The Ten Commandments for Business Failure - Don Keough [14]
After World War II when new households were being formed in new developments like Levittown, Avery not only failed to see the emerging prosperity. He refused to see it. By the mid-1950s, teenagers’ weekly allowances began to exceed the American family’s entire disposable income in 1940. The country was rich and getting richer. But Avery was so inflexible that he simply would not acknowledge the post-World War II economic boom that was all around him. He would not invest in or expand the business in any way. As a result, in the ten years following the war, while Ward’s rival, Sears, was doubling its sales, Ward’s sales declined 10 percent.
Montgomery Ward as such no longer exists. Meanwhile, the inflexible Mr. Avery went to his grave insisting that severe depression was just around the corner. He believed what he believed and could not be convinced otherwise. In fact, he was notoriously brutal in firing those who kept trying to lift the curtain on reality for him.
Another example of just plain dumb inflexibility is Republic Steel. In the 1960s, one of the major customers of Republic Steel was the canning industry, which was beginning to turn to lighter-weight, cheaper-to-ship aluminum. Republic was very rich and successful. It would have been logical for them to get into the aluminum business themselves, and they could have easily done so at the time by tapping into their large cash reserves and purchasing an existing aluminum company. Instead, the company leaders at Republic were so inflexible they announced that they would never give up on steel cans. They even referred to aluminum as “the weak metal,” and they fought its encroachment into their canning market with everything they had. Eventually, everything they had was gone. Republic Steel is no more.
Or for sheer unenlightened stubbornness just consider Hollywood’s attitude toward television in those early days when I was bumbling along with a primitive talk show at WOW-TV in Omaha. How did big, rich Hollywood greet the new baby? They were utterly contemptuous. The joke was: “Vaudeville died and television was the little box they put it in.”
The major studios wanted nothing to do with the silly business. Let has-been burlesque comics like Milton Berle have the toy. The big screen and motion pictures was the future and always would be, according to them. Mainstream Hollywood made fun of television and television people and they were delighted when Newton Minow described TV as a “vast wasteland.” They even boycotted the medium in the hope that it would somehow just disappear. Apparently, no one liked television except the American people.
Eventually, of course, the studios had to embrace it, but their initial inflexible stance created unnecessary conflicts between “movie people” and “TV people,” sometimes within the same companies—not to mention enormous lost opportunities. Instead of becoming the driving force that they could have been in developing television, the major studios became, at their worst, obstructionist stumbling blocks or, at best, bystanders.
One of the most perverse examples of inflexibility is the entire airline industry.
In the 1930s and 1940s, no technical marvel more eloquently symbolized the age of modern transportation than the shining airliners whisking important people from coast to coast in a matter of hours. Not only was this an exciting and innovative way to travel, but soon it was also being innovatively marketed. Pan Am’s Juan Trippe introduced “tourist class” tickets. No longer was air travel exclusively reserved for glamorous movie stars and Wall Street tycoons. The age of mass travel on wings was under way.
But after their bold beginning, for years the industry languished. The planes got bigger and faster but the pace of innovation in the business itself slowed to a crawl. Protected for decades from the vicissitudes of the free market by strict government regulations, they forgot how to be entrepreneurial