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Q: If
you’re part of a diversified company, when do you give
up hope on fixing a broken business? Ron Adner,
Fontainebleau,
France
A:
Big companies hold onto failing businesses for
all kinds of reasons: sentimental value, false hope and
culture, to name just three.
For many
decades in
Japan,
for example, every business was treated like a
shrine—untouchable. Similarly, citing “tradition,” Pan
Am sold off its profitable hotels in the mid-1980s and
kept its struggling airline business. We all know the
end of that story: By 1991 Pan American World Airways
fell apart.
In most
cases, though, inertia is what stops companies from
letting go of broken companies. It’s just so hard to
sell an old operation—and so messy. After all, getting
rid of a fixer-upper takes patience and often the
willingness to take a loss. Who has the time or
wherewithal for that?
Which is
why letting go of a business has to be a corporate
discipline for it to happen at all. Companies should
only keep trying to fix businesses as long as they serve
a strategic purpose. And they should face reality and
“give up hope,” as you put it, as soon as they don’t.
Look,
there will always be times when companies will pour
money into a floundering business to establish a
position in a developing country.
China
was just such a place, and few companies which bought or
built businesses there, especially in its early days of
open-door commerce, escaped a few years of “learning
curve” losses. Similarly, a fundamental belief in an
emergent technology often means years of struggle before
achieving profitability. In such cases, you have to hang
on. Your strategy depends on it.
But
prolonged attempts to fix a business where that purpose
is gone rarely make sense.
Without
corporate life support—which peripheral businesses
usually don’t get, for the obvious reasons—such
businesses have no option but to fend for themselves.
It’s a slow death for everyone involved.
How much
better, then, to give your people their best hope for a
better future. The company buying your “failure” usually
has grand plans for its resurrection. Fight your
inertia, and let them go for it.
Q: What
can America do to improve its brand in the world? Julie Meyer,
London
A:
It can start winning.
Basically, that’s the only choice for any organization,
be it a company or a country, that wants to repair a
damaged reputation.
For
instance, imagine if US policy and military action
finally managed to install a peaceful democracy in Iraq.
Such a victory would no doubt change a lot of minds
about America’s “brand.” We would go from incompetent,
arrogant bullies to brave, persevering heroes in about
the time it took to report the news.
But
before we go too far down this path, let’s get clear
about the kind of trouble the American brand is really
in.
Yes, a
boldly pro-American president, Nicolas Sarkozy, was
recently elected in France, and the leaders of Britain
and Germany are also supporters of the United States.
And, yes, the number of people trying to get into
America has never been higher. But broadly speaking, the
United States
has undoubtedly lost respect on the world’s political
stage.
Leaders
from countries like
Venezuela
and Iran, emboldened by the changing geopolitical
balance of power, feel no compunction whatsoever
denouncing America. Sarkozy’s opponent made
anti-American sentiment a cornerstone of her campaign,
and 47 percent of the populace apparently thought she
picked the right villain. Even Russia, which held hands
with United States while it was in the process of
returning to the global economy, has started treating
the US government with the impudence of a teenager
toward his dumb blundering dad.
But if
America’s political reputation is faltering, its
business reputation decidedly is not.
Today
American companies and entrepreneurs operate around the
world with unparalleled vitality and access.
Europe is still
the largest investor in the United States, and the
United States is the largest foreign investor in France.
Indeed,
in all of our travels over the past several years in
literally dozens of countries, we have never heard of a
single business deal, joint venture or acquisition that
has fallen through because one party said, “I just
can’t. They’re American.”
Maybe
the simple reason is that businesspeople are mercenary.
They care more about profits than politics. It doesn’t
matter. The end result is that business has become part
of the glue that keeps the world from blowing apart.
Most people agree, for instance, that
India’s
nuclear restraint against Pakistan in 2002 had as much
to do with international economics as it did with
international diplomacy.
Now,
we’d never suggest that America’s strong business
reputation will totally wipe away the country’s
geopolitical tarnish. But we would assert that the
American brand is multifaceted—and thanks to that,
hardly ready to be junked. |
