Or if debt's available it's so
prohibitively priced that you just don't want to bother.
And the other thing is you're also introducing it to in addition to
the capital markets being farther down the curve, so too is the customer.
And that's one of the challenges, and
as soon as you prove in a concept with one installation or one project,
one operation then boohoo, all of sudden competitors and potential
competitors say that company took the risk and it works, now I'm going in.
So the instant you have success, you have this wave of competition.
And the question is, how do you manage going up that curve
of growth while you manage the risk at the same time, all sorts of risks,
almost every risk you can think of.
And that in short is what I've been for the last 23, 24 years.
So in all three concepts when I was introducing them,
the key to keep your eye on is what's the goal?
What is the end game?
I think often people can confuse strategy with objectives or,
much more commonly, strategy with tactics.
And in my case, I wanted to successfully introduce a concept and
roll it out across Europe, and that was the objective that at the five year mark,
we would be of x volume, for example x number of high end labels,
brands in our data centers or in our outlet centers across Europe.
That's the objective.
Now the strategy may be, for
example in the retailing concept, you have to be regionally dominant.
You have to have such an outlet center of such scope in size and
attraction and magnetism.
That it's insane for anyone to try to open up across the street.
Regional dominism, that was a strategy.
In the data centers, and then you take regional dominism, and
you want as many dots across the map as you can get.
In data centers, you want to be reasonably dominant, but
you only want the same dot to get bigger and bigger and
bigger because of the economies of scale inherent in that industry.
So, you start with the end in mind.
I always start five years out and I look back to the present.
That's the objective.
Now, the strategy is how do I get there.
And a strategy shouldn't change every month.
It really shouldn't change even I don't think every year.
You should have a strategy to get you there and you're constantly monitoring it.
Ronald Reagan used to say he only has three principles and
it makes governing very easily, because every time there's an issue or
a question to be determined, he goes back to those three principles.
That's what a strategy should do.
Tactics may change daily, weekly, quarterly.
You need to revisit at least annually your objectives, are they still realistic?
You need to revisit your strategy.
Is it still getting you to your objective, and hopefully it is.
It's no sense clinging to an unsuccessful strategy or an unrealistic objective.
But if it remains realistic, stick to it and
find the talent that is more talented than you are to help you get there.
So in determining what should be your strategy to reach what have already been
the derived as the objectives, for five years from now.
And the one year subset of that,
I always look at what are the key success factors for this industry.
Now in my case, there was no industry in Europe with these three new concepts.
So I studied the models in America, I've been in Europe for a long, long time.
I know which countries have certain jurisprudence.
Some are harder or more difficult than others.
But once you get those key success factors, then you cling to them and say
how can I put the building blocks of those factors together to derive the strategy.
And if you don't think you're able to,
then you might need to change your strategy.
So in deriving a strategy for any one of the three concepts,
it's important to realize that I had a fundamental underlying
business model that was similar in each case.
First off, I come from a real estate background so I know real estate and
real estate finance and I'm very very comfortable with that.
Each one of the concepts that I imported had a real estate element to it.
That in turn enabled me to dictate my financing strategy.
And in real estate and all the concepts that which I'm describing,
they are very capital intensive.
Deriving appropriate financing strategy is really, really key and I said,
that the outset when you're going up that curve,
the concept maybe more successful then, the capital markets are following you so,
there's a gap so, your financing strategy is key.
And in these case, I adoption what's called the Opco Propco model,
you have an operating company that is on top of a property company.
And I needed to own the property everywhere I went and
I had a separate operating company on top.
But that gave me the long term security and collateral that I could offer to
the private markets, private banks, but eventually also to the public markets and
I floated a number of bonds on the public exchanges.
And it's the Opco Propco model that is the same model in all three of those
concepts that most people wouldn't understand.
What?
What do you do for a living?
It's so different.
Well, underneath, it's not so different.
Not that different.
So when you're taking courses such as this one, or
if you've gone through a formal MBA program or Executive MBA.
In essence, what you're doing is you're learning
how to stock your tool box with a bunch of different tools.
And then when to use which tool and under what circumstances.
And the tools can be about accounting, and then marketing and finance and on and on.
Michael LenoxSenior Associate Dean and Chief Strategy Officer
Jared HarrisSamuel L. Slover Research Chair in Business Administration
Scott SnellE. Thayer Bigelow Research Professor in Business Administration
