WHY UNDERDOGS START AS FAVOURITES

In the middle of the punishingly deep pile of books I got for Christmas is Malcolm Gladwell’s latest offering “David and Goliath – underdogs, misfits and the art of battling giants”. Ever since his first book “Tipping Point” I’ve enjoyed his ironic, inquisitive style and his ability to spot the counter-intuitive. His best insight to date was of the company which spent more time and money than anyone else recruiting the best talent from the MBAs in the USA.

That company (outright victor in the war for talent) was Enron.

This book first of all describes why David, armed with the pre BCE equivalent of a .44 Magnum (his lethal sling) was the guy to bet on when faced by an overweight clown armed with sword and spear. (Even I would take on Mike Tyson if I had a gun and he didn’t.) His point is that size is not everything.  Yet all the accepted wisdom is power comes from scale. Not if you’re Indiana Jones of course…

Ask little Aldi –grocer of the year for the second year running with sales up 31.5% year on year with car parks resembling that of a posh funeral, as they themselves ironically observe, as they count the tills being filled by their middle class conquests. They and Waitrose are close contenders for the best outfit.  Their trick? Price… yes but quality too. They keep on outscoring the others for taste and quality – sixteen gold medals from the Grocer Magazine - but they’re not so good on what David Cameron, allegedly, called “green crap.” They are on the verge of doing a David on the Goliaths –Tesco/Aldi. They also have the best advertising – check it out.

It must be hateful to fight the Vietnamese and Taleban when all you have are costly tanks and stuff with your soldiers away from home when your opponents have improvised explosive devices and motor bikes so they can get home for tea.  The key words are improvisation and home.

One of his other points is the law of diminishing returns. He cites alcohol. Most doctors will tell you a glass or two of claret a day is good for you. Friends of mine have taken this advice to heart and, just to be on the safe side, have doubled the dose - to nil beneficial effect.  But carry on to a bottle or so a day and the effects are detrimental. More of the same is not a recipe for success. Balance is the key.

Back to scale.  The thought that bigger organisations are ipso facto better is what’s troubled me for ages. Our inbuilt instinct for M&As and “buy-and-build” are plain daft as anyone sitting on an ailing out of town superstore will admit. This inbuilt instinct allied to the desire consultants have to apply old business models to new situations. (Well it worked for RBS ….QED.)

That’s something fast-on-his-feet David didn’t do.