Westinghouse versus Edison: Shocking and Revolting Competition

Here is a brief excerpt from American Entrepreneur: The Fascinating Stories of the People Who Defined Business in the United States in which Larry Schweikart and Lynne Pierson Doti examine an especially nasty competition in the 1880s between George Westinghouse (not yet 30 and already a millionaire) and the legendary Thomas Edison. Westinghouse had developed alternating current (AC) electrical systems, a superior alternative to the direct current (DC) systems then in use, used by Edison’s various devices. “Westinghouse founded Westinghouse Electric Company in 1886 to build the equipment needed to control AC, developing a system of transformers and generators…Edison’s company enthusiastically publicized accidents from AC voltage, to the point of conducting experiments in which cats were electrocuted to show its dangers. Newspapers cooperated with stories whose headlines read ‘Electric Wire Slaughter” and “Another Lineman Roasted to Death.’ After the State of New York adopted electrocution (using AC) as its means of capital punishment, Edison officials referred to it as ‘Westinghousing’ the condemned.”

Then in 1892, Westinghouse’s company won the competition to provide the lighting for the Chicago Columbian Exposition, “proving to the world the safety and efficiency of AC power. That was the break that Westinghouse needed, and contracts to provide electricity to homes and businesses flooded Westinghouse Electric.” Years later, the ailing inventor’s insatiable curiosity remained as active as ever. “He spent his last year working on an electric wheelchair.”

Foxes, Hedgehogs, and Problem-Solving

Think Twice

In Expert Political Judgment: How Good Is It? How Can We Know? published in 2005 by Princeton University Press, Philip Tetlock suggests that so-called experts tend to be either foxes (who know a little bit about a great many subjects) or hedgehogs (who know a great deal about only one subject). Tetlock asserts that “foxes” tend to make better decisions because they rely on a variety of sources and consider several different points of view whereas “hedgehogs” tend to view reality through “a single lens” and explain everything wholly in terms of what they already know.

It is worth noting that these two critters were previously discussed by Archilochus (c. 680 and 640 B.C.E.), more recently by Isaiah Berlin in his essay The Hedgehog and the Fox, and then by Jim Collins in Good to Great.

In Think Twice, Michael J. Mauboussin supports Phil Rosenzweig’s criticism in The Halo Effect of Collins and other business thinkers who write bestsellers. According to Mauboussin, “The important question is not ‘were all great hedgehogs’ but rather, ‘were all hedgehogs great?’ If the answer to the latter question is no – and it assuredly is – then dwelling on the survivors creates a bias in the analysis, leading to faulty conclusions.”

My own take on all this is, both foxes and hedgehogs first need to make certain that they are asking the right question, that they are solving the right problem. Only then can they determine what they need to know and where they can obtain the information their decision requires.

In another commentary, I will share Mauboussin’s thoughts about how to avoid or correct errors of judgment such as those associated with the “halo effect” and reversion to the mean.

“The Five Deadly Business Sins”

Managing in a Time of Great Change

In an article that first appeared in the Harvard Business Review in 1933, Peter Drucker identified what he characterized as “the five deadly business sins.” They are:

1. The worship of high profit margins and of “premium pricing” that always creates a market for the competitor. “And high profit margins do not equal maximum profits.”

2. Mispricing a new product by charging “what the market will bear.” “This, too, creates risk-free opportunity for the competition.”

3. Cost-driven pricing. “The only thing that works is price-driven costing.”

4. Slaughtering tomorrow’s opportunity on the altar of yesterday. Drucker cites the example of IBM that committed this sin at least twice, first when forbidding sales initiatives that could threaten the sales of punch cards and years later when preventing its PC people to contact mainframe customers.

5. Feeding problems and starving opportunities. “All one can get by ‘problem solving’ is damage containment. Only opportunities produce results and growth.”

The complete article as well as 24 others are available for the first time in a single volume, Managing in a Time of Great Change, published by Harvard Business Press in 2009 as part of the centennial celebration of Drucker (November 19, 1909 – November 11, 2005).

High school football at its best

Our Boys

On Saturday, November 28, 2009, the Centralia Panthers defeated the Smith Center Redmen, 20-12, in the Class 2-1a championship game in Hays, Kansas. Thus ended the longest active winning streak in high school football (79) and, following the game, the Smith Center coaches, players, parents, and other supporters gave the victors an ovation of respect. Over the 32 seasons in Smith Center (a town of 1,931), Coach Roger Barta has won 301 games. As Joe Drape explains in an article published by The New York Times, “by creating a culture that values the whole man over a football player, that emphasizes getting ‘a little bit better each day,’ and insists that the Redmen cannot be champions until they love one another.”

Later in the locker room, Barta said this to his players and their family members: “Nobody hang their heads in here. We have lined up 80 times against teams, and finally one of them got us in a game that is going to go down there in the history books. They were a play better than us today.

“We’ve never judged ourselves on wins and losses. We’ve measured ourselves on whether we have been there for each other. You guys have been there all along. What you and those who came before have achieved over 79 games is something a lot of schools in America would like to say they have done.”

