Going Dutch: A Date with Profitability

Roger D. Blackwell

[***Editor’s note: Tom Peters asked colleagues to guest-author his column while he was traveling abroad. Tom returned a month later to resume his duties.***]

It’s fashionable for government agencies to model themselves after business. Yet many businesses would do well to emulate the practices of some governments—or entire nations.

For instance, if your company has relatively few resources and you’re wondering how to compete globally, you could learn much from the history of the Netherlands. The keys to success in world trade—and the ability to withstand the pressure of larger, national competitors—can be found in the earliest Dutch settlements.

A millennium ago, the Amstel River flowed unfettered from Central Europe to the Atlantic Ocean. To control flooding, the Dutch dammed the river, and a city grew along its shores. Hence the name: Amsterdam. The dam, however, created a problem for neighboring traders whose boats were unable to continue downstream. For the Dutch to have said simply, “It’s not our problem” would have invited trouble.

Instead, the industrious Dutch proposed a solution—taking boats out of the river and carrying them around the dam. The proposed fee was so modest and the service so good that the boat owners agreed. Had the Dutch tried to exploit their monopolistic power (as have many U.S. firms with a supposed lock on markets or technology), they probably would have been destroyed by their powerful German neighbors.

The success of early Dutch business principles was evident five centuries later in the paintings of the Dutch masters. While museums in the rest of Europe are dominated by massive paintings, Amsterdam’s Rijksmuseum contains mostly small paintings. The wealth of the nation was concentrated among the Dutch businesspeople. Art created for those middle-class patrons was intended for modest, comfortable homes rather than for the castles and cathedrals that housed most European art.

The key to early Dutch prosperity is conservatively managed, customer-oriented, fairly priced, globally oriented firms. Until recently, Holland owned much of America, second only to the U.K. The success of firms like KLM, Unilever, resort operator Center Parcs, and Shell, to mention just a few, are compelling evidence that ancient Dutch principles still work. It should be no surprise that Southwest Airlines—with its Dutch-like approach to cost and price—is today’s only profitable U.S. airline. And in Grand Rapids, Mich., Dutch business culture lives in discount retailer Meijers, Steelcase, Bissel, and, of course, Amway.

Or consider Edward D. Jones, the nation’s largest stock brokerage firm with 2,200 offices. Wall Street might be more impressed with Merrill Lynch’s New York facilities than Jones’ comfortable, unpretentious, St. Louis, Mo., headquarters. But Jones claims it’s paid less to buy each square foot than Merrill Lynch pays to rent its space. I think keeping up with the Joneses should be measured by cost per square foot, not ostentation.

It is not always high-tech, high-priced, glamorous firms that create lasting value. Enter Consolidated Stores, a value-oriented retailer now headed by William Kelley, former Home Depot executive. Visit Consolidated’s All For One stores, and you won’t find glamor, just good service, pleasant surroundings, and very low prices. In fact the price is $1 for everything in the store. Dutch burghers would have approved.

What else can you learn by visiting the Netherlands? A great deal—without even leaving the airport. In fact, a business-class ticket to Amsterdam averages $1,000 less than a ticket to London or Paris. Schipol Airport houses shops with distinctive products at fair prices -a novel idea! You’ll also find one of the most advanced logistics-management approaches in Europe. A recent study by consultants A.T. Kearny showed firms excelling in logistics average 6 percent for transportation costs vs. 14 percent for others. “Understand effective logistics-management principles, and you’ll win,” say the Dutch.

One thousand years of Dutch history suggest important lessons for today’s business strategists: Provide a needed service, do it well, charge reasonable prices and make a little on a lot. Firms that follow these principles today might not attract much notice or produce the highest margins. But they create fortunes for their owners.

Roger Blackwell, professor of marketing at Ohio State University, works with and speaks to groups throughout the world. His book Consumer Behavior is now in its tenth edition.