Meg Whitman, Former CEO, HP says. “When we need to turn around a company, we should not go and fix what is wrong but figure out what is going right, what right things those people were doing and do more of that. Eventually, we would get into the fixing list”.
BARNUM CIRCUS SHOW
Until 1871, Barnum and Coup circus show had been confined only to the Northeast of America. With hundreds of horse-drawn carriages on under-developed roads, they could cover only a limited distance. Then, the divine luck dawned on them.
The Leap -In 1872, the rapid development of the rail network transformed the circus industry. Barnum and Coup circus could travel from Newyork to Detroit through mid-Atlantic states and Minneapolis, covering 7000 miles in five months and stopping at 146 destinations. They went beyond Northeast of America. Traveling by rail was so successful that the Barnum show grossed a million dollars in revenue. An unknown feat for a circus company at that time. Barnum and Coup relished the success. When everything was going great, the calamity struck.
The Tragedy -On one winter evening, Barnum housed his circus in 14th street in New York City. On the following day, at 4 AM, a fire broke out in the building. It was devastating. Though there was no human loss, Barnum and Coup lost a vast amount of performer’s costumes, instruments and almost the entire menagerie. Barnum’s partner Coup was upset. He could not believe his fate. He felt that it would be impossible to get the show back on the road. He found no other way than exercising a long break from the Circus show.
However, Barnum had been on the entrepreneurial journey for a long time. He had faced multiple failures. Every failure had raised his energy levels. Earlier, he had successfully run a famous, highly profitable ‘Barnum’s American Museum’ for twenty-six years before a fire destroyed the business. It was an enormous loss for Barnum. Rather than agonising over the failure, he diverted his mind by pondering about the next opportunity. He started a circus show with Coup. The show became far more profitable than his earlier business.
FOCUSING ON OPPORTUNITIES
When Coup saw the problems, the ever-optimistic Barnum saw the opportunities. Coup agonised over the difficulty of replacing the costumes, instruments and the animals. On the other hand, Barnum saw that the fire had spared tents, wagons, and horses. He sensed that restoring the wagons and carriages could be achieved at a reasonable cost. He thought that if he could bring some unique animals, the show could go on. Barnum ordered animals -A double horned black rhinoceros from Abyssinia, four large African lions, six Bengal tigers, a pair of leopards and monkeys. His partner, Coup oversaw repair and decoration of 150 wagons and carriages. Within three months, the show was back on the road.
Barnum says, “All that was needed to move forward was energy, pluck, courage and liberal outlay of money. Just put a little electricity in your blood, and we will beat the world.”
Reference: ‘The Circus’ documentary by Sharon Grimberg.
In the late 1990s, Alexandre Behring gave up his executive position at GP Investimentos(a prestigious Latin American private equity fund) Limited to become CEO of America Latino Logistica(ALL), a formerly state-owned Brazilian railway company. The company had recently bought a struggling ‘Southern Line’ of Brazilian railways.
Behring found himself in charge of poorly performing railways. At that time, the Brazilian railroads were in terrible condition. Almost half of the infrastructure needed major repairs & 20% of them were on the verge of collapse. The integration of regional lines was inadequate, limiting the cargo and passenger movement. The railways were reeling under severe loss.
FOCUSING ON OPPORTUNITIES
Despite the struggles with Brazil’s rail system, Behring saw only opportunities. He perceived that trains offered the most favorable cost-benefit for cargo transport compared to the trucking operation. He observed that in the United States, the railroads accounted for 80% of shipments above 2000 kilometers. He believed that the Brazilian railway network could offer a similar kind of value for long-distance cargo transportation in Brazil.
When Behring became the head of ALL, the company had only 30 million reais in cash. To survive, he had to turn the company profitable as early as possible. So, his top priority was to start the rail passenger & cargo service as soon as possible. Sadly, the southern line rail system was in terrible condition. Behring felt that repairing every broken bridge would require hundreds of millions of dollars which he could not afford.
What should Behring do? He knew that focusing on the problems of broken bridges and railway tracks was not a solution. There’s no doubt that they need to be taken care of in the long run. However, the best leaders have chosen to act first on opportunities rather than problems. Peter F.Drucker wrote that solving a problem, however necessary, does not produce results. It just prevents damage. He further added, “You gain growth by exploiting opportunities, not by solving the problem”.
Rather than focusing on the problem, Behring began to look for growth opportunities. He realized that he could operate part of the rail network if he could utilize the existing resources.
- Instead of purchasing new trains, Behring and his team sourced working components from their own fully dis-functional locomotives and used in the other nearly functional coaches.
- The engineers removed tracks at deserted stations and installed them on running routes. They utilized whatever useful things they could discover.
- Behring approved investment proposals only when it provided an immediate increase in operating cash flow.
- He restricted capital expenditures only to those that eliminated bottlenecks preventing the company from growing the revenues.
- Behring also established a partnership model with his core customers. They shared the costs of investments in building distribution centers, storage facilities and a fleet of cars. They would receive discounted freight rates and a dedicated line to meet their demands.
In three years, ALL turned profitable. It’s operating revenues improved from a net loss of 80 million reais in 1997 to a net profit of 24 million reais in 2000.
The above content is part of the following book -
References:: HBR article by Donald N.Sull, Fernando Martins, Andre Delban Silva, Switch by Chip and Dan Heath.