Big Brands Big Trouble
|Big Brands Big Trouble:
the Hard Way
by Jack Trout
|Table of Contents
||The Most Popular Mistakes and Their High Cost
||General Motors: Forgetting What Made Them Successful
||Xerox: Predicting a Future That Never Came
||Digital Equipment Corporation: From Number Two to Nowhere
||AT&T: From Monopoly to Mess
||Levi Strauss: Ignoring Competition Is Bad for Your Business
||Crest Toothpaste: Look, Ma, No Leadership
||Burger King: Always under New Management
||Firestone: Dead Brand Driving
||Miller Brewing: A "Miller" Too Far
||Marks & Spencer: A Bad Case of "Top-Down" Thinking
||Trouble in the Wind: Brands with Unresolved Problems
||An Army of Consultants: But No One to Help
||Boards of Directors: But No One to Help
||Wall Street: Nothing but Trouble
||Knowing Your Enemy Can Keep You Out of Trouble
||The Bigger They Are, the Harder to Manage
||Trouble Begins and Ends with the CEO
Trouble Begins and Ends with the CEO
n the old days, your big company CEO was far behind the firing line. When things went bad, there were people to be blamed and asked to leave. But today, it's a different story. The buck stops at the office of the CEO. Toward the latter part of 2000, an executive employment firm estimated that 350 chief executives in the US had left their jobs. Among them were some big names from big companies having trouble. They didn't last very many months on the job. Take a look: Richard McGinn (36 months at Lucent), John McDonough (35 months at Newell Rubbermaid), Dale Morrison (33 months at Campbell Soup), Michael Howley (17 months at Gillette), Dtirk Jager (17 months at Procter & Gamble), and Lloyd Ward (15 months at Maytag).
This kind7/29/02 of turnover was unheard of in the past. After all, Jack Welch has survived the disastrous "factory of the future" fiasco that sank without a trace in a sea of technical snafus and erroneous projections of customer demand. The late Roberto Goizueta of Coca-Cola survived the New Coke disaster, which has become the poster product of bad ideas.
Today, those executives would have been toast because there appears to be zero forgiveness for mistakes. You screw up and you're dead. As mentioned, boards have gotten good at firing if not fixing problems before they occur. And also, there is a lot more intensity in absolutely hitting the numbers 100 per cent. It is not a range any more, it is a specific number. And as major businesses do multiple acquisitions, they are hard things to pull together; something always shows up to bite CEOs in the balance-sheet.
Mm, mm, bad
What happened at Campbell Soup is instructive. David Johnson took charge of this venerable soup company in 1990. Johnson did what Jack Welch did early in his reign at GE. He carved costs out of an old-line operation and raised prices where he could. Campbell's stock price tripled during his tenure powered by a jump in net profit margins. That Johnson was unable to boost the soup maker's anemic rate of revenue growth was disappointing but not surprising. Soup is soup. It's been around a long time and people get bored eating the same thing. Besides, all that fast food out there is changing people's eating habits. ("Let's send out for a pizza.")
It's not about "the numbers"
If you live by the numbers, you can die by the numbers. CEOs that look at their jobs purely in the context of pushing the troops to make their forecasts are risking not only their jobs but the health of the organisation. Nothing demonstrates this more than the sad saga of Richard McGinn. He was the CEO of Lucent Technologies and had turned the former equipment-making arm of AT&T into a Wall Street star by increasing sales at a double-digit pace.
But nothing goes up forever and in 2000 Lucent missed its numbers twice. So the pressure was on the sales troops. From numerous reports in the business press, McGinn's message was to do deals, no holds barred. According to the press, the company promised its customers a host of discounts, one-time credits, and other incentives certain to eat into future sales. When they badly missed their numbers again, all hell broke loose and Mr McGinn bit the dust. The stock plunged and Lucent's future has been put in some doubt. As said earlier, you can die by being too focused on the numbers.
First, the bad news
There are no superheroes and top executives have to realise that the impossible is impossible, no matter how hard you push the troops. Jack Welch types are an anomaly. Today's new CEOs have no chance to match Welch's longevity because there is no more difficult task than the one they are likely to face: transforming a core business threatened by a new technology. George Fisher tried that at Kodak and it doesn't appear that they will find much happiness in the digital age. And if CEOs get trapped in the great expectations of future growth, they will most probably fail.
What is at the heart of all this is that, in many instances, big company CEOs are barely in control of their company's fate, much less their own. There is a growing legion of competitors coming at them from every corner of the globe. Technologies are ever changing. The pace of change is faster. It is increasingly difficult for CEOs to digest the flood of information out there and make the right choices.
Now for the good news
But a CEO can have a future. The trick to surviving out there is not to state at the balance-sheet but simply to know where you must go to find success in a market. That's because no one can follow you (the board, your managers, your employees) if you don't know where you're headed. Many years ago in a book called The Peter Principle, authors Peter and Hull made this observation: "Most hierarchies are nowadays so cumbered with rules and traditions, and so bound in by public laws, that even high employees do not have to lead anyone anywhere, in the sense of pointing out the direction and setting the pace. They simply follow precedents, obey regulations, and move at the head of the crowd. Such employees lead only in the sense that the carved wooden figurehead leads the ship.
"A book to guide you?