How many high schools in Texas can say they have? There are rimes when it seems to me that the success of a high school’s football team seems to be much more important than the quality of education that the school provides.

You may wish to check out Drape’s bestselling book, Our Boys: A Perfect Season on the Plains with the Smith Center Redmen, and Coach Wooden’s Leadership Game Plan for Success: 12 Lessons for Extraordinary Performance and Personal Excellence co-authored by John Wooden and Steve Jamison.

Book Review: The World of Business

The World of Business

The World of Business: From valuable brands and games directors play to bail-outs and bad boys
The Economist
Bloomberg Press (2009)

A total of six contributors are identified and presumably dozens of others were also involved in the selection, organization, and discussion of a full range of business topics that begin with “When firms started”(Page 2) and conclude with “Business etiquette tips” (Pages 254-261). Think of this as an anthology of generally brief (i.e. one-page) items (approximately 120 in number) rather than as a dictionary, encyclopedia, “history of….” etc. There is a British flavor to phrasing and spelling but the geographic scope is definitely international. As I worked my way from one entry to the next, I occasionally responded with comments such as “I didn’t know that” or “Oh yes, I had forgotten that.” Here are two that caught my eye:

“Some business giants of the past” (Pages 83-91): Andrew Carnegie, Walt Elias Disney, Henry Ford, William Gibbs (previously unfamiliar to me), Ray Kroc, Alfred Krup, William Hesketh Lever, John Pierpont Morgan, Akio Morita, John Davison Rockefeller, Mayer Amschel Rothschild, Sam Walton, and Frank Woolworth.

“Bubbles that burst” (Pages 164-170). Eight are discussed, including the current “credit crunch” that that has squeezed millions of individuals as well as companies, industries, and even countries. Of special interest to me (because I knew little, if anything about them) are “The Mississippi Bubble” (with a Scottish businessman, ironically bearing the name of John Law, playing a prominent role) and “Railway mania” in the UK (in the 1840s) and in the US (up to 1873). “The railway bubble burst in the ‘Panic of 1873,’ the same year as America’s first successful train robbery.”

One word of caution about this delightful as well as informative book: Do not place it in what the English refer to as the “loo” because those who begin to examine it may not reappear for quite some time.

Book Review: The Story of American Business

The Story of American Business: From the Pages of The New York Times
Nancy F. Koehn, Editor
Harvard Business Press (2009)

This volume provides a wealth of material that originally appeared in The New York Times from May 11, 1869 (“East and West,” an account by an unnamed correspondent of the celebration at Promontory Point when the railway first connected New York and California) until September 28, 2008 (“The Richest Man and How He Grew That Way,” Janet Maslin’s review of Snowball, Alice Schroeder’s biography of Warren Buffett). The material is carefully organized according to three major themes: the corporation, American business and the changing nature of work, and the defining moments in technology. As Koehn suggests, “Taken together, these aspects provide us a kind of wide-angle lens on some – though by no means all – of the most important individuals and events that shaped American business history and that, in turn, did so much to give form to our own time and our possibilities in it.”

Most readers will check out the Contents and then select articles of special interest to them. Others may prefer to proceed through one section to the next. Whatever the approach, the reading experience shares much in common with a situation in which a person begins to clear out an attic, cellar, garage or storage area and finds several boxes filled with clippings of articles from The New York Times. Some are about the rise of big business, the emergence of Wall Street, “merger mania,” major business leaders; other articles examine the changing nature of work such as the movement from farm to country and the emergence of labor unions; still others examine the “transportation revolution” (e.g. railroad, automobile, and commercial flight) and communication breakthroughs such as radio, television, and the Internet. There are at least some photographs such as one of a Northern Pacific locomotive in 1900 and another in which Henry Ford sits in his car next to a horse and buggy in 1933. However, the bulk of the material consists of narrative text.

Congratulations to Nancy F. Koehn on a brilliant achievement!

Rules for Good Writing

On Writing Well

In The Best of Business, a book published by The Economist in collaboration with Pegasus Books in 2009, one of the entries identifies and briefly explains “Six rules of good writing.” They are:

1. Do not be stuffy.
2. Do not be hectoring or arrogant.
3. Do not be too pleased with yourself.
4. Do not be too chatty.
5. Do not be too didactic.
6. Do your best to be lucid.

These are eminently sensible general rules to which I now presume to add a few that are more specific:

1. Do not separate a subject from its verb.
2. Always remain in the active voice.
3. Use few (if any) adjectives and adverbs.
4. Never use the word “thing.”
5. Avoid using direct address.

6. Do not break any of these rules until you have published a non-fiction book or The New Yorker has published one of your essays.

In my opinion, the best sources for comprehensive advice on good writing are:

The Elements of Style (50th Anniversary Edition)
William Strunk and E.B. White

On Writing Well: The Classic Guide to Writing (30th Anniversary Edition)
William Zinsser

On Writing: A Memoir of the Craft
Stephen King

Fortunately each of these three is available in a relatively inexpensive paperbound edition.

How social are you?

