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.

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