The recent news that Apple has an eye-popping $250 billion in cash reserves is astounding. Even more amazing is what we can learn and apply from this to our own companies.
Consider that the five largest companies by market capitalization – Apple, Alphabet, Amazon, Microsoft, and Berkshire Hathaway are worth about $2 ½ trillion. As five individual companies, they represent 1% of the S&P 500; but from the perspective of economic value, their $2 ½ trillion is over 10% of the S&P 500’s total market value (estimated at $21.5 trillion, per the S&P/Dow Jones Indices April 28thfact sheet).
Let’s face it, the leadership body of most companies don’t see themselves having much overlap with these corporate giants as they do not benefit from the same scale as the top 5.
Not so fast.
There’s a lesson to be applied from these large companies, and the comparison is as close as your own bank account. Consider your personal finances, and what actions you would take if you found yourself with a comfortable– and growing – cash reserve. Chances are, you would think more keenly about long term scenarios. Some personality types will want to protect wealth while others will be more willing to take chances in search of greater paydays. Your choices and options widen.
This is the world we find ourselves in 2017; where companies now awash in cash are exploring big-space arenas well outside the competitive space the rest of the world considered their traditional domain.
Start with (the) Alphabet. Their original mission as Google was to organize the world’s information. Now they’re taking on the car industry. Stalwarts like GM, have put their R&D budgets through the blender looking for new investments. Just recently, Ford fired their CEO – a 28-year company veteran – to put in an executive with no auto industry experience.
Amazon – that on-line bookseller-turned “everything-seller” – has become the dominant force in large scale cloud computing. Google, IBM and others are in hyper-alert mode. More recently, Amazon has taken to disrupting the supermarket industry.
Microsoft – which has stayed relatively close to its technology roots – beyond their traditional software and gaming business – has become a significant player in the behind-the-scenes world of information security.
Outside of high-tech, the decidedly low-tech company Berkshire-Hathaway, who many Americans are virtually unfamiliar with, is 5th on the list, and a conglomerate owning rail freight shippers, energy and utility companies, retail, insurance, specialty chemicals, home building products and precision components for the aerospace and industrial products industry. They compete with virtually everyone. And they are major players in their markets.
What these 5 companies have in common is this: they have an abundance of cash, very savvy leadership, and a cultural bias to act decisively. It’s a powerful combination. If you think your company understands your competitors, I suggest you put it through a 4-part lens to consider how you’re thinking about your future.
We recently conducted a Strategic Decision-Making workshop and asked over 30 company representatives to answer the following question: Where do you and your leadership team spend the bulk of your strategic thinking time?
Here were the responses.
The situation is telling. Only 20% of the group said they spend their “strategic thinking” time on strategy. In my own experience, even companies with deeply rooted “Strategic functions” find it hard to influence their company’s strategic direction. They blame the bureaucracy; or the pace of change; or even analysis-paralysis (which signals a risk-averse culture stifling a much-needed gut-check).
The upshot is this: Companies who look for new ways to grow, and back it up by spending more than a passing moment thinking about the future will find new ways to grow. The place to start is in how to evaluate strategic choices and formulate strategic decisions.
The threat is clear: neglect strategic decision-making skills, and you’ll wake up to find your market share in the hands of people that weren’t even on your competitive radar.
Or, act with smarts, critical strategic thinking and armed with a culture of empowered teams, and instead, you become that explosive, wildly disruptive company taking – or creating – market share.
For over 50 years, Kepner-Tregoe has been helping organizations and business leaders like you implement structured processes so you can focus on the next big challenge or opportunity. As your trusted advisors, KT’s unique approach to consulting and training, combined with our proven problem solving processes have helped companies across industries both achieve and exceed their goals.