Business on the Board : End Game

Jim Egerton      Thursday, May 11, 2017

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In previous issues we discussed how important it is to have the right leadership style in place for your business. The shifting of leadership styles corresponds to the phase of the business and is one of the most difficult management disciplines to learn. Like a game of chess that is divided into three progressive phases called the opening, middlegame, and endgame, businesses go through similar phases. A different leadership style is appropriate for each phase of the game: transformational in the opening, situational in the middlegame, and, as will be discussed in this article, results-based leadership in the endgame.

 
The opening or startup of a company is different than a growing or mature enterprise. A business in startup mode requires that an entrepreneur be a thought leader with a vision that can be translated into a working model. In the middlegame, a company continues to grow by acquiring and maintaining a competitive advantage using situational leadership to manage their unique position. In the endgame, as the name implies, the game is about to end and results-based decision-making will determine the outcome for the company.

 
Companies operating from a strong leading mode will continue to grow, reinvent themselves, and play in the middlegame. But what if a company is in a weakened mode and is just struggling to survive? That’s when the ability to see ahead and reason backward to evaluate your available options comes into play. A weakened company could look to merge (remember all those weak banks that needed to be acquired during the 2008 financial crisis?), resign (declare bankruptcy and work out a reorganization plan), or liquidate (the way some retailers are ending their game).
 
 
The Endgame

 
Companies avoid the endgame like a plague. Anything happening in that phase is not good. Like a death in the family, no one (except maybe a competitor) wants to see a once flourishing business wind up in the obituary column.

 
But how do you know you are in a business endgame? Here are some signs. Financial analysts run the numbers looking for possible ways the business can continue operating. Continuing quarterly losses allow for fewer options to keep the enterprise running. Stores close (Sears, Sports Authority, and Blockbuster), employees are laid off, rumors circulate, cash on hand is short, bond ratings descend, payroll becomes difficult, and suppliers refuse materials on credit. In the 2008 financial crisis, business headlines declared that “Lehman Brothers is in the Endgame” just days before they filed for bankruptcy.

 
Sears has tried the “survival through merger” route with K-mart, but business journals are reporting that even they don’t see a way forward. Other retailers are closing stores and slashing costs to remain in the middlegame up against the pervasive move toward online purchasing.
 

 
The Priorities of the Endgame

 
In the endgame of a company or a chess game, the players have an exit strategy in mind and can visualize the final result. In chess, the endgame will produce a victory, a defeat, or a draw. In business, it will lead to growth by earnings or acquisition, a bankruptcy with possible liquidation, or a merger. In the endgame, chess players are concerned about activating and centralizing their king, promoting one of the remaining pawns into a queen, and delivering checkmate for victory.

 
Sometimes results-based leadership is used to grow a company to achieve certain goals. Bill Gates saw checkmate in the future by envisioning a PC in every home and then plotted backwards to launch a new industry that positioned Microsoft to change the world. Ironically, the current Microsoft CEO was never comfortable with that goal because he knew at some point it would be achieved, and then what? Determining the future is part of his job description at the moment.

 
Many entrepreneurs have an exit strategy in place when they are still in the opening of their business game. They start and then successfully exit their business early. They want to move on to their next endeavor and let an acquiring party take the business into the future. This is a positive endgame outcome that is generating tremendous wealth for those companies being acquired
 
Serial entrepreneurs in the tech sector learn to run a business by practicing “fail fast, fail often”. The idea is that you learn from your mistakes. Tech start-ups are the perfect arena for learning leadership skills through mistakes because the small scale doesn’t provide the resources to absorb many mistakes before the funding runs out. Each failure increases the entrepreneur’s managerial skill set making them more likely to succeed with their next venture.
 

Related Article

Reinventing Commitment With Suzanne Evans

Wednesday, December 6, 2017

 
History Repeats on the Chessboard

 
In the last issue, Magnus Carlsen executed a brilliant checkmate in two moves against Sergey Karjakin in a raging middlegame position to retain his world champion title at the 2016 World Chess Championship in New York City. The following position is from game eleven of the 2014 World Chess Championship between Magnus Carlsen and challenger Indian Grandmaster Viswanathan “Vishy” Anand in Sochi, Russia. In 2014, Magnus needed to play into the endgame in order to accomplish the same task of retaining his world championship title. In this position, Magnus had just moved his king to the square c3 (Kc3) and his opponent resigned. We are clearly in the endgame because both kings are centralized and active, pawns are moving up the board to become a queen, and whoever does that first will win with eventual checkmate.

 
With a clear example of results-based thinking, Anand looked into the future and could see that there was no purpose to play on and resigned on his move 45. 

 

 
How ironic that Magnus’ last move to retain his title was made by his king. Why did Vishy resign? The following variations show why:
 

 
45…Ka4 to protect his pawns, 46. Re4+ drives the king away. 
 
45…Bb4+ is a skewer tactic which in fact wins the rook on e1 but 46. Kxb3, Bxe1 47. e7 and because the Black king isn’t close enough, the pawn promotes. 
 
If 45…b2, White plays 46. g6, Bf6+ 47. Kb3 stopping the pawns. 
 
If 45…Bxg5 then 46. Re5+ double attacks (forks) the Black king and bishop.

 
In the final position, Magnus made better use of his king than Vishy. Vishy’s misplaced king and overworked bishop were not up to the task of holding the draw. How did Magnus know he needed to practice king centralization? It’s what a strategically stronger leader knows to do. It’s one of the reasons he is the best at what he does. It’s why business executives want to understand what he does so that his insights can help them become better leaders.

 
Next Issue: Leadership – Understanding Strategies Versus Tactics. What are one word definitions for these critical business terms that chess players know and use all the time?  You need to keep it simple, easy to remember, and useful for the future. Knowing what choices you face and what opportunities are available will have you running your business like a grandmaster. 
 

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