Reslience and Renewal

We’ve often talked here about businesses and other kinds of organizations that missed the turn…that failed to react intelligently to market or technology changes and disappeared (or at least suffered great harm)…or, in the case of military organizations, went down to defeat.  Sears failed to take advantage of the excellent fit that the Internet could have offered with their direct mail strengths.  The French Army of 1940 was so focused on the lessons of World War I that they failed to understand the tactics that would be used against them in the coming war.  None of the traditional US steam locomotive manufacturers became a force in the diesel-electric market.  The big integrated steel producers failed to exploit mini-mill technology.  And so on.

In this post & discussion, I’d like to look at this phenomenon from a different angle….what are some examples of organizations that did successfully make the turn, and/or revived themselves after being overwhelmed with internal as well as external problems?

To start things off, here are some examples that seem to fit:

Studebaker–this company was originally a manufacturer of horse-drawn wagons and carriages.  The ‘buggy whip industry’ is used as an archetypal example of an industry that was highly vulnerable to the mechanically powered automobile and failed to exist because of its failure to recognize and act on this vulnerability. (Why do people talk about buggy whip makers, rather than just buggy makers, I wonder?)   But Studebaker did enter the auto business, with electric cars in 1902 and gasoline vehicles in 1904.  Although never a dominant player in the US auto market, the company did manufacture and sell cars until 1963.  (It was also a significant supplier of military vehicles and other items during World War II.)

IBM was overwhelmingly dominant in the era of punched-card data processing…it was by no means inevitable that it would successfully make the transition to electronic computers, or at least would make this transition in a manner comprehensive enough to ensure its future.  Companies such as UNIVAC were more focused on electronics. It is easy to imagine an alternate history in which  IBM chose to exploit electronic computation only for the niche of scientific & engineering calculation, leaving business data processing to traditional punched card methods…but that’s not what happened.

American Express started out in 1850 as a package delivery company, focusing on transportation within New York State.  Fortunately for them, they expanded beyond this focus with the introduction of products such as money orders and travelers checks…I say ‘fortunately for them’, because in 1918, the federal government nationalized the major express carriers and expropriated their property.

Corning started in 1851 but made its mark as a manufacturer of glass bulbs for Edison’s lamps–by 1808, bulbs accounted for half Corning’s business.  This seems like the kind of business that would have been highly susceptible to replacement via vertical integration by GE and the other lightbulb companies which were its customers.  But in 1915, the company came up with Pyrex, and in 1952 the accidental overheating of a piece of photosensitive glass led to the creation of CorningWare.  And in the 1970s, Corning pioneered the use of fiber optic cables for data transmission.

Apple, in the late 1990s, did not look like it had a great future.  The company’s desktop products were doing poorly against PC-type products.  Many experts believed that Apple should get out of the hardware business entirely and merely license its software to other manufacturers, as Microsoft had done with Windows, and, indeed, some licensing deals were struck. But Apple’s future would turn out not to lie in pure software but in software tightly integrated with proprietary hardware, especially with handheld devices.

The Royal Navy, in 1797, suffered from serious internal problems.  The service was rocked by two mutinies–one at Spithead and the other at the Nore.  The Spithead mutiny was mainly about a demand for improved living conditions, due in part to the fact that pay rates had not increased to keep up with inflation.  The Nore mutiny was more far-reaching in its demands, including demands that the King dissolve Parliament and make immediate peace with France.  There was apparently also some involvement by Irish separatists.

Yet these mutinies preceded by only 8 years the great naval victory at Trafalgar.  It seens unlikely that an angry, demoralized, and radicalized force of sailors could have achieved such a victory or enabled Britain’ s “ruling of the waves” for the next 100-plus years.  The willingness of the naval authorities to make needed changes (increased pay, abolition of the ‘commissions’ that ships’ pursers had traditionally been allowed to take for themselves), surely made a difference, along with a combination of conciliation and limit-setting.  (All of the Spithead mutineers received a royal pardon; at the Nore, 29 mutineers were hanged and an equal number imprisoned; some were transported to Australia…however, most Nore mutineers were not punished at all, which was lenient by the standards of the time.)

Speaking of Britain….following the withdrawal at Dunkirk in 1940, the future of that country…and of western civilization…looked dark indeed.  Writing in exile from Brazil, the French writer Bernanos wrote in December of that year:

No one knows better than I do that, in the course of centuries, all the great stories of the world end by becoming children’s tales. But this particular one (the story of England’s resistance–ed) has started its life as such, has become a children’s tale on the very threshold of its existence. It mean that we can at once recognize in it the threefold visible sign of its nature. it has deceived the anticipations of the wise, it has humiliated the weak-hearted, it has staggered the fools. Last June all these folk from one end of the world to the other, no matter what the color of their skins, were shaking their heads. Never had they been so old, never had they been so proud of being old. All the figures that they had swallowed in the course of their miserable lives as a safeguard against the highly improbable activity of their emotions had choked the channels of circulation..They were ready to prove that with the Armistice of Rethondes the continuance of the war had become a mathematical impossibility…Some chuckled with satisfaction at the thought, but they were not the most dangerous…Others threatened us with the infection of pity…”Alone against the world,” they said. “Why, what is that but a tale for children?” And that is precisely what it was–a tale for children. Hurrah for the children of England! 

Men of England, at this very moment you are writing what public speakers like to describe in their jargon as one of the “greatest pages of history”….At this moment you English are writing one of the greatest pages of history, but I am quite sure that when you started, you meant it as a fairy tale for children. “Once upon a time there was a little island, and in that island there was a people in arms against the world…” Faced with such an opening as that, what old cunning fox of politics or business would not have shrugged his shoulders and closed the book?

Britain and its allied did of coure prevail, and at the end of World War II, the enemy countries of Germany and Japan were physically and economically crushed. Their populations were near starvation, and they were viewed around the world as moral pariahs, a status that they had richly earned.

But both countries were able to recover, grow, and prosper economically and to establish reasonably stable democratic governments.  How long this will continue, given the low fertility rates (particularly in the case of Japan) and the suicidal energy policies (particularly in the case of Germany) remains to be seen, but both countries have had a pretty good run over the past 70+ years, probably much better than would have been foreseen by most people at the time.

 

What other examples of resilience and renewal can you think of?

