In 1982, Harper & Row published In Search of Excellence: Lessons from America's Best-Run Companies by Thomas J. Peters and Robert H. Waterman, Jr. In Search of Excellence quickly became a seminal work in the category of business management books and made its authors millionaires. Although it's no longer the literary obsession of freshly minted MBAs that it was in the 1980s, the book's distribution and influence have proved long lasting and pervasive. After its introduction, the book stayed on best-seller lists for almost 4 years and sold more than 3 million copies. A survey by WorldCat, an electronic catalog of materials from libraries in the United States and other countries, ranks In Search of Excellence as being on more library shelves than any other book in the world. With 3,971 libraries listing it as being in their collections, the book tops the list of 100 books held by libraries. It has held the number-one position since 1989.
In Search of Excellence, when it first came out, applied soothing balm to the raw nerves of the American psyche, and this helps account for its tremendous success. The 1970s had been a gloomy time for U.S. businesses. The Japanese had run American companies out of consumer electronics; Japanese cars lasted 100,000 miles, while American cars started breaking down at 20,000; and as the 1980s began, Japanese companies had just started making memory chips more cheaply than their American counterparts. The Japanese even announced they were starting a "Fifth Generation" project to build software that would make computers very, very smart indeed, leaving the poor old United States with software systems that would be the technological equivalent of Studebakers. (The project was a complete bust, like all the others emanating from the artificial intelligence hype machine of the 1980s, and it never developed much more than software capable of storing some nice recipes for sushi.) Yes, the United States was doing OK in this new market for little machines called "microcomputers," but the pundits universally agreed that eventually the Japanese were going to move into that industry as well and that would be it for the Americans.1 Maybe
1 In fact, the Japanese did introduce a plethora of CP/M and MS-DOS "clones." Like many other companies, the Japanese firms failed to understand the impact of the IBM standard on the industry, and none of the machines made a significant impact on the market. In Japan, NEC and Fujitsu attempted to establish independent hardware standards, but their efforts were eventually overwhelmed by IBM's PC standard. The most important long-term impact the Japanese had on computing technology was Sony's successful introduction of a standard for 3-inch floppies.
IBM would survive; after all, it did business like the Japanese anyway. For the ambitious young MBA, a start-up position in agribusiness, such as sheepherding, began to look like the fast track to the top.
In Search of Excellence helped buck everyone up. All the companies it profiled were American firms competing successfully in world markets. It seemed obvious that if you studied the organizations closely, learned the fundamental practices and techniques they used to achieve excellence, and then applied those practices and techniques to your business, it would become excellent too!
The basic thesis of In Search of Excellence isn't complex and can be summed up succinctly: Excellent companies create corporate cultures in which success flourishes. (Yes, this is something of a tautology, but it's a nice one and people always like reading it.) An excellent corporate culture is one that loves the customer, loves its employees, loves the company's products, and loves loving the company. Once enough love is flowing through the corporate veins, a company will organically become excellent and in turn create excellent products and services. This will lead to more customer, employee, product, and corporate love, lifting all concerned to even greater heights of selling and purchasing ecstasy. The cycle becomes self-sustaining, and a universe of almost sybaritic business success awaits those who master the Zen of Excellence.
Most of In Search of Excellence thus functions as the corporate equivalent of the Kama Sutra, profiling different companies as they bend and twist themselves into different postures and techniques designed to build customer desire for the company, increase customer love for the company's products, and provide lasting satisfaction with the company's service. The positions and techniques discussed vary widely and include being reliable, shooting for 100 percent, communicating intensely, being creative, talking about it, talking about it a lot, listening a lot, getting on with it, and so on. High-tech firms are particularly well represented in the book, with IBM, Xerox, DEC, and many others serving as exemplars of how to seize the business world by the tail via the practice of excellence.
