The Ten Commandments for Business Failure - Don Keough [9]
By the late 1990s, Xerox had lost its leadership in copiers and was posting losses and announcing large layoffs. In 2002 the SEC charged the firm with accounting irregularities and several of its executives with securities fraud. As of this writing, however, Xerox is still with us, reinventing itself under new management.
Here we have a proud company, built on technological innovation, so swept up in its success with one kind of product that it completely failed to take a risk on new opportunities springing up within its own ranks, albeit on the other side of the continent. They ignored the simple truth that to create profits in the long term requires innovation in the short term.
Of course, the way forward will always generate some failures. Walter Isaacson in his wonderful biography of Einstein tells a story about what Einstein said he needed in his new office at Princeton: a desk or a table, a chair, some pencils, paper, and a very large wastebasket “for all the mistakes I will make.” In business, you can make a good argument for mistakes like Steve Jobs’s Lisa or Power MacCube because the highly creative Apple environment that spawned them also produced big winners like iPod and iPhone. You can even justify those mistakes that have become the folkloric case studies in how-not-to-do-it courses in business schools all over the country, such as the Edsel or 45 rpm records or even New Coke. These failures, for all the valuable lessons that they teach us in hindsight about management blunders, are simply risks that just didn’t work out. Such miscalculations, costly though they might be at the time, are part of the price of staying in business. As Peter Drucker pointed out nearly fifty years ago, it is management’s major task to prudently risk a company’s present assets in order to ensure its future existence. In fact, if a company never has a failure, I submit that their management is probably not discontented enough to justify their salaries.
Xerox was not discontented in any way. They were very, very comfortable, and, as I’ve noted, when you’re comfortable, the temptation to quit taking risks is so great, it’s almost irresistible. And failure is almost inevitable.
Commandment Two
Be Inflexible
“I’m in favor of leaving the status quo the way it is.”
—Yogi Berra
NOT TAKING A RISK and being inflexible are closely related, but there is an important nuance of difference. The truly inflexible people are not avoiding risks. They are not merely reluctant to take a risk on some change or innovation. They are so set in their ways, so sure that they have the formula for success that they simply cannot see any other way of doing things. That happened at The Coca-Cola Company.
In a 1920 dispute over the use of the Coca-Cola name, a case that went all the way up to the U.S. Supreme Court, Justice Oliver Wendell Holmes ruled in favor of Coca-Cola, describing it as “a single thing from a single source and well-known to the community.”
The company became so enamored of this description that it became almost biblical writ, so dogmatically accepted and jealously guarded that the source of the product began to be just as much a part of its exclusivity as the thing itself. Management was incapable of envisioning Coca-Cola as anything but “Coca-Cola”—and here’s the key to our myopia—“Coca-Cola in the familiar green bottle.” Company leaders came to view the drink and the bottle as one and the same. There was, of course, the iconic bell-shaped fountain glass, but it was never trademarked like the contour bottle.
In all the advertising for nearly half a century the beverage and the bottle were shown together. From