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King Camp Gillette: Disposable Goods

The terms ‘Utopian Socialist’ and ‘Captain of Industry’ are rarely applied to the same person. But they are both sound descriptions of King Camp Gillette. Yet the revolution Gillette arguably led at the sharp edge (!) is not taking us towards a utopia. Far from it. The inevitable consequence of his successful business strategy is a world of depleting resources and growing land-fill.

King Camp Gillette 1855-1932
King Camp Gillette 1855-1932

Short Biography

King Camp Gillette was born in Wisconsin, in 1855. His father was a patent agent, inventor and entrepreneur, who encouraged Gillette and his brothers to tinker and make things too.

The family moved to Chicago and then, after losing pretty much everything in the Great Fire of 1871, to New York. There, Gillette started his business career as a travelling salesman. After a series of jobs, he ended up at the Crown Cork and Seal Company. There, his boss, the company’s founder, recognised Gillette’s ambition to build a business of his own. His advice was:

‘Invent something people use and throw away.’

The Disposable Razor Blade

We all know how that bit of the story ended. The safety razor was already becoming popular in the United States, but still needed to be sharpened frequently. Gillette wondered if he could produce a blade cheaply enough for men to use it until it was dull, and then throw it away and use a new one.

It turns out, he couldn’t at first. So he sold his blades at below cost price, until he could get the manufacturing volumes high enough for the cost price to drop. Gillette had also invented the handle, and his second great innovation was to stop trying to make money on the razor itself. Instead, he gave it away, as a means to tie users into his blades.

So:

  • Disposable products that people need to replace regularly
  • Loss-leading accessories that tie users into the consumable items

Built-in Obsolescence, and a Product Eco-system

Today we’d call these ‘built-in obsolescence, and a product eco-system’. But the formula was phenomenally strong. So strong, in fact, that it was widely emulated – especially once Gillette’s patents expired.

Gillette also initiated the third pillar of the modern shaving business. He was constantly introducing minor innovations and improvements to keep ahead of his competitors – double edged blades, and then tin bladed razors.

Contemporary Corporate Strategy

In a market dominated by a few big players (Gillette among them), the demand is necessarily pretty static (the male population – particularly in affluent nations is not growing, and neither are we growing second heads). In the BCG Matrix, these are ‘cash cows’ – highly profitable lines with minimal growth prospects. All a company can do is defend against its rivals and try to steal some market share. So the strategy of constant incremental improvement remains to this day.

As, obviously, does the Gillette brand. Gillette himself resigned from the business in 1931, due to ill health, but it has retained his name to this day. It is now owned by Proctor and Gamble as one of over 20 global consumer brands. But that’s another business strategy entirely.

Utopian Socialist

Gillette lost a lot of his millions to the Wall Street Crash, but maybe he was okay with that. He wrote a number of books that set out a Utopian ideal for a world of no competition, no wars, and benign monopolistic corporations providing employment and welfare. That’s a dream that still lives on at one end of the political spectrum. Perhaps it’s sad that creating this utopia is not what Gillette is remembered for. Instead, we remember him for the disposable razor blade. Oh well, now I’ve finished this article, I’d better go and have a shave.

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Jack Welch: Supreme Manager

Fortune Magazine named him the greatest manager of the Twentieth Century. He took a well-managed and moderately successful corporation and grew it for 100 successive quarters, transforming it in the process. And now he spends his time teaching younger managers to do the same.

Jack Welch

Short Biography

John Francis Welch Jr was born in 1935 and grew up in Massachusetts. He gained a BSC in Chemistry from the University of Massachusetts in 1957 and went on to post-graduate study at the University of Illinois, where he earned an MSc and then a PhD in Chemical Engineering. From there, he joined General Electric, in 1960.

After concerns about the bureaucracy in his first year, a manager persuaded him to stay and from then, his rise through the organisation was steady and fast. He was their youngest General Manager ever, in 1968 and became a divisional vice president in 1972. In 1979, he was a Vice Chairman and Executive Officer, and a year later was named as the next Chairman and CEO of General Electric. He took the post in the autumn of 1981. He set his sights on creating the world’s most valuable company.