80 thoughts on “Reslience and Renewal”

  1. Japan has a history of extremely long-lived companies, which have to pivot in order to survive for so long, so perhaps it’s cheating to use any examples from there, but Nintendo came to mind, as they switched from playing cards to electronics.

    Disney was doing pretty grim in the 80s until they had a renaissance of their animated film division and started acquiring all sorts of non-film assets.

  2. Churchill, who had not had a good war in WWI, redeemed himself in 1940. He needed us to bail him out but he was able to convince Roosevelt of much of his plan. In fact, the war finished off the British Empire that WWI had so crippled. The Socialists under Atlee made sure the recovery was weak and delayed. I’m reading Churchill’s books about WWI, “The World Crisis,” to get his version of what happened. He has convinced me (not that I needed any) that France very nearly lost the whole thing in the first month as Joffre did exactly the wrong thing by ignoring the Schlieffen Plan and going into Alsace instead. This was very nearly fatal. In fact, in my opinion, this nearly saved 200,000 English lives. The rest of the 20th century history might be quite different.

  3. Disney was doing pretty grim in the 80s until they had a renaissance of their animated film division and started acquiring all sorts of non-film assets.

    Which they seem to be squandering as they move left. I can understand that movies and fantasy businesses will have lots of homosexual employees but they seem to be wagging the dog too much.

  4. Peter Drucker, in his book about non-profit companies, lauded the Girl Scouts as having successfully negotiated the transition in women’s lives. They were originally focused on mothers at home needing something to do. The transition to working mothers was successful in changing the focus to “quality time” with their daughters. All this has been swallowed by the current insanity about children and “gender.”

  5. You forget Corning’s latest and most enduring transition – they make Gorilla Glass, the stuff used in portable electronic touch screens. BIG money-maker.

  6. The people of the Donbass fought the Nazis from the east, who came to claim the industrial heartland of Ukraine from the Commies who lived there, defeated them, pocketed them and killed very many of them. They had Russian Special,Forces leadership, but that’s about it. Minsk was the solution that stopped the breakout after the Develstaba massacre, and then it was ignored. Some 16,000 dead civilians later after endless attacks which continue to this day, on civilian areas they can reach, we can see an end in sight.

    Now the people of the Donbass with the Russians full support have liberated Lugansk and soon the DPR as well. The Ukes are tossing cluster munitions into Donetsk and both Uran 6 robots and crazy people are demining the area. The robots are impressive, as are the lunatics tossing car tires onto the bomblets.

    They are taking back everything and whole more too. Resilience is finally paying off. A great renewal for the people of the Donbass.

  7. I was going to mention IBM too, David, but they actually pivoted twice. In recent years with the advent of the PC and localized processing, IBM focused its business on software and (I believe) facilities management. They had been the mainframe and hardware king. “Nobody was fired for picking IBM”.

    I remember our own Mike K saying about Sears – that they could have been what Amazon became, had they put their catalog on the Net. But the window was small – between the time of the WWW and Netscape, and before Amazon got a toehold.

    I learned a 6 figure lesson some years ago. I was working on the best system for garages and was so focused on “getting it right” I spent too much time in testing, while the industry moved to Windows. I had the best DOS based system, though. No real marketing plan. Thought that the world would come to me. To my credit though I did offer a Unix based system. SCO Unix was the head of PC-Unix – they too got overtaken by (free) linux. Today the servers of the Net are virtually all linux-based.

    I then wondered my many big companies made that mistake in the millions – 10s of millions – not seeing a shift?

    I guess SCO, for one. (stood for the Santa Cruz Operation).

  8. “what are some examples of organizations that did successfully make the turn”

    There are many turns in the road. Studebaker successfully negotiated one turn, but fell at the next. Nokia successfully transitioned from a paper maker to dominating the market for mobile phones (!) … for a while.

    The interesting question is why do companies sometimes successfully adapt & adjust & recognize opportunities, and on other occasions fail? Often the same company at different times! Is it simply a random walk type of phenomenon, or is there some underlying principle of success which others could learn & apply?

    Personally, I am leaning towards the random walk explanation. Apparently, there were about half-a-dozen business decisions which all had to go the right way for Microsoft in order for Bill Gates to end up as the one-time richest man in the world. Another classic example was Xerox’s early development of the personal computer system at PARC — followed by their decision to shelf that and invest in Xerox-brand typewriters instead. If a particular Xerox executive had missed the meeting where that decision was taken because of a cancelled flight, maybe Apple & IBM would never have had a look-in.

  9. “I guess SCO, for one.” Good old SCO did more for Linux than any other non open system.

    I migrated one for my friends who had a computer sales and service operation, and were dumb enough to pay SCO when they set it up. A broken nightmare when it was running properly. I spent quite a few hours on the phone with SCO getting the information I needed to migrate the horror show. They were surprisingly ignorant of the OS they had stolen/bought and repackaged, and eventually I got what I needed from them.

    A few hours later we had a good Linux system up and running and I hid the tricky bits from them with a bunch of scripts. They were very happy, I made zip, but hey. ;)

  10. Regarding steam locomotive builders:

    There were three big steam locomotive builders before WW2:

    Baldwin Locomotive of Philadelphia PA
    Lima Locomotive of Lima OH
    American Locomotive Company (ALCO, ALCo, or Alco), composed of Schenectady Locomotive and several smaller builders merged at the insistence of JP Morgan. (who had created US Steel in the same manner).

    Only Alco was already building diesel locomotives before the war and was well positioned to compete with diesel specialist Electro-Motive Corporation (which became the Electro-Motive Division of General Motors).

    During WW2 the War Production Board did not allow “new” (unproven) locomotive designs to be built during the conflict. Railroads were only allowed to purchase duplicates of what was already available as of 1941. Innovation was frozen for several years just when the steam to diesel transition was beginning. As of 1941 only EMD and the Alco were building diesels in any quantity. During the war much of Alco’s production capacity was diverted to producing tanks, howitzers, and other military needs. To avoid duplication of effort, Alco was assigned production of switching locomotives while EMD got the long-haul freight locos. This shaped their fortunes following the war. EMD was able to learn from their early reliability issues with high-mileage locomotives and knew exactly what still needed to be improved once the wartime restrictions were removed. Alco’s switchers were competitive with EMD, but Alco had trouble developing a diesel engine (motor) that could match EMD for reliability. For a while after the war the entire USA railroad industry was trying to dieselize as fast as they could, and there was plenty of business for both. By the time they were able to redesign a new diesel engine Alco was losing market share and dieselization was approaching 100%, so there were few new clients looking for diesels.

