To be Reactive or to be Active


    Working on my current project has made me realize how easy it is to lose the focus while running a company. This is particularly seen during the good times. If a company is making money, management tends to get complacent.

    A good example could be various regional airlines in the United States, which are heavily dependent on the legacy carriers to provide business for the non-hub routes. They were (and some are still) earning higher profit margins than some of their business partners, the major airlines. Operating profit for regional carriers in the United States was 9% while that of legacy airlines was -4% for 2005.

    Regional carriers, while basking in the profits, refuse to realize the flaw in their business model. They are not diversifying their risks. They are not strategizing and hence not making the most of the market but being reactive to what comes their way.

    Similarly, I recently read the controversial Peanut Butter Manifesto written by the Yahoo S.V.P., Brad Garlinghouse. He talked about how Yahoo needs to change its vision. Instead of reacting to every new online competition, it needs to carve an unwavering course.

    This has, indeed, made me ponder about how bad peanut butter is for a company’s growth.