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DownloadA favorite read recommended by both Bill Gates and Warren Buffett, Business Adventures – Twelve Classic Tales from the World of Wall Street moves beyond the flashy advice of business newbies and provides relevant insights that stand the test of time.
This book summary covers the gamut from marketing and sales to stocks, research and development departments, and so on. Read this summary to learn from decade-old stories that still resonate in the business world today.
Business Adventures was initially written in 1959, so how could it possibly offer value today? This book offers time-tested lessons from the world's largest corporations, many of which are still around and flourishing today. This summary extracts and outlines the richest case studies from the book. Uncover the drivers of demise through the tale of Ford and its infamous "Edsel" flop. Then, hear how Xerox leveraged both proprietary technology and civic engagement to become one of the most successful businesses of the 1960s.
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A car for the career-climbing masses
This case study illuminates the dangers of placing too much hope and investment on a singular product, especially when managers and designers are left to develop the product in a vacuum. It offers lessons on just how far the consumer can be led along before labeling something over-hyped. Ford executives designed the Edsel car with the goal of breaking through the ho-hum clutter of cars for the middle class with a design that offered something new and exciting and evoked the essence of the American dream. They envisioned it as a vehicle that would appeal to the swath of career-climbing families entering the middle class and eager to show off their newfound status. They invested top dollar in design, marketing, and distribution, only to be left flat-footed when customers balked. Here are some of the main fault lines that led to the Edsel's massive failure.
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Market research gone wrong
"The total amount spent on the Edsel before the first specimen went on sale was announced at a quarter of a billion dollars; its launching…was more costly than that of any other consumer product in history."
1955 was dubbed "Year of the Automobile," and business was booming for car manufacturers. This environment of positivity and forward progress led Ford to confidently undertake the design and development of a new car for the middle class. Launched in September 1957, it was ultimately removed from the market in November 1959 after a short run of only two difficult years in dealerships. Today, the name "Edsel" is synonymous to an embarrassing product flop. Its case study has been called "a modern American anti success story." So why did it fail?
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Some claim that the Edsel's failure is inexplicable. They point to the amount of in-depth market research and multiple studies done to inform the strategy behind its launch. However, a closer look reveals that the timing and intent of this research meant it educated the marketing and branding approach but not the design itself.
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"As for the design, it was arrived at without even a pretense of consulting the polls, and by the method that has been standard for years in the designing of automobiles – that of simply pooling the hunches of sundry company committees."
To be clear, Ford was well-supported by data in its targeting of the middle class. The company was frustrated by its customers trading up their entry-level Fords for more medium-priced cars made by its competitors. Ford's middle of the road offering, the Mercury, was an unpopular selection. Company heads issued studies to confirm the attractiveness of a new offering in this space in 1948. The nine-year launch delay was mostly due to the occurrence of the Korean War in 1950, which shifted raw materials away from consumer industries and towards war efforts. Some point to this time lag as a key factor working against the Edsel. While consumers may have had an appetite in the late 1940s for this sort of vehicle, come the late 1950s, these opinions have gotten stale.
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It was easy to see a few years later, when smaller and less powerful cars, euphemistically called 'compacts,' had become so popular as to turn the old automobile status-ladder upside down, that the Edsel was a giant step in the wrong direction.
While intensely marketed as an innovative car, the Edsel failed to deliver in the areas that mattered. Consumer Reports railed against the handling and the driving experience it offered and heavily criticized its so-called upscale features, saying it would "certainly please anyone who confuses gadgetry with true luxury."
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Naming matters
The naming of the Edsel was another missed opportunity to improve its fortune. Edsel Ford was the only son of the original Henry Ford. Family members were not initially in favor of Edsel's name being used and never championed it throughout the development of the car. As a result, executives dove deep into consumer research. They had staffers canvas the streets of New York, Chicago, among other major cities, to test potential names and gauge reactions. They met time and again to review names flashed on cardboard signs in front of them, and even enlisted the consultation of a successful poet but were similarly dissatisfied with her ideas. Finally, they called in ad agency Foote, Cone, & Belding. The agency drummed up 18,000 names in a competition among employees in their global offices. None were ultimately to Ford's liking, though the "final four" weren't far off and were eventually used to indicate distinct trim levels: Corsair, Citation, Pacer, and Ranger.
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So why did executives ultimately fall back on "Edsel"? Research found that free associations with the name were neutral to unfavorable. Additionally, many expressed worries that it had dynastic connotations with it being the name of a former president of the company. In the end, the chairman of the board made the executive decision to go with "Edsel."
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The flop of the car named as such can be partially attributed to this blatant disregard for research and opinion. The four preferred names were chosen systematically. Thousands of names had been carefully parsed and examined until only the four with the most potential remained. All that work was cast to the wind in a brief meeting of senior leaders at the company. They felt their general opinion was superior to strict market testing. As a result, the name "Edsel" is now synonymous with commercial failure.
