The Driving Force
When we arrived at the headquarters of Intel Corporation in Santa Clara, California, to begin our initial round of interviews, we were struck by the intense energy that seemed to supercharge the atmosphere. Evidently we were not the only ones to perceive it. For when we began our very first interview with Intels manager of corporate communications, Jim Jarrett, his very first word in reply to our opening question was energy. What did he first notice when he joined Intel? "Energy. Energy is certainly one of the striking characteristics of this company and this industry."
Nor were Jim Jarrett and Intel unique in this respect. In fact, our experience at Intel was repeated over and over again as we visited a cross section of highly successful companies around the United States. From Silicon Valley to Atlanta, from companies barely a decade old like Apple to centenarians like Coca-Cola, from breakfast foods to life insurance, wherever we found high achievement, we found high energy, too. "There is an energy here. Everybody feels it," declared Doug MacMaster, president of Merck Sharp & Dohme, the nations largest manufacturer of prescription drugs. There is "a kinetic energy that flows through all of us," said Jere Whiteley of Northwestern Mutual, Americas most admired life insurance company.
What is this thing that is so tangible and palpable to the experience of these companies and yet does not find even the slightest mention in textbooks or university courses on management? Energy is basic to all life. Wherever there is greatness, great energy abounds. Many who have been in the presence of a great personality have noted the aura of intensity such an individual radiates, the unbounded and overflowing energy of a Napoleon, a Churchill, a Beethoven, a Carnegie, or a Henry Ford. After meeting Theodore Roosevelt, an Englishman once remarked, "Do you know the two most wonderful things I have seen in your country? Niagara Falls and the President of the United States, both great wonders of nature!"1 One writer described Roosevelt as "a perpetual flow of torrential energy, a sense of motion even in stillness ... thrilling to be near."2
Energy is the basis of all creativity. It is the fuel that feeds the fire of inspiration. Honoré de Balzac, one of the greatest French writers, possessed a vitality as imposing and fascinating as the life depicted in his stories. "Everything he did seemed to have a tenfold intensity. When he laughed the pictures on the walls trembled; when he spoke the words came cascading forth; ...when he worked there was no difference between day and night as he sat writing round the clock and blunted a dozen pens in the process."3 Balzac was a firm believer in the store of energy concentrated inside people, and his life gave credence to his belief. During 1830 and 1831 he poured out approximately 150 short novels, stories, articles, and commentariesa feat unparalleled in the annals of literatureand over the next 20 years, he completed 40 full-length novels.
Energy spurs innovation. No other individual has been responsible for striking the springs of so much wealth as Thomas Alva Edison. Edison was an indomitable worker who frequently went days on end without sleep in the process of producing 1,100 patentable inventions and giving birth to several entirely new industriesthe motion picture, phonograph and recording, and electric and household appliance industries. The General Electric Company, which Edison founded, is today the tenth largest industrial corporation in the United States, with $23 billion in assets. In 1907, when Edison was 60, Hearsts Cosmopolitan magazine urged him to authorize a serialized autobiography. "When I go into senile decay I may consider the autobiographical scheme," Edison replied, "but as long as I can put in eighteen hours daily, I dont want to waste any time on it."4
Business leaders, especially those who have created great enterprises within a single lifetime, are also noted for their energy. In 1940 a psychology student named Mort Feinberg went into an IBM office in Manhattan to process some punch cards for his Ph.D. thesis. A fairly old gentleman came over to offer his assistance. Feinberg was struck by "the tremendous energy, the tremendous strength exuded by the guy." It was Thomas Watson, Sr., the founder of the International Business Machines Corporation. Feinbergs description was identical to the one given by Fortune magazine in an article published the same year. John C. Johnston, the founder of the Northwestern Mutual Life Insurance Company, was known as a man of boundless energy who migrated from the East Coast to the frontiers of Wisconsin and set up the first life insurance company west of New England in 1857.
Most of these leaders channeled their high energy into endless hours of hard work. When J. Willard Marriott opened a small A & W Root Beer stand on a busy street in Washington, D.C., in 1927, he was launching the billion-dollar Marriott Corporation. Biographer Robert OBrien described Marriott in his early days:
His managers never knew what time of day or night hed show up at the kitchen door and go bird-dogging almost at a half-run through the kitchen, the pantries, the storage rooms, the refrigerators, the restaurant itself, running a finger over the shelves to check for dust, checking under tables and in cutlery drawers, checking the ranges, the storage rooms, the trays about to be served, sampling the root beer, and raising hell if everything wasnt spotless, neat, clean, bright, polished, done efficiently, done well.
Sometimes an enterprise has received its greatest impetus not from the founder, but from energetic people who came afterward, like Julius Rosenwald and General Robert Wood at Sears. Wood, who inspired and directed Sears entry into the retail store business in the 1920s, was a tower of strength with a military bearing and a sparkle in his eye. Donald Craib, chairman of Allstate Insurance Company, whose father was a close friend of the general, says Wood was an energetic man who exuded confidence. "You knew you were in the presence of a man who could wield considerable power."
Energy is not the exclusive possession of the great. It is an attribute shared by most successful CEOs who have made a significant impact on the companies they directed. In fact, we all have times when our energies and productivity are far higher than normal. Often this occurs when we are faced with a difficult problem that must be overcome or an extraordinary opportunity that calls for an all-out effort. High achievers are set apart from the rest by the way they use the energy available to them. Mort Feinberg, who is now professor of industrial psychology at New York University as well as consultant and confidant to some of Americas leading executives, says that energy is an "enormously important" factor in their success, but not energy alone. "With the energy comes discipline. These men have a tendency to be highly disciplined. They are not out to parties. They go to sleep on time. They rarely drink. Very few of them smoke. They exercise regularly. They are very disciplined people. Their energies are focused." These individuals are able to accomplish more than the average because they channel all their available energies into activities designed to achieve the goals they have set for themselves instead of allowing that energy to flow in many different and unconnected directions not governed by a clear central focus. Not only is their energy more disciplined and focused, it is also more constant and consistentbecause it is not expended in an extravagant or wasteful fashion on unproductive activities. As a result, highly disciplined and intensely focused energy becomes a characteristic of all that they do. It becomes a conspicuous mark, a presence that can be felt by those around them.
