A good friend of mine who owns the Ben & Jerry’s in Saratoga Springs, NY once told me:
Amateurs study tactics. Professionals study logistics.
It’s interesting that so many people are looking for tactics to get ahead and do a better job than someone else. As if there’s some magical thing that you can do which is going to turn the tide of whatever you’re currently doing and make it into an epic win. The fact is that rarely happens.
Sure, you might get one or two wins to swing substantially in the direction you want or need them to go, but there’s a difference between winning the battle, and winning the war. I use that expression, somewhat intentionally, knowing that most people reading this have probably never fought in a war. I know that I haven’t. Like you, my exposure tends to be quite thankfully limited to movies, books, and the History Channel.
But the unfortunate part of even discussing tactics and logistics is that people don’t understand how to apply them to other parts of their lives. More specifically, I think entrepreneurs could greatly benefit from a solid delineation between what is considered tactics vs. what is considered logistics. So with that in mind, lets get started with some high level stuff. Then we’ll talk about some real world business cases.
What are tactics?
I think the closest non-military definition of a tactic is “any mode or procedure for gaining advantage or success”, which you can find on Dictionary.com. Ramit Sethi of IWillTeachYouToBeRich.com consistently rails against people who are trying all kinds of low hanging fruit tactics for saving money or spending less. Things like not buying a $3 coffee every day will save you about $600/year! WOW! $600! Wouldn’t that be awesome?
Big ole waste of time to Ramit. And to be fair, he’s right.
This is a tactic to save money. But it’s not an epic win. In fact, it’s a short term solution to a long term problem. It doesn’t run on autopilot. You have to constantly NOT buy coffee at Starbucks every working day of EVERY YEAR for this kind of thing to be effective. That’s a lot of work. So what does Ramit recommend?
You should get a raise. In fact, do the work necessary to set yourself up so that you are able to command a raise from your company. What if you got a $3,000 raise? Or maybe a $5,000 raise? Hell, I bet Ramit can point you to people who’ve doubled or quadrupled that. Think it’s crap? It’s not
I’ll point to two different times in my life when I negotiated for massive raises. The first was when I was working for Clearwire out of Buffalo, NY. I had just finished my Bachelors in Computer Engineering from RIT and they made me a full-time offer. I forget exactly how much I was making at the time. Maybe $13/hour or something like that back in 2000. But they offered me around $35k. I left early that day to get out of town because of an incoming blizzard. Yea, Buffalo is known for those. Two days later I had an interview scheduled with Wegmans Food Markets. A week after the interview, I had a second interview and a few days later I had an offer in-hand for a full $20k more than Clearwire offered me. That’s a lot of $3 coffee’s each year.
Naturally Clearwire declined to meet the offer, but the result was a massive pay increase, which resulted in year over year gains that I didn’t have to sacrifice anything for. The next example came at Pedestal Software where I negotiated a $13,000 raise in one year by successfully arguing that I was underpaid for my responsibilities, education, and performance level. They were able to justify it to the HR department by combining it with a promotion.
Epic wins. But are those tactics or logistics?
I would argue that they’re tactics. Before I explain why, lets talk about logistics.
What are Logistics?
If we go back to Dictionary.com and look for the closest non-military definition, we find that logistics are defined as: the planning, implementation, and coordination of the details of a business or other operation.
Pardon me, but what the hell does that mean?
Well, I’m glad I asked. (Yes, it’s easier to drive the conversation when I’m the one offering up nicely leading questions. Now pipe down sonny!) Businesses are guided by logistics. Not some businesses. Not most businesses. I mean ALL businesses.
Apple didn’t become the most profitable company on the planet by making a few cool products. They did it through good tactics used to build great products combined with incredibly awesome logistics. Steve Jobs drove the tactical wins with visionary products. Tim Cook drove the logistical wins by making sure the resources were coordinated to be where they were needed to be and doing it in such a fashion that they could drive the prices down to the point that other vendors couldn’t keep up. Oh and he made them affordable. Otherwise your iPad would cost $5,o00, not $500. Not bad for a guy from Alabama.
By streamlining operations, he reduced costs and made products available at prices that other vendors couldn’t even compete with. Then they packed in a tidy profit and still beat the pants off their competitors by offering superior products at prices others couldn’t come close to. By combining the tactics for building the right product, with the logistics of delivering it in massive quantities at the right time and keeping it all completely under wraps the entire time is why Apple is the most valuable company in the world today.
A Non-Technical Example of Logistics
How about a completely non-technical example of logistics. Let’s say you own a hypothetical ice cream store like. Oh, I don’t know. Maybe a Ben & Jerry’s. Yes, you knew that was coming back. You’re very smart. Now shut up and let me finish.