For the next several years, copies of In Search of Excellence flew off bookstore shelves. Thousands of companies, including most in the hightech sectors, took its maxims to heart. People walked, talked, and communicated with incredible intensity. Peters became a widely sought-after speaker and business consultant (Waterman dropped out of public sight). He wrote more books, including A Passion for Excellence and The Pursuit of WOW!, all of which continued the earlier book's quest for that ineffable corporate phlogiston that when ignited leads inexorably to success. America's affair with excellence appeared to be endless.
Unfortunately, while U.S. businesses were vigorously applying excellence to every nook and cranny of their corporate bodies, a few people began to note that many of the firms listed in Peters and Waterman's tome seemed to be, well, less than excellent. As early as 1984, Business Week published a cover story entitled "Oops!" that debunked some of the book's claims. Most people dismissed these early criticisms as journalistic carping, but over time it became more difficult to ignore that something was very wrong with the book's concept of business excellence.
Take, for example, its examination of Lanier, a major competitor in what is now a vanished world—that of dedicated word processors. The market for these single-purpose computers had been built and defined by Wang. As the market grew, companies such as Lanier, Xerox, IBM, and almost a hundred others competed fiercely for the privilege of selling $20,000.00 boxes that did what a $99.95 piece of software does today (actually, the software does much more). These dedicated devices were often the only experience many people had with computers throughout much of the 1970s, and to many people word-processing stations epitomized "high tech."
In Search of Excellence thought Lanier was really excellent, a company that "lives, sleeps, eats, and breathes customers." The book described how the company's top executives went on sales calls once a month, how the president of the company personally handled service calls (and if you believed that, you probably also went out and bought a famous bridge in New York City), how its service was even better than IBM's, and so forth, and so on.
And Lanier was a sharp marketing bunch, too! The company knew that the term "word processor" put everybody "off." That's why Lanier called its word processors "No Problem Typewriters." Sheer advertising genius.
The only problem with all of this was that Lanier wasn't an excellent company; it was a dead company, a shot-through-the-head dinosaur whose sluggish nervous system hadn't yet gotten round to telling the rest of its body to lie down and die. In 1981, an Apple II+ running AppleWriter or ScreenWriter2 did everything a Lanier word processor
2 An early attempt at a true What You See Is What You Get (WYSIWYG) word processor. The product displayed your text on a bitmapped screen and could show italicized and underlined text. On a 1MHz Apple II it also ran veery slooowly.
did, never mind an IBM PC with WordStar. By 1985, the market for dedicated word processing was as extinct as the Tyrannosaurus Rex, but Peters and Waterman seemed not to have noticed they were profiling a walking corpse.
Now, you can argue that market shifts can catch companies unaware and that Lanier was a victim of the unexpected. This, however, can't be true. In Search of Excellence was written in 1981 and published in 1982. By 1981, thousands of Apples, RadioShack TRS-80s,3 Commodore PETs, and a wide variety of CP/M systems were selling monthly. The IBM PC was also launched that year. WordStar, AppleWriter, and Scripsit (popular on the RadioShack systems) had been available for years. Hundreds of ComputerLand stores, one of the first national franchises dedicated to selling desktop computer systems, were doing business nationwide, and dozens more were opening on a monthly basis. Yet somehow Lanier, the company that apparently did everything but have sexual relations with its customers, never found out from a single one of them that they were interested in buying an IBM PC or an Apple with a good word-processing program that did everything a Lanier word processor did at a fraction of the cost and did other things as well, such as run a nifty type of new program called a "spreadsheet." You would think an excellent company would have caught on much sooner.
It only became worse as time passed and people kept track of the book's list of "excellent performers," particularly the high-tech ones. For instance, Data General: gone into oblivion.4 Wang: moribund by 1987. DEC: PC roadkill. NCR: a mediocre performer bought up by AT&T that passed into extinction without leaving a trace. Texas Instruments: the
3 The first computer I ever owned was a used RadioShack TRS-80 Model I, semi-affectionately known by its owners as "Trash One." The reliability of early models was less than stellar, and the paint tended to rub off their keyboards, leading older systems to develop a rather decrepit appearance.
