dispatches from the new world of work

I'll Take the Tonic!

The Saturday (07.15) pre-dinner party shopping list for me had a few scribbles-at-60mph added to it as I wended my way the 22 miles between me and the closest grocery store. Hence it read:

Seltzer
Sparkling water
Tonic
Minute Maid frozen lemon juice
Citronella for torches
Brandenburg Gate [spy novel for TP]
GM
Ford
GE
Home Depot
Wal*Mart
Microsoft
Dell
Intel
Big Pharma

I'll take the Tonic. High fructose corn syrup notwithstanding, I'll get my money's worth. (And it gets better and better with the temperature climbing into the 90s, even in VT.) The TVP—Tonic Value Proposition—is more than you can get from the corporate section of the list, assuming Stock Price Appreciation is your measure of the Big Co. taste test.

I often rip Big Cos. And, of course, I think it's deserved. To be sure, market price isn't a surefire barometer—but it's about the best we free market junkies, starting with A. Smith, can do. Take the case of Home Depot and its CEO, "What Annual Meeting Bob" Nardelli. He has beyond a shadow of doubt masterminded (bulled through, in Nardellian fact) a turnaround, but his stock hasn't budged—while that of his principal competitor, Lowe's, has marched ever upward. CEOs want to be rewarded for stock price appreciation—at least they do in a bull market. Nardelli has made a king's ransom, which he says he deserves for the turnaround; I might agree as long as he in turn agrees: If the stock does head North he'll be content with flat or even depressed compensation since he will have previously been rewarded for building the framework for the appreciation. (Hey, his whole argument for his couple hundred mil is, de facto, that stock price is irrelevant.).

But the Nardelli riff is mostly an aside. The Big Point of the Post is that perhaps the time of dominance of the above listed companies has passed. And, say I, so be it. (Or, "Whatever.") These Masters of the Universe may indeed have been built to last, and contribute they have, but as usual—as always?—it's not panning out.

I'm afraid I think Built to Last is downright silly. Take GM. Dominant forever and ever, you say. Hold on! When the car market took off in the mid-teens of Century 20, Ford was the clear leader (Henry I's Model T). Upon the arrival of Alfred Sloan and implementation of his divisionalization-brand ideas (Technicolor beats "Black only"), GM became Big Dog. But almost simultaneously, GM et al. got whacked by the Great Depression. WWII bailed them out, and GM rebounded courtesy Tojo, Hitler, and tank sales. GM's true, earth-rattling Commercial Dominance emerged in the late 40s. It continued unimpeded until the First Oil Shock. Enter, Stage Pacific, the crafty Japanese. ("Built to run on not-much-gas" supplanted "Tail Fins R Us.") Thence it has been all downhill, despite micro-comebacks courtesy minivans and SUVs. Now the Big Woes are upon the Big Two. Thence a serious revisionist evaluation suggests that GM in fact was dominant for about ("just") 25 years all told—say, 1950 to 1975. Ain't a bad run on Broadway and what was good for GM was indeed good for America ... but a long way from Built for Eternal Greatness/Built to Laaaasssst. (Unless "last" includes the "hanging on by your fingernails" years—Goliaths are hard to kill off regardless of their irrelevance.)

So last week recently Invincible ("the Ultimate Business Model") Dell and Invincible ("Innovation Machine") Intel announced re-structurings (with more to come in both cases). Despite GE's new dude's increasingly high profile, the stock is becalmed for Mr Immelt and his shareholders. Despite Wal*Mart's blizzard of "We have soul" moves—the stock is becalmed. Ditto Microsoft. And, of course, Big Pharma, which was supposed to become the King of the Hill in a post-GM world, is tanking (Marianas Trench-style), despite a couple of Merck court victories.

In all cases the chief cause is Creeping Clumsiness that INEVITABLY (Big Word, that) accompanies SuperSize, even in the "virtual, outsource-every-damn-thing" age.

Size can surely help you muscle your way into many a market; but INEVITABLY it will choke you to death, or at least deliver growing IRRELEVANCE.

Tom Peters posted this on 07/18/06.

Comments

Great work at 60 mph - if your journey had been 100 miles you could have tackled the rest of the worlds businesss problems too :-)

Posted by Trevor Gay at July 18, 2006 4:35 PM

But, alas, not Lebanon.

Posted by tom peters at July 18, 2006 4:48 PM

Sad but true

Posted by Trevor Gay at July 18, 2006 5:37 PM

JAPAN INC though provides subsidy advantage - MidEast / Leb = kill terrorists radically fast before impotent UN "resolution" ..

Posted by sean at July 19, 2006 8:34 AM

Take the tonic - Trevor has been drinking the cool aid - "tackled the rest" - adding complexity and communism [all the money to the front line drivel] to a world craving simplicity - and now an adopted/semi-coherent lapdog like timjam yapping at his heels beck and call :>}.