    Alco did, however, do rather well in the export market, and old Alco locomotive designs are still produced outside the USA. Fairbanks-Morse (of Beloit WI) renamed itself and still produces the redesigned Alco 251 diesel engine. Alco’s last “new” design was in 1960 and the company was sold in 1964 (to the same company which had purchased Studebaker), and went out of business in 1969.

  11. Another classic example was Xerox’s early development of the personal computer system at PARC — followed by their decision to shelf that and invest in Xerox-brand typewriters instead

    That is a classic example and there have been a couple good books about it,. One was by a leftist LA Times writer, Hiltzik, and another was by some guys in the tech field. I’ve read both (but can’t remember the title of the second) and the second is better. Hiltzik’s book is pretty good. Xerox had a half dozen world changing technologies and told them to get back to designing copiers.

  12. re Xerox…if they had introduced a good, reasonably-priced personal computer (with appropriate software), how would they have sold it? Most likely, they would have fed it into their office products sales force…and while some reps might have done well with it, the vast majority, I think, would have pretty much ignored it: easier to sell the products they were familiar with, and also safer…less risk of angering an important customer if the new product had problems (and most new products do) Also, not clear that in most companies the people who bought copiers were the right people to target with computers.

  13. David F: That is probably what the Xerox executive who did not miss the decision meeting said. There were good reasons for not taking a risk on personal computers. Shelving the new technology so expensively developed at PARC was a rational decision. Looking back, we can see it was the wrong decision — but they had to make the decision looking forwards, without that knowledge.

    On the other hand, if there had been a Steve Jobs type of character in the decision meeting, Xerox might have gone the other way — an equally rational decision. That is why I guess that a lot of these branches in the road are effectively a random walk into the future.

  14. What other examples of resilience and renewal can you think of?

    Intel.

    Pardon my hazy memory, but I recall that CEO Andy Grove noted that the company was going bankrupt because some important product was being produced much cheaper by someone else. He speculated- with some other Intel executive- that the company would go bankrupt, and the buyer would stop making that particular product that was losing the company so much money.

    One of them- I don’t remember if it was Grove or the other guy- said, hey why don’t we just stop making that money losing product? And make something profitable?

    They did. Andy Grove became famous as an awesome CEO and Intel prospered.

  15. Gavin…even at the time, it would have been rational for Xerox to pursue the personal computing market (assuming that the product could be produced at sale-able cost)….but probably should have been done with an alternate sales approach. Then, when (f) it started to seriously succeed, it could perhaps have been fed back into the mainline sales fore.

  16. Xennady…yes, good example. The product was RAM memory chips, the price of which was being undercut by Japanese companies. Intel was also making microprocessors at the time. The conversation went something like this:

    GROVE: If we get fired, what would our successors do?
    OTHER GUY: Probably get out of the memory chip business.
    GROVE: Why don’t we take a walk around the building, come back in, and do it?

  17. David Foster,

    Thank you!

    That is quite literally the exact anecdote I was failing to remember when I made my post.

  18. I remember our own Mike K saying about Sears – that they could have been what Amazon became, had they put their catalog on the Net.

    Maybe. I keep reading the Amazon makes most of its money from its tech service business. Asking Sears to become a tech services company is even less likely than Sears becoming Walmart.

  19. Success stories – I wonder how much the willingness to take a risk played into that.
    It seems that there are times playing it safe is the more dangerous path to take.
    And yet there are lots of fail examples of risk takers…random walk, indeed.

  20. The first realization of the PARC computer interface was the Apple Lisa that couple of years later had approximately zero sales at $10,000. Using the inflation calculator and the half remembered year of 1983, that comes to $28,000 now.) The first Macs were crippled by lack of memory, a design that made upgrades next to impossible and a tiny, also un-upgradeable screen. It took years and the coupling of desktop publishing to make it saleable into businesses. It was the enthusiast market that kept it alive until it found a profitable business market. That wasn’t a space where Xerox was likely to have had much success.

  21. Well, if we’re talking about “people” then I think that the Jews and the Roma are the obvious examples, but I think that’s an entirely different category from companies or other more discrete organizations. An idiot leader can destroy a company, or an organization, but not a people.

  22. }}} And so on

    AT&T developed so much important early computer equipment that they were chomping at the bit to get out from under the consent decree that gave them a monopoly over phones yet restricted them to only phones…

    This was the real reason that AT&T got divested of their monopoly — they wanted to be divested of it. It’s generally the only way to ever get an entrenched government-supported monopoly taken down, if they want it to happen.

    The net result was that AT&T learned that Technology is only a part of the mix — learning how to market what you make is an equally important part… and they had no marketing capacity at all, as they’d never needed it.

    The end result was that they are nowhere near the significance they were in the phone market, and never ever made a dent in the computer market. Their technology development suffered, too, as Bell Labs is no longer the major force in R&D that they once were.

    ======

    Windows was, literally, a monopoly, no matter how you slice it… they destroyed Netscape with monopoly-based marketing strategies even though they have always had an inferior product (IE3 lacked both features and security components that NS2 had had literally years before) and NS owned 80% of the market when M$ finally woke up… Despite this (though NS’s “can’t we all just get along?” marketing approach did not help) M$ slowly but surely destroyed NS in the browser market, partly by understanding the inherent laziness of the typical user.

    It took another substantial shift in tech that M$ failed to catch again — smartphones — to break that monopoly and open the door to another company with equal funds and just as good a marketing system — Google, with Chrome and Android, managed to dethrone them and M$ never managed to break into the phone market (with the very very poorly named “WinCE”, mind you) even as Chrome dethroned IE and its successor, Edge, has very limited market penetration (I am pretty sure Firefox, Netscape’s successor, has more market share — Edge is likely more on par with the eternal also-ran, Opera).

    The result is a more balanced system — Windows is still the PC browser of choice, but there is the “Chromebook” alternative, suitable for many uses, and PCs themselves are far less central to computer usage than they were, with smartphones and tablets being significant, and the marketshare there more thoroughly divided between the Apple and Android camps. With the end beneficial result that no one has a stranglehold on either computers or tablets/phones.