4 Data General made its own contribution to stupidity with the introduction of the Data General-One in 1985. This was the first "clamshell" portable and, in terms of weight and functionality, a breakthrough. A fully loaded system cost about $3,000.00, weighed about
12 pounds, supported up to 512KB of RAM, could hold two 3.5-inch double-sided 700KB floppies, and featured an LCD screen capable of displaying a full 80X25 lines of text, an unusual feature for a portable in that era. It also had enough battery life to allow you to get some work done from your airplane seat. Unfortunately, the LCD screen also sported a surface so shiny and reflective you could literally comb your hair in it, making it almost impossible to view the screen for everyday computing chores. No one could ever quite figure out what had possessed Data General to release a system that basically functioned as a $3,000.00 personal grooming system. I still own one of these systems and once tried to sell it at a garage sale for $25.00. I am happy to discover they're currently worth about $500.00 in the collectibles market.
company that coinvented the microprocessor saw its TI99/4A tossed out of the computer market by 1984. IBM: In 10 years it went from an American icon to an American tragedy.
Xerox, on the ropes by the late 1990s, was on the book's list of hero companies. By the mid-1980s, industry mavens were already puzzling over how a company could develop the graphical user interface (GUI), mouse, object-oriented programming, and Ethernet and fail to make a single successful product from any of these groundbreaking innovations. Instead, Xerox made its inaugural debut into the PC market with an obsolete-before-its-release clunker of an 8-bit CP/M machine with the appetizing name of "Worm" that sold just about as well as you would expect.
Atari, for God's sake, even made it to the book's Hall of Excellence. In 1983, the year after In Search of Excellence's publication, the company was close to death after releasing the worst computer game of all time, E.T. (based on the movie). Before its product hit the store shelves, an "excellent" company would have used the plastic cartridges that contained this all-time turkey to club to death the parties responsible for producing the game that ruined the Christmas of 1982 for thousands of fresh-faced video game junkies.5
It wasn't simply the companies profiled in In Search of Excellence that proved to be disappointments. During the 1980s, it was impossible, especially in high tech, to escape the training seminars, book extracts, and corporate programs that sprang up dedicated to ensuring everyone was excellent all the time and every day. Yet, despite all the talking, walking, and communicating, high-tech firms kept doing stupid things. Again and again and again. And every time they did they paid a price. Again and again and again.
One key to the problem may be that in 2002, Peters announced the data used to "objectively" measure the performance of the companies profiled in the book was faked. Oops. Well, remember, excellence means never having to say you're sorry.
5 It has been my privilege to meet the person who holds the world record for getting the highest score ever achieved on this game, a young man who worked for me in the late 1990s. (The E.T. game and original Atari 2600 game system are somewhat collectible and still used by those interested in retro gaming. If you want to experience the horror that was E.T., you can download the game and a 2600 emulator for your PC from various Internet sites.) I won't reveal the name of this stalwart gamer because my revelation might permanently damage his career. When I knew him, he suffered from insomnia, and after playing many hours of E.T., I can understand why.
But despite this little faux pas, a more important answer lies in the types of companies analyzed in In Search of Excellence. With only a few exceptions, they were large firms with dominant positions in markets that were senescent or static. IBM ruled the world of mainframe computers. DEC and Data General had carved out comfortable fiefdoms in minicomputers. Xerox reigned over copiers. Wang and Lanier both possessed principalities in dedicated word processing.
In these types of business environments, affairs proceed at a measured pace and plenty of time is available for navel gazing. Their vision clouded by all that lint, companies such as IBM and DEC decided it was their natural goodness that made them successful, and therefore they were successful because they were naturally good. By the time Peters and Waterman got around to interviewing them, most of these firms were ossifying, their internal cultures attempting to cement employee mindsets and processes in place in a futile attempt to freeze the past so as to guarantee the future. These firms weren't excellent; they were arthritic.
