Leaders of Melius Research, Scott Davis, Carter Copeland and Rob Wertheimer, reveal timeless lessons from the titans of industry―and offer battle-tested survival tactics for an ever-changing world.
As Wall Street analysts, we’ve seen firsthand how fleeting success can be. In fact, we’ve seen far more failure than success. And we think that trend is about to get much worse. In the decades after World War I, the average age of a company in the S&P 500 was 60 years. Today, it’s less than 20 years and projected to decline for the next decade. So why can’t large, wealthy organizations maintain their competitive advantages? The most common explanation by the pundits is disruption, which is exceedingly hard to predict and most likely a convenient excuse. The reality is more complex and humbling. Companies usually fail because of the incompetence and arrogance of a complacent management team.
We believe that greater focus should be applied to the basic, old-fashioned principles that managers can actually control: fostering a humble culture that encourages continuous improvement, holding the line on corporate costs, driving manufacturing excellence, encouraging extreme customer focus, establishing a disciplined capital allocation process, moving a portfolio toward higher-return assets, all while setting the incentives needed to keep employees focused. These are the factors that differentiate the winners from everyone else. These principles are time tested, and our aim in writing Lessons from the Titans: What Companies in the New Economy Can Learn from the Great Industrial Giants to Drive Sustainable Success is to share them with you.
The market has had a two-decade-old obsession with disruption, digital transformation, market dominance, and cultish leadership. But as the era of the “new economy” shows early signs of maturation, the question becomes, what companies will endure and grow—and how? The answer comes from an unlikely place: the big industrial companies that have chugged along successfully, many of them for decades. They are the market’s original tech sector. They were once young high-flyers, not much different from many of the tech wonders of today. Each was spawned in some manner from a singular disruption, the dream of an entrepreneur, or some key competitive advantage. GE goes back to the inventions of Thomas Edison, Boeing to the origins of flight, Honeywell to the thermostat. But after that disruption phase, each of these companies was tested in ways their founders never imagined. Most importantly, each had to survive periods of poor leadership, grandiose visions, and the inevitable loss of focus that infects an organization when systems and processes are not encouraged.
Our book fixates on culture, but not in the same context as popular literature. A healthy and supportive culture is absolutely critical to any company’s long-term success. But we’ve found it to be a by-product of actions and incentives, not a driver. Said a different way, it can’t be force-fed from the top. Culture doesn’t come from a mission statement or a CEO’s webcasted lecture. It’s actually built from the bottom—on the factory floor or in the cubicles where the actual work gets done. The safety and well-being of employees must be its foundation. The customer centricity in the sales and marketing organization is the next building block.
What is most exciting about this project is that the companies we highlight (GE, Boeing, Danaher, Honeywell, United Technologies, Caterpillar, Roper, Transdigm, Stanley Black & Decker, United Rentals) have tremendous stories which have largely gone unnoticed. Each case offers clear and common business problems and a set of solutions that either worked brilliantly or failed miserably. The lessons from these industrial titans are invaluable. Because if GE can fail, then pretty much any company can. If Boeing, as America’s largest exporter, can go from an enviable profit machine to a company seeking a government handout in less than a year, any company can. And in the same context, if Danaher can win by focusing on manufacturing excellence and cash generation, then so can you. This book—a hardheaded explication of what companies can do to thrive and prosper in the coming environment—will equip you with the insights, strategies, and tactics to ensure that you count your organization among the winners in this new economy.