In some fashion the energy of an individual can be transferred to the organizations he or she founds and become a characteristic of the company as well. One of the most important findings of the McKinsey study of Americas best-managed enterprises reported by Peters and Waterman in their book In Search of Excellence was the presence of a palpable intensity in the companies they studied. The authors noted that they could "feel it."
Our own experience has been much the same. In company after company we were struck by the intensity of the atmosphere we found. It was not just the energy of countless individuals, but a solid mass of radiant power that seemed to pervade the entire organization, supporting and energizing its individual members at least as much as it was supported and energized by them.
But in each company this intensity had a different quality. As Feinberg says, "There is a big difference in the energy of different organizations." At Intel we found the energy disciplined and tense. At Apple it was buoyant youthful enthusiasm. At General Mills, Inc. there was a dynamic exuberance. At Merck it felt like the controlled power of a well-oiled machine. At Coca-Cola it had vibrancy and charm. At Delta it was the intense warmth of a close-knit family. At North-western Mutual it was a smooth, quiet hum, yet very active and alert.
Not only does the quality of the energy differ from company to company, but so does the quantity and what one might call the stability of intensity it produces. In Apple and Intel one had the feeling of a young and as yet unstable foundation that had to be maintained by a conscious effort and constant straining. By contrast, at Delta and Northwestern Mutual the intensity seemed to be fully and firmly established, almost self-existent, and no longer dependent on any effort to support it.
What is the difference between this youthful energy of a successful company still in its adolescence and the stable intensity of a mature institution? The best analogy we could think of is a comparison with a famous professional athlete like Jim Connors, Roger Staubach, or Mary Lou Retton at three different stages of their lives. First, imagine our future stars as children trying to learn how to hit a tennis ball, throw a football, or master the parallel bars. They are boundless and endless fonts of energy without measure or mission, running and jumping everywhere, restless, excited, exuberant. Their movements are clumsy, uncoordinated, and abrupt, because they are not yet masters of their own energies. The energy overflows in every direction but accomplishes very little, because the youngsters lack the skills necessary to control and direct it. This is the stage of many entrepreneurial companies still in their infancy. They subsist on excitement, enthusiasm, and the sheer thrill of the challenge. Now imagine our athletes in adolescence as stars on the high school team. They have gained a measure of control over their energies. Their movements are better coordinated. They have acquired many skills. Yet still, every action requires the utmost effort and concentration. They lack the confidence that comes with long experience. They are as yet nervous, jumpy, anxious, straining, and unsure of themselves. Like Apple they have won a lot of games and surpassed all their peers but have still to prove that they can survive in the big leagues. Finally, think of them as professional athletes at the peak of their careers. They have a calm bearing and steady poise. Every movement is well measured and precise without the slightest unnecessary expenditure of energy. They are in full control of their energies and have perfected their skills. They have a clear knowledge of and a confidence in their abilities. Those who meet them are awed by their very presence, as the computer industry is by IBM.
In the child, energy is a raw forceuncontrolled, undirected, sporadic. It comes in sudden bursts of motion and ends in motionless exhaustion. In the professional, on the other hand, the energy is constant and stable, a solid state of radiant power. Between the uncontrolled raw energy of nature and the pure, power-packed intensity that is the summit of human achievement, there is a vital difference. We see this difference all around us. When energy is brought under control, focused in a particular direction, and harnessed for productive work, it generates intensity. The raw energy of Niagara Falls is converted into an intensity that can illuminate an entire city. The crushing force of millions of tons of water is captured and tamed by human invention and made productive. It is channeled through a carefully designed structure. Its kinetic energy is used to drive giant turbines, which convert it into electrical power. The electricity is directed through an extensive network of systems and delivered over long distances to the ultimate points of consumption, where it may be sharply focused as a tiny beam of electrons passing through the hair-thin filament of an incandescent bulb to illuminate a small room.
A very similar process takes place within companies. All available energies must be harnessed by the organization, controlled by authority, and directed to work through systems and skills to achieve the desired goals. The greater the energies collected and harnessed, the more effectively they are controlled and directed, the more coordinated and integrated the systems through which they pass, and the more perfect the skills with which they are expressed, the greater is the productivity of the organization and the intensity it generates. As Feinberg put it: "Great corporations focus disciplined energy. They channel their energies and avoid fragmentation, diffusion, and nonfocused activities, which are often characteristic of organizations that have lost their goals."
Sources of Energy
It is not just energy that makes for corporate excellence. It is human energy converted into organizational intensity. An organization is a huge repository of latent and potential energies. Where do these energies come from? They come from people. Initially, it is the energy of the founder that gives life to an organization. The founder pours forth his or her energies onto the new creation much as a mother lavishes affection on her infant child. He or she devotes personal attention to every small detail of work, often doing the most mundane tasks himself or herself in the early years like Bill Marriott, Sr., who did the cooking himself in the first Hot Shoppe. The founder works endless hours giving form and substance to the companyhand-selecting employees, training them, designing systems and procedures, establishing priorities and goals, setting a personal example of the values he or she wants to instill in others.
By giving attention to the new recruits, teaching and training them, delegating authority, assigning responsibilities, and rewarding good performance, the founder builds up a core of employees who feel involved and dedicated to the company. They contribute not only their physical energies but their psychological energies as well. Their interest, excitement, enthusiasm, ambition, loyalty, and pride are channeled into the work. By attitude and example, the founder may also foster a spirit of cooperation and teamwork, as C. E. Woolman did at Delta during the early days when he had to pass the hat among employees to collect enough money to fuel the plane for the next flight. To the extent that people begin to feel part of a collective effort and a greater whole, they dedicate even more of their energies to the enterprise.