He spent the next twenty years growing GE spectacularly, in two phases that we can crudely characterise as ripping down the old (1980s) and building the new (1990s). As soon as he took over, he saw that changes in world business and the then emergent growth of Japanese business would mean that the well-managed but moderate-performing GE would flounder unless he could successfully change it, to compete.

His changes were a great success, growing share price from $4 in 1981 to $133 in 1999, with profits rising from $1.6 billion to $10.7 billion when he left the company in 2001. His retirement has seen the publication of three hugely successful books (co-written with his third wife, journalist Suzy Welch) and the creation of his own business school, the Jack Welch Management Institute, which teaches MBA programmes under the aegis of the private Strayer University.

Welch’s books are:

  • Jack: Straight from the Gut (2003) – his biography, co-written with John Byrne. Reportedly earned him a $7million advance.
  • Winning (2007) – his perspective on how he succeeded at GE – along with its companion volume…
  • Winning: The Answers (2007) – both co-written with Suzy Welch
  • The Real-Life MBA (2015) – a guide to management and business inspired by his teaching – also co-written with Suzy Welch

Ripping Down the Old – How Welch Disrupted GE in the 1980s

  • Welch started with a big investment in GE’s corporate management training facility, Crotonville in New York State.
  • He shifted the focus of GE’s business towards services, creating around 6,000 new businesses during his tenure
  • He determined to deal with unprofitable businesses, famously saying that if a business was not rated at number 1 or 2 globally, it would be fixed, closed, or sold. This is a pretty rigorous application of the strategy implied by the BCG Matrix.
  • He flattened the management structures and devolved power down to business units, creating far more decision-making autonomy for general managers.
  • His closures and simplifying activities resulted in a massive ‘downsizing’ of the business by nearly 200,000 staff, saving the business $6 billion and earning him the epithet of ‘Neutron Jack’ (after the Neutron Bomb that kills people while leaving infrastructure standing).

Building the New – How Welch Re-built GE in the 1990s

Having torn down what Welch perceived as not working, in the 1990s, he turned to creating a set of sustainable practices.

  • Managers were evaluated against the ‘Welch Matrix’ of values and new managerial appointments and deployments took up a full month of his time every year. He articulated his 4 Es of ‘energy, energisers, edge, and execution’, and placed adherence to values above achievement of figures.
  • He asked experts at Crotonville to develop a mechanism to hold middle managers at all levels accountable and in 1988 launched the ‘Work Out’ process of town hall meetings where managers had to give answers and make decisions, and created opportunities for large group brainstorming. This process was widely emulated by other businesses.
  • He learned how Walmart – then as now, hugely successful – stayed at the top of its game by gathering information constantly about what promotional activities are working and failing (for their competitors as well as for themselves) and then rapidly making changes. He adapted what he learned into GE’s QMI process of ‘Quick Market Intelligence’. This opened up huge commercial opportunities.
  • To encourage innovation, he recognised the need for excellent communication up and down the organisation, and across its businesses and divisions. His ‘Boundaryless Organisation’ was, perhaps, one of the biggest drivers of GE’s success.
  • In 1997, Welch initiated rigorous quality management, mandating Toyota’s ‘Six Sigma’ process throughout the business, expecting huge numbers of managers to be trained and gain their ‘belts’.
  • Finally (for this quick summary), Welch spotted the coming of the web as a primary means of doing business. Throughout the mid to late 90s, GE businesses were adjusting and developing their practices in a piecemeal fashion. In 1999 Welch launched his ‘destroyyourbusiness.com’ initiative to compel every part of GE to reinvent itself.

The upshot of all of this was not just spectacular growth, which other great CEOs have achieved. Welch was able to create a lasting change that persisted under the next CEO.

Pithy Soundbites

Welch is well known for coining pithy soundbites. Here are a few favourites.

  • ‘Change before you have to’
  • ‘Lead rather than manage’
  • ‘Control your destiny or someone else will’ (also the title of a 1995 book about how Welch was making his changes).
  • GE is ‘the largest petri dish of business innovation in the world’
  • ‘For a large organisation to be effective, it must be simple’
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Business Strategy Tools

The Management Pocketbooks Pocket Correspondence Course

This is part of an extended management course. You can dip into it, or follow the course from the start. If you do that, you may want a course notebook, for the exercises and any notes you want to make.