  23. }}} I remember our own Mike K saying about Sears – that they could have been what Amazon became, had they put their catalog on the Net.

    Maybe. I keep reading the Amazon makes most of its money from its tech service business. Asking Sears to become a tech services company is even less likely than Sears becoming Walmart.

    True, but what enabled that is their sales business in the first place. They needed to develop the tech services for their own purposes, then realized they could market what they had done to provide it for others.

    I grant, Sears’ management quite probably would never have figured out that transition, but it was quite possible that the right leadership might have realized it and gone with it.

    One distinction, though, is that Sears would have likely been a good 5-10y ahead of Amazon in terms of what they would have to develop, so who knows how that flow would have gone? Could Sears have done what Amazon did, 5-10y earlier in the tech development process?

    That’s kind of like asking if Blockbuster could have done what Netflix did? Would they have even tried? Blockbuster wanted to do what Netflix started out doing 10-15y earlier, as well as “Redbox”, but switching from a disc-based business model to an on-demand service may never have gotten past their business process model and the bureaucracy designed to support it.

  24. David F: “The product was RAM memory chips, the price of which was being undercut by Japanese companies.”

    If we want to understand resilience & renewal, we need to look for patterns. Unfortunately, the pattern seems to be no more than — Sometimes it works, sometimes it does not.

    In the case of Intel, it was a rational decision to focus on microprocessors where they had an advantage and cut out RAM chips where they did not. But it would have been an equally rational decision to investigate why Japanese companies could undercut them on price and make appropriate adjustments so they could continue to compete. The long-term consequence of abandoning markets can be serious — but can take a long time to show up.

    Back at the time of the 1970s Oil Shocks, US auto manufacturers effectively gave up on the small car market, believing they could not compete with the Japanese. The US companies told themselves this did not matter, since they still dominated the more profitable large & luxury car markets — let the Japanese have the low profit small car market. What those US executives ignored was that a Japanese auto manufacturer which could make a small car profitably would eventually be able to make large luxury cars — and take that market too.

    The consequences of decisions for an entity’s resilience can take years to show up. Remember that possibly apocryphal statement of Chou En Lai about whether the French Revolution was a good thing — It is too early to tell.

  25. }}} Apple, in the late 1990s, did not look like it had a great future. The company’s desktop products were doing poorly against PC-type products. Many experts believed that Apple should get out of the hardware business entirely and merely license its software to other manufacturers, as Microsoft had done with Windows, and, indeed, some licensing deals were struck. But Apple’s future would turn out not to lie in pure software but in software tightly integrated with proprietary hardware, especially with handheld devices.

    But by the late 90s, Apple was dead dead dead. They had no future at all.

    They Coulda Been a Contender
    https://www.wired.com/1997/11/es-apple-2/
    Jim Carlton, on the full, inside story of Apple’s biggest, most strategic blunder. Once upon a time, Apple Computer was the undisputed king of the computer industry, the leader in nearly all areas of technology and innovation. The time, actually, was not so long ago, but it sure seems like it now.

    And a large part of that was specifically because of their “software tightly integrated with proprietary hardware” — this has ALWAYS been their business process, since the Mac in 1984. It is/was Jobs’ view of computer vs. that of Woz, who was a pure open-systems guy. The entire reason that the IBM-PC/Windows box was destroying the Mac is because of that “tight integration” — it left Apple in charge, early on, of a high payout box with an ever-decreasing market share.

    Luckily for them, Jobs, who had been ousted in the 1980s by John Sculley, wanted his company back, and he got it… and then created a couple of for-then perfect niche products — first the iPod, then the iPhone. The former gave apple the breathing room and funding to develop the latter, and the latter was a major breakthrough product. I assert to you that the old “flip phones” were 1st gen Star Trek communicators. The iPhone is actually a 1st gen Star Trek **tricorder**. It provides access to “the ship’s computers” (aka “the internet”, as well as all the various apps: “There’s an app for that!”) and also has an interesting collection of sensors for data. Not sure what the iPhone contains, but there are mag field sensors in the Android line of phones. I am mildly surprised that they haven’t developed a larger sensor suite for Androids, just on the presumption that you can collect a vast array of useful data from a truly phenomenally large array of locations JUST FROM USERS THAT WILL ALLOW IT — i.e., a collection of anonymized data that has no connection to the phone owner — which allows analysis of things like gravimetric data, air pressure, temperature, and humidity, and so forth, from millions to billions of data points in, or close to, real-time, or recorded values at millions of locations over time. Fuck weather monitoring stations, you could literally get millions of data points from all over the planet for your data set (yes, you’d have to exclude temperature data from people inside buildings, but this would generally be fairly obvious most of the time — especially if you could use GPS to recognize when someone was IN a building as well as other local measurements which were wildly out of sync AND more expected (i.e., if it’s summer in Georgia and it’s 70° F, they’re in a building, “duh”.)

  26. }}} Back at the time of the 1970s Oil Shocks, US auto manufacturers effectively gave up on the small car market, believing they could not compete with the Japanese. The US companies told themselves this did not matter, since they still dominated the more profitable large & luxury car markets — let the Japanese have the low profit small car market. What those US executives ignored was that a Japanese auto manufacturer which could make a small car profitably would eventually be able to make large luxury cars — and take that market too

    I assert this is the same error made by Apple.

    By locking in only on the big-payout Mac boxes, they locked themselves into high profits (good in the short term) on a shrinking market share (deadly in the long term).

    The larger car market inevitably shrunk as the price of gas climbed, and also as the cultural traits that led to routine changeout of car models with the ever-increasing safety-based car prices.

    Equally significantly, the foreign car market (just to include the Germans, and, nowadays, the Koreans), gained the cachet of reliability even as the American car market lost it.

    Contrast the impression of American cars in the 80s-90s to someone in Japan:

    “It’s as big as two rooms, needs a fuel station every kilometer, costs a lot
    of money, and you had better watch your rearview mirror because you may see
    the fender falling off.”
    – The Japanese impression of American cars, according to J.E. Steinhagan,
    a GM Japan executive. –

  27. There’s no shortage of examples of business (or governmental) myopia, nor any danger that there will be; most we’ll never hear about. Donald Rumsfeld was ridiculed for saying it somewhat differently but “you don’t know what you don’t know” is true.

