Learning from History
By Peter L DeHaan
of the assignments I enjoyed most in college was analyzing case
studies. I was, and continue to be, fascinated with
learning what founders and their companies have done – both right
and wrong. While the success stories are the more
exciting and inspirational, it is the failures and missteps that are
the more enlightening and educational.
should not be surprising that I take most seriously the adage,
“Those who fail to learn from history are doomed to repeat it.”
For those in business, the best histories to learn from are
business case studies, especially those accounts of the downfall,
demise, or defeat of once prosperous and successful businesses and
entrepreneurs. Of course, scrutinizing the steps
taken in a remarkable turnaround are also instructive, as well as
encouraging for anyone faced with a formidable uphill battle.
consider the phenomenal success stories, which are uplifting, to be
“light” reading and as much entertaining as educational.
Success stories abound of the cash-strapped entrepreneur who by
focused vision and through sheer determination, bootstraps a dream
into a profitable and flourishing business. In like
fashion, there are many accounts of the big-business corporate
executive who leads his or her company to the next revenue plateau,
into a new line of business, or to revolutionize an industry.
Rare, however, is the entrepreneur who starts with nothing and
using equal parts vision, moxie, and genius launches a business and is
still at the helm as it reaches the Fortune 500. These
individuals are a unique breed. They have the ability to grow, change,
and mature as leaders, in parallel with the evolving entity they
parented. These are the business superstars; three
such examples come to mind.
first is Steve Jobs who, with buddy Steve Wozniak, yearned to bring
the power of computing to the masses. Financed by
the sale of their only tangible assets, the pair began making computer
kits in a parent’s garage. Apple computer was
born, and though Jobs was for a season extricated from the company he
co-founded, he is now back at the helm guiding this eight billion
dollar a year company.
next example is found in Bill Gates and Paul Allen who founded
Microsoft. Starting in 1975, by providing operating
systems and programming languages, they parlayed their fledging
company into a 37 billion dollar a year juggernaut.
there is Michael Dell who started assembling PCs in his college dorm
room, hence the humble beginnings of Dell Computer. Now
a 41 billion dollar a year company and ranked number one in PC sales,
Dell sets the business and operational standards to which the rest of
the industry aspires.
if not most, businesses started with equally humble beginnings.
Tales of founders sleeping in their so that they could
offer 24/7 coverage (and save money on housing!). Others
started in their apartment, out of a converted warehouse, from their
front porch, or even in a garage. Fortunately,
those businesses that survived soon left these inauspicious
beginnings. In true entrepreneurial fashion, they
grew their meager investment into viable, ongoing concerns, quickly
moving to more suitable and appropriate environs.
it is not realistic to expect most businesses to grow into the
multibillion-dollar size of Apple, Microsoft, or Dell, it is wise to
consider their founders’ paths. Indeed, the very
traits and characteristics that serve one well as an entrepreneur, can
become a hindrance and counterproductive as a business grows and
matures. Although Steve Jobs, Bill Gates, and
Michael Dell all made this transition (and had books written about
them as a result), few individuals can successfully transform their
leadership style each time their enterprise metamorphoses into the
next iteration of scale, scope, and complexity. Case
histories and business literature repeatedly shows that, all too
often, the next plateau is met with disaster. Frequently,
the entrepreneur turned reluctant CEO, micromanages his or her
business and unconsciously reduces it back down to a more comfortable
size that he or she can successfully handle; at worst, the miscast
founder mismanages the business into insolvency.
astute entrepreneur, well aware of this trap, can employ several
strategies to avoid this. One technique is to form
an advisory board, consisting of those owning and running larger
concerns, to guide the founder’s nascent climb into management
acuity. Some bring in an experienced and seasoned
business manager to handle the day-to-day management, allowing the
entrepreneurially focused founder to concentrate on visioning,
planning, or innovating – whatever he or she does best and enjoys
most. One wise founder confided that he always
hired management people who were over qualified and paid them
accordingly – knowing that as the business continued to grow, they
would easily rise to the occasion. Others go back
to school and earn their MBA. Another approach is
founders who send their kids to college, in anticipation that the next
generation can guide the company to the next level and beyond.
But that brings up a second caution for small businesses –
passing the baton to the next generation.
studies differ by degree, they all confirm that the majority of small,
family businesses are not successfully passed on to the second
generation and only about 15 percent make it to the third generation.
There are many theories as to why this is the case.
The leading supposition is that the second generation, not
needing to make sacrifices to launch the business, lacks the requisite
drive and wherewithal to persevere. Another is that
problems occur when the business is handed over too quickly to adult
children who are still too young or too inexperienced. Some
entrepreneur parents attempt to avoid these problems by making their
successor children start at an entry-level position and work their way
up the organization. But this fast-track status
often backfires, engendering resentment from non-relatives who may be
otherwise more qualified, better educated, and possessing greater
tenure. In attempts to avoid this pitfall, some
founders add a stipulation for their children to earn a degree and put
in time at another company, gaining valuable experience and acumen
before joining the family business. Although this
final approach is the one that seems to offer the greatest chance for
success, it is by no means a sure-fire strategy.
growth problems occur when a single location business adds a second
location or acquires a geographically disparate competitor.
Since most small business owners employ the simple, yet
effective style of “management by walking around,” they find it
impossible to successfully and simultaneously manage multiple
locations – this is especially true for a service business.
Indeed, this common management style does not work for long if
the manager is not physically present. As stated
earlier, the results are usually disastrous, rooted in either
micromanagement or mismanagement that thwarts growth, hampers quality,
and limits profitability. The solution is simple,
albeit difficult. Quite simply a change in
management style is required. Either the founder
must adapt a new way of doing things or find someone else who can,
giving them the leeway and latitude to do their job. However,
neither approach is comfortable or painless for an entrepreneur used
to putting his or her mark on everything that happens and in making
fourth problem faced by the entrepreneurial founder is addressing
life-cycle changes. While some may have both the
drive and ability to run a business for the remainder of their lives,
most get to a point where they want to scale back, be it not handling
the day-to-day issues, taking longer vacations, semi-retiring, or not
working at all. These are all various forms of
letting go; it is hard, if not impossible, for someone who sacrificed
to launch a business, makes every decision, and oversees all
activities. The solutions to the first three
entrepreneurial dangers all apply to this situation. If
there is a son or daughter interested in taking over the business,
this may be the best solution, providing there is time to do it
properly and correctly. Changing one’s management
style is another option, just as is required for the growing or
expanding enterprise. Still, all too many founders
find themselves in a position where their kids don’t want the
business but they can’t change their management style, so they opt
for the only other solution; they sell the business.
of the situation or business dilemma one faces, rest assured that
someone has encountered it before. Don’t struggle with a
problem as though it is unique to you, because in all likelihood it is
not. Do some research, read some business books and case
studies, and whatever you do, learn from history so that you are not
doomed to repeat it.
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