Extra Point

May 2004

by Jack Tenney, Publisher

Which red, white and blue?

In this presidential election year, key differences between politics and business become more apparent. The most obvious has to do with mistakes. Political leaders deny them while business leaders brag about them.

As a young, aspiring business person, I was very taken with Royal Little, the father of conglomerates. His company, Textron, once the owner of Winooski Mills, got into everything from staples to helicopters during his tenure, which ended in the early '60s. He argued that businesses learned less from successes than from failures. The trick was to avoid messing up successful runs (fixing things that weren't broke) while recognizing bad decisions for what they were, cutting losses and moving on.

There's not enough space here for me to list all my business mistakes Little wrote a book about his but one stands out so clearly in my memory I thought passing it on might provide a reader or two an insight into their own situations.

I had a small part in devising a strategy for changing an under-performing product line into an industry leader. As I heard the marketing guy explain why we couldn't get traction with our stuff that was just as good as everyone else's, it dawned on me that he was describing a classic Economics 101 supply-and-demand graph. I suggested relieving the line of its overhead burden and repricing it to earn marginal returns only. The price drop wowed the sales force and shocked the market. It resulted in a tenfold volume increase and a substantial boost to overall profitability.

Three years into the success, which was compounded with engineering changes to the line that reduced direct costs and improved the line's eye appeal, the marketing guy left for greener pastures and I was made the lead cow.

Well, remembering how smart I was in the first instance, I assumed that I was capable of making the (I thought) trivial decisions on cosmetics for the next year's line. We had just spanked the market with bright yellow, lime green and cherry red models, so in under 10 minutes, I specified orange, blue and purple for the next year.

"Which orange, which blue and which purple do you want?" I was asked.

Thinking it was a trick question and being a very busy executive, I said something like, "Orange, blue and purple, you know. Orange, blue and purple! You know, orange-orange, blue-blue and purple-purple."

With that kind of inspiring leadership, I grossed out the sales force and shocked the market. (Note well: If you're going to shock the market, don't gross out the sales force.) We lost market share. Duh.

So, I hired a good marketing person who saved the line for a few more years by taking what seemed like forever to specify trivial little things like which red, which white and which blue to run up the flag pole.

All right, I made a mistake. Big deal, don't vote for me.