"If it walks like a duck and it quacks like a duck and it looks like a duck, then it must be a duck." That's true as a rule if you're trying to determine what something actually is. But it's equally true that if you walk like a duck and quack like a duck and dress up in a duck costume, you will not, not ever, become a duck.
That leads us to two related principles.
First, we have Cargo Cults. During World War II, the Navy and Air Force descended on various islands in the South Pacific, and set up the airfields needed to assault the empire of Japan. They laid out the strips, put up towers, and began flight operations. The natives of those islands, who had never seen anything like it before, looked on in awe.
It amazed them that these giant metal birds dropped down out of the sky. The birds often carried good things like food. All that came to an end when the war was over. The Navy packed up its gear, got on its boats, and went home. The Air Force took the last plane out and went home.
That left the natives with this airstrip and the tower and the memory of those big metal things we call planes. They liked what the planes brought, and they knew what the Americans had done when they were there so they tried to bring the planes back.
Members of the Cargo Cults would clamber up into the abandoned towers, slap a couple of wooden earphones on their heads, and talk to the box we would call a radio. Then they waited for the planes. But the planes never came.
We see that a lot in business. Right now, Dell Computer is a "darling" of the business world. There are lots of people wishing they could be as successful as Michael Dell and the folks from Austin. So they look at the Dell model and they try to copy it.
They follow the maxim, that works in other places, that if you want to be a master, find out what the masters do, and then do the same thing. The problem is that you have to do what the masters really do, not just what it looks like they do.
I remember an executive that I worked for once who was like that. He'd read all of the books about what characterizes successful executives. And he set out to look like they did.
One time, in the bar after a meeting, he explained to me all the things he'd done to achieve his great success. I worked for him, so I had to listen. What I remember most is that for him it came down to things like the kind of shoes he wore and the fact that he had a thin watch.
It didn't work for long. This was back in the days when the owners of companies pretty much had feudal power over the folks that worked for them.
As it happened, the owner of our company came into town to address senior managers and executives. My boss had been reading those success books again, and he picked up on the point that in order to get promoted, you needed to be noticed. He guessed that the way to do that was to stand out from the crowd.
If he'd stood out from the crowd by virtue of high performance, it might have worked. Alas, he chose to stand out from the crowd of conservative manufacturing executives in their blue suits, white shirts, and blue polka dot ties by wearing a bright green suit.
The owner of the company strode into the room where the executives waited. He glanced around at these folks who were all pretty much dressed like he was. All but one.
His eyes grew wide. He walked over to Bob, and I'm sure, at that moment Bob's little ambitious heart leaped upward in his breast expecting success. Then the boss looked him straight in the eye and said, "You're fired. Security will escort you out."
It often isn't as dramatic as that, but an awful lot of failure results from copying the way things look rather than the way they work. Dell Computer isn't successful because they have a cool looking website. They're successful because they have a simple strategy, "Dell direct" and they use technology and training, and rewards--everything--to execute that strategy as effectively as possible.
It isn't great graphics, it's less than a third of the inventory requirements of the industry. It isn't slick marketing, it's fifty times the personalized websites of their nearest competitor. It isn't just a great idea, it's developing strategy, tactics, and operations that support the idea and deliver value.
Success in business or in life is a matter of delivering value and doing the basics with unremitting diligence. Clamping wooden earphones on your head, or wearing a thin watch just won't get it.
The flip side of the Cargo Cult is the Potemkin Village. It takes its name from Grigory Potemkin. Potemkin was a soldier, and he achieved immense power in the Russia of the late 18th Century first by becoming the lover of the Empress Catherine, and then by just by being very good at power games.
Potemkin accomplished quite a bit. He introduced reforms into the Army, and rebuilt the Navy. His problem was that no matter how much he achieved, he always over-described it, over-estimated what he could accomplish, and over-reported what had actually happened.
Catherine had appointed him the Governor of what was then called "New Russia"- the Southern Ukraine. Potemkin had reported grandly on what he had accomplished, often reporting as accomplishments things which he was only intending to do. All went well until Catherine decided it was time to tour the territory.
That set old Grigory off on a massive campaign to make things look really, really good. The story is told that he actually went so far as to erect facades of prosperous-looking villages that the Empress would pass through on her way through the territory. She would look about and see the prosperity, and think that all was well. It actually worked.
It's from this that we derive the term Potemkin Village. The Encyclopedia Britannica says that a Potemkin Village is "a pretentious facade designed to cover up a shabby or undesirable condition."
There are lots of Potemkin Villages out there in business as well. When I was a boy, the way that you were supposed to build up a business was to deliver value, and aim to build a profitable enterprise that would stand the test of time. In a lot of the versions of this American dream, the idea was to pass the business on to your sons. In those days, daughters didn't get the business.
In fact, one of the great scenes from the business of those days was the time when the sign changed from "John Smith, Jewelers"to "John Smith & Sons, Jewelers." The idea was to build something that delivered value. The idea was to build something that was profitable. The idea was to build something that would last.
