The Ten Commandments for Business Failure - Don Keough [47]
In January 1982, we announced that The Coca-Cola Company had purchased Columbia Pictures. Wall Street said we had paid too much for it and Coca-Cola stock dropped 10 percent. It looked to many people as though Roberto and I had made a substantial mistake. But in a short time the Columbia deal began to look a lot better. We had two major hits, Tootsie and Gandhi, and by the end of 1983 we posted a profit that was 50 percent higher than even our own highest expectations.
For the next several years, Columbia shored up our domestic profits and gave us excitement, and we had made the right decision to buy and operate the business. It was fun to be in the movie business, no question about it. It was very glamorous.* But as we began to grow our revenue and earnings from our rapidly expanding global soft drink business, the need for Columbia’s relatively modest revenue and profit began to disappear. It was really a relatively small part of our overall business, but it was consuming an inordinate amount of time and attention. Columbia was sending a mixed message to everyone about what was really important.
In addition, the business was notoriously unpredictable. The reality of the motion picture business is that you could not develop a guaranteed stream of income from it. Herbert Allen made that clear to us from our first negotiating session and he was right. So ultimately, though our experience with movies had proved successful based on sound advice from Herbert, Roberto and I decided the company needed to return to basics.
Through Allen & Company we sold Columbia for substantially more than we paid for it.
No more mixed messages. We were not a TV company, not a movie studio. We were in the global beverage business. That was what we were best at and that was what we wanted all of our people to be thinking about all the time.
Another IBM Example
When John Akers was running IBM his mantra, the “new paradigm” as he called it, was to get closer to the customer than ever before, be sensitive to the customer, think like the customer.
To underline this philosophy, in early 1989 Akers convened a large meeting of IBM’s key people from around the globe in Armonk, New York. It was a grand affair with lots of bells and whistles. After the opening of the meeting, Akers made a speech on the supremacy of the customer in the IBM world, and in order to highlight how important this new paradigm was, he said that as the centerpiece of this meeting I was to be the speaker at the first session.
As the morning meeting started and “before introducing Mr. Keough,” Akers said more or less what follows: “I want you all to get the flavor of some of the in-depth discussions we have been carrying out here at headquarters to explore ways we can better serve our customers and reaffirm our dedication to those customers.” He then showed a video of senior IBM executives, including him, with their coats off and sleeves rolled up in some clearly serious meetings on customers and customer service. There were charts and graphs and a professional facilitator who kept reminding everyone of the importance of the new paradigm.
I watched this video along with everyone else. Of course I couldn’t help but notice that on the conference table in front of every executive taking part in the customer-oriented discussion was a can of Pepsi-Cola. No one said anything about it.
Then I was introduced. I thanked John for inviting me and asked if he’d do me a favor and just repeat some of that wonderful video showing IBM executives at work. At a certain point, I asked him to stop the film.
I said, “We’re very proud that The Coca-Cola Company is one of the biggest customers of IBM, and you’re honoring us by having me here today. Yet you put together, and I’m sure reviewed many times, this video that shows you and a number of your key executives and in front of every one of them is a can of the most competitive product my company has—Pepsi-Cola.