13 lucky management decisions

"Managerial decisions are risks", writes Stuart Crainer in the Winter edition of Business Strategy Review, London Business School's journal. Crainer continues: "Looking back, they may seem obvious. Of course, Intel had to get out of the memory business. IBM? Bound to be globally successful. Mickey? Great name for a cartoon mouse. But did Walt Disney know that he would make millions of dollars from a cartoon mouse? Did he know it was an important decision at the time? I don't think so. It wasn't a foolproof scheme to get rich quick, just a decision that worked".

He goes on to offer a myriad of great management decisions from his book The 75 Greatest Management Decisions Ever Made. Here we have picked 13 of our favourites:

1. In Thebes in 1000 BC, someone lost a slave called Shem. They decided to post an advertisement offering "a whole gold coin" for the slaves return. This is the oldest existing ad and the precursor of the modern advertising merry-go-round.

2. Eighteenth century British banker Thomas Coutts wrote off the royal family's gambling debts to keep them as customers. A great loss-leading strategy - Coutts thrives as "the top people's bank" to this day. Her Majesty the Queen is a customer.

3. In 1850 Julius Reuter used carrier pigeons to communicate share prices between the end of the Begian telegraph line in Brussels to the end of German line in Aachen. It was the beginning of a news and information business.

4. Pierre du Pont decided that the Du Pont company needed financial management. During his time with the company (1902 to 1940), he developed modern corporate accounting, including concepts such as double-entry bookkeeping, financial forecasting and return on capital invested.

5. After Warner Brothers produced the first talkie in 1927, others joined the fray. But studios weren't sound-proofed, so filming took time. RKO number two, Sam Jaffee, suggested RKO should film at night when it was quiet. It did so and stole a march on its rivals.

6. In 1930 Messrs Eugene Ltd of Dover Street, London, decided to use closed-circuit television to advertise their permanent waving technique at the Hairdressing Fair of Fashion. The TV ad was born.

7. On November 27, 1948, Polaroid demonstrated the world's first instant camera, the Land Camera Model 95. The brave management decision was to price it at $89.75 against Kodak's Baby Brownie, priced at $2.75. The entire initial stock of 56 was sold in the first day, and Polaroid was launched.

8. In 1961 Jean Nidetech was put on a diet by the Obesity Clinic in the New York Department of Health. She invited six dieting friends to meet in her Queens apartment every week. Her invitation created Weight Watchers and the slimming industry.

9. Ray Kroc liked Mac and Dick MacDonald's hamburger stand in San Bernardino, California, so much that he bought the rights to the fast food concept and then franchised them, creating a huge global company and a vast market for quick-served food.

10. In 1977 Ben and Jerry decided to do a $5 correspondence course in ice cream making. They now make a lot more ice cream than they ever thought possible.

11. In 1979 a Hewlett Packard engineer found that by heating metal in a specific way, it splattered all over. The decision to exploit this launched the ink jet printer business - 10 years later, this decision became the basis for over $6 billion in HP revenues.

12. In 1989 Coca-Cola was involved in one of the great corporate debacles: the new-recipe Coke. This was truly ill-advised. The good decision was to quickly go back to the older recipe. Many would have been tempted to stick with the decision and weather the storm. Sometimes the best way forward is to retreat.

13. A computer programmer, Pierre Omidyar, starts AuctionWeb in 1995 to see if the Internet could be used for electronic selling via bidding. eBay is soon born.

Comments

[Paul Feagan]

Bill Gates, working as a freelance programmer, was asked by IBM to write a basic PC operating system. MS-DOS was supplied but for some reason IBM didn't aquire the rights. Millions of IBM clones later and Bill was chairman of Microsoft collecting royalties on every copy of MS-DOS.
Apple had already created a windows-type operating system but the restriction of use to their own machines meant that IBM clones were still stuck with the boring C:/ prompt.
Bill Gates, now awash with cash, was able to fund development of the MS Windows Operating System.
The rest is history.