Businesses were intended to be substantive like the buildings that were built at the time. I live in a building that was constructed toward the end of the 19th Century. It's made of brick and metal. The floors are solid wood. The walls are thick. It is a solid, sturdy building.
That kind of sturdiness has been built into the great companies. If you haven't picked it up, click over to fatbrain.com and grab a copy of James Collins and Jerry Porras' book, Built to Last: Successful Habits of Visionary Companies. This is one of the great business books of the past decade. The authors looked at companies that had been around a long time, at least 50 years, and had survived and prospered.
It wasn't that they didn't make mistakes. They made a lot of mistakes, but they recovered. It wasn't that they all had great ideas. They didn't. It was execution and culture that set them apart. It wasn't even that they had great leaders, over their lifetimes they had great ones and other ones. But they were built to deliver value and built to last.
Compare that with what I call the Inc. Magazine approach to starting a business. It started popping up in the 1980s, and goes something like this. First you get an MBA. Then you get the right suit and a power tie. Then you get venture capital. Then you start a company. Then you go public. Suddenly you're worth millions, billions maybe. Then you cash out.
All of those spectacular Initial Public Offerings (IPO) and Dot Com successes make it seem like that's the way to go. They make it look like that's how the great fortunes are made. While there are lots of cases of that right now, historically they are an anomaly.
Even today, in the roiling, boiling Dot Com cauldron, they're the exception. Of every thousand business plans sent to venture capitalists, six get funded. Of those six, four will go bankrupt and one will go public. The other one? It will stumble along without public financing, or get bought out.
That's the reality, but it's not the mythology. The mythology is the old Hero's Journey. The Hero heads into the Enchanted Forest. The hero vanquishes the beasts and defeats the witches and finds the treasure. The Hero returns triumphant.
That wouldn't be a problem if it didn't affect all of the way that we do business. Think about it. Amazon.com is held up as a poster child of the Internet era. As I write this, Amazon.com has never shown a profit.
Not only that, it doesn't have any prospects on its horizon. Jeff Bezos, their CEO even says this to investment analysts. "We have no reason to believe that we will reach profitability in the near future."
Things are weird in this looking glass world. Jac Nasser of Ford has described Amazon this way. ''His business model boils down to 'Buy at 100 and sell at 80.''' It draws a laugh, but Bezos was Time magazine's Person of the Year for 1999.
Amazon isn't the only insanity out there. Hardly anyone in the Dot Com world is making much money now. Who is? It's like the California gold rush. The miners poured everything they had into mining but very, very few of them got rich finding gold.
The folks who got rich were the folks who sold stuff to the miners. The great fortunes were made on canvas pants and foodstuffs and whiskey and entertainment. Today it's being made on Internet plumbing -- routers and servers and switches.
Amazon probably will make a profit eventually. Yahoo is certainly a success and may be one in the long term. But if they do, it will be because they deliver value at a profit. Even if the popular myths concentrate on great ideas and something called the "new economy."
Somehow it's if we believe that the laws of nature and the laws of economics have changed. They haven't.
Gravity still works both in the physical world and in economics. The seasons still follow one after the other, good times and bad times, in the forest and in the stock market. If you don't make money, you don't live as a business. It's that simple.
But the emphasis on the IPO cash out has led us to create an entire industry of people who are focused on that critical event. They're investment bankers and advisors, and the business plan that ends with a cash out. And it's in their best interest to create companies, not that deliver value and not that will last a hundred years, but companies that can make it through the IPO so that everybody can make their bucks.
Who's making money here? Investment bankers for sure, and the battalions of advisors, and the folks who cash out. So who gets the rotten end of the stick? Folks who buy the shares with the idea that they'll hold them for a long time surely do. And customers who buy shoddy merchandise and service from companies that vaporize surely do.
Oh yes, I hear you cry, but you can make some good money in the short term. Maybe so. But take a look around. The really successful companies in this age, being formed by people who stay with the ship after it's been floated. Bill Gates still heads Microsoft, and Steve Cates runs his arch-rival, AOL. Michael Dell is at the helm at Dell Computer.
These are not companies built for the IPO. They are built to deliver value and they are built to last. The Dot Com companies that appear building for the long term -- Amazon and Yahoo come to mind -- will succeed only if they deliver value at a profit.
Success in business is about the basics - delivering value in the target market. It's about making money not as a goal, but as a necessary condition of life. It's about the basics. It's not about Cargo Cults and it's not about Potemkin Villages.
"In the long run, the most important single factor affecting a business unit's performance is the quality of its products and services relative to those of competitors." That's from the PIMS Principles: Linking Strategy to Performance by Buzzell and Gale. The book was published in 1983. It's based on a study of 450 businesses and 3000 business units over more than a decade. It's about the basics.
If you're looking at your long-term future, I'd bet on the basics and on delivering value. As Ring Lardner once said, "The race may not always be to the swift, nor victory to the strong, but that's the way to bet."
Created/Revised/Reviewed: 12/31/00
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