    There does seem to be a large surplus, however, of business “leaders” who are unable to differentiate between reasonable business risk and betting the rent money on the ponies. That they have neither experience in nor any idea how to evaluate, manage and contain such risks is certainly a contributing factor.

  28. A lot of companies failed to make the turn because they were scared of cannabalizing their existing business with the new one. You mentioned Sears. Sears was perfectly positioned to be Amazon. They had already been Amazon for 100 years.

    They were even better positioned than Amazon since they could have leveraged their stores for pickup.

    But if they had moved to a web based instead of mail based system, like Amazon, they were worried that it would cannabalize their store and mail business.

    You did not mention Blockbuster or Craigslist but two other similar examples. Netfilix tried to sell their DVD by mail business to them early on at some really low price. Blockbuster was not interested as they worried, rightly, that it would cut into store sales.

    Newspapers used to get some large portion of their revenues from classified advertising. Craig Newmark started Craigslist at a kitchen table. He tried to sell it to the San Francisco paper (Chronicle?) for something like $50,000. They were not interested, worried that it would kill their advertising business.

    Sears is now out of business and newspapers are really struggling with the loss of classifieds which brought revenue and readers.

    Anyone remember Montgomery Wards? Pretty much another, slightly smaller, Sears. It just occurred to me that maybe they, rather than Sears, should have become Amazon. They were going down the dumper anyway, what did they have to lose?

    By not cannabalizing their own business they allowed others to do it for them and gained nothing.

    It was less about canabalization but many of the others you mentioned simply got comfortable. “We know what we are doing, why try something new?” Our auto industry “Americans don’t want small cars and we can’t make any money on them.” “Quality? Screw the customer. They’ll take it and like it. What else are they gonna do, buy those Japanese cars?”

  29. 2 Honda stories:

    After WWII, Sochira Honda was building motorized bicycles in a burnt out building. More like putting motors on bicycles than building from scratch. He wanted to expand into building small motorcycles/mopeds.

    I have read that he tried to sell a 50% stake in his company for $5,000 but nobody would take him up on it.

    In the 80s, what I was working for a pharma company here, we had an environmental consultant named Candido. He had worked for Bacardi in Cuba. When Bacardi started moving out of Cuba in the mid-50s he came to PR to help build the big Bacardi plant in Cataño, across from San Juan (Do the tour if you are even in PR.) He eventually retired which is how he wound up consulting for us.

    He told me how, in 1960, his Cousin Geronimo Esteves showed up on his doorstep with the clothes he stood up in. Slept on Candido’s couch for a while. Couldn’t find a job because he was not yet legal so he started servicing coin operated pool tables, eventually buying some and becoming, still (I think) the pool table king of PR.

    One day he came to Candido and said he had an offer to get the Honda franchise for Puerto Rico. This was before anyone had ever heard of Honda here or in the US. They mainly made 50 and 90cc cycles at the time. He wanted Candido to quit Bacardi and come in with him, 50/50 partners.

    Candido thought it would be nuts to leave his good job at Bacardi and declined. I heard the story a number of times, always ending with “How stupid I was. I just didn’t see it.”

    Geronimo Esteves owns the master Honda Franchise for Puerto Rico, Santo Domingo, and parts of South America. Not just motorcycles but cars, boats and everything else.

    In addition to pool tables and a big business selling refrigerated display cases. I think he even had a factory making those for a while.

  30. One of the best business movies ever made, IMHO, is Other People’s Money starring Danny DeVito and Gregory Peck. Dan Devito “Larry the Liquidator” is trying to take over Peck’s company. Lots of BS for drama sake and because Hollywood doesn’t know any better but still excellent as these movies go.

    Best part of the movie is DeVito’s speech to the stockholders. About 4 minutes, you can see it here. https://youtu.be/62kxPyNZF3Q I think everyone should watch this at least once a year.

    “We’re dead already, we’re just not broke. And you know the surest way to go broke? Keep getting an increasing share of a shrinking market.”

  31. Apple killed it computer business by acting like SCO, which was just puzzling to many of us.

    When they boosted the FreeBSD kernel for their OSX roll out, everyone who actually used computers just fell about the place laughing. They did mange to sell a fair number to the “just works” crowd. That did not go far though, compared to computer sales in general..

    They don’t care anymore, they have the silly phone. The chips, well the first one was interesting, but the second one is not really. No world beating magic at all. ;)

  32. Toyoda Automatic Loom Works made the turn pretty well. In 1937 they launched Toyota Motors. Lots of copying from Ford Motor Co with manufacturing methods and techniques. What became the famous Toyota Production System was already 25 years old at Ford when they started.

    Toyoda is still big in the textile business with high speed automated looms.

  33. What became the famous Toyota Production System was already 25 years old at Ford when they started.

    Which Ford forgot during and after WWII. The movie “Ford vs Ferrari” told a fraction of the story.

  34. In re: Xerox – yes plenty of opportunities lost by the innovating things developed at PARC. One of the best examples is the GUI and mouse – Steve Jobs and Bill Gates noted it though.

    I have a good friend who is a self-taught programmer – and in the “early days” worked for Xerox writing code for one of their microprocessor-run large printers.

    He asked them if they wanted to develop a PC and they weren’t interested.

    For those who may have forgotten they did make large printers for mainframes and I think they even jumped into the fray for IBM 370 clones (must have been a dozen manufacturers at one time making alternatives to the System 370 (but they ran on IBMs OS)

    Sorta like Steve Wozniak trying to convince HP.

    And truth be told, when the earliest examples came out people were trying to justify a use for them.

    The old joke was as follows:

    “What am I supposed to do with it?”

    “You can store recipes”

    “I can store them in a box, too!”

    On the computer, someone said something about them that I never forgot. That is is the only machine designed by Man for which there is no explicit purpose – the user decides the purpose.

  35. We should not forget An Wang who developed Wang Computers. A refugee from Mao, he came to Harvard in the 40s and invented something important with hard drives.

    Then he founded Wang computers which was going to change the world with Word Processors. We had them at Alcon in the late 70s early 80s and they were amazing.

    We also had another piece of hardware to do spreadsheets since the Wang only did word processing and a big piece of IBM iron for most everything else. Plus a fire and security system, a climate control system and some others. None of which talked to each other.

