Thursday, October 16, 2014

When It Comes To Change, Slow and Steady Wins the Race for Old Companies

Yes, old companies change and even innovate - they wouldn't have survived for over 100 years if they didn't. However, my research shows that the change process they use is quite different than that used by younger companies. Many might say they are too slow to change, but in the long run this seems to work to their advantage.

In his book The Living Company Arie de Gues explores behaviors of very large, very old companies. He says these companies are tolerant of "experiments on the edges," meaning corporate headquarters doesn't try to control or drive all the change within the firm.  When one of the "experiments" proves to have value, then it can be implemented on a wider basis.  This idea is similar to Peter Sims idea of "little bets" explained in his book Little Bets: How Breakthrough Ideas Emerge from Small Discoveries. In a recent article on corporate longevity in the McKinsley Quarterly former managing director Ian Davis observes: "A company that learns to adapt and change to meet market demands avoids not just the trauma of decline or an unwanted change of ownership but also very real transaction and disruption costs."

The vast majority of 100-year old companies are small to medium-sized firms that may not have a lot of room for experimenting on the edges or the capacity to support many little bets. So how do they go about innovating and changing? Many have different products from when they began and some are in completely different industries. Those that have stayed with their core product or service have still had to adapt to quantum changes in technology, global competition, vastly changing social and cultural mores over the last century. First, they constantly seek small, incremental improvements and adaptations. Second, they keep abreast of trends both within and external to their industry. Then, when it is determined that major change is needed, they take their time to carefully plan and implement the change.

My research indicates that old companies take a significantly longer time to plan a major change than do younger firms.  The reason they take time when making moving the company in a new direction is that they want to bring their constituents along with them, so they make the effort to explain the need for change to employees, suppliers, and customers in order to convince them of the necessity for the new approach.  In the process of explaining the need for change, the leaders are mindful of honoring all that was good about the past even though that may not be what is needed for the future. Leaders also make clear that, though what they do as a company - or the the way that they do it - may change, the core values of the firm will not change.

Because old companies take time to make major change, the casual observer often may not even notice that they are changing.  Perhaps this is why so many people think of old companies as dinosaurs - watching the fast development of entrepreneurial firms is far more exciting.  Well, the old companies may be slow-moving, but they definitely are not dinosaurs. And old companies may not be as exciting as new start-ups, but many more of them will still be around decades from now. To once again quote Ian Davis: "Survival is the ultimate performance measure."

Tuesday, October 14, 2014

The Profit Paradox

GBC Summer logo 7cm

I just returned from the Innovation Institute's Global Business Conference in Dubrovnik, Croatia where my presentation on the "survival" strategies of 100-year-old companies received a great response.  (Dubrovnik is a gorgeous city, by the way, and I highly recommend both the venue and the conference.)  One of the practices of old companies that received the interest of the conference attendees was the tendency for these companies to look at profit as the necessary fuel to keep their companies operating rather than as the goal or purpose of their business.  Don't get me wrong - these companies are profitable; they wouldn't have survived for over 100 years if they weren't.  And if they have to choose between profit and growth, they will choose profit.  They just don't confuse needing to be profitable with the purpose of their business.

                               

Corporate mission statements are very popular today and you can see them on almost every firm's website. These old companies have been talking about the purpose of their business in "missional" terms for decades, though they might not call it a Mission Statement.  Whether it's to make great places to work (office furniture manufacturer), enhance human life (pharmaceutical company), or provide a bit of sunshine to every customer's day (candy store), the purpose of these old companies is clear and meaningful.  They talk about their purpose all the time - with employees, with customers, with suppliers, their local community, academic researchers, and pretty much anyone who will listen. They love what they do and it shows. Their mission statement is not just words developed for their website because some management consultant told them they needed one.  The mission of these old companies is real, and it is what has driven them to success for over a century.

