How Great Companies Tame Technology

They begin with a disciplined business plan. And then they bring in high
tech to make it better

In 1997, I conducted a research interview
with Ken Iverson, the CEO who led Nucor from obscurity
into becoming the most profitable steel company in
America.

By Jim Collins
NEWSWEEK

I particularly looked forward to our
conversation, as the transformative power of technology
had become an article of absolute faith in the church of
the New Economy, and Nucor stood as a poster child
for using technology to transform a business.

NUCOR NOT ONLY GENERATED returns to shareholders
that beat the general market by more than five times, but it did
so in an industry that ranked in the bottom 2 percent of
industries in returns to shareholders during the same era. If ever
there was a definitive case of technology as a key factor in
upending the old order, this surely was it.

But when i asked Iverson, who, sadly, passed away last
week, to name the top five factors that led to Nucor’s
transformation from a good company to a great one, where do
you think he put technology? Not first. Not second. Not third,
fourth or even fifth.

In an 8,000-word interview transcript, the
word technology appears only once. And that came at the end
of the interview when Iverson mentioned it as an afterthought,
which he then used to segue back to his primary passion: the
unique culture of the company and its people. He seemed more
proud of the fact that Nucor had become a Fortune 500
company with only four layers of management and a
headquarters staff of fewer than 25 people crammed into a
cheap veneer office the size of a small dental suite than he was
of his bold investments in continuous thin-slab casting
technologies that had revolutionized the industry.

At first, my research
team and I considered the
Iverson interview to be an
aberration; perhaps he
was simply too modest.
But then we began to
notice a pattern. In 84
interviews across 11
companies that made the
leap from mediocrity to
greatness (defined as
delivering returns to
investors at least three
times greater than the
general stock market over
15 years), fully 80 percent
of the executives we
interviewed didn’t even
mention technology as one of the top five factors in their
companies’ transformation.
The really odd thing about this is that, like Nucor, every
company in our good-to-great study had in fact become a
pioneering leader in the use of technology. Kroger, with
scanners tied into its information systems; Gillette, with
laser-based manufacturing; Wells Fargo, with Internet banking,
and so forth. Yet despite being lauded for their technological
prowess, the executives of these companies dwelled little on
technology as a key variable.

Puzzled, we looked
more deeply into the data
and uncovered a
fascinating finding: the
good-to-great companies
became pioneers in the
application of technology
only after they made the
leap to breakthrough
results, usually years
after. Nucor, for instance, made its bold bet on continuous
thin-slab casting more than a decade after it began its climb to
steadily beating the market. And that brings me to the central
point. When we stand back to look at the rise and fall of great
corporations over the long course of history, we find that
technology is an accelerator of greatness already in place,
never the principal cause of greatness or decline. Great
companies first build a culture of discipline—disciplined people
who engage in disciplined thought and who take disciplined
action—and create a business model that fits squarely in the
intersection of three circles: what they can be the best in the
world at, a deep understanding of their economic engine and the
core values they hold with deep passion. They then use
technology to enhance these pre-existing variables, never as a
replacement.

In the late 1990s, our business culture became infected
with the idea that a New Economy driven by new technologies
had made the eternal verities of management obsolete. But the
question is not “What is the role of technology in building great
companies?” Rather, the real question is “How do those who
build great organizations think differently about technology?”
Bertrand Russell once said, “Most men would rather die than
think. Many do.” It’s a quote that many would have done well to
keep in mind during the last half of the 1990s, and one that we
would do well to keep in mind when The Next Big Thing comes
rolling around.

Collins is author of “Good to Great: Why Some Companies
Make the Leap… and Others Don’t.” He runs a management
research firm in Boulder, Colo.

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