'Excellent' rating no guarantee for big companies

ON EXCELLENCE

September 14, 1992|By TOM PETERS

Ten years ago, give or take a few days, I got one of the first copies of "In Search of Excellence." A few weeks later, it slipped onto bookstore shelves with little or no notice. A few months after that, you couldn't troop an airplane aisle without seeing business people reading it.

I was reminded of all that when I heard Wang Labs was entering bankruptcy. Wang was one of Bob Waterman's and my "excellent companies," and, frankly, I thought it had the world by the tail. Wang made personal-computing appliances before the rest, and seemed positioned for the shift from centralized to desktop computing. Not so.

Wang wasn't our only fallen star. Just three years after the book's publication, a Business Week cover story claimed about a quarter of our picks had the hiccups. Many that it ripped (Hewlett-Packard, Disney) have bounced back; some (Digital Equipment) bounced back, then fumbled again. In fact, lots of "our" firms have kept on rolling (Johnson & Johnson, Wal-Mart, Intel, Emerson Electric, Mars, 3M, Boeing, Merck); a few besides Wang have been blindsided or lost their independence since Business Week had its say (Data General, NCR); and others have been up and down like yo-yos (Fluor, IBM, Caterpillar).

What can we learn from the trials and tribulations of these companies?

* Changing large institutions, even in the face of clear market signals, is no lark. It took IBM, Kodak and Procter & Gamble forever to begin to wake up to long-festering challenges. Perversely, those with the proudest traditions have the toughest times of it. In fact, my greatest respect goes to chiefs of terrific companies who have been able to keep them terrific (albeit in new ways) despite altered circumstances -- e.g., John Young at Hewlett-Packard and, uh, . . . (see my point?).

* Savaging bureaucracy is a must. It's tiresome to read endless diatribes against bureaucracy. That's what Waterman and I thought, so we left the issue on the back burner. The first of the book's eight basics, "a bias for action," is implicitly anti-bureaucratic.

But, still, we weren't fanatics about the perils, in particular, of bloated headquarters. We -- and the chiefs of many firms we examined -- didn't harbor the revulsion toward bureaucrats that's marked Percy Barnevik (ABB Asea Brown Boveri), the Mars brothers (Mars), Chuck Knight (Emerson Electric) and Mike Walsh (Tenneco).

We didn't fathom that "close to the customer," for example, was so much blather unless you destroy 90 percent of the headquarters staff, thoroughly entwine local units with their customers -- and then hold those units fully accountable for results.

* Adaptation is unlikely without radical surgery. To be "good" at something in the first place, you must form deep grooves -- TQM, low-cost production, etc. But by being good (focused), you automatically make yourself vulnerable to new approaches by new competitors from new places.

This is the ultimate business paradox. Waterman and I looked at several decentralized firms that dealt better than most with the paradox -- notably 3M and Johnson & Johnson. But we badly underestimated the demands for adaptivity. In a recent column, I touted Thermo Electron, which sells the public a minority interest in subordinate units in an effort to keep entrepreneurial zeal alive. Such exceptional strategies, I now believe, are the best hope for big outfits. (And overall, there isn't much hope for big firms -- perhaps the most painful lesson I've learned in the past 10 years.)

Hats off to 1982's "excellent" chiefs who saw the need -- and then had the gumption -- to change. My condolences to the rest.

(Tom Peters' column is distributed by the Tribune Media Services Inc., 720 N. Orange Ave., Orlando, Fla. 32801; [407] 839-5600.)

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