The profit paradox is this: though these companies do not talk about maximizing profit as their goal or purpose (many don't really like to talk about it much at all), they are very profitable firms.  In Japan (where my research partner was able to obtain profitability data, even from small privately-owned firms) companies over 100 years old were twice as profitable as the average Japanese firm. I have not been able to obtain such data from U.S. companies, but I suspect they are also more profitable than average.  This is what has enabled them to weather tough times to survive for over 100 years.  They don't focus on profit as the purpose for being in business, yet they are very profitable.  As one CEO reminded me, profit is the result of doing well what they do as a company, not their goal.

                                    

Over the next month I will be posting other behaviors/strategies/principles exhibited by members of the corporate century club.  These are statistically significant, cross-cultural behaviors based on ten years of research in both Japan and the United States. I hope you find this information as interesting as do I.

     

Thursday, September 18, 2014

Companies Turning 100 in 2014


                 

Businesses "living" long enough to celebrate their 100th anniversary are rare and apparently getting ever more scarce.  Yale lecturer Richard Foster says the average lifespan of companies on the S&P 500 has decreased by more than 50 years in the last century: while successful companies lasted an average of 67 years in the 1920s, they typically exist for only 15 years today. So we should celebrate those firms who do make it to their 100th anniversary.  They have survived world wars, economic depression, huge advances in technology, globalization, and major social/cultural change to continue to serve their customers, provide a living for their employees, and contribute to their communities.

Here is my list of U.S. companies that reached the century milestone in 2014.  If you know of others, I would love to hear from you.

American Licorice Company
American Pop Corn Company
California Casulty
DEMACO
George P. Johnson
Johnson Smith Co.
Mechanical Devices Co.
Mine Safety Appliances
RS Lewis Funeral Home
Russ & Daughters
Toro
Utility Trailer Manufacturing Co.
Vogue Tyre & Rubber Co.

Friday, September 12, 2014

New Michigan 100 and Corporate Century Club Member: George P. Johnson (GJP)


                                                   

George P. Johnson may have invented the field of experiential marketing. Though starting out in 1914 as a flag-making and sail-repair business in Detroit, it quickly established itself as a trade show and events management firm for Detroit's automobile industry. In the last few decades it has expanded to become a private multinational firm specializing in experiential marketing and brand management. Headquartered in Auburn Hills, Michigan it now operates 29 locations throughout the world.

Tuesday, September 9, 2014

New Corporate Century Club Member: American Pop Corn Company





When buyers offered Cloid H. Smith less than he wanted for the corn he grew on his farm land in Sac County, Iowa he decided to cut out the middlemen and in 1914 the American Pop Corn Co. was born in Sioux City where they have been for the last 100 years.  Sold under the brand name Jolly Time, the company is still in the Smith family, with 4th generation cousins running things.

The word "innovation" may not quickly come to mind when thinking about popcorn, but American Pop Corn Co. exhibits the dedication to protecting and developing unique technology seen in many companies that have survived over a century.  Beginning with the patented popcorn cribs Cloid designed that "put Jolly Time Pop Corn above the rest in terms of popability" (moisture content is essential to popping performance) and continuing to their patented cleaning, drying, and sorting process called "volumization," their technology focuses on obtaining a "guaranteed pop."  The company also reports innovations in packaging from the tin popcorn can to a pail (which they claim sparked the idea for the beer can), and was the first ever food brand to receive the Good Housekeeping Seal of Approval.  Whether you are a classic "BlastOButter" fan or prefer one of the other versions of their popcorn, chances are you have tasted this company's product.

The company reports having contracts with several multi-generational growers, exhibiting another characteristic of the Corporate Century Club: long-term relationships with suppliers.

Welcome to the Corporate Century Club!

Monday, September 8, 2014

French Paper Company

                             

                                            

Established in 1871, French Paper is a 6th generation family-owned company in Niles, Michigan. One of the last small, independent mills in the country, French Paper exhibits the qualities adhered to by many of the "Corporate Century Club" - including a commitment to the environment.  It has been 100% hydro-electric powered since 1922, using power from a small hydro-electric power plant at the Niles dam.

