Good companies such as M&S and Levi Strauss were leaders in the technological revolution but systems are no substitute for a human strategy.
By ROBERT HELLER, the founding editor of Management Today.
The downfall of the ungodly is deeply satisfying; that of the righteous, plain unfair. Marks & Spencer truly earned its reputation as Britain's best-managed company. Levi Strauss really deserved its accolades for guiding US business towards the management light.
As businesses, both built brands that seemed invincible. As employer, M&S was the model of modern paternalism, while Levi's preached and practised worker empowerment and liberation. Alas, 16,310 of Levi's workers have now been liberated to find other employment. M&S is also in the firing line.
There is no evidence that less benevolent people-policies would have left either paragon better off. Nor can they be accused of getting stuck in old-fashioned ways and shunning new-fangled technology. On the contrary, both companies bid for leadership in the IT revolution. M&S is even singled out for lavish praise by Bill Gates in his Business@the Speed of Thought.
Gates claims information technology enables M&S to 'respond immediately to consumer preferences and to achieve the kind of personalised service that's impossible to get at a typical supermarket chain'. He concludes that M&S 'is tying itself closely to customer buying patterns so that those patterns will drive its business processes in real time'. Yet the company's heavy over-estimation of fourth-quarter sales, plus unmistakable evidence of departure from 'consumer preferences' makes Gates' conclusion read laughably.
This panegyric isn't another isolated boob by the prophet who originally thought the internet a subsidiary technology. M&S also has an ardent fan in Gary Hamel, the most incisive critic of big-time corporates. Hamel lauded it for its pioneering innovations, of all things.
In truth, companies such as M&S and Levi's get locked in by their very success. The entire apparatus, and the careers of all within, is geared to doing very well what has always been done. Reshaping such a company's 'entire being' demands sweeping human change that won't be accomplished by information systems alone.
IT hagiography lauds Levi's for its ability to sell you customised jeans.
No such praise attends its 'Customer Service Supply Initiative', launched to cut the time-to-market from 15 months to three, and restock clothes in three days, not weeks. For two years, literally hundreds of Levi's executives and Andersen consultants laboured away at a cost of $850 million.
When the project was finally killed, the three-day target for restocking compared to an actual 27 days. While systems lunacy raged, Levi's market disintegrated - where 21% of US male teenagers thought Levis cool in 1994, only 7% are of that opinion today.
British retail surveys, where M&S once soared above all comers, on all counts, also show a sudden and severe fall. Both managements appear to have lost touch with their customers while making determined efforts to serve them better. Perhaps, when customers become data, managers start managing the screens - and forget about the human beings.
Worse, the systems can separate the company from its own people. Fortune magazine reported that as the doomed Levi's project lumbered on, 'all over the company people had to reapply for their own positions'.
At M&S, head-office cuts reflect the realisation that Baker Street has monopolised the decision-making, and should stick to what only HQ can do. But devolving power, like applying the digital revolution to the supply chain, is not enough. You have to change behaviours radically, from the top to the bottom. Otherwise you get unhappy outcomes, as at Reckitt & Colman. Here, consultants beavered away to modernise management, but ancient Spanish customs survived to undermine actual performance. The latter holds the key. That doesn't mean just financials, which come in after - sometimes long after - the damage has been done. What do customers and staff think about the business and its goods and services? How have their perceptions changed and why? How do these ratings compare with the competition?
The acid test is what happens when the questions are answered. How does the company react to bad news? At Levi's, the reaction to anything meant 'endless meetings, task forces, memos and e-mails' - and no decisions.
Fortune writer Nina Munk thinks this is usual with group decision-making.
But it needn't be and shouldn't be.
Digital technology can facilitate fast decisions, taken by people who share their thinking and information; and who may operate at any level or place in the company. They may well use IT to speed deliveries, reduce lead times and cut inventories - but only in support of a winning business strategy in which they also share.
Technology will not evolve that strategy. But it will help to show how plans compare with actuality. Closing the consequent gap entails applying the full amazing powers of the technology to the right purposes in the right business context. Then the godly will stay good.