“When you are right, you cannot be too radical; when you are wrong, you cannot be too conservative.” – Martin Luther King Jr.
For years, Kimberly-Clark had made nice, steady profits selling paper wholesale. But when Darwin Smith took over as CEO, he believed the future was in consumer paper goods — and he believed that he could create a lot of new growth by making this drastic change in the business.
Not everybody felt it was a good idea. So, to get their support, he sold off all the company’s paper mills so they would have nothing but consumer paper goods to pay attention to. His gamble worked. Today, 25 years later, Kimberly-Clark is the world’s No. 1 paper-based consumer-products company.
In their book “Upward Bound”, Michael and Jerry Useem liken this bold move to rock climbing without a safety net. They praise Smith for his boldness. I don’t know the details of Smith’s decision . . . but unless the wholesale business was about to collapse of its own weight, I’d say his strategy was foolhardy.
Smith was right about his idea, but he had no good reason to know he was right when he acted on it. He had no experience in selling to consumers, so he couldn’t possibly have known how such businesses really work. In closing his own business, he was unnecessarily risking the jobs of the thousands of people who worked for him.
Smith may have known that the trend was away from wholesale manufacturing and toward consumer goods, but that didn’t mean manufacturing would disappear overnight. Surely he could have allowed the business that was working to continue on during the transition. By hedging his bet, he might have slowed progress down a little but would have greatly reduced his risk.
What Smith did was create a revolution. What he should have done, I’m proposing, is create a new division that focused on consumer goods without giving away the old one — the one that was working. All the great business bonanzas I’ve enjoyed have been innovations, not revolutions. Of the half-dozen (at least) booms I have had the good experience of being involved in during my career, none required me to operate without a safety line. The recent Internet-marketing explosion is a good example.
Several of the businesses I consult with have seen their profits double by taking advantage of this new medium. But they didn’t go into it recklessly. They approached it very conservatively — by applying the old, proven marketing formulas that they knew and understood. More importantly, none of these companies abandoned its original business — mail-order marketing. And wisely so, for they needed the resources that were already in place (the people, the cash flow, and the marketplace) to develop the new business.
I don’t believe in climbing without a safety net. I don’t believe in quitting a job before getting another. And I don’t believe in discontinuing a profitable line just because you believe another line will do better in the future.
Was Smith a genius or a lunatic? I don’t know. Maybe he was a bit of both. But you don’t have to be.