The Ten Commandments for Business Failure - Don Keough [13]
Current business jargon includes the term “pro-sumer,” those customers who both produce and consume products and services. Ford anticipated this concept by nearly a century. In paying five dollars a day, overnight Ford increased the size of his market by paying his workers enough money to actually buy the product they were making, and, more important, he bought the loyalty of a workforce that was notoriously unstable. The conventional wisdom throughout the auto industry at the time was that high turnover was unavoidable. Ford proved the conventional wisdom wrong.
Yet in a very few years, this genius who had been a visionary became so inflexible that he nearly ruined the company.
He reportedly said, regarding the Model T, “They can have it in any color they want, as long as it’s black.” For a long time that was just fine. But then people began to get tired of the black tin lizzies. Yet even as America was roaring into the 1920s with bigger, faster, fancier, brightly painted automobiles, Henry Ford kept insisting that the Model T, essentially unchanged since 1908, was still what America wanted and needed and he was not going to change his mind.
Inevitably, upstarts like Chevrolet and Dodge began to erode Ford’s market and seriously challenge the company’s dominant leadership. At last, more rational minds prevailed and Ford admitted the need to produce a better vehicle. After shutting down his main plant for six months, he successfully launched the Model A in 1928. But Henry Ford’s inflexibility had brought the company to the brink of disaster and cost it a competitive edge that it has never regained.
In more recent years, during the 1980s and 1990s, both GM and Ford continued to rely on their large, gas-eating sport utility vehicles while the emerging market dominator, Toyota, began to develop their successful, high-mileage hybrid cars. Jim Press, the former president of Toyota North America, said, “Both of us had the same tea leaves, the same research—is fuel going to become more plentiful or less plentiful? Is the air going to become cleaner or more polluted? Do you do something proactive and innovative to be in tune with where society is going? Or do you hold on to where it has been and then don’t let go, to the bitter end?”*
The story of each company, each industry that failed is different, of course. Some are more straightforward than others. It’s obvious, when you look back, that in the early part of the twentieth century, no matter how they resisted, ice companies would have to find something else to do because they were going to be replaced by electrical refrigeration. It’s not quite so obvious how the majority of more than three thousand bicycle companies just disappeared while others morphed into the automobile business and even, as the Wright Brothers demonstrated, into the airframe business. Clearly some folks were more flexible than others.
However, there really is no question as to what caused the demise of what was once the outstanding pioneer in its field. Montgomery Ward invented catalog sales. The company died because of the inflexibility of one man.
Montgomery Ward was run into the ground by one inflexible, flinty lawyer, Sewell Avery. Avery had saved the firm during the Great Depression by severely cutting back when others were expanding. The trouble was, Avery carried the Depression mentality with him the rest