The Power of a Simple BIG Objective

Less Is More: How Great Companies Improve Productivity Without Layoffs
by Jason Jennings

(Page 2 of 6)

One company that's a poster child for productivity, Lantech, based in Louisville, Kentucky, discovered the need for a simple BIG objective the hard way. The traditional means for a company to ready their product for shipment involve putting the individual units in boxes, putting lots of little boxes together to make a big box, then wrapping these big boxes in plastic sheeting and sending them through a heated tunnel to form a weatherproof shrink-wrap. When the big boxes come out of the tunnel, they're stacked on a pallet for forklifting onto a truck or railcar.

During the U.S. energy crisis of the 1970s, Lantech founder and chairman Pat Lancaster came up with the idea of wrapping pallets of boxes tightly with strong plastic from a continuous roll. (Picture wrapping a rubber band around your fingers a number of times.) The process meant no more need for shrink-wrap heating, which translated into significant energy savings. Patenting this process and equipment designs, the company spent the 1980s making money hand over fist. Lantech was (excuse the pun) on a roll. Today it's the world leader in stretch wrappers, palletizers and conveyor systems.

That's the bright side of the story but there was a dark side, as well. By Lancaster's admission the company wasn't doing a very good job in a lot of areas. "Quality and customer service were poor, the factory was inefficient, but there was so much demand that we just kept doing things the same old way."

Until one day in 1990. "After arguments all the way to the Supreme Court," he says, "we lost our patent protection and overnight everything changed. We had to admit to ourselves that we'd been selling wheelbarrows and been pretty arrogant about it. All of a sudden everybody else could sell the same wheelbarrow. It would no longer be enough to say we didn't suck worse than our competition."

Pat Lancaster realized in the dark of night and in the bright light of day that the company's free ride had ended. Unless he could dramatically reduce inventories, improve product quality, deliver superior customer service and become more productive, the days of Lantech as a company were numbered.

During the next ten years, Lantech tripled sales without increasing staff, slashed the time it took to build a single machine from five weeks to eleven hours(!), and increased productivity 1 percent a month for the entire time period-all because of one man's focus.

Pat Lancaster's simple BIG objective was to become the most efficient and productive manufacturing plant on the planet and do things better than they'd ever been done.

What? A Company More Productive Than Wal-Mart? Where?

In 1982, New Zealander Stephen Tindall founded The Warehouse, a single-location discount store in Auckland. Fast-forward twenty years and you'll find this publicly traded chain of two hundred stores across New Zealand and Australia outperforming America's Wal-Mart in every metric of productivity. While Wal-Mart puts 3.3 pennies of each sales dollar to the bottom line, The Warehouse puts 6.6. And while Wal-Mart achieves a stunning 24 percent return on equity, The Warehouse smokes them with a killer 40 percent.

At first glance you might think the success of The Warehouse is about technology, but dig deeper and you'll learn it all began and continues to exist because of a powerful simple BIG objective.

In 1982 Tindall, working for another department store, was on a buying trip to the United States and was accompanying a vendor on a supply run to a suburban New Jersey shopping center. When he saw his first suburban discount store, a light went off and he rushed home to New Zealand to quit his job and open his own store.

He took his entire life savings of forty thousand dollars, rented a large old industrial-area warehouse-hence the name-and plopped down thirty thousand dollars of his start-up capital for two computerized checkout terminals. If you're wondering, as I did, where he came up with the money to stock merchandise, you'll understand why he needed the two terminals.

Tindall saw he wouldn't have money for inventory so he went to all the companies he knew that had goods sitting in their own warehouses and offered a proposition. "Put your goods in my warehouse and I'll sell them for you," he pitched prospective vendors, arguing that the stuff wasn't doing them any good sitting unsold where it was. Then, brandishing his computerized inventory and checkout system, he promised to pay them weekly for whatever he sold. The caveat was that if he didn't sell it he could return it, eventually earning him the nickname "Sell-or-Return Stephen."

"Since the day we opened the doors in our first store," Tindall says, "this company has been an enterprise where people come first." But when Tindall says the words, the needle on the B.S. meter doesn't budge. You instinctively know he's telling the truth and want to hear more.

"Look," he continues, sounding a bit like a modern-day Robin Hood, "New Zealand, where we began, is a small island nation and much of what we sell has to be imported. As a result of manufacturers, manufacturers' reps, importers and their agents all taking their markups, the New Zealand consumer was constantly getting screwed and people ended up paying far too much for the goods they purchased."

He quickly showed he'd found a better way. "As soon as I'd proven that my concept for The Warehouse would work, I immediately began applying for licenses to become a direct importer in as many categories as I was able. Do you know the thrill," he asks, "of being able to sell a set of luggage for one-quarter of the department store's price and still end up with a higher margin than theirs?" Tindall chuckles and says, "Now, that's real fun."

But Tindall becomes his most emphatic when he proclaims, "It's not as much about selling merchandise as it is about empowering people and giving the common working person the same choices that the wealthy always had. That's the reason this company exists!"

Today, with his billion-dollar personal fortune, Stephen Tindall can dress, drive and do as he pleases. And he does, with a seventeen-dollar sport watch because "I swim every day and it's a great watch in the water," driving a Volkswagen because "I really like the shape" and living in a modest house he and his wife bought years ago. "Why do we need more house?" he asks.

Originally, the research team had a hypothesis that people heading highly productive companies might be personally thrifty (or cheap) and that their abhorrence of waste was in some part responsible for the creation of efficient enterprises. That's not what we found.

Instead, we found people who conduct their personal lives in harmony with the stated BIG objective. When I pushed Stephen Tindall on the issue of whether personal thrift is a precursor of productivity, he said, "I don't think so." But he added, "It would be pretty silly of me to run a company for the benefit of the common man and ask everyone around me to do the same if I weren't one myself, don't you think?"

Copyright © November 2002, Portfolio Books, a member of Penguin Putnam, Inc., used by permission.

About the Author

Jason Jennings has spent more than twenty years teaching businesspeople how to build great organizations. He gives more than sixty keynote speeches every year and is the author of two previous business bestsellers: Less Is More and It's Not the Big That Eat the Small, It's the Fast that Eat the Slow. He lives near San Francisco.