Posted by sean at July 19, 2006 8:52 AM

Is Big Better??

Well, I must say that these days we hear a lot about surviving (are they really?) big businesses and how important (u think so?) it is to be big and survive. Honestly, there's nothing wrong with big business and one of the most interesting things about it is that no matter how big it might be today -- it started small â€“ teeny tiny and hence many would want to know the correct answer to this questionâ€¦well, is there a RIGHT answer? Is that a â€˜YES or NOâ€™ question (akin to a box-ticking exercise)?

My answer isâ€¦â€BIG COULD BE BETTERâ€ if such companies are managed in a way that would bring about a dramatic difference to the society, people, stakeholders, employees, customers, suppliers, regulatory authorities et al (holistically and not based on a few metrics like share-price performance or turnover). The basic premise of business according to me is TO FIND A NEED AND PLEASE IT and therefore the extent of your success will be determined by your ability to FILL a NEED and by the NEEDâ€™s importance.

I firmly believe that the real challenge we face today in a hyper-competitive environment is to manage a big corporation like a corner-store.

Posted by K.Sriram at July 19, 2006 9:03 AM

Tom, one must assume that at 60 MPH you weren't scribbling or are we taking multitasking to a whole new level?

Posted by Bob Hail at July 19, 2006 10:05 AM

Unless you are privately owned, the analyst pressure is to grow. Eventually you are bought, die or become big.

The Peter Principle for business?

Posted by Jeff at July 19, 2006 10:13 AM

I agree with Jeff on analyst pressure. I recently spoke with a quality assurance manager for Rohm & Haas (ROH) and he estimated that stock performance fills roughly 50% of his decision making process capacity. Though economists may be proud, what does such front-end loaded thinking do to a company's aggregate ability to be agilile. Agility is something that all the companies on Tom's high-speed list lack, yet is essential in the modern global economy. Wagoner says industry consolidation is inevitable, which is I believe would stifel innovation- the one thing that could save the US auto industry.

Posted by Collins at July 19, 2006 11:09 AM

Jeff, but the great majority of us--companies and employees--are/are in privately owned enterprises. Why are we always fixated on big companies? Eg for about 20 years now, as I recall, less than 10% of us work for Fortune 500 companies.

Posted by tom peters at July 19, 2006 3:24 PM

Tom, you're correct that my comment applied only to publicly traded companies (most of which are of some size, I presume).

The US Department of Commerce states that 99.7% of companies in the USA are "small business", as defined by Commerce. They employ/provide over half of the jobs in the country (I recall the number was 70% but that is from memory!).

So, Tom, you're "right on" for just about all companies!

A poll of small business entreprenuers focused on company size would be very interesting.

what is your target size?
(a segmentation of owners who's strategy is to sell vs. those that plan to run their business over the long haul would be needed)

what do you consider a safe size (ie to withstand a down period?

Does size matter? (had to throw that in)
If not, how do you define success?

????

Posted by Jeff at July 19, 2006 7:22 PM

TP - please a short list of how BIG may thrive [Microsoft - Costco - Nordstrom - Starbucks] Emerald City Big: 1. breakup? 2. design small creative units within BIG? 3. model Virtual org principles?

Posted by sean at July 20, 2006 8:30 AM

Ok, so maybe I'm a bit jaded, but does this possibly have something to do with changing perspective. When companies are small they are forced to understand their entire market environment (customers, products, finances, markets, competition, etc.). This is usually done by a small number of people who are absolute experts (not necessarily professionals) on their subject - their business. As the company grows, more and more internal factors start to take precedence and the perspective of the leadership narrows and they are no longer able to be broad-minded experts. They become professional specialists (accounting, marketing, finance, operations, engineering, etc.).

Using this model, companies can grow to dominate a market, but are blindsided by competition since their perspective has become so narrow that itâ€™s as if theyâ€™re looking at the rest of the world through a straw. They also become so dominated by specialists that no one in the organization is able to see much beyond their own small piece of the company to figure out what is happening holistically. Essentially, the organization loses its perspective and runs the risk of imploding due to its own lack of inertia (or as Tom says IRRELEVANCE).

So I guess the questions is, why do some companies that grow to huge size (those "Built to run on not-much-gas" companies who became the Toyotaâ€™s and Hondaâ€™s of the world) maintain a broader perspective while others fail. Is it a more global view? Are they forced to look beyond their own relatively small back yards in order to see new opportunities? Is there something inherent in them that promotes courage and risk? I donâ€™t necessarily claim to know the answers, but to me it seems to have a whole lot to do with their perspective.

Posted by Andrew Hayden at July 20, 2006 10:48 AM