The myth of excellence

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In the black-and-white world of business opinion, Marks and Spencer is now firmly out of fashion. But corporate success depends on establishing and defining one’s own self.

The world of business and economics often seems to be monochromatic. Marks and Spencer, once the epitome of all British business virtues, can now do nothing right. Much the same seems to have happened to Sainsbury’s. General Motors was once America’s most admired company but no longer. The revolving door of fashion and favour went round rapidly for IBM – in, out, in once more

And the same is true of national economies. It is barely two years since the Asian tigers were held up as examplars, not just for less developed countries and the former Soviet Union, but for the whole of the western world. Those of us who claimed to see virtues in the German system of industrial organisation are today held up to ridicule. And business leaders, too, are either heroes or villains. Watch out, Jack Welch and Richard Branson, for the revolving door that sweeps you out.

The cult of excellence, popularised in the 1980’s by Peters and Waterman, took this thinking to its ultimate. There were some excellent companies which had just got everything right. In their world, you can’t be excellent in parts, just as the curate’s egg couldn’t be good in parts. You are either excellent, or not. “Sculley – chump or champ?” screamed one business headline, struggling with the paradox that under John Sculley’s stewardship Apple had enjoyed both periods of exceptional success and periods of abject failure. Disenchantment set in as some excellent companies didn’t seem to be excellent any more, at least judged by their performance. Peters and Waterman classed Digital, Wang and K-mar as excellent.

In the real world of business, organisations and their leaders have both strengths and weaknesses. Sometimes times and markets are such that they allow the strengths to show through, and at other times they reflect the weaknesses. If Sculley made some good judgements and some bad ones, that confirms that he is an ordinary human being, not the invention of a business journalist. Or – more likely in this case – Apple’s changing fortunes were the result of circumstances over which Sculley could have had little control even if he had been Thomas Edison, Henry Ford and Thomas Lipton rolled into one. Apple’s development of the graphical user interface was in train before Sculley appeared on the scene and there was nothing he could have done to prevent Microsoft developing a dos-compatible competitor.

And, like leaders, organisations are similarly imperfect, and variously adapted to the circumstances they face. Ford once ruled the world car market with its model T, then General Motors overtook it, and Toyota then challenged General Motors. Each of these companies succeeded not because they enjoyed some universal characteristic of excellence, but because they were, for a time, the right organisation for their market. And we should not be surprised that they were the wrong organisation for their market at some different time. If Microsoft came out ahead of IBM, it was not because Microsoft was more excellent than IBM, but because different phases of development of the computer market rewarded different attributes.

The superficial, and common, reaction is to say that the truly excellent organisation is the one which is always successfully adapted to its time and market. But the practical reality is that this is rarely possible. GE – – perhaps the most successful corporation of the century – has reinvented itself several times. But that tells us that the competitive advantage of GE is quite special – a depth of management resource which seems to be effective in a very diverse range of activities. The distinctive capabilities of most companies – their brands, their reputations, their systems, their innovation abilities – are market or product specific.

So General Motors’ competitive advantage simply and inevitably diminished as markets evolved in a direction less favourable to its competitive advantages. It could and did acquire some Toyota-like features but it could never beat Toyota at Toyota’s own game. IBM’s extraordinary success was in providing sales and support for large mainframe systems. Those competitive advantages simply could not be transferred to the PC business. The company goes on by redefining itself less effectively as a service company rather than a hardware provider.

Corporations have characteristics and personalities like humans. Like humans, they can modify and change them but are unable to choose the personalities they want or require. Weaknesses are often the converse of strengths: determination is sometimes obstinacy, ambition is sometimes arrogance, inventiveness is sometimes unreliability, precision is sometimes bureaucracy.

And that is why we are inclined to make these black and white judgements, and why they are so often misleading. The sustained success of Marks and Spencer is an extraordinary testimony to the ability of organisational routines to extract exceptional performance from relatively ordinary people. These types of structure have always been effective at making incremental changes. The demand for improvement is ingrained: members of the company and its all embracing culture do not see such change as a threat. Such companies find discontinuous change much harder because of the need for organisational consensus.

So Marks and Spencer must change But its problem may be not that it must now change, but that it has already changed too much. The essence of that company’s personality has been unswerving commitment to customer service, and sustained co-operative relationships with suppliers. Both of these have come under pressure in the cost-cutting environment of the 1990’s. “This above all – to thine own self be true/And it must follow, as the night the day,/ Thou canst not then be false to any man”. Personal, and corporate, success rests on establishing and defining one’s own self.

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