Magazine article The American (Washington, DC)

The Dangers of Wishful Thinking: Too Many U.S. Businesses (Including Tires, Supermarkets, and Information Technology) Have Been Infected with the Disease of Denial, Richard S. Tedlow and David Ruben of the Harvard Business School Show. the Answer? in Lincoln's Words, 'We Must Disenthrall Ourselves.'

Magazine article The American (Washington, DC)

The Dangers of Wishful Thinking: Too Many U.S. Businesses (Including Tires, Supermarkets, and Information Technology) Have Been Infected with the Disease of Denial, Richard S. Tedlow and David Ruben of the Harvard Business School Show. the Answer? in Lincoln's Words, 'We Must Disenthrall Ourselves.'

Article excerpt

If you were to stop by Google's Silicon Valley headquarters in Mountain View, California, it might be difficult to catch the attention of a company employee. When staffers are not working furiously to expand Google's already thoroughgoing dominance of Internet searches and online advertising, they are likely to be busy taking advantage of the company's fabled perquisites, which include a buffet of free, wholesome food; a volleyball court; laundry machines; and even a bike repair facility. Or perhaps the employees would be lost in thought, pondering whether to sell options on a stock that at the end of November hit $676 a share. Google's future has never seemed brighter.

But if you did manage to buttonhole someone at Google and then offered a gentle warning that all the great things being said about the company today were being said--with just as much fervor--about Intel a decade ago, you would likely be met with a blank stare. In the mid-1990s, Intel's semiconductor business was the talk of the Valley; its chief executive, Andy Grove, was selected by Time magazine as its Man of the Year in 1997. When Grove stepped down as chief executive in 1998, Intel's market capitalization was almost $200 billion. Its compound annual growth rate during Grove's 11-year tenure in the top spot was 42 percent. The decade since has hardly been as giddy. Intel is still a company with great strengths. It is hardly a flash in the pan. But for the past few years, the chipmaker has struggled in the eyes of Wall Street and has lost market share to a once nearly forgotten rival, Advanced Micro Devices (AMD). Not long ago, Intel announced a major restructuring, including the elimination of 10,500 jobs. Yet the company clearly must make other moves that are just as bold, or else it is in danger of losing its distinctive position in the world of high technology.

Could Intel's recent past be Google's future? Or worse: could both Intel and Google find themselves one day following the path of General Motors? It is extraordinarily difficult for even the best-run company to maintain a commanding position year after year in its chosen industry. And the last thing that decision makers want to do when they're running a business at the top of its game is to remind themselves that bad things really do happen to good companies.

[ILLUSTRATION OMITTED]

They might prefer not to contemplate it. And yet the evidence is everywhere.

* IBM once dominated the world of data processing. The IBM 360 was given its name because it surrounded your data needs by 360 degrees. No more.

* In 1970, Sales Management magazine described the five big U.S. tire manufacturers as enjoying unthreatened control over their market. Within two decades, four of the five either were bankrupt or had been absorbed by other firms.

* The A&P supermarket chain was once the nation's largest retailer. Today, it is a German-owned concern with stores in six states and the District of Columbia. As the once-mighty business appears headed for the proverbial dustbin of history, the only remaining question seems to be: paper or plastic?

* In 1896, Dow Jones established its "Industrial Average" of a dozen leading companies' stocks. A century later, only one firm on that list--General Electric--has survived as an independent entity.

And then there was the president of the Carriage Builders Association, who said in 1899 that the idea that the automobile would someday replace the horse was "a fallacy too absurd to be mentioned by intelligent men." Every decade, every year, every day, eternal verities turn out to be fleeting. Received business wisdom often is not so wise. The unthinkable is happening all the time. Google founders Larry Page and Sergey Brin possess fortunes that together approximate that of the endowment of Harvard University. These billionaires are still in their early 30s. Harvard has been saving up since 1636. …

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