For high-tech companies, navel gazing is a particularly inappropriate strategy because markets tend not to stay stable very long. In 1981, for example, distinct markets for spreadsheets, word processors, databases, and business presentation products existed in the software industry. By the late 1980s, word processing alone was a $1 billion category. By 1995, all of these categories had been subsumed by the office suite (particularly Microsoft's).
What, therefore, accounted for the success of companies such as Microsoft, Oracle, and Symantec and the failure of other firms such as Novell, MicroPro, and Ashton-Tate? Was it Microsoft's "respect for the individual," something In Search ofExcellence told us IBM had in abundance? Well, Bill Gates once stood up at the start of a presentation being given by a new product manager, fixed the unfortunate fellow with a cold stare, and asked, "Where the fuck did we hire you from?" before leaving the room.
Perhaps it was a "seemingly unjustifiable overcommitment to some form of quality, reliability, or service"? IBM had that in abundance also. Well, Dell is currently the reigning king of PC hardware, not IBM. Although Dell's service is OK, the company isn't "unjustifiable" about it. Oh, Dell pays lip service to the concept of great customer service, and within the constraints of its business model, it does the best it can. If you don't like your PC, Dell will probably take it back if you're within the warranty period and you scream loudly enough and pay for the shipping and maybe fork over a restocking fee if you're a small business. If your PC breaks, the company will do its best to get you to fix the thing. But Michael Dell, unlike the excellent CEO of Lanier, won't be calling your house to handle affairs personally.
That's because Dell has figured out that what people really care about these days in a computer is high performance at a low price. Dell has learned over the years to build such machines. IBM didn't and ended up exiting the PC business in 2005 muttering about "commodization" and "focusing on core competencies" while Dell grew its revenues that same year to almost $50 billion on sales of servers, notebooks, desktop systems, printers, and related items. Computers are very reliable and on a statistical basis don't break down often. If the ones made by your company do, it is possible to sell a great many of them if you price them cheaply enough, as in the case of Packard Bell, a company that briefly became a powerhouse in PC retailing. Alas, the machines were of poor quality, they broke often, and few people ever bought a second Packard Bell computer.
On the other hand, Dell computers rarely break (though they have been known to erupt in flames).6 You, the customer, know that. You're willing to buy a Dell PC because you've made a bet in your mind that the risk that the computer you buy won't work isn't worth the extra money it would cost to have your fanny kissed in the event of a breakdown. People who buy desktop PCs aren't a high-roller audience, and it makes no sense to treat them like one.
Let's move on.
6 In June 2006 at a seminar in Osaka, Japan, a Dell laptop was photographed burning up because of a defective cell in its lithium ion battery. The pictures were quickly distributed worldwide throughout the Internet. The story was particularly embarrassing because Dell had over the past year cut back its not-very-world-class support to levels that invoked the ghost of Packard Bell, proving once again that today's high-tech hero is only one stupid decision away from becoming tomorrow's computing clown. To its credit, Dell immediately announced it was spending $100 million extra in customer support, presumably so it would no longer have to hire so many Indian workers who announce in impenetrable accents that their name is "Ralph" instead of "Ramesh" and ask you to do things like "please to remove the solid drive to check to the connection orifice for proper adherence" (an actual quote I transcribed during a Dell tech support call). At least Dell customers hoped so.
Or perhaps it was "autonomy and entrepreneurship"? Motorola, a company with a history of allowing different autonomous groups within its phone division to tear at each other's throats while firms like Nokia tore away its market share, surely has that in abundance. In the entrepreneurial spirit of "up and at 'em," these groups managed to build what was perhaps the coolest-looking cell phone of its time, the StarTAC. The only problem with the StarTAC was that when it was first introduced it was a very cool analog system when everyone wanted digital phones.
