Sunday, July 05, 2009
WSJ Deal Journal: Coca-Cola Director on How to Fail in Business by Trying Really Hard
By Heidi N. Moore
Published July 25, 2008.
Look at a list of stock tickers. You'll find a pretty decent group of companies that were once heroes and now are, according to the cliche, zeroes. (General Motors, anyone?) Don Keough, the former president of Coca-Cola and current director of the company as well as chair of media-industry investment bank Allen &Co., just wrote a handy book about how other companies can achieve such feats of disappointment, of they dare. Keough's upcoming book, "The Ten Commandments for Business Failure," takes a slightly opposite tack from most business books, which provide prescriptions for success. Keough, instead, decided to dramatize the dangers of the alternative: how to screw up. (Remember: he saw New Coke).
His commandments: Quit taking risks; be inflexible; isolate yourself; assume infallibility; play the game close to the foul line; don't take time to think; put all your faith in experts and outside consultants; love your bureaucracy; send mixed messages; be afraid of the future; and lose your passion for work - for life.
Deal Journal talked to Keough to find out more (or in the Keoughian world, does that actually mean less?) An edited version of our interview is below.
Deal Journal: "The 10 Commandments" is a title that has the threat of biblical wrath around it. Why did you decide on a title like that?
Don Keough: I've always hated the word success because it contains the twin viruses of arrogance and complacency. I think that these two viruses are linked to individuals, to companies and to countries. A few years ago I was giving a talk to the food industry and the issue was how to be a winner. I said 'I don't know how to be a winner but I know how you can be a loser.' I gave a talk about the 10 commandments for losing. And that led to my convenient list of 10 ways to fail.
Deal Journal: That's interesting that you say that you don't like success. In other countries, including England, they think the American focus on success is obnoxious.
Keough: If you look at human activity, it's like Wimbledon - it's the unforced errors that decide who will be the winner. If you look at CEOs, for instance, it's hard to have bad news filter through your staff. A lot of people don't want to upset the boss. If you look at Hitler in his final days, he was in his bunker.
Deal Journal: With the success of advice books, why did you want to write one with a focus of failure?
Keough: There are more failure traps. Once good things happen to a person, you get to a stage where you think, 'I've sort of made it, I've had my neck out on the line, I'm going to stop taking risks.' It's easy when you think things are going well and you're a bit of success. But once you quit taking risks, things happen and failure is not far behind. There are a few examples. Coca-Cola had built its entire business on the fountains. In 1939, a guy came out with a package that twice as big as their regular bottle for the same price. They were inflexible about it and wouldn't change, and that was a mistake.
There's also a tendency in the business hierarchy for the top officer to be isolated. They live in a very narrow world, they go to lunch with their close staff, and they rarely go on a commercial airplane and see people tough it through a travel environment. It's easy to isolate yourself, get no bad news, and have good PR to see to it that you get all the credit. That leads to failure.
If you look at all the annual letters written, the reason why Warren Buffett's annual report is such a bestseller is that he will point out the mistakes that he made. Usually the way it works in American business is that executives will say 'we had a challenging year' or 'mistakes were made.' The way these things work is sort of assuming infallibility. I remember when I was involved in Coca-Cola, the East Germans were about to open. They wanted a huge amount of money. I didn't think we should do it. The guy spearheading the move into East Germany was getting ready to leave the company because, he said, I never listened to the opportunity. He said, 'You've never been to East Germany.' We made a $1 billion investment because we saw his courage.
The age we live in now is that we're surrounded by data. It isn't information. It's data, a series of bits and pieces that flow into us. Paper is increasing by the carload. We're surrounded by data. Some of us are almost wedded to the BlackBerry. We put ourselves into situations where we are so flooded with little pieces of information that we don't have time to think, and then bad things can happen.
Deal Journal: Which are the most important commandments for failure?
Keough: One is to be afraid of the future. There is almost a malaise in the country right now about the future. All through the years we're confronted by things that will destroy our future. It's the killer bees one year, and the bird flu the next year. If you look at Malthus, he had us all drowning in a sea of flesh. Right now there are going to be fortunes made and there are those who see the future as a tough time but an opportunity.
Another is to love your bureaucracy, because it has a way of preserving itself. If you put male and female animals into a pasture, there will be more animals. If you put middle managers together, they will create more bureaucracy. Don't put your faith in experts and bureaucracy.
Deal Journal: But aren't you the chairman of an investment bank? They provide outside expertise.
Keough: Unless we have something important to add, people are damn fools to use it.
Deal Journal: What comes next?
Keough: If you look at the next 12 to 24 months, there's going to be a lot of interesting activity, and I'm an absolute optimist. Everything will be okay.
Dear Journal: That's in marked counterpoint to the message of your book, but it's comforting to hear.