“Crime is common. Logic is rare.”
– Sherlock Holmes (Sir Arthur Conan Doyle), The Adventure of the Copper Beeches
“Crime is common. Logic is rare.”
– Sherlock Holmes (Sir Arthur Conan Doyle), The Adventure of the Copper Beeches
Just once, a scientific approach would be nice. Just once.
The pundit class’s reaction to the imminent demise of Hostess and its tasty collection of bad-for-us products has been anything but scientific. Because instead of enumerating the possible causes and evaluating each on its merits, they’re mostly engaged in the popular pastime of starting with their one-size-fits-all solutions and working backward to ammunition in the form of bits and pieces of data that reinforce their panaceas.
Hate unions? Hostess’s unions didn’t accede to the company’s most recent requests for concessions. See – it’s the unions’ fault!
Except that the unions made significant concessions to Ripplewood Holdings, the private equity firm that bought Hostess in 2009. And, while the union was making these concessions, executive compensation was more than doubling. According to the best available information, three executives alone accounted for more almost $2.5 million in executive compensation increases. And the company’s top executives will share another $1.8 million in bonuses for successfully liquidating its assets.
(Reminder: My consulting company, IT Catalysts, has a long-standing service offering: We’ll wreck your company for half.)
Also … had union members agreed to work for nothing, the only impact would have been on price. Does anyone seriously think Twinkie sales are down because Twinkies cost too much?
Then there are those who figure greedy private equity firms are what cause companies to fail. It’s all Ripplewood’s fault. After all, it extracted significant management fees following its acquisition. That theory, though, doesn’t stand up to Ripplewood’s decision to stop taking them when the business didn’t turn around. All in all, Ripplewood invested a bunch in the attempt, and it’s taking a bath on its failure.
Innovation! That’s the problem. Hostess didn’t innovate, so as consumer tastes changed, Hostess didn’t change with its customers, who now want healthier fare.
Well, maybe. Certainly, there hasn’t been a flood of new Hostess products over the past decade or so. But on the other hand, there hasn’t been a flood of new beef products either, and despite plenty of evidence that eating lots of red meat is bad for you too, Americans are still eating lots of steak and hamburgers.
Here’s a theory I haven’t read anywhere: Hostess sales declined because Hostess stopped advertising its products.
When I was a kid, Wonder Bread built strong bodies twelve ways, Hostess Cupcakes and Twinkies were all over the airwaves, and when Hostess introduced its fruit pies, everyone in the country knew about it.
I can’t remember the last time I saw an ad for a Hostess product.
Sometimes, what kills a company is nothing more complicated than ignoring the fundamentals. Using advertising to build and maintain demand for your products is as fundamental as it gets.
My point in all of this isn’t to explain why Hostess failed. Without a doubt, it failed for more than just one reason (a horrible thought for purveyors of panaceas).
Or, it failed for just one reason, by definition. Namely, it failed because of bad management. That’s the definition of bad management, isn’t it — management that leads to business failure?
Why does this matter to you? No, not you as a junk food consumer. You as an IT leader. The answer is, I hope, clear: A failing or broken organization is only rarely like a car with a flat tire, where you can make just one patch or replace just one bad component and everything will be groovy a week later.
Pushing the analogy a bit, a failing or broken organizations is more like car with a tire that gradually went flat, starting to lose air five thousand miles ago and out of air a few thousand miles later. Had the owner fixed the tire at the first sign of trouble, the fix might have been easy, but after driving on a bad tire for a couple of thousand miles, the car will require a major overhaul, and the flat tire will be the least-expensive line item on the repair bill.
Organizations, that is, have lots of interconnected moving parts (we’ve identified 150 for IT alone), so when an organization is failing, any attempt to find the root cause, to fix the organization with a single change, is a fool’s errand. Turning the organization around will rarely be as simple as fixing just one broken element. That’s as true for a failing IT organization as it was for Hostess.
My opinion: Any CIO who doesn’t understand this point is a Ding Dong.