As the company grows, it requires a steady influx of new energy, talents, and capacities. Some of the early recruits lack the education, technical background, or managerial experience the work demands. A greater emphasis is placed on recruiting bright, educated talents with alert minds and new ideas. At a relatively early stage, the founders of Apple recognized the need for highly trained professionals to build up efficient production and marketing facilities that could effectively deliver their innovative products to large numbers of people at competitive prices. This influx of mental energies adds to the growing reservoir of corporate strength.
The young, developing company also forges relationships with the world around it. It wins some loyal customers who appreciate its products or services. It finds reliable suppliers that appreciate its regular business. It may attract investors willing to risk funds on the strength of the companys achievements and prospects. These people, too, contribute their energies to the growth of the organization.
Though all growing enterprises draw energies from these various sources, companies do differ in the energies they possess. Much depends on the quality of the people they recruitthe importance the company places on selecting people with good health, enthusiasm for work, strong nerves, dynamism, expansiveness, education, and intelligence. But companies differ even more in the extent to which they are able to release, harness, and channel the various energy resources at their disposal into productive work. People are not a limited, finite resource like so many kilowatts of power or pounds of salt. People are a nearly limitless reservoir of physical, psychological, and mental energy and talent. The key is in knowing how to utilize peoples capacities to the full or, rather, how to motivate people to give themselves entirely to their work.
Tomas Bata was a man who possessed this key. He was the ninth generation in a family clan of shoemakers from the town of Ziln, in what was then Austria-Hungary, now Czechoslovakia. Tomas and his brother founded a shoemaking "factory" in their house at Ziln in 1894 with two sewing machines and some hand tools. Despite this rather modest beginning, Tomass ambition was to transform shoemaking from a cottage handicraft into a modern industry run with shoe machinery. Inspired by the American system of mechanized production, which he studied during two visits to the United States, and by Henry Fords idea of an inexpensive car for the masses, Bata dreamed of producing shoes in quantities large enough and at prices low enough to shod the feet of all humanity. By the end of World War I, he had built up a medium-sized shoe industry employing 2,000 workers and producing a half-million pairs of shoes annually, part of which was exported to other European countries.
In 1922 Europe was in the midst of the first great postwar depression, which drastically cut Czechoslovakias export trade, creating widespread unemployment throughout the country. The newly formed Czech government adopted a policy of tight monetary controls to fight inflation on the home front, resulting in a 75 percent devaluation in the currency in a single year. As a result of these factors, demand fell, purchasing power declined, and exports decreased to a fraction of their former level. Debtors, which included most businesses that had expanded on bank credit during the war, were suddenly faced with high levels of debt and falling incomes. Production declined. Layoffs multiplied. More than 400,000 Czechs were unemployed. Batas business suffered badly. His exports dropped by 75 percent. Stocks were accumulating until his warehouses were full to overflowing. There was enormous pressure to cut production and lay off workers.
In August of 1922 the national manufacturers association of Czechoslovakia called an urgent meeting of its members to discuss the governments policies and formulate recommendations to avert economic disaster. Those who attended felt they were helpless victims of external forces and government actions. They were nearly unanimous in condemning the government and demanding relief, but none could propose a viable solution to the problems facing the nation.
On the second day of the conference. Tomas Bata rose to speak. Bata saw the futility of the governments policy and industrys response to it. He believed that some radically new strategy was needed to break the vicious cycle of economic decline. He was a man who firmly believed in seizing adversity by the horns and wrestling it into submission. He was also motivated by a deep sense of commitment to the thousands of people who depended on him for their livelihood and very survival. When Bata addressed the conference, he did not strike the familiar refrain demanding government action. Rather, he called on the business community to act courageously for its own preservation. He ended his speech with a dramatic announcement that startled the entire gathering. Bata refused to lay off a single worker. He chose instead to seize the initiative and act decisively. The first necessity was to stimulate market demand. "Gentlemen," he said, "we are going to cut the prices of our shoes in half and we are going to sell them for half the present price."6 Batas announcement brought a hushed silence, which was followed by squeals of derisive laughter. He was dismissed as a lunatic or a fool. How could a company cut its prices by 50 percent and survive? How could it ever repay its creditors by lowering prices?
Bata returned to Ziln and explained his radical decision to his employees. It was the only possible solution to save the company and preserve their jobs. All costs had to be reduced to the absolute minimum. Waste of all description had to be completely eradicated. Efficiency and productivity had to be raised to much greater levels. He imposed across-the-board 40 percent wage cuts for all employees, despite the opposition of a powerful union, but he promised to supply all workers and their families with food, clothing, and other necessities at half the present price to ensure their maintenance. He divided his factory into profit centers and promised incentives for higher productivity. Having put his internal operations on a war footing, Bata launched a national poster advertising campaign depicting a huge fist crushing the Czech word drahota, which represented the high cost of living.
The public response was overwhelming. Shoe stores that had been languishing for months were suddenly invaded by mobs of people seeking an affordable pair of shoes. Police had to be called in to restore order and regulate traffic. Orders poured into the warehouses until they were almost empty of stock. The workshops were geared up to full production capacity. Within a week, the sense of uncertainty and despair was replaced by one of urgency, excitement, and purpose. In the coming months Bata not only maintained full employment but actually started to expand. He continuously introduced improved production techniques, administrative systems, and employee incentives to increase productivity.
Over the next five years, employment in Batas factories more than doubled, and production multiplied 15-fold. Between 1922 and 1932 the average retail price of Bata shoes fell by 82 percent, while wages in Bata factories rose by 200 percent. Like Henry Ford, Bata succeeded in producing so efficiently that a former luxury became accessible to the masses for the first time. By 1928 Bata operated the largest tanneries, shoe-making factories, and shoe machinery industry on earth. Czechoslovakia led the world in footwear exports, and the Czech people were the best shod in Europe.
