Saturday, June 25, 2011

Routes to Greatness and Roads to Ruin

There are only two routes to greatness, and they are similar. One is to provide consistent quality. The other is to provide luxury. Quality means that the product does what it is supposed to do without fail. A luxurious product functions even better, and there is a reason for the improvement. The first breakout Rolexes are a good example of luxury. They were waterproof. Before that, one needed to take care when anywhere near a sink.

Most of what is expensive is false. A designer once described it to me. He was talking about busy interiors with too much brightwork in cars sold by the Detroit 3. He said they were trying to be fancy. When asked to elaborate, he compared the interiors to going to someone's house. Everyone has seen examples of the living room that tries too hard. There is a grand piano in the middle, and no one who lives there can play it. I remember seeing Trump Tower in its heyday. There was lots of brass and marble for no reason.

I would like to see more great companies. Unfortunately, writing From Gold to Garbage was very easy. Management usually does more staring in the mirror than managing. Today's captains of industry are largely like bad ship captains. Instead of making money consistently with successful voyages, they sink their ships for big payouts right now.

Here are some rules for achieving corporate greatness.

1. Greatness comes from somewhere.

Globalization thus far is a retreat from greatness. For example, countless factories have moved from their places of origin to China. Since then, many of them have moved on to places like Bangladesh and Vietnam. A product from China can only be great if it is uniquely Chinese. Otherwise, it's just part of the global scrap heap. If companies like Lenovo can find their roots, they will achieve greatness. If not, they will succeed as long as they remain low cost producers.

Some companies keep their origins, but become local as well. Coca-Cola is deeply rooted in the American South, but they have bottling plants all over the world. They are from somewhere, but at the same time, their reps can say, "Have a sip of this. It was bottled right over here!"

If Coke were to save money by moving out of the South, their brand would instantly become a commodity.

Levi's understood this rule for most of their history. Their American product was the only thing available here. It was expensive in other countries, where local products were also on sale. Now, their only American products are press releases.

2. Greatness comes from consistent management.

One of the great tragedies in business was Indian Motorcycles. They were great innovators who racked up patents, won races and became the biggest in the world. The company died because it endured one management shake-up after another. Buyouts were frequent. As time passed, they went out of business. They ended in ignominy, the only company in history to have been out engineered by Harley-Davidson.

Any change in management, especially a buyout from a private equity company, means that quality is on the way out.

Great companies are run in an orderly manner. There isn't constant drama.

3. Greatness means connections from top to bottom.

If you're a CEO who can't converse with those who sweep your floor, you're not at a great company. Suffering cannot be outsourced. Where it happens it must be alleviated or paid for at a fair price. Similarly, suffering cannot be hidden. The world has been communicating at the speed of light since the first transatlantic cable was laid in 1858. Other oceans soon followed.

Many companies are tainted by their workers' suffering and chemical exposure. Apple products are labeled "Designed in California," to avoid the stain of how they allow workers at their contract manufacturers to be treated in China. Most famously, workers for them have skipped labor unrest and gone straight to committing suicide.

Have we learned anything from Robert Thompson Crawshay? He was an English industrialist who died in 1879. His epitaph reads, "God forgive me." While one might argue the existence of God, no one argues the existence of human memory. In spite of well funded efforts to control what happens after they're gone, people are usually remembered as they deserve to be remembered.

Some companies have achieved greatness through connections that run throughout the organization. Wal-Mart, under Sam Walton comes to mind. He drove an old pick-up and worked in a small office in Arkansas overlooking a parking lot. He pioneered profit sharing and made an effort to buy locally. He could walk into any of his stores and be well received. More importantly, he could walk out of a store without a lot of snide comments behind his back. For the leaders of Walmart, things are much different.

Nobel Laureate Muhammad Yunus says that a global minimum wage is needed. If such a measure passes, it wouldn't be the first time that corporations have fought against a regulation that was ultimately good for them.

4. If you have to choose between greatness and success, choose greatness.

Sometimes, it's time to close a business. If that time comes, close it, and pay everyone fairly at the end. If everyone can't leave together and close the doors for the last time, something is wrong.

If on the other hand, you keep grasping, you'll look craven and pathetic.

One great company that recently folded was Bristol. They made fast luxury cars with excellent coachwork and engines from other companies. They were pricey and worth it to those who bought them. Those in charge accepted that their time was up. There is no Bristol Cayenne, and there is no Bristol Cygnet. Every car they built was a Bristol.

On that note, it's time to end this blog, before I become a total crank. As promised, there were only 52 products, a year's worth. I hope you enjoyed it.

Saturday, June 18, 2011


Ferrari's niche is defined by elegance, exclusivity and speed. Their position is in danger on all three fronts.

Elegance and exclusivity are fading quickly. Their logo is no longer sought after. It's everywhere. Why would anyone want a car that is also a brand of socks, pencil sets and neckties? Solving this problem is easy enough. They just need to stop plastering their logo all over everything.

It is becoming harder to define a car company in terms of speed. Street legal cars are hitting technological limits, just as race cars did decades ago.

Ferrari is strong in both areas. While I was working on Japanese Car Magazine in the 90s, I asked Peter Brock and John Morton about race cars. Both agreed that for many years, it had been possible to build cars capable of pulling more Gs than a driver could endure. Both thought unmanned racing would be an anathema.

More and more ordinary cars have their top speeds set by governors at 130-150 mph. These speeds used to be the realm of exotics. Higher end cars without governors can hit 200 mph, but there is little potential beyond that. Land speed records are held by vehicles at testing facilities that ride on rails to prevent them from becoming airborne.

Even without their logo problems, Ferrari has a dilemma. Where do they go from here? Is it possible to maintain a niche based on speed? Can or should they transition to something else? Comments?

Saturday, June 4, 2011


Three of the most important things in business mirror priorities in real estate. They are location, location and location. Companies have identities, and they lose them by moving around in search of cheap labor and tax dodges. Neither route leads to greatness.

Boeing was Seattle. It helped build the community, and it was part of it. While the company is still strong in Washington, it is now an outsider. The trust is gone. First individuals were disposable. Then, Seattle was. Now, Boeing is no more a part of Seattle than it is Chicago. Who would welcome them?

Air travelers wouldn't. Every Boeing product looks exactly like the last. An airport picture from the 1970s looks like an airport now. The wings are folded up on the ends, but that's the only visible improvement. From the outside, you can't see the seats growing smaller and smaller.

Boeing does not aspire to greatness. In spite of similar subsidies to their competition, they are incapable of keeping up. If Aesop were alive today, he would write about Boeing and Airbus as two competitors who went to sleep and completely forgot that they were in a race.

Airbus deserves special mention. They are such non-entities, that they can't get their own section on this blog. Think about it. Air Bus. The company looks like it was born out of a strict truth-in-advertising law. As soon as someone finds a way to put turnstiles in the sky, the evolution of air travel will be complete.

Meanwhile, Boeing is building the Dreamliner. It sounds better than calling it the Vaporwareliner. Having outsourced everything everywhere, they are discovering that final assembly is harder than they thought. When the new plane is put into service, those of us who are passengers will wait through longer delays and sit in the smaller seats while someone in a faraway boardroom smiles about saving money. No one will think it's an achievement, because for passengers, it will be the same as every other plane.