The story of Zenith is quite telling.  In the 1950s, Zenith was the bright star in the world as America’s #1 black and white television manufacturer.  They continued their ascent into the 1970s until the founder left the hands of the company with a septuagenarian CEO and encountered the rise of the Japanese assault.  Zenith entered a phase of denial that the Japanese could really have any serious threat to their preeminent position in the world.  As the world knows, they did.  Zenith started to enter a stage 2 to 3 expansion and denial phase that included home security systems, video recorders, and a slew of other unrelated products.

In the 1980s, the brilliant Jerry Pearlman, a cum laude graduate from Princeton and 2% top graduate of the Harvard Business School, came in to save the day.  He launched an IBM compatible computer that led Zenith to a renaissance. However, with mounting debt the company simply ran out of money.  Today, the company is not bankrupt but irrelevant with only 400 employees compared with 36,000 at its, well, zenith, a 98% reduction in size.  It is now entirely irrelevant in the market.

The lesson that Collins outlines is how do we as individuals avoid going through stage 2 through 5 in our personal and professional lives.  He closes the book with the example of Xerox under the tireless stewardship of Anne Mulcahy who brought the company from the brink of stage 4 back into an exuberant profitability.  Collins admonishes that we all must be tireless in our pursuit of our businesses (and our lives) in the good time and in the bad, as Louis Gerstner of IBM espoused in the quote cited in last Friday’s blog: “I have a sense of urgency that never changes, whether we’re doing well or we’re doing poorly…”  I hope that this short blog series that may have ostensibly strong business leanings may carry import for anyone even wanting to better himself/herself in his/her personal life as well.

HP hired the bold visionary woman Carly Fiorina from Lucent Technologies in 1999.  Shortly thereafter, Carly made it in Forbes, Fortune, and Business Week with a gaggle of stories on her womandom and her sales and business savvy.  The media simply could not get enough of Carly and Carly played the media well.  She brought sizzle, launched HP’s famed campaign “Invent” and galvanized the troops with moving things at Net Speed.  She admitted in her memoir later, Tough Choices that “I was in a hurry…”  By 2005, she was out.

Louis Gerstner was brought into a dying IBM in 1993.  Unlike Fiorina, he quietly assumed the helm of the company, refusing media exposure and working on getting the company straight.  He said, “I have a sense of urgency that never changes, whether we’re doing well or we’re doing poorly…But by no means do I think this company is in crisis.”  Gerstner focused first on getting the right people to helm the ship and delayed any notion of  a vision.  Fiorina, on the other hand, launched sweeping vision statements and campaigns.  IBM succeeded via Gerstner’s strategies. HP did not under Fiorina.

Collins states that as companies enter Stage 4 they begin to grasp for what he calls a silver bullet.  Anything that is big and bold to radically change the company without proven research or forethought.  Gerstner proved the way to get a company back to functioning is not reacting to panic but methodically reworking the engine through hiring the right team and figuring out something as elusive as vision later.

Motorola in 1985 thought that the Iridium project, which would use low arcing satellites to allow cellular phone calls in remote places, to be a worthy gamble.  After all, there were no real cellular networks to speak of in the 1980s.  By 1996, the company bet big on this technology despite the mounting evidence that cellular networks had already made the Iridium project obsolete.  In order to use an Iridium phone, you would have to travel with a brick-sized phone, only use it outdoors where you would have direct satellite access, and pay $3,000 for the handset plus $3 to 7 per minute for air time.  That may have made sense in the 1980s but with burgeoning cellular networks and rapidly dropping rates, the Iridium project was doomed before it really started.  However, it was not that Motorola came up with the idea but that it bet the house in 1996 and a year after the project officially launched the company defaulted on 1.5 billion in loans and closed the project.  Over the 1990s, Motorola had grown from 5 to 27 billion per year in revenue and was focused on doubling their continued expansion. However, they blindly did not see the obvious due to their hubris.

Texas Instruments (TI) on the other hand developed DSP technology in the 1970s in their Speak & Spell model that facilitated changing voice, etc. from analog over to a digital stream.  The continued to work that technology as a small offshoot of their larger company until in the late 1990s, they saw the true potential for their technology and the concomitant profitability of expanding that sector of the company.  The CEO actually shrunk major microchip sectors of the company to focus on expansion of the DSP market and were able to capture a lucrative Nokia bid so that today they own half of the $8 billion market share of DSP.  TI only made the gamble after 15 years of plying this technology and seeing the worthiness of expanding it rather than creating a blind gamble in the face of mounting evidence to the contrary.