During this period Bata succeeded in releasing enormous energies latent within his small company and in tapping equally great energies from the world around him. He was a man who knew how to mobilize some of the infinite powers of an organization.
Levels of Energy Utilization
If you look at various companies in any field, you can see how much they differ in their capacity to mobilize and harness the human resources at their disposal. Some waste a large portion of their energies by internal conflicts, pursuit of goals that turn out to be dead-end alleys, inefficient production techniques, and endless indecisiveness. Others conserve their energies through rigorous discipline and systematic controls, eliminating waste of all types, keeping costs down, staffs lean, and inventories low. Still others succeed in actively utilizing available energies in a constructive fashion for gradual but steady growth. Their employees perform well. They are open to suggestions and new ideas. They make every machine and system yield its maximum. Then there are those companies that expand at a very rapid pace by constantly releasing latent energies from within the organization and drawing fresh energies from outside. They enthuse their workers to make extraordinary efforts. They offer employees constant opportunities to acquire new skills and take on greater responsibility. They draw inspiration and ideas from their customers, attract the best talent in the field, and are sought after by investors.
At the pinnacle of corporate life are those companies that have discovered the secret of fashioning the human resources of which they are composed into an integrated and cohesive living organization. They have evolved to their present position through a long process of trial and error under the leadership of a few dynamic individuals who have imposed the imprint of their own dynamism and enthusiasm on the company. These companies utilize the energies at their disposal with consummate skill and constantly seek to develop new skills so that latent talents can emerge. They channel these highly skilled energies through carefully designed systems. These systems are precisely co-ordinated with each other and perfectly integrated with the structure and functioning of the organization. The organization acts like an optical lens to focus all these energies for the fulfillment of the companys central purposeits values, mission, and objectives.
Intense Crises and Opportunities
Every individual and every company have known periods when their energies reached peak levels of intensity. Such periods may come in response to a severe crisis, as the economic conditions in Czechoslovakia did for Tomas Bata and his company. During a crisis every drop of energy is mobilized to cope with the danger and ensure survival. When Chrysler Corporation found itself at the edge of the precipice in 1979, the threat of impending catastrophe released a great reservoir of pent-up energies from within the organization and brought forth unexpected reserves of support from suppliers, labor unions, bankers, and governments. Lee Iacocca was able to mobilize and utilize all these available energies for a dramatic revival of the company.
Peak periods of intensity also occur in response to the opening up of new opportunities in the environment. In 1978 such an opportunity thrust itself on Merck, the most admired pharmaceuticals company in the United States, according to three successive Fortune surveys.
The largest drug companies launch a major new product about once in two years and spend the remaining time promoting its use. But in 1978 Merck Sharp & Dohme, the United States prescription-drug manufacturing and marketing division of Merck & Company, Inc., found that three major new products would be ready for introduction at virtually the same time. Rather than delay the introductions to provide more time for preparations, MSD decided to launch all three products within a period of 90 days, and it mobilized all its energies, talents, and resources for the effort.
No pharmaceuticals company had ever introduced three major products in three different therapeutic areas in such a short time. MSDs professional representatives set industry records in taking information on the new drugs to U.S. physicians. The companys representatives traveled more than 5 million miles in nine weeks. In the first week they called on 90 percent of all the opthalmologists in the United Statessome 9,000 of themto present the first of the three products, "Timoptic." The operations department worked round the clock in 12-hour shifts, six days a week for almost three months to prepare 2.5 million special dispensers for that drug. In order to launch the second product, "Clinoril," more than 110 million packaged tablets had to be prepared within a little over a month. Measured by the number of prescriptions filled in the first two months alone, it was the fastest-selling new prescription drug introduced in the United States in 20 years. During the third month, MSD representatives met over 50,000 physicians to discuss the new broad-spectrum antibiotic "Mefoxin." In addition, 3.2 million pieces of promotional literature were printed and distributed for the three drugs in 61 daysa process that normally takes 90 days for a single new product.
What was the result of Mercks intensive effort? Six years later Timoptic is one of the worlds leading medications for the treatment of glaucoma, Clinoril is one of the most widely used drugs for the treatment of arthritic conditions, and Mefoxin is the largest-selling antibiotic in the United States.
Some companies do not wait for a crisis or an opportunity to generate maximum intensity. They consciously induce and maintain peak levels of intensity by setting goals or accepting challenges that can be achieved only by a constant, all-out effort. Milwaukee has never been regarded as a very exciting place to live. Nor is the life insurance industry thought of as a very exciting field. Nor would it appear that there could be anything very exciting about a life insurance company in Milwaukee that calls itself" The Quiet Company." Yet appearances can be deceptive.
There is something exciting about life at 128-year-old North-western Mutual, the nations tenth largest life insurance company, which ranks first in the industry by almost every performance criterion other than size. It is the most admired in its field according to Fortunes surveys of corporate reputations in 1983, 1984, and 1985. Bests Review rates it first among the 71 largest life insurance companies year after year on a variety of technical criteria. The largest business enterprise in Wisconsin, with $16 billion in assets, in 1984 Northwestern Mutual earned nearly $1.2 billion on its investments. Yet it remains restless and ambitious even at this ripe old age and is never quite satisfied with its achievements.
In 1984 Northwestern Mutual set a goal for itself that generated waves of excitement throughout the company and its 4,500-person agency field force and caused a few ripples in the rest of the industry as well. In January of that year, Northwestern Mutuals president and CEO, Donald Schuenke, announced what he termed the "$100 billion challenge." He called on the employees and agents to raise the value of the companys in-force insurance policies from $93 billion to $100 billion before the July annual meeting. To accomplish this goal, the firm would have to accelerate new-policy issues by roughly 30 percent during this period, which would require a dramatic increase in sales as well as in all the administrative paperwork involved in evaluating and issuing policies. For a company that was already the most productive among industry leaders in terms of amount of insurance written per employee and per dollar of operating costs, an additional 30 percent increase would be no mean achievement.
