Headwinds and Tailwinds

We have long emphasized the importance of continually improving to drive rather than be a victim of the increasing rate of creative destruction. But in recent years, as the speed and magnitude of these changes accelerated, a heightened sense of urgency was required to not only improve but transform our performance. This led our businesses and capability groups to apply the concept of headwinds and tailwinds to transform their ability to succeed in a variety of environments by modifying their visions and strategies and building the required capabilities.

Headwinds exist for a product where its long-term opportunities and profitability are being seriously eroded by declining demand or a reduction in the barriers to entry. These winds can be generated by, among other things, competition from new technologies or products, unfavorable changes in consumer preferences or government interventions.

Tailwinds exist for a product where its long-term profitability has the potential to greatly increase. These winds can be generated by, among other things, new technologies, products or strategies, favorable changes in customer preferences or distortive government subsidies and mandates.

Wherever a headwind or tailwind exists it creates competitive forces in the opposite direction. The effects of headwinds are lessened by negative factors, such as those listed above, which deter new entrants, investments and innovations. The effects of tailwinds are lessened by stimulating a flood of new competitors, investments and innovation.

The headwinds/tailwinds model we developed for entering or remaining in a business, based on whether we have or can build the right capabilities for whatever conditions exist, has been a major factor in our recent successes.