    In 1983 Wang came to Puerto Rico. In Juncos they built a 300,000 square foot factory. Biggest single industrial building in PR at the time. A year or two later the IBM-PC came out which would do word processing and a lot more. Wang went out of business a few years later and Amgen bought the facility. I don’t think Wang ever used more than 40-50,000 square feet of it.

    Amgen basically digested the building in a million, or more, square foot campus making some very high end sterile pharmaceuticals.

    If Wang had been able to make a high end PC that could do more than Word processing, they might still be around today.

  36. The story about Wang and the end of his word processors reminds us of a key element in Resilience & Renewal — Whether or not a particular business plan works depends a whole lot on what other people do.

    Nokia made a great transition from a little Finnish paper company into a world-leading cell phone manufacturer — an astonishing example of Renewal. But they were caught flat-footed when Apple marketed the smart phone.

    That is part of what makes this whole topic look like a random walk into the future — decision-makers do not know what other competitors might do. And so what looks from the inside of one company as a rational decision may later look from the outside as really dumb.

  37. One factor in Wang’s failure: the founder’s decision to appoint his son, Fred, as CEO.

    They might have failed anyhow….transition from a world in which word processors were a (rather expensive) stand-along product to a world in which they are just another application on a multipurpose personal computer was a pretty hard strategic challenge. But the Fred appointment surely didn’t help their chances.

    ‘Riding the Runaway Horse’, by Charles Kenney, is a well-written history of Wang’s rise and decline.

  38. I was at Dartmouth in 1995, just about the point when things began to change quickly. I had an IBM PC but Dartmouth was an all Apple place. I learned a lot there. First time I think I used email, which they called Blitzmail. That was the start of Amazon. When it occurred to me that Sears should be adopting online buying. I think Bezos even said something about how Sears could have had the whole business. My college scholarship was funded by Sears people. David Brooker was the one who interviewed me for the scholarship. They arranged for me to do the “management trainee” program part time while I was in college. I saw a lot of the insides of Sears. Afterward I worked for Douglas Aircraft on an IBM 650. Even I could see what Sears needed but I had decided on medical school by then.

  39. When digital camera makers came along, they kicked Kodak to the side. Apparently, Kodak had been investigating digital photography, but decided against investing in it — probably because of what John Henry mentioned: “A lot of companies failed to make the turn because they were scared of cannabalizing their existing business with the new one.”

    But Kodak’s executives had no control over what other companies would do. The fear of cannibalizing one’s existing business simply leaves the new business open to others.

    So then we had digital camera makers on a roll — until smart phone makers decided to put camera functions into the phone. This brings us to one of those roads not taken. Presumably, digital camera makers could have beaten the smart phone makers to the punch by adding phone functions to their cameras. It is interesting as to why the camera makers did not take that road. Almost as if the smart phone makers were thinking “We make communication devices — all kinds of communication”, whereas the camera makers were thinking “We make cameras”. Perhaps imagination has a lot to do with Resilience & Renewal?

  40. Kodak stopped being a serious player in cameras around 1900, by the time digital came around, they were essentially a chemical company totally dependent on Germans and then Japan to build the cameras that exploited the capabilities of their films. They still made good money out of the box cameras for people that weren’t about to spend the sort of money that a good camera cost but not even close to the cutting edge. It’s not particularly surprising that they died with the film business.

    Assume for a minute that Xerox had started a crash program to build a PC based on the PARC work the moment that Jobs walked out the door. Given the prevailing prices, it probably would have cost 15-20K. Unless they also developed something to run on it, why would anyone buy it when most others were 2-3K? It would have left a crater visible from orbit. Xerox would have exited, stage right, several million poorer and that would have been the end of it. Apple didn’t have an alternative, the Apple II was on the way out, they had to make it work, or else. Timing is everything.

  41. Fuji generated the Kodak “what could have been” story. Like Koday, Fuji had an established and substantial film business. But while Kodak clung to its film line and eschewed digital (even though it was an early leader in digital camera technology), Fuji made the pivot and now has a thriving digital camera business.

  42. I was curious about Fuji so I took a look. Except for some Polaroid clone toys, nothing less than $1,000 and most quite a bit higher. So no longer in the consumer space. Considering how good phones are, that may be a smart bet but a still very competitive space.

  43. Still does not address the issue — Why did Fuji not add phone functionality to their cameras and tie up the market before cell phone makers could add camera functionality to their phones?

  44. Remember the conventional wisdom when the iPhone came out was that it was a stupid idea. And for years their cameras were trash. So why would a camera maker think it’d make sense to try to add a phone to their high quality camera to try to match that?

  45. Brian…”Remember the conventional wisdom when the iPhone came out was that it was a stupid idea.”

    One of those who thought it was a stupid idea was the then-CEO of Microsoft.

  46. Fuji still makes film in large quantities. Just not photo film. They are a big player in packaging making film for pouches and bags.

    Very similar technology to photo film. Uniform quality substrate, precise coatings and printing

    They also make shrink films for labeling and tamper evidence. These come to the line as a tube on rolls are cut to length opened and dropped over the neck or the entire bottle. Then passed through a heat tunnel that shrinks it conformally.

    I don’t know the economics of packaging vs photo film. I’d be willing to bet that, because of much greater volume, fuji makes more on it than photo film.

    Fuji and Kodak used to make a lot of xray film. That’s all digital now too.

    Fuji used to have a huge photo/xray film plant in South Carolina. I don’t know if they still do.

    Yep. https://www.fujifilm.com/us/en/about/region/affiliates/manufacturing 500 acres, 2.5mm sq ft, 500 employees.

  47. JH…the story about photo film and packaging film reminds me of something written by the late Dr Michael Hammer, one of the relatively few business consultants / academics who actually had insightful things to day:

    “Every MBA knows the story about the company that failed because it thought of itself as being in the buggy-whip business when it should have seen itself in the transportation business. In fact this old chesnut entirely misses the point. Strategy is not primarily about markets, either the narrow market for buggy whips or the broader one for transportation. Indeed a company that made and sold whips was highly unlikely to be positioned for manufacturing automobiles. What would have enabled it to succeed in a world of internal combustion engines? The company that sold buggy whips should have asked itself what it did best, at what processes it excelled. Perhaps its real strength lay in its leather fabrication processes, or in its process of filling orders from a network of independent small manufacturers, or in its product development process. Its future was more likely to lie with leather gloves or bags than with metal chassis. What a company does is central to deciding what it is, and where and how it should compete.”

