D. Wayne Lukas, Lukas Racing

D. Wayne Lukas grew up in a very small town in Wisconsin. His grade school class had two - him and one other. He dreamed of being a basketball coach. He also dreamed of owning and racing a horse that would win a local pari-mutual. He became a school teacher and basketball coach, and later decided to try his hand at training horses. He soon raised his aspirations to winning a triple-crown race. One hundred fifty thousand hours of work later, he reached his goal. Many wins would follow, and today he is the winningest horse trainer of all time - 13 Triple Crown wins; 17 Breeder's Cup wins; 14 times named U.S. trainer of the year; and $250 million in lifetime winnings, more than double any other trainer in history.

Make no mistake - horse training and racing is a business just as any other. Lukas Racing started with one client, one horse and very little else. Let's take a look into the man and his business, and into the philosophies that have allowed him to change and dominate an entire industry.

The Business of Horse Training. Lukas Racing is in the business of training thoroughbred race horses. Lukas' customers are owners of horses - typically wealthy individuals who invest in race horses for the fun, prestige and profit. Horse trainers, like Lukas, make money by getting hired to train horses. They are paid a daily fee for managing, feeding, sheltering, caring for, training and racing the assets pledged to their care. Trainers, such as Lukas, also typically get a cut of purses won.

Bucking the Status Quo: Noteworthy success is typically found by doing things a little different - by finding a better way and cutting a new path. The Lukas Racing story is no different. As Lukas struggled to differentiate his offering and give owners compelling reasons to hire him, he kept things simple (one of his primary tenets). His clients simply wanted to hire the trainer that would win races. Lukas noticed that trainers tended to enter their horses in local or regional races only, rarely transporting their horses to complete in races held far away. He lamented that at times a horse of his would be outclassed in a local race but would have far better odds in an out-of-region race. For example, he'd have a sprinter but the local race would be an endurance test. Why not simply transport the horse to a place and race at which it could win? Take that sprinter to a sprinter's race. Painfully simple, yes, but (unbelievably) such was not the common practice of the time.

And so it began. By discontinuing the practice of blindly entering horses in local races - regardless of ability to place in the money - Lukas began to tactically rationalize his stable of horses across races in which they were most competitive. The result was a winning percentage and purse yield that caught the attention of everyone.

Building and Continually Fortifying a Competitive Advantage. Lukas found a way to win (a competitive advantage) - in being willing to transport his horses over long distances so that they could run in races that matched their abilities. The result was more wins and more purse money. More and better customers followed and profits surged. But as competing trainers figured out the Lukas strategy and began to emulate it, the competitive advantage and profit windfall come under siege. Unsatisfied with short-term success, however, and incredibly disciplined, Lukas resisted the temptation to squander the newfound monies on luxury items. Instead, he invested his early profits back into his business - upgrading facilities, personnel and programs that would contribute to race wins in a manner that would be much harder for his competitors to emulate. The strategy has worked amazingly well.

Find Persons and Horses, with God-Given Talent: In selecting winning horses and people, you need an eye for spotting God-given talent. Once you have someone with natural ability, the task is to give him what he needs to get him to the winner's circle.

Great Training and Managing, Comes from a Deep Knowledge of the Subject: Every horse and person, has unique strengths, weaknesses, tendencies and sensitivities. The only way to draw out top performance is to get to know, in a very deep way, the subject's unique characteristics and, with that knowledge:

a.    Design a training program to which the talent will best respond, and

b.    Place the talent in positions that enable their unique skills to shine and their weaknesses to be least damaging.

So the key is to spend a lot of time with your human or equine talent, observing and looking for clues to what makes him tick. Lukas says he can spot even minute changes in his horses, such as a few pounds gained or lost or subtle changes in disposition.

Mind over Matter: "The mental state is three-to-one more important than the physical state," says Lukas. Both people and horse are complex and sensitive creatures. They react to every stimulus, positively or negatively. And when bad things happen, the detrimental affects tend to stick around much longer than the effects of the positive.  He says, "One of the things that we tell our people is 'never take the try out of the horse.' If he loses the try, the joy of participating and competing, you're in trouble.  Yet, you still have to bear down on him to the point that he's fit enough to go a mile and a quarter. So therein lies the problem."

Leading by Example: "You, the leader, must set the example. There is absolutely no excuse for being outworked," Lukas imposes. He says he has only missed seven days of work in the past 14 years, and that includes holidays and weekends! Pretty impressive for anyone, and Lukas is 69. He continues, "To succeed, you have to be right in the middle of the deal. You have to be very, very intense and involved. For those people who don't succeed the thing that usually undoes them is that they can't handle 365- days-a-year, 18-hour days."

Staying Informed And Being "On The Job": Lukas Racing has 90 employees, five of whom report directly to Lukas. "Each of them has to call me between 4 a.m. and 5  a.m. each day, again between 11 a.m. and 1 p.m. and again right before they lay their head down to sleep," says Lukas. "I don't want any surprises and I want to know what is going on."

Demanding Excellence: "People crave discipline," says Lukas. "They want to be dedicated and focused. Require that of them and they will learn to love you for it." Lukas accommodates this need by demanding discipline and excellence in every facet of Lukas Racing. The barns must be perfect at all times, as do the clothes of every employee. He demands that everyone write neatly, speak clearly and answer the telephone in just the right way. He says, "We keep everything spotless, not because it will make our horses run faster but because that discipline will carry over into the things that DO matter."

Find out What Drives Your Economic Engine: Lukas says he's actually never made any money by training and racing horses. He says it's really tough to get enough in training fees and purse percentages to cover his substantial costs. He figured out, however, that the money is in the stud fees. Train a winner and the stud fees are where the big money is. "We could have tried to really increase what we charge to train horses, but we decided to offer a compelling value proposition to the horse owners. When we get the best talent and train them to be winners, we make money on the back end. A lot of money."

Additional Quotes from D. Wayne Lukas:

"I ask my employees to, when they see a problem, give it to me straight. I want to hear the bad news first and then the solution you propose."

"Praise performance, give credit and share the rewards of success."

"Always ask why. I want my employees to learn how to think. If they just do as they're told, they won't learn why. They must question, ask questions and learn the answers."

"I had an employee call me and say he couldn't sleep for worrying about what he might have forgotten, what he needs to do and where he's supposed to be. I said, 'Perfect, you're coming along just fine'."

"I like to kick their ass whenever I can. I go after them every day - and I like to keep score, too, because that's what motivates me."

"Being born a man or a woman is a chance. Being a man or a woman is a choice."

"Take the tension out. Tension drains performance, in humans and horses.  Have fun and be loose."

"I tell my new hires, 'Don't buy a new set of clothes because you'll be a size smaller in 30 days'."

"Just because you win doesn't make you a winner; and just because you lose doesn't make you a loser - It's how you prepare and dedicate yourself, how much you improve."

"We've never been real interested in the status quo, just interested in winning."

This article was written from discussions with Mr. Lukas, notes from his keynote address to the Newsletter and Electronic Publishers Association (NEPA), and an article that appeared in the May 2004 issue of the Harvard Business Review.