[Mark Chisholm]

Seem to have forgotten the Knights Templar here who invented the international banking system. They provided travellers with proof of money owned but removed the need for them to travel dangerous lands with hard currency. When the traveller arrived at a destination they could exchange their credit note for cash. Paper money and travellers cheques all in one.

[Justin]

I belive it was RANK XEROX who came up with the Idea of

Windows
Icons
Menus
Pointer

or the `WIMP` Enviroment, they didnt patent the idea. MANY MANY years later Bill Gates company come up with the ghastly win3.1

[Tim van Laun]

Luca Pacioli first described the double-entry bookkeeping system, already popular with merchants in Venice, in 1494. His work shows many of the modern attributes of accounting practice - assets & liabilities, year-end, trial balance.

[arthur waldman]

Gee and Rothschild used pigeons to get news of NApoleans defeat @ Waterloo..{whereupon he started selling British assets creating a sell-off that he then scooped up at discounted prices...teh start of hedge Funds??}

[Tom Donnelly]

Legend has it that England's King Henry VIII was so impressed with this type of meat, he dubbed it Sir Loin. The more likely source of the name if from the French word SURLONGE (sir-lawn), which literally means over the loin. Now it's an international best seller!!

[Kris Jenkins]

Pierre du Pont developed double-entry book-keeping? I think not. Debit du Pont, credit the Medici brothers (back in the 14th century).

[Stuart Crainer]

Assembling this list what I think was interesting was that decisions are often extremely lucky rather than shrewdly calculated and often evolve rather than happening at a precise time -- they are magic moments which often appear fairly ordinary at the time they happen. Anyone who announces that they have made a great decision is asking for trouble. This gives us all hope.

[Sophie Pollard]

#9 is based on commonly-held misinformation - propaganda from Kroc, master of PR. Fast food was already extremely popular by the time that Kroc bought the company, and the business was already franchised. Kroc did not invent the Golden Arches logo and pretty much all of the food items which he tried to introduce to the menu flopped.

[Dan Russell]

Quote: "someone lost a slave" - interesting interpretation of the circumstances, perhaps Shem decided being a chattel was fairly unfulfilling and "opted out".

[Fazal]

the Waltons and WalMart?
They control the largest retailer in the world. Got to be worth a mention, surely?

[Bob]

"6. In 1930 Messrs Eugene Ltd of Dover Street, London, decided to use closed-circuit television to advertise their permanent waving technique at the Hairdressing Fair of Fashion. The TV ad was born."

Not very likely. Philo T. Farnsworth, the inventor of televison, was still hard at work perfecting his theory and development of the first television. There were no TV ads then, either.

Read about it at the following location on the net:

http://www.videouniversity.com/farnhal.htm

[Kookas]

RE: Bill Gates. The first comment on this blog is thoroughly inaccurate: Bill Gates is not a coder and never has been. He has always been in management and marketing (admittedly MS's two key areas of expertise).

In the early days of home PCs, there was a great choice of operating system: IBM's own but inadequate PC-DOS, Peter Norton's superior Q-DOS, and MS-DOS amongst many others. Microsoft's OS was in all respects an average, technically mediocre product.

MS's coup was to secure a deal with IBM to distribute MS-DOS with new PCs at very low cost. This was a very shrewd business decision and it allowed MS-DOS to become the dominant PC operating system, and paved the way for MS to take the monopoly they've exploited to great profit ever since.

Technical strength has never been the focus of MS's business; they have always relied on marketing, and creating the illusion of need.

The company's unparalleled success, in spite of the low quality of their actual products, is truly a glowing testament to the brilliance of their executives' business skills.

[David Henry]

Bill Gates DID NOT invent MS DOS.
First came CP/M developed for the 8080 microprocessor which then evolved into QDOS. BG bought the rights and marketed it to IBM.
If anything Microsoft excelled in marketing, not technical proficiency.

