Since 1987, our sales have increased 300%, from $40 million to $160 million, and we've been profitable every year. In the same period, we've added 563 employees, bringing our total workforce to 871. And a share of SRC stock that was worth 10¢ in 1983, the year we started, and $13.02 in 1987, when we launched Engines Plus, had an appraised value of $81.60 as of our most recent valuation.
The success of Engines Plus changed the whole way we thought about growing SRC. Instead of one business with two divisions, we're now a diversified collection of enterprises and a business incubator.
And what if we had simply stuck with our original business and optimized like crazy? To tell the truth, I'm not sure SRC would even be around today. Both of the divisions we had back in 1987 got into trouble. One of them struggled for years until we finally sold it. The other has been hit hard by the economic downturn, although SRC as a whole has come through the recession unscathed. The new businesses have carried us.
We are also stronger in ways that don't show up in our financial statements. Back in 1990 we had a whole generation of managers and supervisors who had nowhere to go within SRC. They were the bright young stars of the company, people we'd been training for years. The problem was, they couldn't move up because the positions above theirs were taken. Without the new businesses, we no doubt would have lost a lot of them.
Instead, we held on to almost all of them. They became the leaders of the new businesses, where they kept learning and growing. As a result, they were able to take on ever greater challenges as time went along.
Then, too, when the young stars left their old jobs, they created opportunities for other people to move up, which in turn produced job openings for new recruits. So we kept training new leaders and never suffered from the talent shortage that plagued so many companies prior to the recession -- and that will return as soon as the economy recovers.
At the same time, we reduced our overhead in our established businesses, since the new people didn't earn as much as those they replaced. The subsidiaries have thus given us a way to cut costs without downsizing, without layoffs, and without undermining our culture. So we've been able to keep optimizing -- and remain competitive -- while retaining our capacity for innovation.
I don't mean to suggest that all our innovations have been successful. Of the 39 businesses we've started since 1990, 17 no longer exist. But there are always a lot of failures when you innovate. It goes with the territory. The point is, we've been able to experiment and innovate at minimal risk. If one of the businesses fails, the rest of the company is safe.
And yet, for all the obvious benefits of our system of innovation, I sometimes think that -- if we're not careful -- someone might come along and optimize it right out of existence. It's a feeling I often get when I'm showing around the visitors who come from all over the world to see what we've done and how we've done it. Almost all of them are impressed by the number and diversity of businesses we've created. People listen intently as I and my colleagues explain how important innovation is to our long-term success and how careful we must be to make sure we foster conditions under which it can flourish.
But afterward, without fail, two or three people will come up to me. It's great what you've done, they'll say, but wouldn't it be a lot more efficient to centralize a lot of functions? Couldn't you cut out a lot of waste by streamlining the organization? Yes, innovation is important, but how can you afford to keep operating the way you do?
My answer is, how can we afford not to?
About the authors
Jack Stack is the president and CEO of SRC Holdings Corp., formerly Springfield Remanufacturing Corp., based in Springfield, Mo. Bo Burlingham is the editor at large of Inc. They are coauthors of the best-seller The Great Game of Business (Doubleday/Currency, 1992), which is about the revolutionary system of open-book management developed at SRC. This article is adapted from their next book, A Stake in the Outcome: Building a Culture of Ownership for the Long-Term Success of Your Business, which will be published by Doubleday/Currency this month.
Online Resources
If SRC and Jack Stack sound familiar, they should. We have been following them since August 1986, when we published "The Turnaround," which chronicled the company's rise from the ashes of International Harvester and the invention of its system of open-book management, the Great Game of Business. Subsequently, Stack became an Inc contributor and coauthored, with Bo Burlingham, a series of groundbreaking management columns under the rubric of Critical Numbers. You can find the article, the columns, and more at www.inc.com/incmagazine/columns/numbers.html. You can also find interactive materials on innovation, as well as links to other resources, at www.inc.com/keyword/innovate.
Please E-mail your comments to editors@inc.com.
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