  48. “A lot of companies failed to make the turn because they were scared of cannabalizing their existing business with the new one.”

    And:

    “The company that sold buggy whips should have asked itself what it did best, at what processes it excelled. Perhaps its real strength lay in its leather fabrication processes, or in its process of filling orders from a network of independent small manufacturers, or in its product development process.”

    All of which goes to flexibility and vision as being just as important as renewal. “Staying in your lane” is not a productive activity when the road ends just over the next hill, but without forward scouts armed with maps, compasses and communications gear one wil not know that; unfortunately, in a great many cases when the scouts do exist they are ignored, or not infrequently, banished to “more productive areas of the business.”

    There is a less-than-zero chance that those “more productive areas” will be found at a competitor’s workplace.

  49. David, the US military is busy dismantling itself with the crazy CRT indoctrination. Why would any young man join an organization that risks his life if the organization tells him its not worthwhile? I spent a few years interviewing and examining military recruits. The number of black recruits was smaller than their share of the population. Some of that was due to criminal records and drugs. Now, why would a black kid even think of the military ? White kids are voting with their feet. Enlistments are down and retirements are up. Vaccine mandates have winnowed out the “white supremacists” who objected to involuntary injections that are a risk to young men.

  50. “Now, why would a black kid even think of the military ?”
    It’s still a chance to get out your nightmare neighborhood.
    My understanding has always been that there’s very distinct reasons why different groups join up. Lots more white boys sign up to defend the flag and country the way their fathers, grandfathers, etc., did. Lots more blacks, men and women, join up to get out of the hood, get a skill and some money for school, etc. The CRT changes seem more likely to crush the former but not as much the latter.

  51. Mike K….that is all true. But what I’m looking for here are historical examples of organizations that got themselves into that kind of condition…but straightened out and recovered.

  52. ” But what I’m looking for here are historical examples of organizations that got themselves into that kind of condition…but straightened out and recovered.”

    Not quite what you’re looking for but the discussion reminded me that the start of every war has found the U.S. military in a sorry state. So far, we’ve always managed to turn it around, always at great cost.

    To get back on track, I wonder if the median life span of businesses would be as long as 30 years. That we all can bring to mind no end of bad examples sort of supports that.

  53. ” that the start of every war has found the U.S. military in a sorry state. So far, we’ve always managed to turn it around, always at great cost.”
    Wait, what? Always? You sure about that? This cliche is 60 years past its sell-by date…

  54. MCS has a good point about the US military. There is an interesting book “America’s First Battles, 1766 – 1965”, edited by Heller & Stofft which makes the point that the opening battles in most US wars have been disasters for the US side. Since the US mostly ended up on the winning side, clearly changes had to be made to turn things around.

    It is not just the US. British Field Marshall Slim wrote another interesting book “Defeat Into Victory, Battling Japan in Burma & India, 1942 – 1945”, which describes the same phenomenon.

    Perhaps the message is that when people’s backs are to the wall and their lives are on the line, they are much more open to making changes.

  55. Better to lose the first and win the last than vice versa, no?
    The myth that the fact that we were historically always unprepared for war is a bad thing has been insanely destructive, and looks like a fatal mistake.
    Should have listened to Ike. He did try to warn us, but he should have been more explicit, and should never have presided over the start of entrenching the MIC…

  56. Lots more blacks, men and women, join up to get out of the hood, get a skill and some money for school, etc.

    I saw that with black women but not much with males. A few. One told me he had 17 half siblings and did not care if he ever saw one again. He had some scars of self mutilation, which would require a waiver, but I hope he got in. I did see some African males who were focused on citizenship, GI Bill and education. One was Nigerian who had a BS in Mechanical Engineering and an MS in Industrial Engineering and was joining the reserves. He was pleased when I asked him if he was an Ibo, Of course he was.

    In LA I saw lots of Chinese with families in China who were joining to get citizenship. They had very thorough security checks. Two with math degrees had to reapply because their background check had taken more than 2 years.

    I suppose we could discuss the recovery of the Military after Vietnam. The voluntary military might be killed off by the CRT stuff.

  57. MCS,

    I don’t know about the median life span is but most new businesses fail and they do it in 3-5 years. Venture capitalists build their whole business model on 15 out of 20 businesses they invest in failing and losing their investment. 2-3 break even and 1-2 are Facebooks or Amazon and profitable enough to cover all the losses and more.

    I do a lot of work with a company that buys and sells used machinery. They have a million sq foot warehouse chocked to the gills. About 10-15 years ago they started renting individual machines and entire packaging/processing lines to companies that wanted to “fail faster”.

    60-80% of all new product introductions fail in the food and packaged goods industry. Frain let’s the company rent the machine (no capital outlay) from stock (weeks instead of months delivery) as a turnkey installation.

    If the product is successful, the producer can buy the line or new equipment. If it fails, they load it on a truck and send it home to Frain.

    They have built up a hell of a business by eliminating a lot of risk of a new product.

  58. Since the US mostly ended up on the winning side, clearly changes had to be made to turn things around.

    Marshall ruthlessly pruned the ranks of incompetents. Something that does not happen now. If Generals get fired, like Carter Ham, it is for political reasons. McCrystal was also fired for political reasons. None for incompetence. There are lots of defenders on line for Obama about Ham but it doesn’t pass the smell test.

  59. Re military, I wonder how many join for medical benefits?

    I certainly never thought of it back in the day, I just didn’t want to go to Vietnam so joined the Navy. I’ve used my GI Bill to get more education than I know what to do with. A point or two off my mortgage and starting about 15 years ago all my medical treatments. Thankfully not much. I could not be happier with the service.

    I had an arrhythmia in June and they put me in the San Juan VA hospital, did a million tests with CAT scans, catheterization and more. It would probably cost me $100,000 or more in a civilian hospital. Probably multiple thousands in deductibles under my wife’s plan.

    I have not gotten the bill yet but I will be surprised if, all in, they charge me more than $500-1000. Including follow-up visits.

    I am not retired, have no service related disability. Just an ordinary guy who served and is now really benefitting from VA care. VA, medical and other benefits, is really one Hell of a deal.

