CEO, the CFO, the CIO and the COO, he says.

For example, Southwest Airlines (LUV) - Get Report is a company that Holland believes is in the red zone, and it's gambling on a strategy that could well make it a winner -- or a loser.

TSC: How does all this football "stuff" apply to the world of business?

Holland: I do the football stuff because we have worked with big companies for years and years, and watched them make major attempts, periodically, to improve their business. These major attempts are things, like they'll change their strategy; they'll do a big merger; they'll do a big re-engineering; they'll implement an ERP enterprise resource planning system.

You've heard of

SAP

: These are big computer systems that are comprehensive and span an entire firm, so that rather than each part of a firm having its own computer system, there's one big system that everybody in a firm can get into. That's been a major wave of the past seven or eight years.

Here's my point: We've looked at companies trying to get ahead, and they use what we call "maneuvers" like a merger or implementing a big

computer system or going through a big culture change. And the thing that we noticed about those maneuvers is that more than half of those maneuvers don't work. Many companies, instead of getting ahead, fall back.

TSC: Why don't these strategies work if they are so well-thought out?

Holland:

They

are

well-thought out in concept, but the problem is

that when it comes down to executing them, they don't work out.

For example, there are some statistics out there that upward of 80% of the big mergers that happen don't create enough extra value to pay for the cost of the lawyers and the accountants who did the merger.

So what we were trying to do was figure out a way to say to big companies, "Yes, you are entering a very critical time, and yes, you have an opportunity to move your company forward with this maneuver, but you also are facing a big risk because these maneuvers are very hard to manage. They are not hard to conceptualize, but to manage them and make them work is

very

hard." We wanted to say, "You are going to come out of this new critical time either way ahead or way back. But you aren't

ever

going to be the way you were before."

Let me try a football analogy on you here. In football, when a team gets inside the 20-yard line on the way to score, they call it, arbitrarily, "the red zone." It means either they go forward and score -- that's the good news -- or they fail to score and the other team has a moral victory and

the first team loses their momentum.

As to why these maneuvers don't work more often, the answer is because

management doesn't understand that

they have to change the way they think when they enter the red zone. In football, for example, when you get near the goal line, you change the way you play. All the rookie players come out, and the old stars, the pros -- whether they are hurt or not -- they get in the game.

The plays are now called by the head coach himself and not by some assistant. They actually open a red zone playbook that is special; these plays only work inside the 20-yard line.

So, I thought this would be a useful analogy to communicate the idea to managers, "You guys do one of these big maneuvers, you're in a red zone and you've got to change the management rules."

TSC: Can you give an example?

Holland:

You ask a typical manager for just one principle that they've got beaten into their head, they'll probably tell you, "Delegate, delegate, delegate." In the red zone, we ask the leaders, "Don't delegate. You've got to be the leader. You cannot hand off the responsibility for getting a merger done or for changing a strategy.

TSC: Who should be in charge of that?

Holland:

That's what we call the C-level executives: the CEO, the COO, the CFO, the CIO. Those are the guys that have to become the leaders when we do these big maneuvers.

TSC: Well, aren't they involved

anyway?

Holland:

They are absolutely involved in the beginning. It is not at all unusual for the C-level folks to be involved in the planning of a merger. They probably serve as a steering committee while the maneuver is being consummated, but rarely are they the leaders. And that's the problem. They need to be in there and be the actual leaders.

TSC: Can you give us another example?

Holland:

OK, well, let me move to this. Given the tenor of the times right now, with the world kind of changing around us, what we are seeing in business terms is what amounts to tremendous market upsets, and by that I mean various industrial upsets -- not just the stock market upset.

Our understanding of the marketplace and where it was going by the end of the year 2001 have now changed radically because of the economic downturn and the Sept. 11 attack.

TSC: What would you recommend to an industry such as the commercial airline industry, which has been hugely impacted by the events of Sept. 11?

Holland:

Many of the airlines right now are putting in place new strategies based on their assumption that passenger air traffic miles are not going to come back to where they were until the end of 2002. So they are going through a strategy change. If it works, great. If it doesn't work, they'll be worse off from having made that move.

I just read how Southwest Airlines has decided that their strategy is going to be

not

to react to the market upset. They are continuing all their flights. They are continuing their exact plans for expansion, and they are using this time to have a differential between

how they behave and how their competitors behave.

So Southwest Airlines is in a red zone. They are trying a maneuver that could have a

huge

economic payoff. But if, lo and behold, airline traffic doesn't come back and they don't respond,

it could be disastrous. Right now, Southwest Airlines is running at a very low load rate compared to where they were this time last year, but every flight is going.

So, that's the message I have for the times right now. I think it's very important for our senior executives to look past the emotional upset of the terrorism situation and to read it in pure business terms. And if you read it in pure business terms, what we have right now is a market upset. Stocks are one kind of market, but every company has their own market of customers, and that's the root of where all those companies that trade on that stock market are in.

That's where it all begins. That's the root of how these big public companies are going to continue to be profitable and thrive. The red zone.

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