De-Risking Through Adjacency Opportunities

Recently I wrote an article entitled “Have The Habits of Highly Effective Leaders Changed?” in which I set forth the 6 new habits of highly effective leaders as described in the book The Elastic Enterprise.

The 6th new habit is called de-risking and it’s where the new leader responds to the global competitive economic changes by seizing radical adjacency opportunities; essentially taking the company into areas where they have no core competency. This strategy requires leaders to be learning on a daily basis so they can develop an overall knowledge of how the new options, alte
atives and markets can be integrated into the business. Let’s get a better idea of how this could work by examining Forrest Lucas, the founder of Lucas Oil Products and how he got started.

Raised on a farm in Indiana, he left home at 15 and worked on a small cattle ranch. He married at 17. He always had a fascination with trucks and bought his first semi when he was 21. He started working for a moving and storage company making about $14,000 a year. Gasoline was just 25 cents a gallon. He drove day and night while studying the people whose furniture he was moving. They were CEOs, generals and admirals. He noted that all of them who made it to the top were nice people and incorporated that into his philosophy. To this date, all of his employees are nice.

He had planned on driving and saving money to buy a gas station so he could spend more time at home and raise a family, but he ended up divorced after 11 years. He purchased more trucks and ran his own business. In the 1980s after the trucking industry was deregulated and his move to Califo
ia, he realized that he needed better lubricants for his trucks. He bought different additives and studied how to make them. With an open mind, he tried difference things, got a private blender and soon was selling an additive at truck stops. He found a secret ingredient and suddenly the business took off.

At that same time, the transportation company cut his rates for his best customer to the bone. It was fortuitous as he sold his 8 trucks and went full-time with his oil business in 1989. He was faced with new challenges because few want to be the first to try a new product. Further he had to determine what price to charge and how to sell it. His biggest fear was that the big oil companies would cut him out of the business. They too had additives, but they didn’t have his mechanical knowledge.

In the beginning they used racecars to get people to look at the product. For $500 he started marketing by painting LUCAS OIL on the side of a racecar. By 2003 they built a second plant in Indiana and had to buy a railroad (Lucas Rail) in 2006 to get the product out. It’s just 13 miles of track, but Lucas thought there must be companies with railroad cars that needed to park them somewhere. Soon he was turning a profit renting rail parking space and got his products hauled away in the bargain.

By this point the company is making truck oil for themselves, and racing, boat, motorcycle and hydraulic oils at different weights to accommodate the North American market. In 2006 he purchased the production company that had been making their commercials (Lucas Oil Studios), as he wanted to get into motor sports and lifestyle programming; and he wanted the naming rights to the shows and banners. He purchased some speedways too.

In 2008 he purchased the Indianapolis Colts for the naming rights for Lucas Oil Stadium. Last year he purchased MavTV, an independent cable station so the company will always have a programming space if other networks decide to drop motor sports. Lucas said, “Being the little old do-it-yourselfers we are, no one can take us out that way.”

When asked about the future, the 70 year old said, “We are already looking 10 to 20 years ahead. For example, we’ve been working with many race teams, including Chip Ganassi Racing, on light-oil formulas and friction-free greases. We started making synthetic diesel oil for an oil-drilling company in northern Canada and are now selling it to a mining company in the Congo. We’re made in America and sold to the world.”

Lucas’s philosophy is to empower people to go ahead and do things themselves. He believes that way they can make more good choices in a day than many corporate giants. As a result his company has grown through the recession, particularly since most people are thinking about maintenance as they are keeping their cars and trucks longer. Because of the path that Lucas grew his company, he now enjoys knowing that more tha
90% of what is asked for by brand name in the auto parts industry will be something his company has produced.

Each move that Lucas made throughout his years in business has been to de-risk or to reduce the odds of the big competitors derailing his company; yet each of these adjacency opportunities catapulted his business several levels.

Whether you are a leader of a company or an individual building your career, applying this habit will strengthen your value and open up bigger, better opportunities in the future.

Susan Bagyura, a leadership coach and author, works with leaders to inspire success from the top down. The book is available at Family Bookshop in MQ.
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