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Grist: The Risk of Doing Nothing

It's easy for businesses to quantify mistakes. But the bigger financial risk is the hidden cost of doing nothing.
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Grist

Observing the debris field that is also known as the U.S. economy, you can't miss the twisted remnants of bad decisions and voodoo opportunities. Amid this carnage, business leaders are being exhorted to slow down, take a deep breath, pull back. The false comfort of cliche gurgles to the surface: stick to your knitting, tend your garden, look before you leap.

Yet that is a potentially dangerous reaction. True, the new economy has been discredited -- and only a fool could fall for the propaganda that the business cycle could be transcended, anyway. But is that a reason to regress into amniotic inaction?

Consider that the fate of Montgomery Ward may be more instructive than the fate of eToys. The latter tells us not to be seduced by flawed "business models" (which is just an ornate way of saying "Make sure you make money"). The demise of the former, though, is fragrant with heuristics, lessons like "Don't lose focus on your customer," "Obsess over your competitors," and "Watch trends vigilantly."

Montgomery Ward did nothing -- or very little -- to ensure its survival. Big, rich, and powerful retailers also did nothing as Wal-Mart grew from 125 stores in 1975 to become not just America's largest retailer but its largest company. Other examples? Eastman Kodak did nothing for years as the digital world exploded around it. Xerox did nothing as the future of traditional copying became grimmer and grimmer, and Xerox's own inventions -- the mouse, the graphical user interface -- were grabbed by Apple. The airlines did nothing, even as they saw Southwest achieving the supposedly unthinkable: satisfying customers and making money simultaneously. Sears did nothing as two guys who got fired from their last job -- Bernie Marcus and Arthur Blank -- built Home Depot into a chain of more than 1,400 stores. Unilever, the maker of Lipton, did nothing for years as Snapple drank its lunch. Procter & Gamble and Kraft General Foods (the makers of Folgers and Maxwell House, respectively) did nothing as Starbucks redefined coffee.

There were hundreds of points along the way where any of these companies could have broken the continuum of paralysis -- but at each point the consequences of change were judged greater than the risk of doing nothing. That's what's so insidious about the absence of action: no single decision to delay or defer ever appears monumental at the time. Inaction also takes time for the contours of its dumbness to be revealed, so it rarely punishes current management; only the future gets mortgaged.

Right now the American economy is brimming with the next poster companies for inaction. Yet who's getting rewarded and promoted in this zeitgeist? The postponers and delayers, the action-phobic, the calming voices of mush. Andy Grove's stock might be a shadow of its former price, but that doesn't make him any less right when he says, "Only the paranoid survive."

What business history tells us, repeatedly and clangingly, is that human beings -- and by extension, the corporations we create -- are essentially conservative organisms. That's a natural inclination that must be resisted in business. Especially now. We must not misinterpret the current economic mess as an excuse for a giant national hold button. We must not demonize the hyperawareness that leads to action, writing it off as 1990s-style hyperbole. Put an action audit together and see how your business, large or small, measures up. The last thing we need is complacency gussied up as the New Prudence. As the poet Charles Wright has said, "What we refuse defines us."

Contributor Adam Hanft is president of Hanft Byrne Raboy, a Manhattan-based advertising and marketing firm. He is the coauthor of Dictionary of the Future (Hyperion).


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Last updated: Dec 1, 2002




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