Ten Years Later
Ten years ago, give or take a few days, I got one of the first copies of In Search of Excellence. A few weeks later, it slipped onto bookstore shelves with little or no notice. A few months after that, you couldn't troop an airplane aisle without seeing several businesspeople reading it.
I was reminded of all that when I heard Wang Labs was entering bankruptcy. Whoops! Wang was one of Bob Waterman's and my "excellent companies," and, frankly, I thought it had the world by the tail. Wang made personal-computing appliances before the rest, and seemed well positioned for the shift from centralized to desktop computing. Not so.
Wang wasn't our only fallen star. Just three years after the book's publication, a Business Week cover story claimed about a quarter of our picks had the hiccups. Many that it ripped (Hewlett-Packard, Disney) have bounced back; some (Digital Equipment) bounced back, then fumbled again. In fact, lots of "our" firms have kept on rolling (Johnson & Johnson, Wal-Mart, Intel, Emerson Electric, Mars, 3M, Boeing, Merck); a few besides Wang have been blindsided or lost their independence since BusinessWeek had its say (Data General, NCR); and others have been up and down like yo-yos (Fluor, IBM, Caterpillar).
What can we learn from the trials and tribulations of these companies during the past 10 years?
1. Changing large institutions, even in the face of clear market signals, is no lark. It took IBM, Kodak and Procter & Gamble forever to begin to wake up to long-festering challenges. Perversely, those with the proudest traditions have the toughest times of it. Turning your back on a fabled history is one helluva trick. In fact, my greatest respect goes to chiefs of terrific companies who have been able to keep them terrific (albeit in new ways) despite altered circumstances—e.g., John Young at Hewlett-Packard and, uh, ... (see my point?).
2. Savaging bureaucracy is a must. It's tiresome to read endless diatribes against bureaucracy. That's what Waterman and I thought, so we left the issue on the back burner. The first of the book's eight basics, "a bias for action," is implicitly anti-bureaucratic. But, still, we weren't fanatics about the perils, in particular, of bloated headquarters. We—and the chiefs of many firms we examined—didn't harbor the revulsion toward bureaucrats that's marked Percy Barnevik (ABB Asea Brown Boveri), the Mars brothers (Mars), Chuck Knight (Emerson Electric), Mike Walsh (Tenneco). We didn't fathom that "close to the customer," for example, was so much blather unless you destroy 90 percent of the headquarters staff (and perhaps the headquarters itself), thoroughly entwine local units with their customers—and then hold those units fully accountable for results.
3. Adaptation is unlikely without radical surgery. To be "good" at something in the first place, you must form deep grooves—TQM, low-cost production, etc. But by being good (focused), you automatically make yourself vulnerable to new approaches by new competitors from new places.
This is the ultimate business paradox. Waterman and I looked at several decentralized firms that dealt better than most with the paradox—notably 3M and Johnson & Johnson. But we badly underestimated the demands for adaptivity. In a recent column, I touted Thermo Electron, which sells the public a minority interest in subordinate units in an effort to keep entrepreneurial zeal alive. Such exceptional strategies (all the way to total, voluntary breakup), I now believe, are the best hope for big outfits. (And overall, there isn't much hope for big firms—perhaps the most painful lesson I've learned in the past 10 years.)
4. Listening to customers is no panacea. Few companies were in touch with their customers when Search appeared. Alas, little has changed. So the need to reach out remains high (hang out in the marketplace, like Wal-Mart execs). But there's also a case for going your own way. In crowded markets, "close to the customer" often deteriorates into a string of "me too" products; after all, what consumers can tell you they want what they've never imagined—desktop publishing, Velcro, Post-its?
5. Looking at the right "models" is imperative. Many stars of Search still shine brightly (whew!). But are they defining tomorrow? Rarely. The book's chief failure, in retrospect, was that Waterman and I—both from conventional roots—mainly examined conventional firms. But these are not conventional times. In the age of brainwork and constant change, we should be studying non-conventional organizations—professional service firms (Chiat/Day/Mojo, EDS), CNN and movie companies, and "new network" firms (from Management Maximizers, described last week to MCI and Sun Microsystems). Some of these outfits may stumble but they all provide path-breaking organizational approaches for our volatile, knowledge-based society.
We missed or glossed over other things, such as the onrush of globalism. But the point is neither to defend nor denigrate 1982's work. Search provided a challenging message. Many of its lessons are timeless, yet almost all beg re-examination in light of new conditions (lean means L-E-A-N, etc.).
Hats off to 1982's "excellent" chiefs who saw the need—and then had the gumption—to change. My condolences to the rest.
(C) 1992 TPG Communications.
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