Sunday, November 25, 2007

Eating your seed corn

In the book "Built to Last," companies that did well for at least fifty years changed their product line as needed to survive. 3M, for instance, routinely stops producing products, even good ones, to foster innovation and new products.

At least recently, the Lab seems to have been run a bit differently. The analogy is not of an innovative company trying to survive but of a buggy whip manufacturer bought out by a private equity firm. The object is to sell as many buggy whips and as many company buildings as possible as quickly as possible and then close the place down.

In the mean time, sell the tanning solution that makes the buggy whips pretty (think 'safety' and 'security') because this is all the customer wants to buy.

So you get short term income at that cost of eating your seed corn -- there will be no new crops because there is nothing to grow them from.

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