Note: Strictly for fans of The Wire. If you haven’t seen Season 3, you should go see it before reading further.
I sat in meetings that were all about taking over corners. How many corners do we need? —Stringer Bell
In Season Three of the Wire, the show shows the downfall of the Barksdale organization and the rise of Marlo Stanfeld and his crew. This is a stunning downfall for the Barksdale crew who had put themselves in a great position of power by the end of Season Two.
On outward appearances, this seems solely due to a series of tactical mistakes and unlucky breaks by and for Avon Barksdale and Stringer Bell.
None of this explains why a superior organization, with numerical superiority, a better ‘product’ from Prop Joe was taken down in a short time by a upstart.
What happened to the Barksdale organization is a a result of a few strategic mistakes, committed long before the first gun shot was fired between them and Marlo.
The blowing-up of the Franklin towers represents a fundamental disruption in the market. The Barksdale’s marketshare disappeared in one single explosion. Since buildings don’t get blown up on a whim, we can assume Stringer knew of this and had time to prepare.
In his book ‘The Innovator’s Dilemma’, Clayton Christensen says, “Disrupting has a paralyzing effect on industry leaders. They are always motivated to go up-market, almost never motivated to defend the new or low-end markets that the disruptors find attractive.”
Stringer’s strategy of choosing to push a higher quality product rather than holding down the right territory or win some of it from Marlo ultimately proved to be highly flawed. Just like big corporations don’t want to tangle with a small startup in a low-end margin product, Stringer didn’t want to engage with Marlo and his peers.
Christensen’s book outlines the fall of integrated steel mills. Instead of producing all grades of steel (with very different margins), they decide to leave the low-margin steel to the upstart mini-mills. This is a great short term decision because their margins go up, they own the high-end of the market and the mini-mills are left with the unattractive low-grade steel business. However, over a period of time, the mini-mills got better at producing higher grade steel, causing the bigger mills to retreat to higher and higher margin segments. Ultimately they had nowhere left to hide. Closer home, we’ve seen this play out over and over again in the software world.
In The Wire, the Barksdale crew grew comfortable with the margins from the Franklin Terrace towers. Though they had the resources (‘the muscle’) to go hold down corners outside the towers in West Baltimore, they chose to not do so, letting people like Marlo grow in power and win uncontested territory. And when they they suddenly needed to in Season Four but by then it was too late.
In Microsoft, you saw this play out with Internet Explorer. After winning the browser wars, Microsoft let the browser team erode and ignored IE development. When they needed to respond to Firefox, they were suddenly faced with turning around an old, creaky codebase with a non-existent team.
Jim Collins outlines the many stages of an incumbent’s downfall in ‘How the Mighty Fall’. You can see the Barksdale organization go through each of the stages until their ultimate downfall.
Even with all these mistakes, the Barksdale crew could have survived if they had focused on external threats and followed one consistent strategy.
However, like many large organizations, the leaders were distracted by their power struggle at the top and followed two conflicting strategies at the same time. All they had to do was to put all their resources behind either Stringer’s ‘co-op, lets move into real estate’ play or get all behind Avon’s street warfare. The two organizational leaders tried to do both, and failed at both.
Ultimately, the Barksdales did to themselves what once great companies like DEC, Sun, RIM, Nokia and many, many others did to themselves.
Ironically, it is Stringer Bell, smarter and more qualified than most corporate CEOs, who commits many classic CEO errors and dooms his organization to irrelevance.