                                                                                                                                                           

Friday, September 5, 2014

Many Additions to Michigan's Century Club

I've been working at updating the list of Michigan's companies over 100 years old. Below is the most accurate data base I can put together at this time. The good news is that there are over 130 companies on the list. However, I may still be missing many small businesses, so if you know of a company that should be in Michigan's Business Century Club, please let me know.  Here's the list:

Acme Mfg.                                        1910                            Auburn Hills
American Seating                              1886                            Grand Rapids
Armstrong Int’l                                  1901                            Three Rivers                 5th gen
Atkins Hardware & Furniture       1905                            Vassar
Bahle’s (dept. store)                          1876                            Suttons Bay                             
Bauer’s Jewelry                                 1891                            Saginaw
Bissel                                                 1889                            Grand Rapids
Bond Decorating                                 1891                            Iron Mtn.
BorgWarner*                                       1880                            Auburn Hills
Brammal Industrial Supply                  1873                            Benton Harbor
Buckley’s Shoes                                  1894                            Bad Axe                       4th gen
Buis Mattress                                      1913                            Holland
Bulman Products                                 1905                            Grand Rapids              
Carhartt*                                            1889                            Dearborn
Carlson’s Jewelry & Gifts             1894                            Cadillac
Cascarellis Restaurant                         1909                            Albion                          4th gen
Central Michigan Paper                        1885                            Ada
Chelsea Lumber Co.                             1908                            Chelsea
Chelsea Milling                                    1901                            Chelsea
Chelsea State Bank                              1897                             Chelsea
Chris Engel’s Greenhouse                     1883                             Detroit
CMS Energy*                                        1890                             Jackson
Corbishley’s Clothing                           1876                             Bad Axe                       4th gen
Crandill Funeral Homes                        1902                             Fremont, White Cloud
Daniel Orr Sons Hardware                     1875                             North Branch
Dekker’s Jewelry                                  1882   (in NL)                Zeeland
Detroit Store Fixture Co.                       1898                             Detroit
DeVries Jewelers                                   1901                             Grand Rapids
DeWitt Barrels                                       1893                             Marne
Dickenson’s Hardware                            1876                             Fennville
Diltrich Furs                                           1893                             Detroit
Doncker’s Candies & Gifts                1896                             Marquette
Dow Chemical*                                       1897                             Midland
Dykstra Funeral                                      1900                             Holland
Ebonex Corp.                                          1878                             Detroit Area
Edge-Sweets (ESCO)                                1887                             Grand Rapids
Eikenhout, Inc.                                       1894                             Grand Rapids
Federal Mogul*                                        1889                             Southfield
Feigi’s Interiors                                       1854                             Saginaw
Ford Motor Co.*                                       1903                             Dearborn
Frankenmuth  Brewery                             1912                            Frankenmuth
Frankenmuth News                                  1906                            Frankenmuth
French Paper Co.                                     1871                             Niles                             6th gen
Fris Office Outfitters                                1900                            Holland                          5th gen
Fritz Family Restaurant                            1902                             Richville                        5th gen
GB Russo & Son                                 1905                             Grand Rapids  
General Motors Co.                                  1908                             Detroit
George Jerome & Co.                        1828                             Roseville
George P. Johnson                                    1914                             Auburn Hills
Getz Dept. Store                                      1880’s                           Marquette
Gilbert Chocolates                                   1900                             Jackson
Golden Shoes                                           1905                             Traverse City
Gordon Food Service                                 1897                             Grand Rapids  
Graafscap Hardware                                 1860                             Holland           
Groskopf’s Luggage                                  1881                             Grand Rapids
Harley Ellis Devereaux                              1908                             Southfield                    
Heidi’s Old Village Flowers & Gifts     1905                             Plymouth
Henry the Hatter                                      1893                             Detroit
Herman’s Boy (Coffee Roaster)                  1901                             Rockford
Herman Miller Inc.*                                    1905                             Zeeland                       
Herter Music                                              1903                             Bay City
Hoekstra’s Hardware                                  1867                             Kalamazoo
Homer Monumental Works                          1889                              Homer
Holland Peanut Store                                  1902                             Holland                        5th gen
Independent Bank Corp                               1864                             Ionia
