A Talent for Longevity

After a decade or so when new companies seemed to dominate the headlines, old companies may at last be back in fashion. There is something reassuring about a company such as Shell or General Electric, which were in the world’s top dozen by market capitalization way back in 1912 and are still there today. But why are some companies more durable than others?

The key, says Jerry Porras of Stanford University, who gave a lecture on great and long-lived companies at the Royal Society of Arts in London, is “the way a company is put together”. He is doing a study of European companies that are not just survivors, but widely admired and respected: the list includes Shell, Siemens, BMW and – sadly - Marks and Spencer. A similar study in America, he says, showed that admiration and durability went together with “making a contribution to the environment in which they operate” and being “deeply imbedded in the fabric of society”.

One reason why some successful firms do not endure, argues David Garvin of Harvard Business School, is that “relatively few business sectors are for ever”. That helps to explain why Pullman and Singer have vanished from the top dozen: no longer do people travel much by train or run up most of the family’s clothes at home. In that sense, he says, the big oil companies are anachronisms; for, sooner or later, the world will run out of hydrocarbons. If they have not found a new niche, they will go the way of US Steel.

Mr.Garvin. who is doing a five-year study of the management of ten global giants, sees two main routes to durability. One is “active reinvention”, such as GE’s ability deliberately to adapt. The other is “organic adaptation”: 3M, founded in 1902, has survived by edging sideways from abrasives and adhesives into new markets. Looking at the crop of companies that have soared to the top in the past decade or so, he singles out Dell Computer as possibly having sufficient flexible and transferable supply-chain management to be tomorrow’s 3M.

Reinvention and adaptability are not the whole story, however. John Kay, a British economist, points to the importance of competitive advantage. Market power, of the sort conveyed by licenses or regulation, tends to erode over time. Technological innovation brings transitory gains, unless a company understands how to reinvest to widen its base, as Glaxo has done. But brands and reputation, if managed properly, can also prove remarkably durable. Yet “it is possible to screw up”, admits Mr.Kay. “My students cannot believe that Hilton was once a generic term for a very good hotel.” GE is an extraordinary example of a company whose strength lies in its ability to pick and train the best managerial talent. For most of the 20^th century, GE had a succession of chief executives just as admired as Jack Welch.

None of these explanations answers the question that John Sunderland, chief executive of Cadbury Schweppes, poses. His company is a combination of 200-year-old Schweppes and 150-year-old Cadbury, imbued with strong social conscience of the Quaker Cadbury and owner of some of Britain’s (and the world’s) best-known food-and-

drink brands. That might explain why the company is both durable and admired. Yet, as Mr.Sunderland points out, Rowntree was also a 150-year-old Quaker company with a stable of brilliant brands, but “was sold out to Nestle by the investment managers in ten minutes. “ What makes the difference? Sometimes, it seems, old companies just roll over and die. A bit like people, really.

` The Economist

Notes

1. way back in 1912 – as long ago as 1912
2. Royal Society of Arts – Королевское общество покровительства искусствам (организует лекции, выставки по пропаганде научных знаний в различных областях прикладного искусства)
3. no longer do people travel – эмфатическая конструкция: см. Краснов § 20
4. Jack Welch – former Chairman and CEO of General Electric (1981-2001), gained a solid reputation by using his innovative management strategies and leadership style to run GE, increasing its market value by more than $400 billion over two decades
5. to reinvent – перестраивать, переосмысливать;

reinvention (of a company) – перестройка; syn. restructuring

6. Quaker – 1) квакер, член “Общества друзей”

2) фирменное название многих пищевых продуктов (Quaker breakfast cereals, Quaker oatmeal products and pancakes, more)

7. to roll over and die – потерять желание продолжать борьбу

Vocabulary

to manage – управлять, администрировать; manager– управляющий, менеджер; managerial (staff, talent) – управленческий (персонал, талант); managing director – управляющий директор; investment manager – инвестиционный менеджер; management– управление, менеджмент

niche– “ниша”: специализация фирмы; рынок товаров, услуг, который слишком мал для сильной конкуренции или пока никем не занят

global giant – крупнейшая международная компания

to reinvent – придать новый облик предприятию; reinvention – перестройка, придание нового облика предприятию, реструктуризация

to adapt -приспосабливаться, адаптироваться, применяться к новым условиям

adaptable – легко приспосабливающийся, адаптирующийся; adaptation– адаптация, приспособление; adaptability – приспособляемость, способность к приспособлению

supply chain – система поставок

competitive advantage – конкурентное преимущество

market power – рыночная сила

brand – торговая марка, бренд

generic – общий, характерный для определенного рода или группы товаров; generic product– продукт, который не имеет известного бренда, не рекламируется, имеет дешевую упаковку и продается по цене ниже сходного продукта известной фирмы; часто это дешевые копии известных марок (generics)

chief executive (officer) - главный исполнительный директор ( CEO)

Exercises

1. Pronounce the following:

longevity, transferable, adhesive, managerial, reinvention, transitory, anachronism, hydrocarbon, niche, route, adaptability.

2. Explain in English or paraphrase the following :

to be deeply imbedded in the fabric of society; to vanish from the top dozen; to run

up most of the family’s clothes at home; the big oil companies are anachronisms; companies that have soared to the top; transitory gains; it is possible to screw up; a succession of chief executives; a stable of brilliant brands.

3. Answer the questions:

1. What mainly accounts for durability of a company, according to the researcher?

2. In the U.S., what inspires respect for a company?

3. What future is in store for the big oil companies, and why?

4. What’s the key, in Mr.Garvin’s opinion, to a company’s longevity?

5. How can brands and reputation serve the goal?

6. In what context was Rowntree mentioned?

4. Find in the text words close in meaning to the following:

durability, to endure, to exhaust, to adjust, to ask a question, one after another without interruption, adjustment, to disappear, intentionally.

5. Translate the sentences paying attention to the underlined words.

1. Relatively few business sectors are for ever.

2. Technological innovation brings transitory gains unless a company

understands how to reinvest to widen its base.