Perhaps this pessimistic view of leadership skills has led to the explosion of hundreds of books dealing with leadership (most of them downright silly). There is advice on whom to emulate (Attila the Hun), what to achieve (inner peace), what to study (failure), what to strive for (charisma), whether to delegate (sometimes), whether to collaborate (maybe), America's secret leaders (women), the personal qualities of leadership (having integrity) how to achieve credibility (be credible), how to be an authentic leader (find the leader within), and the nine natural laws of leadership (don't even ask). In fact, there are more than 3,000 books in print with the word "leader" in the title.
How to be an effective leader is not worth a whole book. The fabled management guru, Peter Drucker, gets it into a few sentences: "The foundation of effective leadership is thinking through the organisation's mission, defining it and establishing it, clearly and visibly. The leader sets the goals, sets the priorities, and sets and maintains the standards."
How do you find the proper direction? To become a great strategist, you have to put your mind in the mud of the marketplace.
It's about perceptions
If there is one lesson to take out of this book, it is this: Success or failure are all about perceptual problems and opportunities in the market-place. And it is all about understanding that the mind of the customer is where you win and lose.
You cannot be swayed by those wonderful presentations by your executives on how your company can make a better product or leverage your better distribution or your better sales force to get into the marketplace. You have to stay focused on the mind of the prospect. Minds are difficult if not impossible to change. And if your executives say it can be done, do not believe them. The more you understand the minds of your customers or prospects, the less likely you will get into trouble.
I once asked one of the ex-CEOs of General Motors if he ever questioned the proliferation of models that eventually destroyed the meaning of the company's brands (he was a financial man with little background in marketing).
That question caused him to stop and ponder for a few seconds. His response: "No, but I do recall thinking that it was getting a little confusing." His concern was absolutely correct but he failed to act on his instincts. His assumption was that his executives knew what they were doing. This turned out to be a false assumption. But it took a number of years for this mistake to be felt at General Motors. Today, thanks to intense competition, mistakes are felt in a matter of months, not years. That's why marketing is too important to turn over to an underling. To survive, a CEO has to assume the final responsibility for what gets taken to the marketplace. After all, your job is on the line.
It's about knowing what's up
The unpretentious Sam Walton travelled to the front lines of every one of his Wal-Mart stores throughout his life. He even spent time in the middle of the night on the loading docks, talking with the crews.
Unlike "Mister Sam," many chief executives tend to lose touch. The bigger the company, the more likely it is that the chief executive has lost touch with the front lines. This might be the single most important factor in CEOs' mistakes. How do you know what is really happening? How do you get around the propensity of middle management to tell you what they think you want to hear? How do you get the bad news as well as the good?
If you don't get the bad news directly, bad ideas can flourish instead of being killed. One possibility of finding out what is really going on is "going in disguise" or poking around unannounced. This would be especially useful at the distributor or retail level. The reason: To get honest opinions of what is happening.
The members of the sales force, if you have one, are a critical element in the equation. The trick is how to get a good, honest evaluation of the competition out of them. The best thing you can do is to praise honest information. Once the word gets around that a CEO prizes honesty and reality, a lot of useful information will be forthcoming.
It's about thinking long-term
Let's just say you have focused on your competitors and figured out their strengths and weaknesses in the mind. You have searched out the one attribute or differentiating idea that will work in the mental battleground. Then you have focused all your efforts to develop a coherent strategy to exploit that idea. And you have been willing to make the changes inside the organisation to exploit the opportunities on the outside. Now you must be willing to take the time to let that strategy develop. Marketing moves take time to develop so you must in the face of pressure from Wall Street, the board, and your employees be willing to stay the course. Nothing demonstrates this better than the Lotus Development Corporation, the company that invented the spreadsheet for the PC. It was overrun by Microsoft with its version of the spreadsheet, Excel for Windows. Since Microsoft invented Windows and Lotus was late with its version of a Windows spreadsheet, Lotus was in deep trouble.
Jim Manzi, then the CEO, decided to shift the battlefield. To him, the future of the brand had to be "Groupware" because they had in early stages a product called "Notes," which was the first successful Groupware program (software designed for groups or networks for computers as opposed to software for individual PCs). So Groupware became the focus as Jim Manzi began the process of building and supporting the Notes/Groupware business.
It's about hanging in there
Getting to where Lotus is today took an enormous effort. When asked about this effort of changing focus, Jim Manzi summed it up as a "brutal process." Here is the story he told me in his own words: The spreadsheet was the centre of gravity at Lotus. It once represented 70 per cent of our business. It was our "mainframe" business, so to speak.
But Microsoft and Windows really put a big hole in our future. In the early 1990s I felt Notes was the best future we had. Unfortunately, not everyone in the company felt that way. Many wanted to just continue to improve the spreadsheet.
During one difficult period, 12 VPs left the company. They didn't see the future the way I did. All this, plus the ongoing investment in this product, didn't go unnoticed by our board of directors. Keeping them on the Notes bandwagon required telling the story over and over, maintaining perspective, and building relationships both inside and outside the company. Once the board loses that vision of the future, your problems magnify.
The beginning and the end
If one theme runs through this book, it is that CEOs often make bad decisions leading to big trouble. They either do things that cause problems or don't do things that could have avoided problems.
And when danger looms, the CEO is probably the only person who can effectively take the company out of harm's way. He or she is indeed the captain of the ship. And every CEO should have a plaque on the wall that reads: Remember the Titanic.
© Jack Trout
Email this article | Respond to this article