Irwin Seating                                              1908                             Grand Rapids
Jesperson’s Restaurant & Pie Shoppe   1903                             Petoskey
Johnson’s Studio Camera                            1892                             Cheboygan                   4th gen
Keep & Martinson Lumber                    1905                             Tekonsha
Kelloggs*                                                    1906                             Battle Creek
Kindel Furniture                                         1901                             Grand Rapids
Koeze Co.                                                  1910                             Grand Rapids
Kositchek’s                                                1865                             Lansing
Krzyske Bros Co.                                         1890                             Monroe, Waltz
Langeland- Sterenberg Funeral                   1860                              Holland
Lokers Shoes                                              1913                             Holland
Lovewell’s Corner Store                              1905                             Lupton
Mapes Furniture                                         1892                             St. Ignace
Martins Shoe House                                    1846                             Monroe                                   
Masters LaLonde Shoes                               1879                             Alpena
MBT Financial Corp                                     1859                             Monroe
McClellan’s Frankenmuth Woolen Mill          1894                             Frankenmuth
McKee Monument & Mercantile            1901                             Marshall
Metcaff & Gonkhoff Funeral                1894                             Grand Rapids               5th gen
Michigan Ladder                                         1901                             Ypsilanti
Milkins Jewelers                                         1905                             Wyandotte                   4th gen
Model Drug & Apothecary Shop            1908                             Holland
Moore & Carter Lumber                      1904                             Sandusky,  Croswell
Mosher’s Jewelers                                     1898                             Port Huron                   4th gen 
Murphy & Caris (Law Firm)                 1905                             Fremont                                  
Oliver Products                                         1890                             Grand Rapids              
Padnos                                                      1905                             Holland                        4th gen
Palmer Auto Svc.                                       1912                             Frankenmuth
Perrigo                                                     1887                              Allegan
Pewabic Pottery (non-profit)                      1903                             Detroit
Pomeroy Funeral Home                              1890                             Croswell
Power’s Clothing                                        1892                            Jonesville
Raymond Hardware                                   1850                             Port Sanilac
Reusch Jewelers                                        1885                            Cheboygan                   4th gen
Rogers Sterling Jewelers?                           1910                            Chegoygan
Schaefer Bierleen Cars                               1852                            Frankenmuth              6th gen
Sempliner’s Bride & Formal                 1873                            Bay City
Sieb Plumbing, Heating & A/C             1868                            Monroe            
Siegel Jewelers                                          1889                            Grand Rapids
Skaff Carpet & Furniture                     1911                            Flint
Smith Floral & Greenhouse                  1903                            Lansing
Staffan-Mitchell Funeral Homes                  1853                            Chelsea
Star of the West Milling Co.                        1848                            Frankenmuth
Steelcase*                                                  1912                            Grand Rapids
Steven’s Van Lines                                     1905                             Saginaw          4th & 5th gen
Sunnyside Florist                                        1894                            Owosso
Superior Sports Store                                  1909                            Holland                   4th gen 
Standard Supply & Lumber                   1904                           West Michigan            
The Yale Expositor                                      1882                            Yale
Vail Rubber Company                                  1904                            St. Joseph
VanPoppelen Bros. Inc.                               1904                             Bay City
Varnum                                                      1888                             Grand Rapids        
Vortuba Leather Goods                               1876                             Traverse City
Vredeveld Shoes                                         1909?                             Fremont
W.B. Hayden & Sons Hardware             1886                             Cassopolis
Webber’s Floral & Gift                         1905                             Sault Ste. Marie
West Branch Flour Mill                                1892                             West Branch   
West Michigan Printing (?)                           1886                             Ada
Westbrook True Value Hardware                 1888                              Croswell
Whirlpool*                                                  1911                              St. Joseph                         
White Insurance Agency                              1873                             Fremont
Willis Sausage Co.                                                                           Frankenmuth
Winglemire Furniture                                  1858                             Holly
Wm. B. Eerdmans Publishing                       1905                             Grand Rapids
Wolverine Worldwide*                                1883                              Rockford         
WW Fairbairn & Sons                           1890’s                           Alanson
Yaeger’s Shoes                                           1846                              Monroe                        5th gen
Yale Expositor                                            1882                              Yale
Zeeland Print Shop                                     1908                              Zeeland                       4th gen