Collins talks about two types of gambles:  those that sink the ship and those that do not.  When a ship has a hole blown through it above the water line, things are okay and reparable.  When the hole is blown below the waterline, the ship will rapidly sink.  When we make professional and personal choices in our life, are we making those choices above the waterline or below it?  Interesting ideas.

The example of Circuit City versus Best Buy is perhaps the best example in my opinion of stage 2 differences.  Circuit City launched new programs like Divx and Carmax that ultimately failed.  Collins argues that it was not the failed experimentation that led to Circuit City’s eventual bankruptcy but instead the failure to improve its core business, electronic sales.  Many companies try new things that fail but they continue to improve their core business model.  The opposite example is Best Buy that slowly and quietly consumed market share.  Best Buy worked through refinements of its core business, or concepts.  Concept 1 was based on a traditional commission-based sales model.  Concept 2 compelled the sales person to give the consumer as much information as possible to help consumer purchase.  Concept 3 established in room showcases that let consumers experience the technology first hand.  Concept 4 helped consumers navigate the sea of choices available to them when evaluating potential electronic purchases.  Then they added the Geek Squad that facilitated home installation and remedy of technology snafus.  They worked their core and refined the concept that led to their growth.

An owner of multiple businesses (building, salon, spa, facial plastic surgery center), I have to grow each business but keep my focus on my core business, facial cosmetic surgery. I have enough talented leaders who have helped me grow each of my other sectors but I simply must continue to push my core business and professional model that helps me sustain any downturns in my other sectors and facilitates their potential for growth.  In short, continue to focus on your core business and do not overextend yourself due to unbridled hubris.

The answer lies in Sam Walton who practiced humility and inquisitiveness and pushed those characteristics into the culture of Wal-Mart that continues to this day.  A story of some Brazilian investors who in the late 1980s were looking to learn from corporate American success is indicative of Walton’s character.  The Brazilians sent out a letter to 10 U.S. CEOS asking them for a meeting to learn from their business practices.  They only got one response: Sam Walton’s.  When Walton picked up the CEOs himself from the airport and took them to his old pickup truck, the Brazilians were wondering when they would meet Mr. Walton. To their surprise, they were already in his presence.  When Walton was cleaning up the dishes that night after dinner, he was filled with more questions for the Brazilians than dissertative lectures about his own success.  He was trying to learn anything he could from the Brazilians.  In short, he wanted to learn rather than pontificate.

Walton chose his successor, David Glass, very carefully.  The fact that you don’t know David Glass is a testament to the spirit that Walton created at Wal-Mart.  Glass carried forward Walton’s vision of humility and inquisitiveness.  In juxtaposition to Walton, the CEO for Ames, Herb Gilman, put in place a brash and loud outsider that pushed Ames hard but veered away from core values.  The lesson of Walton is a wonderful one that we all can learn from, especially me.  I have written in the past on radical humility, and I love Walton’s embodiment of that spirit.

This blog is not going to talk about his book but about the man. I read a fascinating article on Mr. Collins on the May 24, 2009 edition of the New York Times about how Collins conducts his business practices.  He spends 53% of the time being creative, 28% of the time teaching, and the remaining time of 19% he allocates toward other pursuits to get the job done.  In fact, he is relentless with his time mangement, keeping a stopwatch to make sure that he lives up to his word of how he budgets his time.  He commands a whopping $65,000 per lecture but consciously limits his speaking engagements to only 18 per year (hence I am quite fortunate to hear him talk this year).

What I got out of this article was that Collins at 51 is on a relentless pursuit of self improvement and nurturing his business through creativity, pushing away lucrative speaking engagements that compromise his vision.  Collins’ guru is the famed  Peter F. Drucker.  To quote the New York Times:  “Do you want to build ideas first and foremost?” he recalls Mr. Drucker asking him, trying to capture his mentor’s Austrian accent. “Zen you must not build a big organization, because zen you will end up managing zat organization.”  Therefore, in Jim Collins’s world, small is beautiful.

I also like Collins’ commitment to creativity, to push and to contribute to society. I really like the relentless pursuit of being better, thinking better, and ultimately contributing to society — a lesson that we all can learn.  I hope you all can learn as much as I have from Mr. Collins in the coming blogs.