"In an increasingly crowded, noisy global marketplace, innovation is not optional." Tom Peters
To quote my friend and Forbes publisher Rich Karlgaard: VOTE CARLY.
That is, Carly Fiorina, Hewlett-Packard's CEO. Fiorina has doubtless made her share of mistakes. And the HP-Compaq merger does not solve all of either firm's problems.
But one thing is for sure: HP cannot survive as it currently is/stands. Same-same Compaq.
It's tragic, really. DAVID PACKARD-THE-ELDER WAS ONE OF TECHNOLOGY & BUSINESS'S MOST FORESIGHTED RISKTAKERS. And yet son David Woodley Packard is mired in the past.
I was working with HP 20 years ago when the "instruments firm" made its big push into computers. I was 1980's David Woodley Packard. (Albeit Powerless.) I didn't think HP had any business straying so far from the ones who brung 'em. David Packard did. Bottom line: (1) He took a huge risk. (2) He was right. (3) I was wrong.
Which is ... again ... not to say that the Compaq gamble will work out as well. (Frankly, I doubt it will.) (But I've been wrong before. See above.)
I do know that the spirit of HP is renewal, at times remarkably bold-not stasis.
Some have threatened to resign from HP's board if the deal loses. I can't do that, but I promise I will resign as an HP Friend.
VOTE CARLY. (A vote for Carly is a vote for Bill Hewlett and, especially, David Packard.)
-- Tom Peters/San Francisco/02.23.2002
P.S. Read Karlgaard's masterful summary of all this in "Digital Rules" in the 18 February issue of Forbes.
P.P.S. R. Karlgaard is the positive reason I'm writing this. My pal (former?), Jim Collins, the Built to Last Guy, is the negative reason. He's an avowed Fiorina enemy. Collins likes incremental change and con-ti-nu-ity. I LOVE V-E-R-Y CREATIVE & MESSY DESTRUCTION. Ah, well. (See my pal Richard Farson's latest ... Whoever Makes the Most Mistakes Wins: The Paradox of Innovation. Or Dick Foster and Sarah Kaplan's ... Creative Destruction.)
My wife thinks I’m crazy. I don’t disagree. We are on vacation in Hawaii for 9 days. Took me 15 minutes to pack clothes. Took me weeks to get my books set. I weeded … and weeded … and weeded. And ended up with a scant 25 books … not quite 3 per day. Made sense to me.
MYSTERIES. Patricia Highsmith, Those Who Walk Away. Ian Rankin, Set in Darkness. Ian Rankin, The Hanging Garden. Magdalen Nabb, Death of an Englishman. Michael Malone, First Lady. Arturo Pérez-Reverte, The Nautical Chart. D.R. MacDonald, Cape Bretton Road. (Comment: Highsmith & Rankin & Perez-Reverte are as good as it gets.)
BUSINESS & ECONOMICS. Lawrence Lessig, The Future of Ideas: The Fate of the Commons in a Connected World. Peter Bernstein, Against the Gods: The History of Risk. (Comment: Bernstein’s book is a "page turner" … about INSURANCE … and Enron, it turns out.)
PHILOSOPHY & SCIENCE. Louis Menand, The Metaphysical Club; A Story of Ideas in America. (COMMENT: THIS IS AWESOME. IDEAS MATTER. BIG IDEAS MATTER A LOT.) Philip Howard, The Collapse of the Common Good: How America’s Lawsuit Culture Undermines Our Freedom. Stephen Bayley, General Knowledge. Damien Broderick, The Spike: How Our Lives Are Being Transformed by Rapidly Advancing Technologies. (Comment: Zounds. The "new stuff" … will … change everything … fundamentally.) Matthew Watkins, Useful Formulae: Mathematical & Physical. Paul Erlich, Human Natures: Genes, Cultures, and the Human Prospect.
GENERAL NON-FICTION. Anne Fadiman, Ex Libris: Confessions of a Common Reader. Joyce Carol Oates (Editor), The Best American Essays of the Century. Jeffrey Tayler, Facing the Congo: A Modern-day Journey into the Heart of Darkness. OAG Pocket Flight Guide. (Comment: Sadly, can’t live without it.)
A report I saw claimed that CEOs appointed after 1985 are three times more likely to be canned than those hired pre-1985.
That is, scrutiny of the Big Cheese is at an all-time high … thanks to "raiders" like Boone Pickens and large shareowners like Calpers.
