In March this year, Uber celebrated its tenth birthday. Within a decade, the business has grown from zero to a valuation of around US$82bn – that’s roughly the same as the GDP of Ethiopia.
So how do you build a multibillion-dollar company in under a decade?
Uber’s example suggests a fairly simple formula: pitch a ‘disruptive’ idea to tech investors and then funnel the investment into subsidising consumers, with the aim of building enough scale to crush any opposition from regulators and competitors until monopoly power has been assured. Thanks to a combination of ultra-low interest rates and ultra-aggressive venture capitalists keen to find their next unicorn, this approach has become so popular it now has a name: venture capital to consumer (VC2C) and explains the ubiquity of urban mobility and delivery startups that have promised to make megacity living seamless and connected.
But the model doesn’t work for everybody.
According to UCL’s Consumer Data Research Centre, four large dockless bike-sharing schemes operated in London a year ago and collectively covered 617 sq km with around 5,800 bikes. By February this year, three of the four competing schemes had folded – ofo, Urbo and oBike. Aside from sounding like hobbit names, the collapse of these schemes has been rapid and spectacular: latest estimates suggest the number of bikes is now down to 2,100. Only one competitor remains: Mobike.
In a February interview with The Guardian, Mobike’s head of growth and PR in Europe explained that his company had survived because it learned to pick its battles – focusing on cities that welcomed bike sharing and downsizing its fleets to avoid oversupply. Ultimately, it seems that the hobbits were so focused on beating each other to achieve scale that they littered London’s streets and pavements with a glut of unwanted bikes. Bikes were vandalised. They were dumped in canals and left dangling from trees. Some were set on fire. They had become such an ubiquitous annoyance that they were seen as junk rather than a way to get around. They are a cautionary tale of what happens when businesses become so toxically obsessed with beating the competition that they neglect the needs of their customers.
It’s possible to be fiercely competitive without this becoming toxic.
Few environments are more intensely competitive than Formula One. And few rivalries are as deep and enduring as McLaren’s with Ferrari. Enzo Ferrari invested every ounce of his passion and knowledge to build a team capable of dominating a sport created to test physical, mental and technical limits. McLaren entered Formula One in 1966 with one simple objective: to challenge Ferrari’s dominance. Eight years later the team won its first Constructor’s title, beating Ferrari into second place. The teams have fought for ascendancy ever since, competing for history’s most talented drivers and engineers, as well as Drivers’ and Constructors’ titles. John Allert, who has been CMO at McLaren for well over a decade, explained that while the business enjoys a fierce rivalry with Ferrari, its true nemesis comes in another form: mediocrity.
“Our nemesis – the thing that worries us most – is letting down ourselves and the premise of our brand through mediocre performances, errors, faults, or even just doing something that’s seen as being average. We’re effectively allergic to mediocrity, and there are all sorts of checks and balances to try to mitigate against that ever happening. The thing that could undo us the most is not Ferrari – it’s mediocrity.”
This allergy to mediocrity was embedded in the brand by its founder, Bruce McLaren, who tragically died in 1970 during testing. He would sweep the floors every morning before anybody was allowed to start work. And he would sweep them again at the end of the day after everybody went home. Ron Dennis exhibited a similar level of fastidiousness and dedication to detail. A self-perpetuating culture emerged as people who shared this ethos joined, stayed and succeeded. The chance of anything being allowed to happen in any way other than optimal was zero – whether that was design, build, racing, team discipline, presentation of people, team kit, cleanliness, standards, or the environment and the garage. It came from Bruce McLaren in 1963, but was honed and developed by Ron Dennis throughout the ’80s and beyond. Excellence isn’t something that’s talked about at McLaren. It’s something that is striven towards.
A nemesis is not the same as a rival or a foe. As the hobbit cycle companies demonstrate, rivalry in business can be a huge cause of distraction; it encourages an organization to glance sideways rather than looking forward. Ferrari isn’t even close to being the biggest threat to McLaren’s future – climate change, technological innovation, population growth and income inequality will play a far more powerful role in the business’s future. McLaren’s nemesis of mediocrity keeps the business honest and focused on what matters most. Pick your nemesis carefully. It’s not the rival you most keenly want to defeat – it’s the hidden menace that threatens the very existence of your business.