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Failures among the first Edsels
"…Many of the very first Edsels – those obviously destined for the most glaring public limelight – were dramatically imperfect."
Stories of Edsels breaking down or having significant hiccups in their drives off the lot abounded. These failures only contributed to the negative press that was accumulating. All of the marketing dollars spent and the hype generated by advertising campaigns just made these early failures worse. Issues ranged from oil leaks to front hoods bursting into flames.
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Far from being one-off mistakes in production, an Edsel executive admitted that he would estimate only about half of the cars performed properly. It's no surprise that an error-ridden model was delivered to the Consumers Union. Taken together with its ill-timed launch, the multitude of Edsels misfiring on the roads compounded negative opinions both among individual buyers and in the widely-read press.
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Creating value through copies
Through the early 1900s, the word "copy" had a decidedly negative connotation in the public's impression. Copies were seen as fake, fraudulent, cheap, and generally unfavorable. Business owners worried that copies might present opportunities for the theft of sensitive information or simply cause clutter and confusion in general. As industry and modern business came along, these ideas changed. Xerox was part of that shift. From 1900-1950, copying technology crept along, and by 1950 the best way to create a copy was still to use carbon paper.
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1950 marked the beginning of intense competition among companies offering more efficient and effective office copying, until Xerox entered in 1960 and completely changed the game. Xerox's competitors all required special paper and typically had major inconvenience associated with using the machine. These issues ranged from being difficulty in operation to the production of damp or heat-sensitive copies.
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Xerox, on the other hand, was able to make dry, good-quality, permanent copies on ordinary paper with minimal trouble. Making duplicates was now deemed "a revolution comparable in importance to the invention of the wheel." Copies soared from twenty million in the 1950s to the tens of billions in the 1960s, all due to the Xerox Corporation.
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Xerox is a prime example of the need to create dramatic value for customers. While other companies were desperately meeting a need, Xerox changed the game. Xerox offered such a tremendously better copying experience that its competitors could hardly be considered as such. Xerox's case also illustrates how they served as both a classic 19th-century business but also a business that pioneered best practices for the 20th century and beyond.
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Old-fashioned business
Xerox's development from a "small, family-oriented" company to an eventual behemoth of industry has been called reminiscent of classic 19th-century business. A young man named Chester F. Carlson lived in New York, worked in a manufacturer's patent office by day and tirelessly designed a copy machine in his small apartment kitchen by night. Eventually, Carlson came up with a satisfactory design, secured a web of patents, and pursued a partnership with the non-profit industrial research firm Battelle Memorial Institute, and later The Haloid Company. The Haloid Company and Battelle invested millions of dollars to improve the device's processes and effectiveness. The Haloid Company changed its name to Haloid Xerox and later just Xerox. The rest is history.
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The story reflects the American dream – a lonely inventor who doggedly pursued his invention against all odds, the reliance on the patent system that paid off in the long run, even the use of a classical Greek name ("Xerox" means "dry-writing" in Greek). Together, these features might lead you to believe that Xerox embodied old-fashioned business principles. On the contrary, Xerox was on the leading edge of how to develop corporate values and operate as a forward-thinking enterprise.
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A forward-thinking enterprise
"In the matter of demonstrating a sense of responsibility to society as a whole, rather than just to its stockholders, employees, and customers, it has shown itself to be the reverse of most nineteenth-century companies."
Today, it is nearly the norm to expect large corporations to have a conscience and to act out of it. It is expected that companies consider their impact on society and the planet and attempt to make it a positive one. It's not well-known that Xerox was a pioneer in this regard. Here are just a few of the initiatives they made to set this example for business in the 21st century and beyond:
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The "one-per-cent" program
In its successful inaugural decade of the 1960s, Xerox was already giving back generously to its local community. Xerox subscribed to the "one-per-cent" program, a system in which local businesses contribute one percent of their income (pre-tax) to universities, schools, and other local educational institutions as a means to raise the bar for all in the local area. This method, originally established in Cleveland, was pursued by others but not with the same vigor as Xerox. For example, their 1965 and 1966 donations equaled 1.5% of gross income, whereas these figures were much lower for peer organizations. Consider RCA with 0.7% and AT&T with less than 0.1%.
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Support of the united nations
Despite substantial negative feedback and even an engineered letter-writing campaign, Xerox spoke out in support of President Woodrow Wilson and his creation of the United Nations. They spent a year's worth of advertising dollars on a television campaign in promotion of the UN.
Support of scholars and authors in copyright law
One of the hot-button topics that came out as a result of Xerox's success was the issue of copyright law, particularly as it related to the rights of academic scholars and authors. These individuals were worried about others' newfound ability to easily copy their work without legal purchases. While general industry spokespeople stood by idly or refused to take a stand one way or the other, Xerox spoke out in support of these individuals. Even though they stood to profit in these situations, they took the high road and refused to support copying exemptions to copyright law.
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