Of Telegraphs, Telephones, Radios, and Organizational Momentum
As told by Joel Kurtzman
Never missing an opportunity to miss an opportunity
Western Union, founded in 1851, commercialized the telegraph. In 1865, at the end of the American Civil War, the first war in which the telegraph played a role, Western Union was America’s largest and most valuable communications company. In 1884, it was one of the original stocks in the Dow Jones Industrial Average, having built a nationwide communications infrastructure. And then it went to sleep.
In 1879 a young, Massachusetts‐based educator and high‐tech inventor, Alexander Graham Bell, attempted to interest Western Union in one of his inventions: the telephone. He argued that with his patents and its nationwide infrastructure of telegraph wires, the company could quickly be transformed into something new and potentially far more valuable: a national telegraph and telephone company.
The never‐before‐challenged leaders of Western Union huddled together and examined Bell’s patents, which they collectively deemed “no big deal.” Of course, we now know Bell’s patents were the most valuable in all of business history and went on to form the basis of the U.S. and global telephone industries. Those patents led to the creation of the Bell Telephone System, the American Telephone and Telegraph Company (AT&T), and many other companies. For nearly a century, the companies Bell founded were the world’s most valuable, enriching millions of investors who owned their stocks.
After it had passed on the telephone, Western Union was offered another new invention: radio. With radio, information could travel around the globe instantly, reaching communities everywhere, not to mention ships at sea and airplanes high above the earth. But Western Union passed on radio too.
Later, in the late 1930s, Western Union glanced at another new technology: television. Some of its suppliers had decided to produce TV sets and TV production equipment, but the leaders at Western Union once again declined to participate, preferring instead to focus on what made them money then—delivering telegrams and transferring money—rather than what might make them money in the future.
Later still, Western Union observed the introduction of the Internet and briefly flirted with the idea of becoming a player in that burgeoning field. And why not? With its wire‐and‐microwave‐based infrastructure, Western Union could have become an important carrier of packets of digital Internet traffic. But in the end, Western Union failed to invest in the Internet.
Finally, in the early 1970s, Western Union watched as cellular telephone technology was developed by Motorola and then commercialized in the mid‐1980s by AT&T, one of Bell’s companies. Again, Western Union’s infrastructure could have supported this technology. But the company decided not to invest. Western Union kept its network and its company intact, but failed to take advantage of decades of progress and change.
Where they are today
Today Western Union continues to exist, but it is limping along on the verge of extinction, saddled with debt, having been taken over, sold, and resold several times. And rather than growing, this old firm has spent most of its long life in slow decline. Today, as in 1871, Western Union’s largest (and now sole) business is transferring money.
The moral of the story
Western Union was organized from the top down, like most other companies of its time. All strategic decisions and capital allocation decisions were made at the very top. Western Union’s leaders could not be challenged. They were experienced people, from similar backgrounds. They had inherited a company of substance, which they were determined to preserve. And they were suspicious of outsiders and of new ideas.
The Affect of A, B, and C players in an organization
Tragically, poor leadership tends to perpetuate itself, which explains why once great organizations slowly wither and die. As Joe Griesedieck, vice chairman and managing director of CEO services at Korn/Ferry, the world’s largest search firm, told me, A players pick other A players with whom they surround themselves and from whom they build their teams. But B players pick B and even C players to prevent their leadership from being challenged. Over time, B players are succeeded by the B and then C players they picked. And since leaders in hierarchical organizations can’t really be challenged, the tyranny of the B player is preserved. As a result, once great organizations wither and die. Missing out on opportunities is as much a killer of organizations as failing to pay attention to bad news
How many other organizations are in the same boat as Western Union, missing opportunities, failing to innovate, resistant to change, led by a cloistered assortment of B and C players? How many organizations turn away from the future even when it knocks at the door? Sadly, the answer is far too many.
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