Strategic Planning – Proactive or Reactive, “We looked for the enemy. The enemy was us.”

For the casual investor and casual observer who are looking at the Dow Jones Industrial Average group of 30 companies it is sometimes a thought that Corporations tend to endure forever - always have been the leaders and always will.  Either fortunately or unfortunately such is not the case.

Thirty years ago, of the thirty companies that made up the DJIA in 1979 only 10 of those companies still make up the Dow today. Some of the largest Corporations that make up the Dow today measured by market capitalization didn’t even exist thirty years ago, notably Microsoft Corporation and Intel.

On the fortunate side is opportunity. The bedfellows of opportunity are both innovation and project management. Quite possibly why they have the opportunity to work so well together is linked directly to the Corporate Culture, accountability and sound business decisions.

How do large companies grow and prosper and why do others stub their corporate toe? Let’s take a quick comparison look at General Electric, RCA and Eastman Kodak. General Electric joined the Dow in 1907. Today, along with appliances and consumer electronics, they are in consumer and corporate finance, health care, oil & gas, rail and security and aviation among others.

The subject of the General Electric entry into the aviation industry represents a great Business Case study. Leaving the issue of start-up capital aside, how would it ever be possible to compete much less become a world leader in the manufacture of jet aircraft engines?  It was truly a monster of an undertaking.  Was it realistic to even try to take market share from both Pratt & Whitney and Rolls Royce?  The engines of Jet aircraft worldwide carried either the Pratt & Whitney eagle in flight logo or the Rolls Royce double R.

It would have been very interesting dialogue at the GE Board level when their Senior Management made their initial Business Case Board presentation. The answer came from in depth Market Research and innovation and the answer was also driven in part by their Corporate Culture and mission statement to “Harness the power of the imagination to make life better for our customers and consumers worldwide” a veritable green light.

General Electric thinking moved ‘outside the box’ and away from the actual unit cost associated with the manufacture of a traditional jet engine as a key driver. GE saw an opening. With GE innovation their focus shifted instead to the operating efficiencies side of the product itself; noise abatement, engine thrust and fuel consumption – a great success story.

The GE move into new businesses provided them with the financial flexibility to become less dependant on their original core businesses and a shift in corporate culture. 

Not so successful was RCA Corporation, which was originally started by General Electric in 1919, then spun off. Over the next 50 years RCA initially grasped the market for broadcast and commercial radio point-to-point transmission through NBC Radio Networks till the monopoly was broken up by antitrust legislation.  Like GE, RCA then moved further afield with successful innovations in key technological advancement areas.  Fuelled by an almost endless list of electronics innovations RCA then became a Dow listing and subsequently grew into one of the largest companies in the world.  30 Rockefeller Plaza in New York, the Corporate Head Office of RCA became known as the RCA Building. 

Broadcast radio and recorded music (RCA Victor and Nipper the Fox Terrier logo) were the lynchpins followed by RADAR, television, first black and white then color TV, then HD-TV to name a few.  The old Indian Head TV test pattern was created by RCA. The RCA color-TV and RCA television cameras and were adopted as the standard in broadcast TV technology for American color TV transmitting and reception by the NTSC. In addition to broadcast television, the electron microscope, Radiotron vacuum tubes, LCD’s, VHS-VCR’s, HD-TV’s, satellite systems all found their genesis at RCA.

The story of the meteoric rise of RCA Corporation was also the story of David Sarnoff, his drive and leadership which permeated the entire fabric of RCA. Just at a time RCA thought they could do no wrong Sarnoff was succeeded by his son Robert the downward spiral began (early 1970’s). Robert Sarnoff took RCA in another direction.  RCA then embarked on complete departure from their core competencies of electronics and communications with the acquisitions of Hertz (rental cars), Coronet (carpeting), Random House (publishing), Gibson (greeting cards) and Banquet (frozen foods), all of which created a serious drain on the availability of research capital and a very real distraction from their traditional businesses.  With the distraction came mistakes, an open door to the competition and the ultimate slow road to self destruction.  RCA was taken over in the late 80’s by GE, broken up and sold off in pieces. RCA exists today only as a trademark.  RCA Victor Talking Machines and RCA antique radios remain as collector’s items.  Nipper is no longer listening to ‘His Master’s Voice.’

Eastman Kodak was replaced on the Dow in late 2005. With a loose application of the GE model there is some general agreement that they were slow to react and diversify. For decades Eastman Kodak was the undisputed market share leader in all segments of the photography and photofinishing industry. The early warning signs were there however, even as far back as 1973 when Paul Simon, in his song ‘So Mama Don’t Take My Kodachrome Away’ maybe recognized the market dominance of Eastman Kodak and Kodachrome as the most famous and financially successful film of all time. What may have been overlooked however was Paul Simon’s not particularly subtle reference in the song to his Nikon camera.  

Today there is no question that Eastman Kodak is a very different company than it was in those days. They no longer manufacture either film or cameras with the exception of the disposable camera. Through Unified Workflow Solutions in their Graphic Communications Group (GCG) they are into Graphic Design, Digital Imaging, digital photography and digital imaging solutions. Again, very different company with very different products but what was lacking in both RCA and Eastman Kodak was the drive and vision of a David Sarnoff.

What was very similar to all three were the marketplace dynamics.  Quality produce solutions manufactured in South East Asia in countries like Japan, Hong Kong and China were flooding the market. Neither RCA nor Eastman Kodak had viable solutions. Forward thinking Strategic Planning driven by qualitative market research has been the enduring GE corporate culture of Business Process Re-Engineering for over eight decades.  The ‘catch-up’ game is indeed a very difficult game to play.  It boils down to a ‘proactive’ strategy versus a ‘reactive’ strategy’ and the difference between the two strategies has defined GE, RCA and Eastman Kodak.