    I seem to be OK. They are thinking about a bypass or stent but won’t make a decision until September. Live normally, but not strenuously in the meantime they tell me. So it does not seem too serious.

  60. Here’s a wiki excerpt about a very old company. One whose product I expect we all have purchased. The excerpt describes some morphing that followed the customer.

    “In 1891, 29-year-old William Wrigley Jr. (1861–1932) came to Chicago from Philadelphia with $32 and the idea to start a business selling Wrigley’s Scouring Soap. Wrigley offered premiums as an incentive to buy his soap, such as baking powder. Later in his career, he switched to the baking powder business, in which he began offering two packages of chewing gum for each purchase of a can of baking powder. The popular premium, chewing gum, began to seem more promising, prompting another switch in product focus. Wrigley also became the majority owner of the Chicago Cubs in 1921.”

    The steps wiki details along the way since 1891 suggest multiple wise readings of ability and of market. For the most part Wrigley “stuck to the knitting”, ie, did what they did best rather than attempt very different products. However, I wonder if mergers of the last several decades will couple with non Wrigley family CEOs leading into different enterprises to bring corporate disaster.

  61. JH….”60-80% of all new product introductions fail in the food and packaged goods industry. Frain let’s the company rent the machine (no capital outlay) from stock (weeks instead of months delivery) as a turnkey installation.”

    Very interesting. Carrying it a step further, I guess someone could set up as a contract manufacturer with a wide range of equipment on-site, and thereby make the initial runs of a new product without having to ship the equipment anywhere, just moving it around locally.

  62. “I am not retired, have no service related disability. Just an ordinary guy who served and is now really benefitting from VA care. VA, medical and other benefits, is really one Hell of a deal.”

    Really good, almost as good as a Canadian. As a low income person, I am not poor, I pay basically nothing and get some great breaks on my medicine.

    This makes desperation over medical issues in Canada a very rare thing, promoting social cohesion and reducing crime.

  63. We lost Korsa today. The female commander of the DPR’s Grad delivery services, and serious fighter in the DPR since 2014. Respect.

  64. Canada Cycle & Motor Co. Ltd. Formed from four failing bicycle companies in 1899. By 1905, the bicycle market was saturated, so they started making hockey skate blades from scrap steel. Today and for many years, the world’s premier brand of hockey gear.

  65. Sony was literally a pile of rubble in 1945, and it came back and became a world leader by making small, cheap transistor radios.

    Good to Great by Jim Collins is a series of case studies of companies Hey that had either stagnated or were in actual decline, and which recovered and took off. Precisely the question of this post. If you’re not familiar with that book, you would like it.

  66. Checked on Amazon about “Good to Great”, published 2001. Note science-mom’s review:

    “It’s hard to know what to say about this book. People love it, and love what it says, but several of the companies profiled turned out to be cooking their books, cheating customers, etc… Wells Fargo, Sallie Mae, GE… So I’m left wondering, were these companies extraordinarily successful because of the processes and ideas presented in the book, or was their extraordinary success based on cheating.”

  67. What all the pundits touting the Welch management style at GE missed was that there were two ways to get ahead. You could perform exceptionally, that is to say lead, which was the goal. Or, you could avoid being last by sabotaging someone else, sort of like the old story about hunting bears. The present state of GE attests to the fact that the people gaming the system outnumbered the people that weren’t. This puts it exactly on par with every other “incentive” program I’ve ever been involved with. The actual incentive is to maximize individual return while minimizing individual effort. Generally the opposite of what’s intended. The canonization of Welch was a bit premature.

  68. “Sony was literally a pile of rubble in 1945, and it came back and became a world leader by making small, cheap transistor radios.”

    And now they sit on the analog masters for so many great recordings, and will only let digital copies out. Just maddening for some of us. ;)

  69. well GE went away from it’s core product, under immelt, which is the production of reliable electricity, like BP under Lord Browne, Beyond Petroleum, that’s how you end up with the TransUnion spill, which like Esso in 1969, and Exxon Valdez in 1989, led to greater dislocation (the first led to earth day, and the oil embargo, the second enabled the Gulf War,

    with Churchill,he had too more strikes against him, his favoring the Gold Standard as Chancellor of the Exchequer, and his stance on India, hence Baldwin and Chamberlain was favored in the leadership,

  70. “GE went away from it’s core product, under immelt, which is the production of reliable electricity, like BP under Lord Browne, Beyond Petroleum”….long before Immelt, GE’s business went far beyond electricity generation & distribution. The appliance and lamp businesses, of course, increased *demand* for electricity, so they benefited power generation revenue as well as their own direct revenues. The jet engine business has nothing directly to do with electrical generation, BUT the skills required to make jet engines are pretty similar to those required to make power turbines. There were also materials businesses: Welch, a chemical engineer, actually made his initial reputation at the Plastics business.

  71. well they are still in the core business groups, windmills and solar panels are an extravagance we don’t need, why was BP nor Goldman targeted by the Enron taskforce, instead of Arthur Andersen, which had a much smaller role,

    a finance professor I had in grad school had worked under welch, and it gave him a bad perspective on the company,

  72. MCS: “What all the pundits touting the Welch management style at GE missed was that there were two ways to get ahead. You could perform exceptionally, that is to say lead, which was the goal. Or, you could avoid being last by sabotaging someone else”

    There are many ways to fail. One very large European company decided to identify a group of potential high-flyers on their staff and cycle them through management positions in some of their key assets to help identify which to promote as future senior executives — not necessarily a bad idea, if the incentives were designed properly. However, what happened should have been no surprise.

    The high-flyers were smart, for sure, but they were also very focused on climbing that greasy pole. Rotate that kind of person through an 18-month management position in an important asset and what is she likely to do? Will she invest in projects that might take a couple of years to get going, and thus make her successor/competitor look good? Or will she cut costs to increase short-term profits? We can all guess what the high-flyer was likely to do.

    Result was several of that European company’s assets stagnated and were eventually sold off to astute competitor companies who put in long-term managers, invested in the business, and extracted significantly more value. One person’s mistake is another person’s opportunity.

  73. Re military, I wonder how many join for medical benefits?

    A lot of women, especially black women, join for clerk jobs and medical benefits. Very few are into combat except pilots. In Gulf War I the Navy, for the first time, had women serving on ships. Of those deployed to Iraq, 25% got pregnant and had to be returned home. They got pregnant on the ship.

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