The $100 billion challenge demanded not only a tremendous effort and dedication but also extremely high levels of coordination between the field and office staff. "Quiet days" were instituted, during which the new-business department did not answer any telephone calls. Productivity on these days rose from the normal average of processing $78 million of business a day to $105 million. At the July 23 agents annual meeting, Schuenke announced that the company not only had reached the target but had done so two weeks early, making North-western Mutual only the fourth company in the industry to cross the mark of $100 billion of individual life insurance coverage.
A Celebrated Challenge
A far cry from quiet Milwaukee, with its Germanic work ethic and traditional conservatismuntil a few years ago, drinking coffee (except at lunch) was forbidden at Northwestern Mutualthere is another company where creating challenges to generate intensity has become a way of life. On April 24, 1984, San Franciscos Moscone Center became the focal point for a $2 million dealer extravaganza. Some 3,500 people, including 2,000 North American dealers and 1,500 sales reps and software and peripheral-product developers plus members of the press, gathered for the launching of Apples new IIc computer, amid flashing lights, stereo music, stirring speeches, and hoopla. And as if all that were not intense enough, the celebration was perfectly timed to coincide with an earthquake that registered 6.2 on the Richter scale.
The IIc introduction formed part of a carefully conceived and well-executed strategy, which Apple calls "event marketing" and which involves such functions as sales support, public relations, software development, and so on. Besides the excitement, the Moscone event also generated 50,000 orders for the Apple IIc, making it one of the most successful single product introductions in the history of the computer industry. Like the "$100 billion challenge," "Apple II Forever" was an attempt to release energy and channel it into productive work.
Apple has accomplished its meteoric rise by capturing the imagination of the American people with a unique combination of sophisticated technology and an almost playful people-orientation, which the companys logoa rainbow-colored apple with a bite taken outcalls to mind. Apples real strength is its appeal to a vision of the future in which people and machines can live harmoniously and happily together. The Moscone event was designed to release the enthusiastic energies of Apples staff, sales channels, and third-party developers of software and peripherals.
Event marketing at Apple is far more than a mere publicity stunt. It is clearly attuned to the realities of a highly competitive, rapidly changing market where limited retail shelf space has forced a narrowing of the field to a few major brands and failure to become a total success may be tantamount to total failure. A highly motivated and directed workforce and an enthusiastic customer base are critical not only to growth but even to survival in this industry. Event marketing is "a way that we can all focus on what we have to accomplish internally within Apple to make it happen." says Del Yocam, executive vice-president of the Apple II Division; "and its also a way that we can bring all of the external forces togetherour dealer base and rep firms, vendors, press, and analysts." Apple is consciously releasing and focusing energies, internally and externally, for its growth.
Intensity Versus Excitement
While acknowledging the success of Apples strategy, we must be careful not to confuse focused intensity with agitated excitement. Corporate intensity is a rich, highly productive atmosphere based on alert, brisk, harmonious physical functioning, supported by dynamism, enthusiasm, cooperation, and expansiveness, in pursuit of clear values and objectives, whereas an effervescent excitement is a high-pitched, short-lived burst of undirected energy, basically unstable and unproductive, a form of feverish movement that shoots up rapidly and later crashes down. It is the intensity of destruction. For lasting achievement, excitement must be transformed into productive energy and institutionalized as corporate intensity.
Effervescent energy and agitated excitement are a common response to the sudden expansion of new markets, such as the explosive growth in demand for video games between 1979 and 1982, when profits grew by 600 percent, or the nearly tenfold growth in the personal computer market from 1980 to 1983. When the market suddenly opens up like this, hundreds of companies rush forward to share in the wind-fall. The number of American personal computer makers doubled to over 200 between 1981 and 1983.
During the initial period of expansion, demand far exceeds supply, customers clamor for the product, sales boom, and profits soar for every company that happens to be in the field. Activision, Inc. began manufacturing video game cartridges in 1979 with $700,000 in capital and by 1982 had sales of over $60 million. Apple, which had assets of $5,309 at the beginning of 1977, had a stock market value of $1.79 billion by the end of 1980. Intoxicated by fantastic predictions of exponential growth of demand, exhilarated by the rapidity of their rise, companies hurry to grab a larger share of the profits and work with desperate speed to produce and sell more than the competition, without thought for the morrow.
During this phase the customer will buy anything he or she can lay hands on, regardless of quality. Companies prosper even if their product is poor, price high, service indifferent, and attitude rude or arrogant. In the scramble for rapid expansion, most companies ignore the basics of sound management. Systems are absent or only partly functional. The hierarchy of authority is ill-defined or frequently by-passed. There is no insistence on perfect quality, since the market will take anything the firms produce. There is no need to try to please the customer, since the customer is happy just to get the product. Standards for recruitment fall, because there is a shortage of quality personnel in the marketplace. Training of workers is abridged by the urgent demand for greater production. Normal levels of cleanliness and orderliness in office and factory give way to dirt, disorder, and sloppiness generated by the rush to meet deadlines. In such an expansive and buoyant climate, even minimum levels of efficiency are enough to earn high profits. Standards are low, lapses are tolerated, and sales gimmicks work wonders.
