Seduced Once More by the Myth of Corporate Persistence

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You could hear the disappointment in my friend’s voice. “I had a lot of respect for Toyota,” she observed. More than most onlookers she knew the literature on its vaunted system of continuous process improvement. Here, she thought, most of us thought, was an enduring example of superior corporate performance. As the recall notices piled up I couldn’t help thinking, “How many more times are we going to fall for this excellent-company nonsense?”

What I call the myth of corporate persistence has an allure like a siren’s song to sailors storm-tossed on the seas of business mutability. Look to our example, sailors, for a safe harbor where you can put aside your discouragement and skepticism. This fine company offers ever-instructive lessons in how to do things right. Learn from it, be like it, and you’ll be smarter, stronger, more likely to survive the tempest.

Just don’t be surprised when, steering in the sirens’ direction, your modest corporate barque ends up on the rocks. Study after study has shown that exemplary corporate performance—as in “consistently beats market averages” or “invariably delivers on promises”—doesn’t last. Just ask Tom Peters, who five years after In Search of Excellence began another book with the sentence, “There are no excellent companies.” For his accompanying, slightly zen-koan like observation—“excellent firms of tomorrow will cherish impermanence”—tomorrow has arrived. Over the past decade the competitive advantages companies once enjoyed, often the basis of their “excellence,” have disappeared at an ever brisker clip, part of the fiercening of capitalism. Consider, for instance, poor Dell and its pride in being the low-cost competitor. Or Enron, in the 1990s everyone’s favorite paragon of corporate innovation.

Even in the face of the evidence, authors of management books and articles continue to feed our gullibility. How satisfying for the expert to buttress his point with an iron-clad real-world example of top-flight corporate behavior, one that sets every head in the audience nodding with agreement. The other evening I sat in on a presentation by an extremely distinguished authority as he made his case that companies should make serving customers their highest priority, this instead of worshipping the false god of shareholder value. His chief example of putting customers first was Johnson & Johnson and how it responded when a madman laced packages of its Tylenol with poison.

The Great Tylenol Recall occurred in 1982, in October of 1982 to be exact. That was slightly over 27 years ago by my calculation. If the distinguished authority had checked more recently he would have come across newspaper reports from mid-January of this year about how J&J’s McNeil subsidiary had angered federal regulators by taking 20 months after the first consumer complaints to decide to recall smelly batches of Tylenol and other over-the-counter medicines. A little more digging would have unearthed other assertions of less than exemplary behavior on Johnson & Johnson’s part, like a federal civil complaint alleging that two of its subsidiaries had paid kickbacks to Omnicare to stock its products in the chain’s nursing-home pharmacies.

So what’s a would-be student of best corporate practices to do? Surely there must be some value in seeking lessons from the experience of others. There is, of course, but keep in mind a few illusion-resistant guidelines as you go about the exercise.

1. Sharpen your focus onto the specific process or behavior that you want to learn from. Toyota does indeed have some terrific processes (though most may be so embedded in and dependent on its culture that they’re almost impossible for others to emulate). Study those, rather than getting lost in general admiration of the company’s reputation or “the Toyota Way,” whatever that might be.

2. Look for a sell-by date on the example you’re considering. Did the supposedly exemplary behavior occur recently enough to still be relevant? Like since the global financial crisis? Or after the dotcom crash of 2000?

3. Expect the mighty to fall, watch how they do it, and learn a cautionary lesson from that, too. Danny Miller’s 1991 book, The Icarus Paradox, lays out a still-convincing case that companies get into trouble from overplaying their strengths rather than falling prey to their weaknesses. Toyota might not have always had the flashiest designs, or the most up-to-date models for every market, but you could always count on its manufacturing excellence, right? Until you couldn’t.

If you ask a Johnson & Johnson executive what the company is particularly good at, as I have, he or she will indeed talk about concern for the customer. But in the next breath, or sometimes in the same breath, he’ll also semi-brag, “We’re really good at marketing.” And maybe a tad too aggressive about putting and keeping sales points on the board?

4. Keep checking yourself for any tendency toward hero worship. As the management sage born Robert Allen Zimmerman in Duluth, Minnesota observed, “Don’t follow leaders. Watch the parkin’ meters.” As the musical-chairs game of business speeds up, nobody gets to sit on the throne of excellence very long, whether a company or an individual executive. (Please, don’t get us started on the pernicious effects of making CEOs into celebrities.) Look for and learn from brief flashes of brilliance, and understand they’re fleeting. Along the way notice how many big shiny corporate examplemobiles may be sitting next to expired meters.

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