Tag Archive: company

Change and Commitment

The International Isle of Man TT (Tourist Trophy) Race is an annual motorcycle sport event run on the Isle of Man in May or June of most years since its inaugural race in 1907. It is still billed in popular culture as one of the oldest and most dangerous motorsport events in the world, with over 250 fatalities in its history. On the 20 March 1954, when Honda Motor Company was still a small company and less than eight years old, Soichiro Honda made the following announcement to his employees:

“Since I was a small child, one of my dreams has been to compete in motor vehicle races all over the world… I have reached the firm decision to enter the TT Races next year. I will fabricate a 250 cc racer for this race, and as the representative of our Honda Motor Co., I will send it out into the spotlight of the world. I am confident that this vehicle can reach speeds exceeding 180 km/h… I address all employees!
Let us bring together the full strength of Honda Motor Co. to win through to this glorious achievement. The future of Honda Motor Co. depends on this, and the burden rests on your shoulders. I want you to turn your surging enthusiasm to this task, endure every trial, and press through with all the minute demands of work and research, making this your own chosen path. The advances made by Honda Motor Co. are the growth you achieve as human beings, and your growth is what assures our Honda Motor Co. its future.
With this, I announce my determination, and pledge with you that I will put my entire heart and soul, and turn all my creativity and skills to the task of entering the TT Races and winning them. This I affirm.”
(Source: Honda Motor Company)

Opposition by the Japanese Government and difficulties in conforming to TT rules and regulations delayed Honda’s entry until 1958. In that year, Honda won the manufacturer’s prize.

Westley and Mintzberg (1991) differentiate between the different styles of those who spearhead fundamental change. There are idealistic visionaries like Benjamin Franklin. There are entrepreneurs like Soichiro Honda. And there are the transformers who transform existing companies and their products or services from the inside, such as Lee Iacocca and Jan Carlzon of SAS (the Scandinavian Airlines System). The word intrapreneur has been coined to describe those people exhibiting similar behaviours to entrepreneurs but who work within an organisation. Pinchot (1986) offers ten guidelines aimed at circumventing the bureaucracy and getting things done in large organisations:

  1. Come to work each day willing to be fired.
  2. Circumvent any orders aimed at stopping your dream.
  3. Do any job needed to make your project work, regardless of your job description.
  4. Find people to help you.
  5. Follow your intuition about the people you choose, and work only with the best.
  6. Work underground as long as you can – publicity triggers the corporate immune system.
  7. Never bet on a race unless you are running in it.
  8. Remember it is easier to ask for forgiveness than for permission.
  9. Be true to your goals, but be realistic about the ways to achieve them.
  10. Honour your sponsors.

Stocks are not Shares

People think of stocks as all the same thing. But different stocks look very different. Suppose a company decides to issue a lot more shares. And with the proceeds of the shares, invest in bonds. If they do that really aggressively, what are you owning when you buy the stock? Well the original business was diluted down to – the share issuance is aggressive enough – to negligible proportions. That’s dilution. At the same time, the stock is now really represented by the bonds the company owns.

Or in reverse, a company can do the opposite of that. They can borrow money and buy back shares. And then that’s the opposite of dilution. Then the company becomes leveraged. And it becomes riskier than most stocks because it is kind of an amplified stock. What is the essence, what is this thing called stocks? They are an essential element of a modern capitalist economy for the functions they fulfill. Some people think they own a part of a company if they buy their shares. But it is not the case. The right of shareholders to contest the appropriation of the company’s assets – it was the key issue in a leading case in corporate law, Short Vs Treasury Commissioners, and the shareholders cost. Their Lordships went on to say, in unequivocal terms, ’shareholders are not, in the eyes of the law, part owners of the company’.”