Business Strategies Are Easy to Spot with Big-Name Winners and Losers

High-powered corporate officers named names—of CEOs and companies that flopped or soared—in assessing the best strategies for business at a panel that invited the audience to “stump the strategists” at Management Conference May 18 at Gleacher Center.

Questions ranged from the quality of corporate leadership to the value of consultants and led with an examination of Robert Nardelli’s failure to turn Home Depot around. “He came in with answers, not questions,” said Alan Gilman, chairman of Steak ’n Shake. “And the answers were from his GE toolkit. The retail business is entirely different from the manufacturing business.”

Gilman contrasted Nardelli with Alan Questrum, who he called “the outstanding turnaround merchant in the U.S.” Among Questrum’s successes have been JCPenney, “which was getting killed by Kohl’s.” Questrum refocused the merchandise and showed more sensitivity to customers. His performance also stood out at Federated Department Stores, Nieman Marcus and Barney’s, Gilman said.

Panel moderator James Schrager, clinical professor of  entrepreneurship and strategic management, responded to another question with criticism of the purchase of Chrysler by Mercedes-Benz. “There’s no economy of scale when you get that big,” he said.

Gilman recalled the days when General Motors claimed 60 percent of the automotive market, with marketing men boasting repeat sales and engineers riding herd on quality. “What happened when the bean counters moved in?” he asked. “They moved away from both.”

American automakers in general sat on their hands when Japanese companies came along with small cars. “There was no understanding that markets were going global,” Gilman said. “Today there is no Plymouth, no DeSoto, no Olds. Their sights were set too narrow.”

A student asked about the role of consultants. “I hated them until I found out how useful they could be, said William Carmichael, a director of Simmons, and Cobra Electronics. They can ease employees’ workload, although their presence may be resented, he said.

Consultants are fine as long as it’s remembered that strategy should be set by CEOs, Schrager said. On the positive side, consultants are independent and offer a fresh point of view. Also, Schrager said, “It’s lonely at the top, and consultants can sometimes take that away.”

Another student asked panelist John Lewis, president of ACNielsen North America, about the accuracy of television ratings. “It’s as good as any sample can be,” Lewis said. But in this age of TiVo, the company must keep up with technology. “We’re starting to fall behind,” he said. Asked if TV commercials are on the way out, Lewis said, “They aren’t going away. But their efficiency is declining. The question is, what are people blogging about?”

One audience member raised the issue of McDonald’s, which embarrassed Wall Street analysts who said the company’s growth was over by finding new ways to grow—expanding globally and adding drive-throughs, to name two examples. The chain’s restaurants “are in the hands of many people and they’re in that store every day,” said Gilman. But he noted that McDonald’s had taken some bad advice as well. “They bought Boston Market and Chipotle, they tried out deli and grilling, and then they fired that guy.”

Turning to another success story, that of Starbucks, Gilman said, “They have robust coffee and an intense flavor profile, and they allowed people to feel good about themselves. They carry a cup around like a badge of honor.”

“Are you saying Starbucks’ strategy is well grounded?” asked Schrager, and everyone groaned.

—Gary Wisby