Bill Gates recently revealed that his favourite business book is “Business Adventures,” a 1969 collection of New Yorker articles by John Brooks that illustrate the formation of the modern American corporation.
Gates says he asked Warren Buffett back in 1991 what his favourite business book was, and Buffett responded by sending his personal copy of “Business Adventures.”
Innovators need to keep innovating.
Gates writes that one of the most instructive stories in the book, especially when taken in a historical context, is the article with his favourite title, “Xerox Xerox Xerox Xerox.” Brooks chronicles how Xerox recruited researchers to develop the product that would replace the mimeograph machine and change how offices worked around the world. After the Xerox 914 hit the mass market in 1960, “xeroxing” a document soon became office parlance. Five years later, Xerox brought in $US500 million in revenue.
Don’t release a product before it’s ready.
Xerox’s initial success is important to look at, as well.
Joseph C. Wilson, the company’s founder, inherited The Haloid Photographic Company in the late ’40s. After learning of the physicist Chester Carlson’s invention of an electronic printing machine, he made an agreement with Carlson and decided that his company’s future was in finding a way to turn the experiment into an easy-to-use office tool.
Wilson took the new name of this copying process, xerography, and renamed his company Haloid Xerox in 1958, while the xerography machine was still in development.
Wilson’s board grew anxious as he insisted on the years of R&D the machine required, and Brooks explains that even the researchers weren’t convinced they could create a marketable product. Wilson could have given customers a cumbersome product, but it likely would have bombed and then later improved upon by a competitor. But $US75 million later, the Xerox 914 made Wilson and his executive team rich and Xerox a household name.
Corporate culture matters.
Brooks expresses fascination with Wilson’s do-gooder rhetoric, concluding that it was genuine.
Today, many companies hype their compassionate corporate cultures, but it was less common in the ’60s. Wilson believed that it was his duty to donate millions of dollars to charities and universities and to have progressive hiring policies during the civil rights movement.
Though Wilson’s unorthodox ideas initially faced pushback, it’s widely accepted today that beyond just doing good for others, corporations with a charitable mission or flexible benefits like generous leave for new parents attract motivated employees and promote employee retention. And it’s good PR, too.
Don’t let egos trump research.
Another one of Gates’ favourite case studies in “Business Adventures” is the story of the Ford Edsel, which remains one of the most disastrous product launches in corporate history.
Ford’s executives decided that they would use research to develop the perfect car for middle-class Americans. Its designers and marketers spent two years gathering suggestions from the public and testing ideas on focus groups. But after all that research, Ford’s executives did what they wanted.
They also tried to please everyone instead of focusing the brand. Ford debuted the Edsel in 1957 in 18 variations, none of which seemed to target a particular audience.
As for the name, the chairman of the board decided at the last minute that the car would be named after Henry Ford’s son Edsel, dismissing the list of names that took endless hours to compile.
Don’t put yourself in a situation you can’t get out of.
Before the car was finished or even named, Ford began promoting teasers for the “E-Car,” which promised to revolutionise the automobile industry. Brooks says that the executives never even considered failure an option, creating an entire Edsel division and signing distribution contracts with dealerships before the vehicle was completed.
The stock market took a nose dive in the summer of 1957, and people stopped buying mid-priced cars. The Edsel was set to launch in 1957. Had Ford’s leadership acted more cautiously and avoided betting so much on the Edsel, they likely would have been able to avoid losing $US350 million.
If you fail, accept it, learn from it, and move on.
Despite the countless mistakes that Ford’s leadership made with the Edsel, Brooks found that no one would take responsibility for the failure and felt they had done everything right.
Edsel marketing manager J.C. Doyle even tells Brooks, “People weren’t in the mood for the Edsel… What they’d been buying for several years encouraged the industry to build exactly this kind of car. We gave it to them, and they wouldn’t take it. Well, they shouldn’t have acted like that.”
Managers must communicate clearly with their employees.
Brooks also tells the story of the 1961 price-fixing scandal among 29 electric companies. He looks particularly at the biggest party involved, General Electric, where employees worked on their own to profit from their illegal actions. So many people were lying or withholding the truth from each other that Brooks says it was “a breakdown in intramural communication so drastic as to make the building of the Tower of Babel seem a triumph of organizational rapport.”
Brooks writes that even after researching the case thoroughly, he couldn’t tell if the higher-ups were responsible or at least aware of the price fixing because GE had a culture where nobody seemed to communicate with each other. Multiple employees even testified that their bosses would often say things with a wink, making it difficult to ascertain if what they just said was what they actually meant.
Credit: Business Insider