Why Initiatives Fail
Why, then, do companies with good cultures and the right people keep embarking on technology initiatives that fail?
Because there's no disciplined thought behind them. Remember when the Internet came along? Take Walgreen Co. Everybody was talking about how Walgreen was going to be toast. But they should have looked closer. Walgreen hit breakthrough in 1975, and about 1985 it began to accelerate the flywheel with some key technologies. So it's humming along, the flywheel's spinning fine, and bang! We hit the mid-1990s. The Internet comes along. Walgreen looked at the Internet and said, "We're a crawl-walk-run company, and our response to the Internet is going to be crawl-walk-run." So, Walgreen wasn't too worried about drugstore.com, which went from run to walk to crawl. Walgreen stood back and, with disciplined thought, confronted the brutal facts of the Internet. It knew it didn't understand the Internet and needed time to figure it out. So it crawled at first. Of course, Walgreen has ultimately prevailed in its application of the Internet. Meanwhile, drugstore.com is no serious threat.
Now, companies like Walgreen sizing up the Internet, or The Kroger Co. thinking about whether scanning technology applies, or Fannie Mae thinking about applying expert systems for risk assessment for mortgage lending, they're not taking the technology in isolation. What they're doing is always tying their technology back to a fundamental business model. We learned that the fundamental business model that drives that flywheel to breakthrough momentum is one that reflects deep understanding of three things: one, what the company is passionate about; two, what it can do better than any other company in the world; and three, what best drives its economic engine.
Technology only helps when you understand that, and you harness your technology back to those three concepts. Any technology that is not harnessed to those three concepts is just technology for technology's sake.
Many companies have gotten to the stage of trying to use technology to cut costs, boost profits and innovate. But time and again, they run smack into cultural problems as they implement these technologies. Can technology make it harder to be great?
Well, first of all, we found virtually no evidence of cultural resistance among great companies, but we found lots of it in the comparison companies. Great companies always began with the question, "Do we have the right people?" A "right" person, fundamentally, is someone who understands that they do not have a job, they have a responsibility. Big difference. If an air traffic controller were to say, "I did my job right, but the airplane crashed," it doesn't really matter whether he did his job right. The airplane crashed. That controller has a responsibility to make sure the planes don't crash.
The cornerstone of the cultures in great companies wasn't just that they had a culture. They had a culture of discipline, one where people have a wide amount of freedom within the context of very stiff responsibilities. If you have a very stiff responsibility, you're responsible for the lives of people on that plane. How would you respond if someone said, "I can give you better information that will help you keep those people alive and planes from crashing?" If you view it as, "I have a job," then you're more likely to react to the new technology by saying, "I have too much to deal with already." But, if you're the type of person who believes that you need every tool and every piece of information you can gather to execute your responsibility, then your response to information is that you need more of it to execute your responsibility, rather than just to survive your job.
So the amount of information at your disposal does ultimately matter?
Not at all. We found no evidence at allnonethat the Good to Great companies had more or better information than the comparison companies. When you look over economic history and comparisons of companies in the same industryWalgreen to Eckerd Corp., Abbott Laboratories to The Upjohn Co., Nucor to Bethlehem Steel, and so onyou don't find that the great company had this key information that the comparison company didn't. You actually find that in any given industry, information starts to be pretty widely available. There's really not a lot of mystery, and people tend to collect the same kinds of information. They may have better systems or whatever, but fundamentally pretty much everyone has the same key pieces of information. So what's different? The key is how you turn information from just plain information into information that cannot be ignored.
Bruce Woolpert, CEO at [construction materials company] Granite Rock Co., initiated what he called "Short Pay." At the bottom of every customer invoice, he gave customers the chance to decide whetherand how muchto pay, based on their satisfaction level. It says at the bottom of the invoice, if there's anything you're not completely satisfied with, identify the item, deduct the amount from the total and send Granite Rock a check for the balance. Imagine something like that on your airline ticket stub! Woolpert now has a very powerful customer information system that turns customer data into information that absolutely cannot be ignored.
I think the fundamental principles of what it takes to build a great company, like the laws of physics, don't change. But the engineering, the practices, the ways we need to do it need to be continually evolving.