The New York Times had a story on Tuesday morning about an advantage the Ford Motor Company had over its competitors at GM and Chrysler: it is still family-owned. As the Times explained, the family ownership was able to take a longer view than their competitors. In fact, we still don’t know whether the re-tooling the family has ordered up will work in the long run. But we do know that they have had a steadier and more far-sighted management because the family cared about the long-term health of the business, not just the next quarter’s profits.
This recalled to me a conversation that I had with Peter Wiley, currently the Chair of the Board of John Wiley & Sons, over dinner 15 or more years ago. Peter said then that he believed Wall Street undervalued family ownership. As Peter put it, “just about all our competitors are focused on quarter-to-quarter results. Mike, my family has owned this company since 1807. I am not thinking quarter-to-quarter.” Wiley’s financial results (even though they have suffered in this recession along with everybody else) over time have certainly vindicated Peter’s opinion.
Family-controlled businesses have been been ubiquitous in publishing through my whole career. When I was young, there were Scribners at Scribners, Doubledays at Doubleday, sometimes two Roger Strauses at Farrar, Straus & Giroux. When family-controlled but publicly-traded Barnes & Noble acquired Sterling in 2002, they acquired it from the founding families: the Hobsons and the Boehms.
I have consulted with several family-owned or -controlled businesses. Wiley, Barnes & Noble, and Ingram are distinguished by how well managed and basically competent they are as organizations. They really do the “blocking and tackling” well. A big part of the competitive edge of all three companies is in the quality of their operations.
They make the investments, particularly in infrastructure, that are critical to the business. I once asked Peter Wiley why it was that his company’s travel web sites were so much more commercially successful than those of other publishers with equivalently-strong travel brands. “Constant, controlled experimentation,” he said. “What worked for us was on the third try. We didn’t get it right the first two times.” Family ownership — with belief — can make those kinds of investments and stay with them. And it can support a second and third attempt to make a good strategy that is tricky to execute succeed.
John Ingram, the member of the owning Ingram family who runs the book industry-related businesses, got a clear vision of the potential in print-on-demand a little over a decade ago. Very few other owners, and almost certainly no publicly-traded owner, would have made a bet of the scale, in relation to the size of the company, that he did with Lightning Print. But John could see that POD would become extremely important and that Ingram, because of its position in the supply chain, was in a great position to apply the technology. And although it took a few years for him to be proven right, the family had the commitment to see it through and, as a result, Lightning occupies an increasingly central place in the US supply chain and is the linchpin of Ingram’s plans for future growth as the traditional book wholesaling business contracts.
What most distinguishes the successful and still-profitable Barnes & Noble from its once equal and now reeling competitor, Borders, is the quality of B&N’s supply chain. That required investments in warehouses and systems that Borders, long ago sold by its founding family, didn’t have the long-view management to make.
Now I’m working with another family business called BookMasters, in Ashland, Ohio. BookMasters started out as a printer in the 1960s. Their operations have grown in both directions along the value chain from printing. They have a business, BookMasters Digital, that provides an XML workflow from concept to the press. And they have another division, BookMasters Distribution, that takes the output from the presses and provides warehousing, sales, fulfillment, and collection. The Wurster family that owns BookMasters has many business characteristics in common with the Wileys, Riggios, and Ingrams. They have a high degree of loyalty with many long-standing employees. They have a persistent commitment to operational excellence. And they have a high degree of strategic consistency: they are willing to build things over a long period of time.
John Ingram saw over a decade ago that the book wholesaling business Ingram was in was living on borrowed time. He saw Lightning as a bridge to the future. Dave Wurster knows that printing is not a growth industry and he’s building his bridge to sustainability with service offerings that expand his importance to his customer base. Over time, both of these family owners can see the possibility of a totally transformed businesses. Their focus primarily is on how to make sure their business survives a long time, not on immediate profit. In a time of great change, I believe it’s a competitive edge.