Get the job done … in a hurry … or get out. In fact, some have called it the era of "one strike and you’re out."
Bravo redux. Sure beats boards stacked with the CEOs' golf pals.
All silver clouds seem to have dark linings.
That is, there are apparently no limits to which CEOs won't go to pump up … and then try to keep up … share prices.
Which, of course, brings us to Enron. Or Tyco. Or UAL. Or, literally, a hundred others.
Enron had a great business model. (It, if not the firm, will persist.) Problem: It was such a good/original model … at the exact right moment (Internet bubble, Internet reality of plunging "transaction costs," benefit of the doubt on Wall Street, genuine boom, Age of Intellectual Capital, Age of De-regulation, etc.) … that the world of financiers and media went gaga.
Up … up … up … up goes the stock price.Chairman Ken Lay is famous (in Very High Places), CEO & bus. model inventor Jeff Skilling is "the genius," so revered/touted that he can get away with calling sacred W. Street analysts "a.holes" -- and get another share price boost for his troubles.
Tyco acquires … and acquires … and gets the rep as … The Next GE. Share price soars … and soars … which spurs more and more acquisitions bought with "cheap money." Meanwhile, truly crappy underlying operating performance is brushed aside.
UAL … and all its kin … rent their airplanes from, essentially, shell organizations. Why? Makes the Balance Sheet shine. I.e., virtually no debt.
So on the one hand, we hold CEO toes … all 10 of 'em … to the fire. But smart lads (and they're almost all insanely competitive "lads") that they are … they quickly figure out how N.A.G./the New Accountability Game is played.
It's played by doing damn near anything to keep the share price soaring.
(Stories abound of companies, at the end of a quarter, jamming millions of dollars of "sold" goods onto rented trucks … which circle the block as the quarter ends … so that the "travelin' goods" can be "legitimately" booked as "invoiced sales." No shit.)
Mix in a real (as well as perceived) boom … and the requirements to be "average" go up and up … and up. Which adds more pressure to do damn near anything (scratch the "damn near"?) to bump the share price more up, steeper up.
Add in, for the hell of it, a (truly) New Economy, based on intangibles ("intellectual capital") rather than tangibles ("smoke stacks"), and you have an absurdly volatile mix.
CEOs have been pulling fast ones approximately forever, in order to spruce up the Bottom Line & the Balance Sheet. (Small business owners, too, hardly go out of their way to tell their bankers bad news.) But the last decade, and perhaps the Junk Bond Decade before it (with its emphasis on "pro forma" future earnings, not demonstrated past earnings), have taken The Game -- and it is a Game/THE Game -- to unimagined heights. (Depths?)
Which brings me to those CEOs who love the job … and its $$$$ … and its perks … and the adulation … too much.
"Sprucing up" the P&L/B.Sheet then edges over the line into, legal at the margin or not, something akin to fraud. Moral fraud, if not illegal fraud.
Oddly, some of the best have avoided it. GE is not above a little "sprucing up." On the other hand, GE is perhaps the nastiest "performance culture" I’ve ever run across. Deliver … in hard dollars … or "hit the road, Jill." (And the Testiest Internal Auditors imaginable are there to keep you straight. Thousands of them.)
Or … take retail (in general). There's only, as far as I can tell, one measure that matters to … Those Who Watch. Namely … SAME STORE SALES. That is, the sales of the same store (not some recently acquired store) … a year ago at the same time & place. No doubt, there are a jillion ways to pad this or that … but the measure is pretty immune to screwing around. (I think.)
Geoffrey Colvin pens a thoughtful column in Fortune. A few weeks ago, he offered some good news … re this column of my own. He claimed (based on some serious analysis) that the long-term winners in the Shareholders' Value Race practiced two disciplines in particular. First, they'd suffer several quarters of depressed earnings … in order to support a TGBRP … Truly Great But Risky Product. And, second, they'd EXPENSE the TGBRP … which compromises immediate earnings … but which signals … unmistakably … support for the risky/scintillating venture.
So … there it is. All I know. IF YOU LOVE YOUR JOB TOO MUCH -- even if you’re a CEO -- you may well do stupid/immoral/illegal things to … HOLD ON.
Tom Peters/Haena, Kaua'i HI/02.12.2002
Before blogging became all the rage, Tom was posting book reviews and Observations (essentially early blog posts) to this site. You can find the archives below.