Enduring Lessons From a Short War

Over the course of 21 days of war, seven companies faced a test: Would their best-laid plans work? And if not, could they quickly adapt?

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Some held prayer vigils, while others stuck to staff meetings. Some could hardly keep up with all the new business, while others laid off workers. Some fretted about colleagues and family members fighting in Iraq, while others saw the war only as a far-off, impersonal TV event. American business owners experienced in vastly different ways the period from the first missile strike against Iraq on March 19 until the fall of Baghdad on April 9. Still, there were commonalities. Everyone knew the war was coming. Most everyone feared the initial campaign would be far bloodier than it turned out to be. As business leaders, all had to address their personal concerns and the concerns of their employees, as well as the reality of operating a company during a period of deep uncertainty for the nation. For the 21 days from the start of the war until Saddam Hussein's statue toppled in Baghdad, Inc. decided to closely follow an array of successful business owners in various industries and regions of the country, choosing companies that might be the most affected by the war, including importers, truckers, restaurateurs, and retailers. Why? Most every business faces crises from time to time. Not all that often, though, does the same type of intense event face so many business owners at the same moment in history. Inc. set out to discover what business lessons might be gleaned from this unusual circumstance, as well as to document some of the more important business trends now taking place. The war, of course, did not turn out to be the crippling event it might have been. But the business owners facing the prospect of a crisis didn't know that when the shooting started. As Paul Kithcart of GTS, a small transportation management firm located in Twinsburg, Ohio, put it on day one: "Right now, everything is running smoothly. It really is just another day. But tomorrow, well, nobody knows."

"Nobody knows" is a phrase that can unsettle the best-run outfit. Expansion plans stall. Sales sputter. And new hires are a distant wish. In war, uncertainty was the new buzzword, as ubiquitous as "ramp up" during the Internet bubble. Questions about battle plans and casualties and how long the war might actually last became intertwined with volatile market swings, a flat economy, sinking consumer confidence, and the general pall over the U.S. economy. As Walter Russell Mead predicted in these pages in March, however, the onset of the war actually relieved much economic uncertainty -- and propelled many businesses back into growth.

Even in the course of following business owners during this short war, we came away with strong impressions of what went right for so many of them. The companies that were tuned into the economy, read the trends right, and diversified were way ahead. The successful entrepreneurs we followed also proved to have this in common: good planning moderated by flexibility. Relationships, policies, and innovations made in calmer times played pivotal roles when companies were tested by stresses. The best time to make good decisions is when things are going well. Owners should consider whether the decisions they make now will serve them well in times of turmoil. Yet not every contingency can be anticipated -- and even where plans are set, circumstances may call for a different course of action. Which leads to another point: Adaptability is a competitive advantage. As the following seven cases demonstrate, rolling with the punches is good business.

A Discretionary Choice

KNIGHT & CARVER YACHT CENTER, SAN DIEGO

"I don't have a clue what's going to happen now," Sam Brown, CEO of yacht builder Knight & Carver, says on day one of the war. "Nobody really needs a yacht." Knight & Carver is located in blue-collar National City, an industrial area just south of downtown San Diego. The company's bayfront property is almost adjacent to the home base of the "mothball fleet" of Navy vessels, nearly all of which were deployed to the Middle East. Just prior to the start of Operation Iraqi Freedom, the huge port was filled with hundreds of military tanks being loaded onto freighters. "You can't help but think of our employees, their families, and of war," says Brown. He's quick, though, to laugh at himself and his ruminations. "I don't own a boat, and I don't even have a skipper's license. But I do have a real responsibility to everyone who works here, and what we want to do is to keep on working."

In the two and a half years Brown has been at the helm of Knight & Carver (which also repairs commercial fishing and military vessels up to 200 feet long), the company has been profitable on revenue of about $12 million a year. But recently, "we've been expecting a slowdown because of the discretionary nature of what we do," says Brown, 45, referring in a roundabout way to the obvious: Nobody ever really has to buy a yacht. Brown has been working with the company for 14 years, previously serving as its outside lawyer. "When a client doesn't know what the future may bring, a client does nothing. And it's the 'does nothing' part of the equation that can screw up anybody's so-called business plan."

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