[Fweezabird]

Here's a couple of brave decisions that have worked out well for American Airlines.

1. Flying very much in the face of the psychedelic sixties zeitgeist, American Airlines decided to dispense with a paint scheme on the fuselages of its aircraft and instead sport a bare metal surface buffed to a gleaming shine. Derided at the time as a retrograde return to the aesthetics of the pre-jet age, the decision was confidently predicted by the sages and pundits to be a sure-fire marketing disaster. Yet this inspired decision has saved American Airlines many, many millions of dollars over the years. It avoids substantially all of the very significant material, labour and lost productivity costs associated with maintaining a paint scheme on its fleet. Also, it significantly reduces aircraft operating weight and surface friction, thereby achieving significant fuel savings (whose value is of course increasing in line with rocketing fuel prices). Sweetest of all though, its aircraft are today some of the most distinctive and readily recognised at airports around the world.

2. American noticed that only a very small percentage of its passengers consumed the so-called 'salad liner' served with its in-flight meals (the 'salad liner' is the limp lettuce leaf, topped with a slice of sweaty tomato and a chewy sliver of greying olive that line the bottom of your typical starter or side-dish). By dispensing with the salad liner, American saved $2.0m in total direct and indirect operating costs in the first year.

[Blah]

Goldman Sach's side stepping of the credit crunch owes a lot more to luck than anything else, probably worth a mention

[Me]

Another interesting one was that the ATM was invented by John Reed of Citibank. Initially, he saw it as a way of receiving money from customers and therefore increasing the bank's balances. Oops... ended up being just the opposite.

[sharp]

I suppose writing a book called *The 75 Greatest Management Decisions Ever Made* and then filling it with a load of bogus and innaccurate blah and then getting Times to endorse it - Decision76? Possibly not great, but it is clever.

[Carol Lewis]

Clearly I'm not going to agree with you on the "bogus and inaccurate blah". Both I and the London Business School think the book is an interesting read. So yes, Stuart made a clever decision. It is always easier to criticise than to do. What is interesting is that many of these decisions provoke a feeling of "why didn't I think of that?" They are great and clever because in retrospect they seem so damn simple. The trick is being the first to see, and capitalise, on an opportunity.

[Robert]

The first public demonstration of television was by John Logie Baird in Soho London on 26 January 1926.

The comment about Philo T. Farnsworth seems to be an attempt by Americans to take credit as usual.

[Andora Glanvill]

Maybe Stuart Crainer's new book has a few inaccuracies but with the amount of interest that has already been shown it was surely a good idea to publish. I hope he makes a few quid!

[Kent Betts]

Bill Gates wrote a BASIC language interpreter for the Altair 8080. This eventually attracted the attention of IBM, who wanted to license it, and who in passing asked if Gates also had "an operating system to run it on." Gates phoned the owner of PC-DOS and paid him $50k cash for the full rights. When IBM returned a few days later, Gates had both BASIC and an OS.

[Wally Fairway]

Henry Ford did not invent the automobile nor did he invent the assembly line - but he brought those two together and paid his workers $5 a day. More than anyone else paid in those days, and a wage that allowed them to be able to purchase an Ford Model T.

And now 100 years later we have a global oil crisis.

[williamcompanyman]

you bought Coca-cola's propaganda hook, line, and sinker. "New Coke" was introduced to clear the public's palate while Coca-Cola switched over from cane sugar to high fructose corn syrup. When "Classic" Coke was "re"introduced, it was even newer than new Coke.

A group of Senators from the South and the Middle West of the United States have put such incredibly stiff tariffs on cane sugar to protect a tiny handful of sugar growers that in the U.S., you can only get real Coca Cola at Passover, as corn syrup is not kosher.

The Life Savers candy company actually had to move to Canada to be able to afford the cane sugar for their product.