And it was certainly entrepreneurship that led Motorola to launch its Iridium project. Motorola spent $5 billion plus to put 66 low-earth satellites into orbit so that anyone could phone anytime from anywhere with a Motorola phone. Unfortunately, the satellites spend 70 percent of their time over our planet's oceans and aren't usable for much of their life (unless perhaps you're adrift in the middle of the Atlantic); the phones, though they may have worked from the top of Mount Everest, didn't work indoors, in the shadows of buildings, or under trees (early demos of the system enjoined purchasers to "make sure the phone is pointed at the satellite"7); the service's monthly cost was high; the phones were huge; and every major metropolitan area already had cheap and reliable cellular systems. In other words, Iridium had no market. After the last satellite was launched, the system quickly went bankrupt.8 Despondent Motorola stockholders, watching the value of their shares plummet as Iridium crashed and burned, suggested sending up the project's marketing and engineering teams in rockets without space suits to join their orbiting financial debacle, but current law forbids this. You would think an excellent company with entrepreneurial instincts would notice that 70 percent of Earth's surface is water.
Uh huh. Maybe that isn't it.
In fact, if you examine high-tech companies, only one factor seems to constantly distinguish the failures from the successes. This factor is stupidity. More successful companies are less stupid than the opposition more of the time. As Forrest Gump astutely noted, "Stupid is as stupid does."
7 I was present at such a demo. I interrupted the demonstrator to inquire "Which one?"
8 The system was sold to a group of investors for the fire-sale price of $25 million.
One of stupidity's most endearing traits is its egalitarian nature. Its eternal dull lamp beckons endlessly to those dim bulbs who seek to rip open the hulls of successful companies and ideas on the sharp rocks of bad judgment and ignorance. With stupidity, your reach never exceeds your grasp; any company, no matter how large or small, can aspire to commit acts of skull-numbing idiocy and have a hope of success.
Take, for example, the creation of the worst piece of high-tech marketing collateral ever developed, the brainchild of the founder of a small company, Street Technologies. The front page of Street Technologies' expensive, four-color, 81/2 X 11 corporate opus posed the following challenge:
"How to eliminate half your work force."
The inside of the brochure provided the means to rise to the task:
"Get the other half to use your software!"
When it was pointed out to the president of Street Technologies that a marketing campaign designed to create mass unemployment and spark a brutal Darwinian struggle for personal survival in its target audience might not be the most effective of all possible approaches, he airily dismissed the issue with the observation that "the piece was not aimed at the employees but their bosses." He'd apparently not considered the issue of who was going to be opening the mail.
Creating silly collaterals isn't a task reserved only for high tech's small fry. The second worst piece of marketing collateral ever created was a noble effort by software giant Computer Associates. This was a brochure designed to be included in a direct marketing campaign for a bundle of OS/2 business software. The piece trumpeted the presence of a free goodie that buyers of the bundle would receive upon purchase—a package of canned sounds you could use to liven up your OS/2 desktop. Sounds highlighted in this amazing bit of literature included "farting," "pissing," and "orgasm." One can only mourn that the package didn't include the noise made when a marketing manager is summarily decapitated for committing an act of boneheaded silliness, such as developing and printing thousands of patently tasteless and offensive four-color brochures.
The reason for the absence of stupidity can vary. In some cases, firms avoid stupidity because the company's culture creates more intelligent behavior. In other cases, it's because a company's personnel is smarter than the competition's and thus avoids making stupid mistakes. In yet others, it's because a business's leadership is smarter than the competition's and thus tends not to behave stupidly. Usually, it's a varying mix of all three. In a sense, the reason for not acting stupidly doesn't matter—the avoidance of it does. By reducing the number of stupid actions you take vis-à-vis your competition, you're more likely to outcompete them over time.
