Wednesday, August 8, 2007

Full Circle

One of the most important satirical novels of the 20th century was Animal Farm, by George Orwell. In this story, the animals on the farm were sick and tired of the harsh and inhumane treatment they received at the hands of humans. Finally, they took matters into their own hands started a revolution—kicking all the humans off the farm.

At first, everything after the revolution was wonderful. All the animals felt equal and appreciated. The noble cause of the revolution was put to song. To ensure that the animals on the farm would never again suffer as badly as they did under the humans, they enacted the Seven Commandments:

1) Whatever goes upon two legs is an enemy.
2) Whatever goes upon four legs, or has wings, is a friend.
3) No animal shall wear clothes.
4) No animal shall sleep in a bed.
5) No animal shall drink alcohol.
6) No animal shall kill another animal.
7) All animals are created equal.

For the animals not smart enough to remember all of the commandments, they were shortened to one chant: Four Legs Good, Two Legs Bad.

Over time, Napoleon the pig started gaining more power. The more power he gained, the crueler and more dictator-like he became. Slowly, Napoleon started changing the seven commandments in order to justify his dictatorial behavior and the fact that he was letting the pigs ignore the rules. The commandments started to read as follows:

No animal shall kill another animal without cause.
No animal shall sleep in a bed with sheets.
No animal shall drink alcohol to excess.

Over time, most of the older animals who remembered the great cause behind the revolution die off. Squealer the pig, one of the last of the original group, assumes power and continues the cruel and harsh dictatorship from the pigs which began under Napoleon. Squealer even taught himself to walk upright on two legs and began to wear clothes.

Squealer changed the chant to: Four Legs Good, Two Legs Better. Then he changed the Seven Commandments to a single commandment: All animals are created equal, but some are created more equal than others.

The pigs decided to invite the neighboring human farmers over to show off how productive the farm was (due the harsh treatment of the non-pigs). As the other animals watched the dinner proceedings through the window, they realize with horror that they can no longer tell the pigs’ faces from the human ones.

New businesses often take off and become successful because they have done something “revolutionary.” It may be a revolutionary way to deliver a product so that the price is dropped significantly below what it could be purchased for previously, like what discount stores did to department stores. It may be a revolutionary approach to service that pleases the customer far more than what they had before. It could be a revolutionary way of treating the employees, which creates unusually high morale and productivity, such as what was done at Costco. It could be a revolutionary process which produces never-before seen levels of quality.

It could also be a special way in which the company bonds with the community, going above and beyond the call of duty to give back to the local community. It could be a devotion to particular causes, like sourcing locally, being environmentally friendly, not testing on animals, and so on.

Whatever the source of the revolutionary concept, the new twist on the way things are done can often result in success. Success can change the attitude of companies.

In the Animal Farm story, the revolution started for a noble cause—to eliminate cruel treatment of animals at the hands of the humans. At first, this creates great joy among the animals, who are willing to make sacrifices for the greater good. Eventually, the noble cause is forgotten, and the pigs become just as cruel to the animals as the humans had been. In the end, the animals cannot distinguish between the humans and the pigs.

This same thing can happen when revolutionary companies get large and successful. The idealistic leader is eventually replaced with a “professional manager,” schooled in the old ways. When tough times come (and they always do), instead of sticking to the cause of the revolution, they begin to cut corners. Those unbelievably low prices start to become closer to what others charge. The revolutionary service becomes less revolutionary. Employees are treated less like partners in a revolution and more like costs which need to be contained.

Eventually, there are very few people left in the organization who remember the humble beginnings of the revolution. Now, all that the management sees is a large company.

Before you know it, the customers have a difficult time seeing differences between this formerly revolutionary company and all the old, large companies it used to be taking share away from. The pigs look just like the humans. The customers stop patronizing the company and move on to the next revolutionary company. And thus, everything has gone full circle, from revolution to normalcy to stagnation…and then the cycle begins again with another company’s revolution.

It is very difficult to keep from falling into the trap of going full circle, of losing your reason for success due to losing the spirit of the revolution. The revolution will not stay alive on its own. Natural forces will tend to push a company more towards normalcy. A company must proactively put into place mechanisms to keep the revolution alive.

Look at Apple. Apple started out as a very revolutionary company, doing things differently from others. These revolutionary differences were the driving force behind the success Apple was having. When Steve Jobs left Apple, the revolution faded, and so did the fate of Apple. Steve Jobs had to come back and start the revolution all over again. Now Apple is back to designing revolutionary products under a revolutionary philosophy and selling them in a revolutionary way. The success is back, bigger than ever.

A similar situation happened at Gateway Computer. Ted Waitt started the company in an Iowa farmhouse in 1985. His rural Midwestern culture and personality (which was not like traditional businessmen) helped to create a revolution in the computer business. Eventually, the success caused the company to become quite large. Ted felt that his style of leadership and approach to business was no longer appropriate for such a large firm.

As a result, in 1998 he moved the company from South Dakota to California, where all the other big technology companies tended to be. At around the same time, he hired a bunch of “professional managers” to run the place, people schooled in the traditional way of running large companies. In 2000, Ted Waitt completely backed away from active management and left the “professionals” in charge. Between the move to California and the professional managers, the revolution at Gateway died…and so did the prosperity of the company.

Not very long later, Ted had to call off his retirement and come back to manage the business again. He fired the professional managers and tried to resurrect the old culture via TV commercials. Unfortunately, by then it was too late. The revolution was dead and could not be brought back to life. Regarding the professional managers, Ted said, “They were really nice people, but they didn’t seem to do anything,” at least not anything in the hands-on manner that Ted was used to.

The situation at Whole Foods may soon be approaching the loss of the revolution. The recent revelation about outbursts of CEO John Mackey on internet stock message boards is forcing the board to have to reign in Mackey a bit and make the company more “professional.” The old homey, down-home natural approach to the stores is starting to be replaced with glitz and glamour. At some of the newer stores you find things like fancy restaurants, fancy day spas with personal shoppers to purchase your goods while you get a massage, fancy cooking schools, and so on. The potential loss of the revolution could lead to big trouble down the road.
This is why strong vision statements and attention to culture are such an important part of strategy. They help to keep the revolution alive—the differentiation which made the company great in the first place. This may ultimately be more important to long term success than any other part of the strategic process.

When designing a strategic planning process, it is important to proactively work to retain some of the revolutionary heritage which created the initial success. Otherwise, when the leaders and other revolutionaries retire, the revolution will die. Then you will just be another big company, and indistinguishable from everyone else. You lose your competitive edge and are replaced by the next revolutionary company.

Wal-Mart has succeeded for so long because the revolutionary culture surrounding low cost/low price started by Sam Walton has been so ingrained in the culture that the revolution has survived more than a decade after his death. Recent cracks in that success stem in part from a new culture of paranoia filtering through the company as well as a desire to be a little more upscale (walking away from the strong foundation).


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