A few years after I left K-C, one of its executives asked me what I found the most different between K-C and other companies of similar stature I was now consulting with. My answer was “diversity” – they had more businesses, more categories, more products. But who can say whether that approach is right for every company? It just wasn’t right for me.

It’s always tricky for a firm to extend its capabilities. One can point to numerous examples of firms moving out of their core areas of operational or marketing expertise and face-planting (e.g. Grumman into municipal buses), but also of a number of successes (e.g. J&J). The key issue in whether a firm succeeds in branching out and making a practice of it, I suspect, is whether it can “move its base foot from the bank of the stream to a new rock in the stream.”

What I mean by this metaphor is that successful firms start with one thing they are unusually good at and comfortable with, usually either operational or marketing-based. That’s their “base on the bank.” Then they often come up with a new market for a given operational capability (or a new set of activities they can deliver to a given market), which is like their second foot leaving the bank and stepping on a rock in the stream. The firm still feels pretty comfortable at this point, and maybe proud that it’s found some new profit centers, but its scope is still fairly narrow.

The hard part comes when you ask them to use the newly acquired capability with a second, even newer, one. They’re pretty happy where they are. The thought of resting all their weight on the new thing they’ve learned while they swing their back foot out over the stream is not comfortable. (At this point you can see that we had a creek in the woods behind the house where I grew up.) The new base feels insecure; the new target rock seems far away and slippery.

If they freeze up in that position they will never navigate the stream; if they try to move out but slip they may not venture out there again. Putting together new and even newer capabilities for the first time seems like a fundamental hurdle for successful firms.

Grant: The classic diaper-forming machines historically were finicky beasts where it took months or years to get their manufacturing speeds up, with lots of fine-tuning and adjustment. If you think of how easily (and capriciously) a photocopier’s paper path jams and then picture something much bigger, faster, and more complex, you can see where once you had a line going well you would be loath to fool with it.

Maybe good statistical process control, poka-yoking for different models, and the rest of the quick-change bag of tricks from Japan could reduce changeover times, but the fundamentally temperamental qualities of folded paper under tension makes me skeptical that a machine using the same basic technology could be significantly more nimble (at any size). But it’s an empirical question and I have no direct experience, so you could well be right.

On Fri, Sep 11, 2009 at 8:37 AM, wrote:

Interpretive Barriers to Successful Product Innovation In Large Firms, Organization Science, (1992) 3: 179-203.

The Illegitimacy of Successful Product Innovation In Established Firms, Organization Science, with Trudy Heller, (1994) 5:200-218.

One important sidelight to me is that K-C’s manufacturing prowess was absolutely critical to their ability to survive and compete in the disposable diaper market. The overwhelming technological imperative of keeping those block-long machines spewing out product at 500 units/minute (or whatever it’s gotten up to) really restricts the amount of niche product manufacturing you can do. Turning them on and off or redesigning them to produce different products is very, very costly. (The main reason Johnson & Johnson was unable to exploit its baby franchise in the disposable diaper industry was its lack of capability at high-speed paper manufacturing. They bailed out in 1981, I think, after about seven years of effort.)