Some may object that stupidity isn't quantifiable, but in fact, the opposite is true. Stupid behavior is both quantifiable and identifiable. For example, it's stupid to create two products with the same name, price point, functionality, and target audience and attempt to sell them at the same time. This may seem stunningly obvious, but somehow one of the world's largest software companies, MicroPro, publisher of WordStar, a product that once ruled the word-processing market, did precisely that. A few years later, Borland repeated very much the same mistake with very much the same results. Then Novell. After you read Chapter 3 and learn precisely why this is a stupid thing to do and what the likely outcome is, you'll be less likely to make this mistake in your own marketing and sales efforts. That puts you one up on your competition who, unless they've also read this book, are far more likely to repeat MicroPro's fatal blunder.
Nitpickers like to claim that context often changes the nature of what is stupid behavior, but this principle is vastly overstated. For instance, if you spend many millions of dollars successfully creating a consumer brand, and then, when your most important product is revealed to be defective, stupidly attempt to blow off the public (as I describe Intel attempting to do in Chapter 5), you'll suffer. It really doesn't matter what industry you're in or what product you're selling. Expect to be immolated.
Or take the example of Syncronys, publisher of the immortal, never-to-be-forgotten SoftRAM "memory doubling" utility for Windows. Introduced in May 1995 with a list price of $29.95, SoftRAM was designed to "compress" your computer's memory using your computer's memory to give you, effectively, twice the memory you had physically installed (the problem with this concept should be apparent once you think about it). SoftRAM was quite the best-seller upon its release, with the Windows 3.x version selling more than 100,000 copies and the
Windows 95 version selling more than 600,000. The company's president, Rainer Poertner, was dubbed Entrepreneur of the Year by the Software Council of Southern California. Syncronys stock jumped from $.03 per share in March 1995 to a high of $32.00 per share in August 1995.
SoftRAM was a handsome-looking piece of software that after installation presented buyers with a snazzy dashboard that supposedly let them increase their PC's RAM with the touch of a button. Unfortunately for both purchasers of SoftRAM and Syncronys, the software didn't actually do that. Actually, it didn't really do anything except change a configuration setting in Windows that increased the amount of memory that could be swapped to disk, an operation a Windows user could perform manually in less than a minute for free.
It turned out that SoftRAM was an example of what Syncronys coyly called "placeboware," the software equivalent of a deed to the Brooklyn Bridge. The concept annoyed the spoilsports at the Federal Trade Commission (FTC) greatly, who forced the company to stop selling the package and promise to give everyone their money back. (Interestingly enough, no one was prosecuted for fraud in the case, the FTC apparently having bought the argument that the difference between computer sales reps and car salespeople is that car salespeople know when they're lying.) It would seem obvious to anyone with even half an uncompressed brain that no one would ever buy a product from Syncronys again, but in an act of supreme idiocy the company actually tried to sell other software packages9 after the SoftRAM debacle. Sheer imbecility, because Syncronys promptly went out of business.
However, more than just a few trenchant examples of stupidity are needed to support a substantive examination of the subject, which brings me to the point of this book. In Search of Stupidity was written to provide you with a more comprehensive look at the topic. Within these pages are documented many of high tech's worst marketing and development programs and strategies, as brought to you by some of its most clueless executives. In my quest to bring you the best of the worst, I selected from a wide range of companies, from arrogant smaller hotshots on the path to meltdown to sluggish giants too muscle bound to get out of their own way.
9 For instance, it tried to sell a utility called "Big Disk."
In the interest of fairness, I haven't included hard-luck stories. No natural disasters, plane crashes, or tragic deaths played a part in any of the disasters discussed. All of the blunders, snafus, and screwups described in this book's pages were avoidable by the individuals and companies that made them and are avoidable by you and your company. After reading this book, you'll know what they are and you'll be in a position to act less unintelligently. For you, history won't repeat itself.
Of course, it is possible you'll make other stupid mistakes, ones not chronicled in these pages, but not to worry. If your competition is making the mistakes I describe in these pages, as well as all the others, you'll still probably prevail. Remember, the race goes not to the strong, the swift, or the more intelligent, but to the less stupid.
Besides, I'm planning a sequel.
Best of luck!
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