Over the years, Pocketblog has covered some important business strategy thinkers, so we will start by reviewing what we have.

Good Strategy/Bad Strategy

This is the name of Richard Rumelt’s book and it neatly frames any discussion of business strategy by defining what your outcome needs to look like. Take a look at ‘What makes good business strategy?

The Balanced Scorecard

In one of the all-time classic Harvard Business Review articles, Robert Kaplan and David Norton set out to ensure that our business strategies are balanced across a range of different areas of the business. The tool they introduced is nearly ubiquitous in the upper reaches of the management world, and no manager can get away without at least a passing familiarity with the Balanced Scorecard. Take a look at ’Balance is Everything’.

The McKinsey 7S Model

One of my own favourite tools is also about balance, but this time about ensuring all the elements of your business strategy and planning are all aligned. It was developed by consultants at top US firm, McKinsey: Tom Peters and Robert Waterman. The seven S model reminds us that shared values, style, skills, staff, structure, systems, and strategy must all be consistent with one another. Take a look at ‘On Competition: Internal Forces and the 7-S Model’.

The Awesome Michael Porter

Over the years, three blogs have featured the thinking of business strategy specialist, Michael Porter.

‘On Competition: Five Forces’ briefly introduced two of his principal ideas: the five forces model and his three generic business strategies that flow from them.

‘On Competition, again: Porter’s Five Forces’ took a deeper look at the five forces model.

‘On Competition – The Far End of the Value Chain’ focused on the three generic business strategies and his concept of the value chain. Here, I speculated that some businesses have found a fourth, very successful business strategy.

By the way, a recent entry in the Pocket Correspondence course returned to the idea of the value chain. Take a look at ‘The Value Chain’.

The Boston Consulting Group Matrix

Having finished reviewing the archives, let’s take a look at one business strategy tool. This is designed to help us answer a very simple question:

‘We have a number of products (or services) but limited resources to invest in their development and marketing. Which products (or services) should we focus our investment on?’

The folk at Boston Consulting Group who developed the tool suggested that two considerations are paramount in making our judgements:

  1. What is our market share?
    Do we have a dominant market position with this product/service, or a modest share. This dictates the base from which investment can grow or maintain our position.
  2. What is the growth potential of the market?
    Is this product in a growing, static or declining market? Clearly static and declining markets offer far less opportunity to recoup investments.

The result was a simple matrix that plots these two conditions against one-another and identifies four generic strategies. You can click on the image to enlarge it.

The Boston Consulting Group (BCG) Business Strategy Matrix

The Matrix gives us four strategies, three compelling labels for our products/services and one label that is, frankly, honest but lame.

Stars

Place your biggest investment bets on the products which dominate markets with high growth potential. If you are Samsung, you will be investing highly in mobile telephone products because the market continues to expand and you already have a dominant position.

Dogs

Do not invest – arguably, disinvest – in products which have a small share of a static or declining market. There is not much to win and you are not placed to take much of it.

Cash Cows

What do you do if you are a dominant player in a static or declining market? BCG suggested it is like having invested in a cow: you should look after it and milk it while it is healthy. This is how I read the men’s razor market. If you are one of the big players in your region (Gillette, Wilkinson Sword, Bic, for example, here in the UK), then you have a lot of investment in products and marketing, and a strong, valuable revenue stream. Over investment can gain little, as the market will never expand until men grow two heads or we need to shave more of ourselves. But if you don’t invest, you will lose the benefit of your position to your rivals. So, what do we see? Incremental investment in new – but hardly innovative – products. When I started shaving, two blades was new. Now we are up to five. By the time I no longer need to shave (about thirty years or so, I guess) I predict an eight bladed razor will be common.

Question Marks

What to call these pesky products… Does the label attach to the products or the challenge BCG found in labelling them with a cute title? Set aside that curious linguistic conundrum and we face the most difficult challenge of all. Your market is growing, so there is a big prize for the skilled/lucky investor. But your market position is weak, so you have a low chance of success against bigger rival products. Like many good tools, the BCG matrix does not give you all the answers. But it does bring your choices into stark relief.

Further Reading 

From the Management Pocketbooks series:

  1. The Strategy Pocketbook
  2. Business Planning Pocketbook
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