Anonymous, RE: All old, large companies are inefficient. If you were a fly on the wall of IBM, GE, GM, Ford, AT&T, or any other company that has been around more than 50 years (most of the DOW components will do, thank you), you're gonna find that they all operate in an inefficient mode. They are just like the government and its bureaucracies. They believed in empire building in the old days and old habits are hard to change
I must not have been clear in my earlier post.
Indeed, every company is inefficient. In fact, in younger, high growth companies, there are even more inefficiencies that some of the old guard. This is particularly the case when revenue growth is paramount (i.e. most every 'Net company out there). Cost control is an afterthought.
My point was that LU should follow the example of GE, one of the companies you cited. Yes, there are inefficiencies at GE. But rather than accept them as a way of life, Welch has instilled the attitude of cost management throughout the company. IBM almost bled to death a couple of years ago before new management (including an outsider as CEO) forced the company to realize that you don't have to completely sacrifice all the good things about a company when your focus on cost control.
LU will be at a crossroad sooner than you think. The company would be well served to follow the example of GE and IBM. If they don't, think about another couple of highly innovative companies--MMM and EK. MMM in particular rivals Bell Labs for innovation, and both were thought of as the finest of corporate America back in the days when I was in school. Both have done a very poor job rewarding shareholders during this decade, in spite of the ideal economic conditions, because they thought that the hard decisions that I am talking about didn't have to be made. |
