Commandment #1 Top of the list: quit taking risks
Here we have a proud company, built on technological innovation, so swept up in its own success with one of a kind product that it completely failed to take new risks. They ignored the simple truth that to create profits in the long term requires innovation in the short term. Can you guess the name of the company?
Xerox was not discontented in any way. They were very, very comfortable and when you’re comfortable, the temptation to quit taking risks is so great. It’s almost irresistible. And failure is almost inevitable.
Regardless of the size of your company, the way forward will always generate some failures. These failures could be risks that don’t work out or worse not taking a single risk at all. As Peter Drucker prudently pointed out, it’s all up to management to prudently take a risk for its future existence. If a company has never failed, chances are their management is discontented enough to justify their salaries.
“He that is overcautious will accomplish little.” – Friedrich von Schiller
Commandment #2 Be inflexible
Herb Kelleher founded a new airline that resembled the established airlines in only one respect – transporting people on airplanes. He changed almost everything else. He changed the way routes were laid out. He changed the way seats were assigned. He changed the whole fleet to just one kind of airplane. He changed the pricing and went after different customers. The result? Southwest Airlines became profitable in an industry that some had already pronounced hopeless.
No business can afford idiosyncratic resistance to change, and indeed, even the most successful business leaders would certainly never characterize themselves as inflexible. More than likely they would pay lip service to a philosophy of change, expressing the usual platitudes about how they embrace change and welcome it. In reality, it’s so tempting to get stuck in the status quo. Why? The answer is simple. Change is difficult. Think about it. Making a move to a new town can be absolutely wrenching.
“I’m in favor of leaving the status quo the way it is.” – Yogi Berra
Commandment #3 Isolate yourself
Assume the whole world lives as you do. Hubert Humphrey once suggested every member of the Congress to take public transportation once a week so they know how the world really lives. This should apply to top business leaders. It reinforces the old adage: “I may be the CEO at the office, but I take out the garbage at home.”
If you isolate yourself, you will not only know what you don’t know about your business, you will remain supremely and serenely confident what you know is right. People like Henry Ford and Sewell Avery and companies like Xerox and IBM became convinced they were not only right, at times anyway, and that they could do no wrong. Watch out because they are advancing confidently into the infallibility trap, which is the next commandment.
“Think not those faithful who praise thy words and actions but those who kindly reprove thy faults.” – Socrates
Commandment #4 Assume infallibility
When Neville Isdell returned to the Coca-Cola Company to become CEO, before making a single change, he spent his first hundred days travelling just all over the world, looking at operations and talking to employees and customers. It really pays to see for yourself. And it pays to really hear your own people face-to-face instead of through layers of filtered bureaucracy.
You cannot exploit any marketing advantages you may have without knowing what’s happening on the ground, what the trends are and what matters in each location where you do business. The best source of information is from your own field force, your local team. If you want to increase your chances of failure, the best way is to deny the possibility that you’re not always 100 percent perfect in your judgement. So, pose as an infallible leader if you want to fail.
Commandment #5 Play the game close to the foul line
The Coca-Cola Company always had a corporate culture founded on trust and the absolute necessity of doing the right thing. When NBC earned a documentary back in the 1970s on the plight of migrant workers, the company was utterly appalled to see many of them, hired by third-party labor contractors, were living in dreadful conditions. Paul Austin, then CEO, sent his senior management team to investigate. Conditions were indeed deplorable. Austin went before anyone else started investigating the issue and when he was presented with the reality, he said, “Senator, not only are conditions as bad as you say – they are worse than you can imagine.. The Coca-Cola Company cannot, in any good conscience, tolerate this situation. We are going to do a great deal to try to fix this.”
And they did. They came up with a plan to upgrade the living standards of all workers, from better housing, better transportation to the gloves and other amenities. Old housing was bulldozed. And the company formed a team of behavioral scientists to plan a comprehensive program that would face up to the basic human problems involved. Following the results of the study, the company opened a clinic and established social service centers offering child care, preschool training and adult education. Wages and benefits were increased. Community organizations were established, governed by the workers.
“Success is more permanent when you achieve it without destroying your principles.” – Walter Cronkite
Commandment #6 Don’t take time to think
It’s easy to make the same mistakes over and over again… unless someone stops and takes time to think. When there’s a failure of some kind, our natural instinct is to look around to assign blame or make excuses or punish someone. That way we won’t step back the time we need to analyze the failure.
Good hospitals regularly convene morbidity and mortality sessions to discuss and learn from their own failures. Their cases involve life and death. Most businesses are not dealing with anything nearly so serious. But mistakes do get made. And mistakes are opportunities to think about a less than successful technical change or a marketing faux pas and figure out, as objective as possible, what went wrong.
