Whatever works

 I spent a fair chunk of my career trying to manage networks of petrol stations. Perhaps that sounds rather pathetic. But I am not complaining, because it gave me a good living, introduced me to interesting people and taught me many life lessons.

 

The first trick to managing networks of petrol stations is to understand one station. A petrol station is like many small businesses. People, detail, standards, expectations and money all matter a lot. Petrol stations have their own little quirks, and it helps to be an expert in those, but a lot of the skills are more generic and transferrable to other businesses.

 

So managing a network is mainly about optimizing its elements, and many of the same priorities are equally important at a network level. It is grinding work without quick fixes. We need to trust people but also to be skeptical. We need to see a big picture but to keep a close eye on tiny details. Count those cigarettes every day, and be seen to be counting them!

 

There are many levers to pull, but a lot of them are frustrating. In the same way that a soccer team relies on motivating different players in different ways, many levers work well on some stations but have unintended negative consequences on others. Grandiose strategies like brand differentiation are critical but often fail to match realities on the ground and only yield benefits in the long term. Pricing offers the temptation of immediate impact but can be a hornet’s nest. Station level details like recruitment and maintaining standards can seem to have little impact at network level. Some levers feel tempting but either carry prohibitive initial cost or face regulatory blockers.

 

In my experience, this often causes managers (including myself) to reach for the shiny lever called the system. In the case of petrol station networks, this refers to the contractual and operational relationship between the network owner and the managers of individual stations. Who should own what? How are incomes and costs shared? What leverage and security does each party have, and what risks? What procedures deal with special situations?

 

It is a gross simplification, but for stations owned by the network owner rather than individual operators, a key choice is between company operation and some form of franchise where the operator has more control. In the first case the operator is like a manager, paid a salary with incentives and bonuses, while in the second case the operator is more like a business owner, running their own ship within a framework of rules.

 

The generic pros and cons of each approach are obvious. Company operation seems to retain more control and sanctions, allows network level initiatives without negotiation and retains more upside. Franchises can incentivize hard work and care, so fraud will usually be less and decisions can be made with more agility.

 

I learned many lessons by living through this debate and through implementations. The first lesson is to avoid lazy labels. The top line may say company operation, but underneath the detail might work more like a franchise, and vice versa. The detail matters more than the label. In the same way, dogma does not help. Many of us lean towards a franchise or lean towards control, but we should always be open to whatever will work in a given situation, rather than simply applying our dogmatic bias to every case.

 

Next, resist pulling that lever! Change is always costly, slow, and loaded with unintended consequences. It is also never a panacea – a terrible network with terrible operation will not be transformed merely by a system change. But it is also important to pull that lever occasionally. Systems become tired and over time the flaws become endemic, so the time for change eventually comes around. Good practice is to evolve a system gradually via incremental change, but that can be difficult.

 

Next, context is everything. Are we growing or declining, and a market leader or a distant follower? What best fits the local economy, in terms of talent, regulation, common practice or other factors? How does the decision fit with our wider company culture and strategy?

 

Next, horses for courses. Not every station needs to have an identical model. Hybrids may be operationally necessary or even beneficial. We should play to our strengths, be adaptable and always learn.

 

Finally, implementation is everything. Details matter, and these include transition, training, communications, pace, handling of special situations and maintaining operational focus during change.

 

My example comes readily to mind when thinking about the much larger question of political systems for countries. There is constant chatter comparing democracy to autocracy, these days especially when it comes to the war of words between the USA and China. A few weeks ago, Chaguan, normally my favourite Economist writer, made a ritual defence of the values of the west in comparison to China, and it all rang very hollow to me. China has many flaws and engages in reprehensible behaviour, but lazy analysis abounds.

 

All of my generic lessons apply. The first is about lazy labels. Communism versus capitalism has overtones of company operation versus franchise, and democracy versus autocracy has its own generic pros and cons. In both cases, lazy labels only hinder intelligent thought and debate. Every model has its own quirks, and many details make up the overall picture. Chaguan relied on such lazy thinking, and sadly that is often all the west has to offer these days. Our system sucks but at least we can vote! Well maybe, but in the US votes are rare, usually meaningless in gerrymandered constituencies, appoint representatives who follow no manifesto and are often fodder for lobbyists and are stymied by dysfunction, corruption and inequity, including in the courts.

 

So we must look beyond labels and beware dogma. We should also resist pulling the system lever, especially without a strong implementation, as the Soviet Union tragically demonstrated in the 1990’s. Adaptable, incremental change within a system is key, and here the US is a disaster area, while China has recently done a wonderful job.

 

Then there is context. It can be argued that the current model in China is ideal for its stage of development, though I acknowledge that this would sound very hollow to somebody languishing in a Uighur indoctrination programme. The general context of the mind set of the majority of the people, the level of development and education, the relative position compared with other nations, and the international constraints and opportunities, would point towards centralised decision making within a structure of clear strategy and goals. They have also been smart with horses for courses. Xinjiang is a brutal example, Hong Kong and Macau also questionable but effective, and policies stratifying cities and regions are excellent. Look out for unexpected but brilliant moves concerning Taiwan, perhaps starting with the TSMC, the world’s leading microchip company.

 

And implementation is everything. It will not last, the time to pull the lever will come eventually as complacency sets in, and there will be losers as well as winners, but I sense the Chinese winning streak has some time to run yet. The quality of implementation is in a different league to their main adversary in so many areas, and I see little sign of that changing.

 

In the west, we would do well to go beyond dogmatic slogans and labels, and start to find some incremental fixes to our myriad problems. Oh, and perhaps it is a mistake to confront an adversary whose system may be less appealing but who seems to be playing a better game than us just now.