The Connectors

In The Tipping Point, Malcolm Gladwell observes, “What makes someone a Connector? The first–and most obvious–criterion is that Connectors know lots of people. They are the kinds of people who know everyone. All of us know someone like this. But I don’t think that we spend a lot of time thinking about the importance of these kinds of people. I’m not even sure that most of us really believe that the kind of person who knows everyone really knows everyone. But they do. There is a simple way to show this. [Select a number of common surnames at random. Johnson, for example.]… (The definition of “know” here is very broad. It is if you sat down next to that person on a train, you would know their name if they introduced themselves to you, and they would know your name.) Multiple names count. If the name is Johnson, in other words, and you know three Johnsons, you get three points. The idea is that your score on this test should roughly represent how social you are. It’s a simple way of estimating how many friends and acquaintances you have.”

To those who wish to become much more effective connectors, here is some excellent advice from Maribeth Kuzmeski:

1. Develop a true “What’s in it for them” mentality: Focusing on others brings more for you.

2. Listen – curiously listen: Connecting is not about being a great talker.

3. Important questions to ask are those that attract and nourish connections: get others to do the work!

4. Get the sale to close itself: Use creative strategies to sell without pushing what you offer.

5. Create a memorable experience: Differentiate yourself by the positive, memorable impact you have on others.

Kuzmeski explains how to achieve these objectives in The Connectors: How the World’s Most Successful Businesspeople Build Relationships and Clients for Life, published John S. Wiley & Sons (2009).

I also urge you to check out the resources at www.RedZoneMarketing.com.

What Innovators Can Learn from Bill Belichick

Scott Anthony

Here is an excerpt from an article featured by the Harvard Business blog. You can read the complete article by visiting http://blogs.harvardbusiness.org.

What Innovators Can Learn from Bill Belichick
Scott Anthony

Even non-football fans probably heard about Bill Belichick’s “blunder” of a call on Sunday night. Believe it or not, the call — and the firestorm that followed — has important lessons for innovation managers.

A quick recap. The New England Patriots led the Indianapolis Colts by six points with two minutes to go. It was fourth down, the ball was on the New England 28 yard line, and the Patriots needed just two yards for a first down that would almost certainly have sealed a victory. Conventional wisdom called for a punt, but Coach Belichick decided to go for it. After the Patriots fell just short of the first down, the Colts marched into the end zone and won the game.

* * *

What does this have to do with innovation?

First, the “Belichick incident” highlights the challenges facing a leader who makes the hard, right choices. If Belichick had punted and the Patriots lost, no one would have complained. Following a seemingly non-conventional approach opened Belichick up to criticism. Successful innovation requires similar bravery. It isn’t easy to go after non-existent markets or follow non-obvious approaches when analysts and investors are grilling you over minute-by-minute results. After all, naysayers tend not to criticize risks you don’t take.

The other important implication relates to rewards. People moaned about Belichick’s decision because the result was negative. Just like companies reward people who hit their numbers and penalize those who don’t. Getting world-class at innovation requires moving beyond rewarding results to rewarding behaviors. Remember, the odds that an initial strategy is right are very low. If a team learns quickly and cheaply that initial assumptions won’t pan out, they should be celebrated, not castigated. In the long run, those behaviors will lead to more successes than failures.

No one said leading innovation was easy. Getting uncommon results, however, sometimes requires following uncommon approaches.

* * *

You can read the complete article by visiting http://blogs.harvardbusiness.org.

Anthony is the Managing Director of Innosight Ventures. He has written three books on innovation: Seeing What’s Next: Using the Theories of Innovation to Predict Industry Change with Harvard Professor Clayton Christensen (Harvard Business Press, 2004), The Innovator’s Guide to Growth with Mark Johnson, Joe Sinfield, and Elizabeth Altman (Harvard Business Press, 2008), and The Silver Lining: An Innovation Playbook for Uncertain Times (Harvard Business Press, June 2009). He has published articles in various, is a regular contributor to Harvard Business Online and serves as the editorial director of Strategy & Innovation.

“The Turd Seller”

William Gibbs

As revealed in The Best of Business, a book published by The Economist in collaboration with Pegasus Books in 2009, William Gibbs (1790-1875) became an exceptionally wealthy man by selling guano, seabird dung, that is rich in nitrates and phosphates, and harvested off the coast of South America from the middle of the 19th century and used as (what else?) fertilizer. He and his brother George signed their first contract with the Peruvian government in 1842 and in 1858 imported 300,000 tons of guano to Britain. Gibbs also built a number of churches as well as a mansion for himself, at a cost of 70,000 pounds (the profits from just one year’s trade), Tyntesfield, a Victorian Gothic Revival estate near Wraxall, North Somerset, England, in the Vale of Nailsea, seven miles from Bristol. In 2002, it was acquired by the National Trust for 25 million pounds.

As I read this brief account of William (“The Turd Seller”) Gibbs, I recalled Randy Mayeux’s Superfreakonomics blog post about The Parable of the Horseshit. (By the way, the etymology of word “shit” is “top of the soil.”) Perhaps I have not recognized, much less appreciated, the value of all of my efforts that did not immediately produce the desired results, of all of my consulting proposals that were rejected, of all of my book reviews that were not well-received, etc. There may be a few uncashed checks buried somewhere under them.