Before going too far, let’s add some local flavor to the stew. What the heck happened to the likes of some of these local boys?
- Joseph Schlitz Brewing Company
- Allis-Chalmers Manufacturing Company
- Schuster’s Department Stores
- Strong Funds
- Midwest Express Airlines
- M&I Marshall & Ilsley Bank
- Please insert your favorite corporate debacle here.
Were the CEOs idiots? How did these fabulous business blunders occur? We may never know exactly. But here are a few suggestions.
- Bad Strategy. In the end, what was Midwest Express anyway? A high-end, “best care in the air” corporate travel airline or a no frills, discount alternative to a bus? Customers were confused. Employees were confused. Vendors confused. Shareholders? Confused and left holding the lost luggage.
- Rotten Execution. In an effort to cost cut its way to prosperity, “the beer that made Milwaukee famous” changed the brewing process and started using cheaper ingredients. Not only did the reformulation change the flavor and consistency of the beer, the new Schlitz had a shelf life of about a day and half. Customers noticed. Can you say Budweiser?
- Blame Game. “We were making so much money, we just couldn’t quit.” Those pesky housing bubbles in Arizona and Florida were the problem. What a nice, conservative mid-western company from Milwaukee was doing in high risk, high reward ventures way outside its market area is another question. But for crying out loud, the M&I was a bank!
- Trends…Unforeseen, Denied, Misunderstood and Delusional. Kodak is an easy target here. An electrical engineer at Kodak literally invented digital image capture technology in the mid-1970s. How did the six Kodak CEOs since the ‘70s screw it up so badly?
The four bullet points listed above are certainly not all encompassing. And there is almost always more than one reason for the failure of the CEO to respond appropriately to the challenges of running a business successfully over a long period of time. How to improve the odds? Some suggestions.
- The Reality Check. My guess is the CEOs of some of these failed companies would have been better served with a strong board of directors that knew when and how to challenge the strategic thinking of the CEO. Absent a board, some CEO peer groups, like TEC, are designed to “question the answers” of the CEO. One of my TEC members employs a designated “BS Detector,” from outside the company during the strategic planning process to help the group avoid delusional thinking.
- People. People get things done. Weak management teams don’t. Failure to put the right people in the right jobs is bad. Failure to deal with people problems – fast - is worse. Jim Collins’ bus analogy of the right people in the right seats is well known. It should be pointed out, however, that CEOs need to get the wrong people out of the seats and off the bus before the new folks can get on. CEOs usually have an inner sense about weak people on their teams. They sometimes refuse to see it and deal with it in a timely fashion.
- An Intentional Culture. There is a real nice company down in Racine, Wisconsin that does not allow its people to say stuff like “I didn’t make plan because of (fill in the blank).” Or “I failed to fulfill my commitment due to (some circumstance beyond my control).” Realistic commitments that are made, are kept. No excuses. One TEC member CEO eliminated the words “hope” and “luck” from his company’s corporate lexicon, as well.
- Apply The Trends to Your Business. TEC Resource Specialist Adam Hartung suggests analyzing the mega trends eight years out. He recommends the intentional creation of “white space” disconnected from the business for innovative thinking. Get people outside the box. Then, have them think.
Truth be told, even the CEOs who really mess up aren’t idiots. CEOs are people. They make mistakes. They fail sometimes. Some learn and get better. Some don’t. But as long as we have human beings running corporations, there will be room for improvement.
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Are CEOs idiots?
ReplyDeleteOr . . . are CEOs as vulnerable to the forces of competition in our still reasonably free competitive enterprise system as are champion athletes and, champion race horses, most of whom can eventually be humbled by competition, or master bridge players or even damn good Milwaukee Shafkopf players by a bad run of cards?
A cursory look at some of the examples cited –
Eastman Kodak, the dominant picture film provider of the 20th century, found it tough to compete in the 21st century market of non-film-using picture devices. Maybe they should have followed the advice they gave to Steven Sasson, their engineer inventor of the digital camera, “It’s a cute idea just don’t tell anyone.” Shades of buggy whips and slide rules!
Joseph Schlitz Brewing Company, the pride of the Uihleins, once competing with the largest brewery in the world went down trying to be more competitive by getting its costs down with a new improved fermentation process resulting in increased production capacity, a lighter taste to meet public demand and no aftertaste to encourage greater consumption. But for those doggone competitors spreading rumors that the new brew was still green and not properly aged, it might have worked. Had it worked it could have been a great competitive move. Who knows?
Or Marshall and Ilsley, proud achievement of three generations of Puehlichers, John, Albert and Jack, sunk by a staying-alive effort to compete in new markets beyond their traditional and provincial Milwaukee market. Had the Puehlichers’ successor CEOs chosen to stay closer to home would they have survived longer?
How about Kimberly Clark’s Midwest Airline, the airline that served meals on china plates and provided warm chocolate chip cookies? Perhaps they faded into oblivion not so much because of taking competitive risks but because their competitive cookie crumbled? Not the cookie they gave to passengers but their concept of running an airline with first class amenities against competitors offering steerage class hauling.
I suspect that CEOs are still most successful when they are keenly competitive . . . and are dealt a decent hand of cards.
An old TEC guy
RCK