When everyone is reaching for the moon, there are a few companies that keep their feet on the ground, their nerves steady, and their eyes leveled on the horizon. When everyone else is excited and jubilant, they remain calm and keep their heads. At a time when even the minimum is enough, they insist on giving their maximum. These few exceptional companies understand that those who take temporary advantage of temporary movements will be temporary companies. They go out of their way to please the customer, even when it is not required to make the sale. They strive to develop the best technology, and they insist on quality, even when the market neither demands it nor rewards it by a higher price. They continue to display courteous behavior during the pressure of heavy work. They try to maintain prompt payment schedules, even when suppliers are fighting with each other to sell them goods on any terms. They take pains to carefully build up their organization, even though it distracts them from production to meet waiting demand. They insist on systematic functioning through appropriate channels, despite the temptation for urgent on-the-spot personal management by the CEO. They maintain high standards of cleanliness and orderliness, as if they were in no big hurry. They recruit their staff with great care, even if it means taking on fewer new hands. They refuse to abridge the training process to catch a few extra worker-days for production. These companies make an enormous psychological effort to adhere to the basics when others are rushing after gold. They work extremely hard and methodically, expending more energy than the situation demands, and this effort creates the foundation for corporate intensity.
When the period of mushrooming growth is over, when sales peak and begin to decline and prices start to drop, when the giant corporations in the field move in to take over from the hundreds of small fries, companies begin to fall as rapidly as they rose. The effervescent ones disappear. The excited ones totter. Those that ignored quality find no market. Those that ignored the customer find they have none. Those with low efficiency cannot compete at a lower price. When, like the South Sea bubble, the boom starts to collapse, companies scramble for survival. They cut production, reduce prices, discharge staff, close facilities, introduce countless gimmicks and giveaways to get rid of swelling inventories. This is 1983 for the video game industry, when Atari, Inc. lost half a billion dollars and cut its payroll by 30 percent, when Mattel Inc.s electronics division lost around $400 million and pushed the entire company close to bankruptcy before Mattel sold it off, when the Timex Group Ltd. slashed prices on its personal computer by 50 percent and still saw its sales cut in half within two months before it finally bailed out of the market altogether.
Now the honeymoon is over, and only the very best can survive. Unless you please the customers, they will not buy. Unless your quality is high, the product does not sell. Unless operating costs are low, every sale generates a loss. As companies fold, the competition thins out. Those that stuck to the basics during the boom find that their customers remain loyal, their markets remain healthy. They still earn profits despite falling prices because their efficiency is high and systems are fully operative. Apple survives and continues to surprise the experts, while countless others fade from memory. This is the phase when giant companies dominate the field. Growth is slow. It requires a hundred times greater energy to survive than it did during the initial period of expansion. Those companies that have been faithful to the seminal values that nourish an organization are able to survive and grow. They pass the test in a million details of everyday functioning.
During the ascending spiral of the market, when it is commercially unnecessary and psychologically difficult to stick to the basics, these companies maintain them as a religious ritual. During the downward spiral, when it is a physical necessity to do even ordinary things perfectly, these companies are able to, because the habit of perfection is already deeply ingrained. The effort these companies have made to stick to essential corporate values through all the vicissitudes of the market cycle has generated an intensity that saturates the organization and overflows on all sides. This intensity is a vast reservoir of productive power that could eventually carry the company to the top of its field.
One That Made It
Apple began in the mid-1970s, like hundreds of other garage operations, with few expectations, no resources, and no clear direction, knowledge, or experience to guide it. Yet early in Apples career, it began to differentiate itself from the pack. In the first year it was probably held together more by "a relentless pressure" than by anything else.7 There were plenty of the errors that youthful exuberance is prone to, but "the early gaffes were concealed by the forgiving nature of an expanding market."8
At a very early stage, Apple began to reach out for the knowledge and expertise its founders lacked. Much of its success must be attributed to its ability to recruit highly qualified professionals with greater talents than the immediate situation necessitated or warranted. The influx of experienced executives helped instill a sense of discipline, while the informal, unconventional atmosphere fostered innovation and expansiveness.
The dramatic response of the market to the Apple II reinforced the vision of the founders that the personal computer was revolutionizing societyand gave the company an inspiring mission around which to rally all its energies. The structure, systems, and skills brought in from outside provided a means to channel these youthful energies into productive work. A succession of talented, hard-nosed presidents managed to instill a nontraditional type of order and discipline without killing the companys idealism and enthusiasm. Within eight years a garage operation had been transformed into a publicly held, divisionalized, multinational corporation holding revenues of $1.5 billion in 1984.
Attention to the Smallest Customer
Energy is the starting point; intensity is the result. But how does that intensity express itself? It is expressed in every action a company initiates, in the smallest and least significant as much as in the largest and most important. In fact, the greater the intensity, the smaller the act in which it is manifested. It is not the grand, dramatic eventsthe crises and the challengesthat are the truest measure of corporate intensity. It is in the way a company attends to its ordinary customers, the way it relates to its lowest-level employees, the way it performs its most ordinary routine daily acts.
Most companies dote on their biggest customers and smother them with VIP service. Every letter receives a prompt, courteous, and proper reply. Every complaint is listened to with due sympathy for the customers viewpoint. Every error is generously compensated. Every appointment and time schedule is adhered to with perfect punctuality. The company displays great thoughtfulness in anticipating its most important customers needs and preferences as well as a strong desire to please in every way possible. All this requires a very great effort by the entire company, from the CEO at the top, who may have to personally call on the customer to take an order or handle a problem, all the way down to the shipping department, which must follow the customers special packing instructions without error and deliver merchandise at short notice on a high-priority basis, bypassing other customer orders to do so. In dealing with the VIP, everyones energy and enthusiasm are at a high pitch, cooperation between people and departments is at a maximum, the organization puts on its best performance.
But when it comes to the small customer, how many companies extend the same consideration and treat them with the same sense of importance? The common experience of small customers is that their orders are the last to be filled, their letters often "misplaced" and never answered, and their complaints most frequently ignored. The effort required to extend VIP service to the smallest customer is truly enormous. Every staff member must be continuously full of enthusiasm and on his or her best behavior. Every system must work smoothly and flawlessly. Punctuality must be maintained as an established routine, no longer a special effort. All this requires a tremendous expenditure of energy.