“The real problem is not whether machines think but whether men do.” – Burrhus Frederic Skinner
Commandment #7 Put all your faith in experts and outside consultants
Management is a craft, not a science. Beware of management who try to mathematize and quantify human behavior. Coca-Cola had managers and consultants who saw people merely as numbers. Needless to say, they did not last long at the company.
In 2007, we saw financial markets in trouble because they were following statistical models that grossly underestimated how risky subprime lending could be. It was initially explained as ‘model error’, except that it wasn’t. It was human error. Anybody with good gut feelings could have predicted a lot of loans to people without any measurable means of repaying them. But the geniuses of the financial world kept planning their magic beans. And everyone was surprised when the money trees didn’t grow. The narrow perspective of what appears to be genius is often the inverse of wisdom.
“It’s better to know some of the questions than all of the answers.” – James Thurber
Commandment #8 Love your bureaucracy
In 1986, the space shuttle Challenger exploded shortly after liftoff, killing all seven crew members. In 2003, the space shuttle Columbia burned up on re-entry, killing all seven crew members. Both disasters were initially attributed to technical flaws.
Because we don’t have firsthand knowledge, we can only speculate based on what came to light in the public hearings and in other post mission analysis. But a number of analysts seem to agree that technical fairies in these missions were partially the consequence of bureaucratic failure. Within NASA, the evidence appears to indicate that responsibilities were so diffuse that everyone evidently thought someone else in the system would catch an error. But it did not happen. From the testimonies after the disasters, it appears the ultimate decisions were not made by those with the best information but by those with the most power
When bureaucracies in business malfunction, it’s difficult and costly. A lot of time, effort and resources are wasted sorting things out. People are probably more likely to make mistakes because of the sheer frustration just trying to get off the dime. But those kinds of mistakes just cost more money.
“A committee is a group of men who individually do nothing, but as a group decide that nothing can be done.” – Fred Allen
Commandment #9 Send mixed messages
In 1982, the senior management at Coca-Cola announced the purchase of Columbia Pictures. Wall Street said the company paid too much for it and Coca-Cola stock dropped 10 percent. It looked to many people as though the company had made a mistake. But in a short time, the Columbia deal began to take off. Following the major hits of Tootsie and Gandhi, the company posted a profit that was 50 percent higher than their own highest expectations.
For the next decade, Columbia shored up their domestic profits. Coca-Cola had made the right decision on acquisition. But as they began to grow from their global soft drink business, the need for Columbia’s modest revenue and profit began to fade away. It was really a relatively small part of their 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 the end, Coca-Cola decided to sell Columbia for substantially more than they paid for it. No more mixed messages. Coca-Cola was no longer a TV company. They were in the global beverage business. That was what they are best at and that was what Coca-Cola wanted all of their people to be thinking about all the time.
“The problem with communication is the illusion that it has been accomplished.” – George Bernard Shaw
Commandment #10 Be afraid of the future
Several years ago, Coca-Cola bottling business in the Philippines, which had always been a strong business, began a downward spiral. It was under the management of a local company whose leaders wanted to concentrate on expanding their beer business and began to ignore its soft drink base. A few years later, the tide turned badly and Pepsi was outselling Coke two to one in the Philippines.
Eventually, John Hunter, one of Coca-Cola’s top executives, reached an agreement to run the business operation under a joint operating agreement. The new management walked through the plant, greeting people by name, asking about their families and talked with their customers. They had a contagious kind of enthusiasm that defies quantifying but you know when you see it. That’s leadership. In one year, Coca-Cola was outselling Pepsi two to one. What had the new management done with bottling employees? They connected with their people and convinced them that they were better than the competition. They gave them a picture of the future with optimism that rubbed off on everyone from the lowliest sweeper to the highest volume customer in Manila.
The pessimists tell us the world was born in chaos and has been going downhill ever since. If you want to fail, be afraid of the future. If you want to succeed, approach the future with optimism and passion. One optimist in a sea of pessimists can make all the difference.
“Fear is that little darkroom where negatives are developed.” – Michael Pritchard
Commandment #11 Lose your passion for work – for life
Long time ago, Saint Augustine wrote “Hope has two beautiful daughters. Their names are Anger and Courage. Anger that things are the way they are. Courage to make them the way they ought to be.” If you want a better world for your generations to come, believe. Believe that one person can make a difference. And that person can be you.
You will fail if you stop taking risks, are inflexible, isolated, assume infallibility, play the game close to the line, don’t take time to think, put all your faith in outside experts, love your bureaucracy, send mixed messages, and fear the future.
On the bright side, there’s redemption. React in time. Recognize the danger signs. It’s hard for people and businesses to avoid mistakes all the time. Most successful companies and individuals fail from time to time. But never for very long. No matter what happens they are never mired in failure. They fall but always find ways to pick themselves up and move on.
“They laughed at Joan of Arc, but she went right ahead and built it anyway.” – Gracie Allen