If you own a Ben & Jerry’s, you probably own at least one store. Let’s assume that you only own one. So how can you make more money? In any given city there are only so many people living there and that creates an upper limit on the number of people who are going to come into your store. Also, in the northern areas of the country, there are going to be serious seasonal adjustments that need to be made to accommodate for the differences in demand between summer and winter months.
But let’s think about how we can maximize our income, and thus our profits:
- Raise prices – Let’s face it. Ice cream is a commodity, just the same as coffee. Sure you can dress it up a bit with a good story, but there’s an upper limit of what you can charge and it’s not a lot more than what others are charging.
- Open more stores – Lots of startup capital required for this, but it’s certainly possible to do. It can be twice the work though, not to mention twice the risk.
- Increase foot traffic to the store – Again, this is going to be limited by the location and the number of people there.
- Increase distribution – Difficult to do when you don’t own the national production chain.
So what else can we do? Let’s go back to opening more stores and work out a variation of that, combined with increasing distribution. Summer months are huge for ice cream vendors. No, actually I mean they’re HUGE. So can we capitalize on that? Sure. Let’s open more locations… but only in the summer. Better yet, let’s make those stores mobile so we can go out to people, taking the ice cream to them and increasing our distribution. There’s a carnival? We’re there. A company party? Got it. Massive horse races with tens ouf thousands of people? All over that like white on rice.
This avoids problems with getting people to the store, it increases your reach, and can be scaled up during the summertime. Epic win, right? Not exactly.
The problem here is that it’s summer. Let’s say that a mobile station can go through a few hundred gallons of ice cream in a day. (I’m just making stuff up here, since I really have no idea.) How do you keep 200 gallons of ice cream from melting when your nearest freezer is miles away and you’re constrained on your available space?
This is where the true value of logistics starts to shine. You go without a freezer and use just-in-time delivery to make sure that as the stations are starting to run out of ice cream, you deliver more. Now you don’t need a full-size freezer on-site, the ice cream won’t melt and can sell lots of ice cream to the masses during the time when they want it the most. Oh, and you probably charge more since they’re desperate for relief from the heat.
Now there’s just that pesky problem of figuring out how to make sure those lines of communication stay open and the ice cream gets where it needs to be, on time and without melting. But we’re software entrepreneurs so let’s leave that problem to the ice cream guys.
How does this apply to me?
Remember when I said that I’d come back to the part about getting raises and those being tactics rather than logistics? Here we are.
Saving money by not buying something and getting a raise are both performing the same type of operation, even though it’s on a different scale. Saving money is a small win and continues to take work every day. Getting a raise which gives you year over year gains is a big win and takes less work in the long run. These are two tactics in your arsenal for helping you to live the life you want to live but that’s all they are is tactics. You need to coordinate multiple tactics as part of a larger plan. That includes managing your real estate situation, your savings, your retirement fund, your primary mode of transportation, your career, your vacation time, etc.
In the ice cream example above, we used used tactics to overcome specific obstacles. We used logistics to coordinate resources such that we accomplished the goal of delivering unmelted ice cream to the masses during a critical timeframe that they’re willing to pay more for it. Overcoming individual obstacles is like winning a single battle. The coordination of multiple tactics to achieve a goal that cannot be accomplished without that coordination is logistics.
And that’s the important part that many people don’t realize about running a business. It’s all about logistics. Coordinating a lot of moving parts is a juggling act that only clowns and entrepreneurs could love. But when you do it right, and things are falling into place just when you need them, you’re not just moving the needle forward on your business. You’re propelling it forward, and quickly.
As an overly simplified example, but slightly more relevant example: if Sally and Jim are working on two pieces of code that need to work together and Sally spends 2 weeks waiting for Jim to finish, you’ve got a logistical problem because you’re paying Sally to practice her Olympic Thumb Twiddling skills while Jim finishes up his work. It’s an extreme example that doesn’t usually happen in practice, but it serves to illustrate the point. There’s a certain amount of waste inherent in the fact that Sally has to wait and you want to minimize that.
The Job of an Entrepreneur
Your job as an entrepreneur is to deliver resources where they are needed at exactly the time they are needed so as to create as little waste as possible. Whether those resources are:
- people (developers, designers, sales reps, customer support, etc)
- physical goods (ice cream, boxed products, computers, etc)
- digital goods (software, documentation, marketing collateral, etc)
- tools & equipment (software utilities, scoops for ice cream, office space, etc)
- information (training, press releases, etc)
Managing these things is typically a full-time job, which is why large companies have VP’s of everything. Those VP’s are in charge of managing the logistics of their own team, while the CEO/COO help to coordinate corporate direction from the top.
Unfortunately, most of us don’t have the luxury of having people report to us who are responsible for their own logistics. So let’s chat about it. What tips do you have for aspiring entrepreneurs for how to coordinate everything? What kinds of things do you wish someone had told you when you first started out? Leave your comments, questions, or tips & tricks below.