We examine the present in light of the past
so as to better understand the future.
John Maynard Keynes

* With apologies to Karl von Clausewitz

Creosote Companies or Why Greed Really Isnít Good

Here’s an idea that will annoy a few people: the word ‘winning’ has no place in the world of business.

That doesn’t seem right, does it? People talk about ‘winning’ all the time. We hear of people ‘beating’ the competition, growing faster than the rest of the sector, securing a larger chunk of market share, being bigger than all the rest, as if ‘bigger’ was somehow automatically analogous with ‘better’. Comparisons of business with sport and warfare, two activities where beating the competition is very much one of the primary objectives, are commonplace. Best-selling books like Playing to Win by Procter and Gamble chairman A.J. Lafley reflect the popularity of this idea.

The idea that the purpose of business is winning is now so widespread that it is practically a part of popular culture. Look at the popularity of The Apprentice, a television show in which people succeed in business by beating their rivals, in effect clambering over their bodies in order to get to the top.

But as I describe in Managing for Success (out 23rd April) this idea is wrong, and dangerously wrong. When companies start to concentrate on winning, on beating their rivals, on becoming the biggest in their sector, they take their eye off the ball. Size, growth, market share all start becoming targets to beat. They become the end game, the purpose for which the business exists. What then develops is a culture of greed, in which companies see expansion and growth as their raison d’etre. Strategy is developed around the idea of growth, bonuses are awarded for achieving growth. These companies become like the Monty Python character Mr Creosote, devouring everything around them.

Royal Ahold, the Dutch supermarket group, wanted to become the largest food retailer in the world. Nortel, the Canadian telecoms company, cherished similar ambitions to dominate its sector. Swiss national airline Swissair dreamed of rising to compete with the global players. All three grew spectacularly, and all three collapsed, destroying hundreds of millions in shareholder value and thousands of jobs. These were Creosote companies, that grew until they exploded (or imploded). These examples are not the only ones, they are just the high-profile cases that made the news.

Every day, somewhere a business goes to the wall because its managers forgot the real reason why they are in business. As Peter Drucker said, the only valid purpose of a business is the creation and retention of customers. Customer service and customer satisfaction are the real end game. If we pursue those successfully, then profit and growth will follow automatically. If we fail to do so, then growth is an illusion that will soon shatter.

It’s not about growth. It’s about service.

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Adi Gaskell commented on
Management Consultancy
5/12/2015

Pradee commented on
Oh, no, not another book on management!
27/3/2015

Laurie commented on
Another one bites the dust - reflecting on my new book on management failures
12/12/2014