Learning, they say, is a matter of timing. You acquire knowledge when you're ready to receive it. Perhaps the scene on the entrepreneur street prepared me for Guangzhou (formerly Canton), the next stop on our itinerary, for that is where I had my epiphany.
Guangzhou is in southern Guangdong, a coastal province and a showcase for China's economic reforms. Except for the rare free-market street, those reforms seemed scarcely to have touched the inland cities such as Taiyuan, still dominated by large, state-run manufacturing enterprises. But Guangzhou was an altogether different story. In place of the drab grays and blues of Taiyuan, there were seas of bright reds and yellows. The energy on the streets was palpable. For me, it was close to a religious experience. I felt as though I were seeing capitalism for the first time. Yes, I had lived in a capitalist society for 45 years and had studied and written about capitalist enterprises for 25. But I had never experienced the system's vitality as I did in those first 10 minutes on the streets of Guangzhou.
I returned from China a born-again devotee of Adam Smith. Something had happened. An important piece of the puzzle had fallen into place. I spent the next six weeks or so trying to figure out what it all meant. I reread David L. Birch's Job Creation in America and Piore and Sabel's The Second Industrial Divide. I devoured Burton H. Klein's unconventional Dynamic Economics, which relates macroeconomic growth to company vitality. I went over and over the manuscript of The Third Century, a paean to entrepreneurship and immigrant vitality by Joel Kotkin and Yoriko Kishimoto.
And little by little, it dawned on me that there was an economic issue I had been badly underestimating all these years: the issue of scale. The truth is that I had never considered size per se a decisive factor in business. What I admired about the small and midsize growth companies was the way they conducted business, not the scale on which they conducted it. But now the lock-step relationship between the two became apparent.
I thought about the Seabees and the Pentagon. Didn't scale help to explain the difference? Weren't we so productive in one instance because we operated in small teams and so lethargic in the other because we functioned as cogs in a bureaucracy? And what about Tait Elder and 3M? What was it that had dazzled me on that cold day in February 1979? We had written about 3M's lack of bureaucracy, its radical decentralization, its speed of innovation, and its responsiveness to customers. Weren't those the very qualities it shared with entrepreneurial businesses rather than its Fortune 500 peers? As one seminar participant had put it, 3M was a company that had "grown big without acting big."
I thought about the week I had spent shadowing Xerox's vice-president of strategic pricing. He wasn't a bad guy. On the contrary, he was one of the best. Like many of his colleagues, he had come to Xerox after a stellar career at IBM. He was bright, competent, and conscientious. So, for that matter, were his staffers. I remember one, a young economist, with whom I used to engage in endless debates about "marginal cross-elasticities." (If you introduce product X+1 at price Y, will it destroy older product X at price Z?) Our eyes sparkled, but it all added up to less than zero, because the company was paralyzed by bloat.
Then I thought about watching the first film clips from Stew Leonard's grocery store. And standing for the first time in the spotless service bay at Sewell Village Cadillac. And seeing Frank Perdue, untrammeled by bureaucracy, rush to the phone after a Skunk Camp session, so that he could instantly implement ideas he had just picked up from Milliken & Co.'s restless president, Tom Malone. I thought about driving with Mike Weaver from Indianapolis to Van Buren, Ind., on a spring day in 1986, listening as he explained how Weaver Popcorn had cornered two-thirds of the Japanese popcorn market. I thought about spending a day at Johnsonville Foods' sausage factory in Sheboygan, Wis., where hourly workers told me how they'd developed new products from scratch, studied economics and computers and statistics, visited vendors to scope out new equipment for their production line.
I compared all this with the depressing sessions at Fortune 500 companies, and the terrible evening with the corporate elite in Palm Beach. And I thought about the clerk in the Friendship Store and the goldfish entrepreneurs and about Taiyuan and Guangzhou. Everywhere I looked, I saw the issue of scale.
And so I took the last step. In my office, we turned in our long-standing skunk logo, which we had used in honor of the renegades in big companies. We still honor them, and we still support them, and we certainly wish them well. But our new logo features a gazelle -- the symbol of the upstart companies that are leading the U.S. transformation.
And make no mistake, our economy is being transformed. Is it happening fast enough? I honestly don't know. I look at our largest companies, and I become terribly pessimistic. Then I look at the legions of small and midsize companies, and I feel a glow of hope. In any case, I know that the future does not belong to the companies I grew up with, the elephants that I used to serve. These wild and woolly times call for a new species of competitor -- fast, agile, thriving on change. I'll cast my lot with them.
Welcome, Tom Peters, to the Age of the Gazelle.