For C. E. Woolman, the founding patriarch of Delta, every single customer was precious. "Get me one more passenger," he was always saying. Add one more passenger to every Delta flight and you are adding $50 million in revenues a year. Jim Ewing, Deltas director of national media and internal publications, recalls that one time when he boarded a flight with Woolman, a flight attendant informed them that the plane was overbooked. Woolman turned to Ewing and said, "Jim, it looks like you and I are going to have time for a cup of coffee back in the terminal." When a newly employed executive called up Deltas station manager in New York ordering him to hold the next flight for ten minutes till he could reach the airport, the station manager contacted a flight controller who called Woolman for clearance. Woolman replied, "Have I ever asked you to hold a flight for me? Send her off on time."
Woolmans attitude toward the customer pervades the Delta organization from top to bottom. Flight attendants Chris Hendrix and Lynn Gauwitz could both recall occasions when they gave their own food to hungry passengers on flights without meal service. When an elderly disabled woman showed up unescorted for a Delta flight, another Delta flight attendant, who was just leaving duty for a few days off, volunteered to fly for another eight hours as a passenger in order to escort the woman safely home.
Keeping to the flight schedule is a commandment at Delta. Delta mechanics often assist in loading baggage to ensure that flights take off on time. If a Delta flight is behind schedule for whatever reason, any available employee, including executives, may pitch in to clean the cabin so the plane can leave sooner.
Deltas marketing division is constantly striving to improve the speed and courtesy of its phone reservation agents. Recently Delta has brought down the average time for answering phone reservation calls to the very low level of 20 seconds, even during peak hours.
As a result of such a persistent and dedicated effort to serve the customer best, the entire organization rises to a peak level of performance and maintains itself there. The enormous energy expendedor rather, investedis converted into a constant state of organizational intensity.
Attention to the Lowest-Level Employee
At the higher levels of management, most firms maintain respectful and cordial relationships among colleagues, with people adjusting for each others convenience, tolerating mistakes, and refraining from open confrontations. How much greater effort is required to display the same patience, courtesy, understanding, and tolerance when dealing with subordinates as we express in dealing with colleagues and superiors.
Bill Marriott, Jr., president and CEO of Marriott, says that one of the real keys to his fathers success in building up what eventually became a major multibillion-dollar corporation from a single root beer stand was the way Bill, Sr., related to his hourly employees. "In establishing the culture of the company, there was a lot of attention and tender loving care paid to the hourly workers. When they were sick, he went to see them. When they were in trouble, he got them out of trouble. He created a family loyalty."
During the early 1930s, when Bill Marriott, Sr., was operating six Hot Shoppes in the Washington, D.C., area, he and his wife would frequently drop into the restaurants at off-hours to chat with the manager, cooks, and waitresses. He firmly believed that if you want to please the customer in a service business, "youve got to make your employees happy. If the employees are happy, they are going to make the customers happy."9
C. E. Woolman recognized from the outset that Delta was in the people business, dedicated to serving people, and to carry out that mission, the key ingredient was people. Deltas president, Ron Allen, says of Woolman: "He showed so much interest in the individual. For example, it was not unusual to find him in the hangar talking to the mechanics, just seeing how the day was going." Woolman took great pleasure in bringing his homegrown orchids to the office for the ladies.
Woolmans attention to employees has become institutionalized at Delta. Every year teams of top executives go around to meet with every group of employees in the country to discuss the companys current objectives and hear whatever employees have to say. We pressed Hollis Harris, senior vice-president for passenger service, to tell us what it is he tries to communicate during these meetings. "The main thing we are trying to communicate to our people is that we are interested in their problems and their suggestions. We are concerned with them personally. We believe that if we do communicate that, they will communicate the same attitude to our customers."
Delta considers each and every employee so important that even before hiring an agent in Seattle, the company will fly the final candidate all the way to Atlanta for a final round of interviews. Deltas open-door policy enables virtually any worker in the company to meet the chairman or president with a suggestion or a complaint. To listen carefully and consider every idea that comes from anywhere within the organization requires genuine openness, considerable psychological effort, and enormous patience. How much easier it is to just keep the door closed!
When each employee in an organization is treated and treats others with respect and importance usually accorded only to top management, the very best attitude and behavior are brought out. Cooperation, coordination, and harmony grow to a far higher level. Every employee exhibits a far greater sense of commitment and responsibility. The employees full energies and enthusiasm are released and get magnified by reverberation. A positive milieu is built up within the organization that becomes a permanent culture of the company and a rich, supportive atmosphere of intensity.
Success in Small Matters
The intensity generated by serving the smallest customer and relating to the lowest-level employee also results from giving full attention to every routine detail of work.
Roberto Goizueta, chairman and chief executive officer of Coca-Cola, really believes that "God is in the details."10 Francis Rodgers, a recently retired vice-president of IBM, says, "above all we want a reputation for doing the little things well."11
Julius Gwin, comptroller at Delta Air Lines, told us: "One of the reasons the company is so successful is that people pay attention to small details." C. E. Woolman set the tone by his own words and actions. Elimination of waste was one area where Woolman was really a fanatic for detail, and everyone knew it. When a relay tower was being dismantled, the supervisor was concerned about how to dispose of 70 feet of rusty wire that had been used as a support. He knew Woolman would not approve of discarding it. While the supervisor was contemplating what action to take, Woolman arrived on the scene and inquired how the wire was going to be used. The supervisor replied, to Woolmans approval, that he planned to sand it down and reuse it. A week later Woolman visited the workshop to ask the supervisor about the wire. The supervisor assured him that it was being sanded. The next morning Woolman returned with the secretary-general of the United Nations, whom he was showing around the premises. Woolman was pleased to find the supervisor sanding the wire himself. "Its good," he remarked, "to see people who attend to details."