High Fructose corn syrup, like trans fats, is a terrible unhealthy invention by the way, which became necessary in the U.S. because of a corrupt government policy.

New Coke? You're still drinking it...

[JonL]

In order to shave money off its annual $200 million fuel bill, UPS developed software that maps out driver routes with no left turns.

[Steve]

....Yet this inspired decision has saved American Airlines many, many millions of dollars over the years. It avoids substantially all of the very significant material, labour and lost productivity costs associated with maintaining a paint scheme on its fleet.....

Another myth...A painted skin has no significant ongoing maintenance costs whatsover other than an occasional wash. (And of course a repaint every 4 or so years which are normally done on heavy checks anyway so not losing not much productvity of the airaft) A buffed skin however requires constant polishing and manpower costs which offsets any or a lot of savings. The cost/benefit between both methods is actually very small (if at all)

http://tinyurl.com/2mnl2d

[Steve]

....you bought Coca-cola's propaganda hook, line, and sinker. "New Coke" was introduced to clear the public's palate while Coca-Cola switched over from cane sugar to high fructose corn syrup. When "Classic" Coke was "re"introduced, it was even newer than new Coke....

Another myth of a myth itself...ahhh so many urban legends to choose from, which ones right..:-)

http://tinyurl.com/3h7hp

[Jayne]

1. I believe the oldest form of advertising goes to the oldest profession **cough** The ladies would walk with "V" imprinted on the bottoms of their sandals...gentlmen would follow. #3 is wrong...Rothschilds early 1800's. #4 is wrong. #6 is wrong, #9 is wrong and #12 is wrong. Maybe Snakes and Ladders should look into the accuracy of their topics OR is it easier just to print things slap dash? This was my first time on this site. Never again even though I booked marked it.

[Carol Lewis]

As the comments here testify great initiatives are often the subject of controversy and many attract multiple claims of ownership.

Perhaps only Methuselah could arbitrate between the whores and the lost slave... other claims though are more easily verified. Reuter's says that it's beginnings are exactly as quoted: http://about.reuters.com/home/aboutus/history/index.aspx - no mention of Rothschild.

Other claims are not so black and white. Many accounting techniques were first developed hundreds of years ago and continue to evolve. There are multiple claims to have 'invented' double-entry bookkeeping and other accoutancy techniques such as return on investment many of which date back to the 14th century but there are few claims more justified than Du Pont's to have pulled it all together in to a coherent corporate financial system, surely?

But that's the fun of blogs you never know who is going to comment next or what they are going to say. Debate and discussion are good though. Bring it on I say ...

[Freek Vermeulen]

Having done research on "where strategies come from", with various successful companies, I would even dare to propose that ALL successful strategic innovations had a major moment of "serendipity" at some point in the process. If you're interested, see my blog http://www.freekvermeulen.blogspot.com/ for some examples (and more to come in the future).

[James McFarlane]

Here in the UK we are still on "old coke" made from cane sugar. Only in the US is high fructose corn syrup used.

[Iain]

David Henry is right in what he states about CP/M etc.
Bill Gates did buy the rights and marketed it to IBM, but only after he had tweaked the code and made it much better

[meralyn mungereza]

I think the idea of the book was quite brilliant that's why I checked out the page! but I guess if someone is goin to make such claims, they should do their best to get the facts correct, because when the wrong story circulates for so long, the truth may never comeout and when it does, it will sound inaccurate! that is the danger with having so much information today, evrybody can voice their opinion and never have to explain themselves, unfortunately some readers never get to see the corrections made in subsequent issues or publications!

[Gerry]

Surely the oldest form of advertizing is nakedness? what about the tootpaste firm that sold is own brand of toothbrush 3/8" longer than standard so people would use more toothpaste.
Or advertisers justifying their sleazy exsistance by saying the offer the customer choice.
Henry Fords greatest marketing ploy was built in obselesence,in his cars that way ensuring spare parts and creating a cash cow.