Expenditure is another area where Delta is obsessed with small details. That is part of the reason why Delta has earned the title of "the worlds most profitable airline." Cost control at Delta is both comprehensive and minutely detailed. All items of expenditure above $1,000 in this $4 billion company must be approved by an executive committee headed by the president, which meets every Monday. Lesser amounts can be sanctioned by a senior vice-president but are still reported to the committee on a list the following week.
Item:Typewriter rental, $95
Item:Snacks for employee meeting, $90
Item:Dishwasher repair, $309
Just how small an expenditure is of concern to Delta? Gwin says that he and Frank Chew, the treasurer, "can spend up to $25 with impunity!"
It is in the small, routine items of work that the most successful companies surpass the rest. It is not very difficult for staff members to be punctual for a conference addressed by the chairperson of the board or a sales meeting with a $10 million customer. But to maintain punctuality for routine daily meetings with subordinates is very rare in most companies. It is easy to clean factory floors and polish machinery in anticipation of a scheduled visit by the CEO, but to constantly maintain high levels of cleanliness requires a tenfold effort. Many companies reply to important phone calls and letters on a high-priority basis, but to respond to every call and letter the same day requires a highly disciplined, well-organized, and dedicated staff. Important correspondence and documents are usually kept safe and are "only occasionally" misplaced in most organizations. But how many companies maintain faultless systems for filing the least important piece of paper?
Even after Marriott Corporation had grown to include hundreds of facilities around the country, Bill, Sr., vowed he would personally inspect every restaurant and hotel at least four times a year. Don Mitchell, vice-chairman of Marriott and former president of Sylvania, called Bill, Sr., "a perfectionist of the most avid type." If during a tour he saw a few cigarette butts on the floor, he would pick them up and say, "The restaurants are filthy." Today the company is far too big for any single individual to visit all its facilities even once a year. But Bill, Jr., and other senior executives try to visit as many as possible and to continue the tradition. What is the smallest thing they look for when they visit a Marriott hotel? Fingerprints on the brass door rails, dirt in the light fixtures.
Everyone makes an exceptional effort to perform well under exceptional circumstances, but the truest test of efficiency is how an organization carries out small, recurring routine tasks. Even in very successful companies, 25 percent of routine work may not be done properly on a regular basis. If the smallest work at the lowest level is always to be done well, it is not enough that employees are motivated, or that supervisors are attentive, or even that middle-level managers take interest in it. It is only when top management is fully committed to perfection at the lowest level that it can be achieved and maintained. Proper performance of routine work in each department depends on proper execution of routine work in other departments to which it is related. Consistency between departments depends on the establishment of uniform standards at a higher level that are passed down, monitored, and enforced. That is why the drive for perfection must pervade the entire organization from top to bottom in order to be successful.
Companies like Delta and Marriott that make an extraordinary effort to do ordinary things promptly and perfectly raise their normal level of performance to a high pitch of intensity and release a hundredfold greater energy for growth.
Effort Releases Energy
Where does all this energy come from for investing in excellent performance and building up organizational intensity? The more energy an individual or organization expends on constructive work, the greater the energy at its disposal and the greater its strength. How does a bodybuilder build up his or her body? By constantly expending more and more muscular energy in constructive physical exercises. How does a runner build up endurance for longer races? By constantly running farther and harder each day. Every runner and every successful executive knows the phenomenon of "second wind." You run and run, work and work, until you have exhausted your last breath, and suddenly a miracle happens. A full breath of fresh air fills the empty lungs, a burst of fresh energy fills the tired limbs or dull mind. The gold-medal runner is one who is constantly exhausting every ounce of energy and constantly getting "second winds," and companies that generate high intensity are much the same.
The founders of successful companies are only rarely people of exceptional talent. But they are almost universally people who work very hard and are able to inspire others to work hard, too. They are sharply focused and highly disciplined and direct all their energies to give life to something greater than themselves.
Creativity, achievement, and enduring success are associated with high levels of energy. Successful individuals and companies somehow are able to release, mobilize, harness, and control these energies through an effort of will and self-discipline and channel them into productive and carefully executed work. In the process, these unstable raw energies are converted into a steady state of radiating intensity that saturates the organization. This process involves not only the physical energies that move our bodies but also the psychological energies that excite, motivate, and enthuse us and the mental energies that inform and inspire our thoughts. The intensity that results may be expressed as a dynamic power for focused action, as at Merck; a calm, steady, unagitated drive to excel, as at Northwestern Mutual; a rich, cheerful, overflowing enthusiasm, as at Delta; or a clear perception and firm commitment to the realization of a high and distant goal, as at Apple.
Perhaps the ultimate example of this state in the individual is the self-mastery, perfect harmony, and grace of ballet dancers. Compared to the energetic, clumsy, and uncontrolled gestures of children, the movements of mature dancers are poetry in motion. Every muscle of their body is under perfect self-control. The nerves are absolutely calm. There is no trace of excitement or agitation in the expression on their face or in the rhythm of their dance. Their mind is alert, concentrated, still. They are able to move from a state of tranquil repose to dynamic action in a flash, to suddenly freeze animated in midair and again resume their dance with perfect form and graceful ease. Calm, power, harmony, and perfection are the attributes of excellence in dancers and in companies.
The highest art of dancers is expressed in the gestures that accompany their movementsa slight turn of the hand, the blinking of their eyes, the faint glimmer of a smile on their lips. The highest art of corporate excellence is expressed in the smooth, graceful execution of the least significant routine actsa warm, cheerful tone in the service agents voice, a letter promptly and properly answered, a file in its correct place, a storeroom or light fixture immaculately clean, a genuine concern for the lowest-ranking person in the organization.
The conversion of energy into intensity and the expression of that intensity in the perfect execution of work are the keys to the achievement of enduring success. But who is to generate this intensity, and how is it to be done? To answer these questions we must first introduce ourselves to the most important person in the life of any organizationwhich some may be surprised to learn is not the founder or even the CEO.