Executive Interviews: Interview with Christian Stadler on Staying on Top, Always
October 2009 - By Dr. Nagendra V Chowdary

Christian Stadler
visiting scholar at Tuck School of Business at Dartmouth.

• Firstly, congratulations for coming out with an interesting book, Enduring Success: What We Can Learn From the History of Outstanding European Corporations and the subsequent HBR article, ‘The Four Principles of Enduring Success’ (HBR, July-August 2007).
  It’s more than two years since that article was published and since then the world economy was engulfed by unprecedented troubled times triggered by the US financial crisis. Any updates on the companies covered in the book?
  The intention of our study was to learn from the history of great companies. It is tempting to study how the companies we cover continue to perform but this is really beside the point. Their past performance in no way guarantees their future success. What the economic crisis shows is that the long-term perspective taken in our work is possiblymore fruitful than an obsession with quarterly earnings. Having said that I think my gold medalists did fairly well. The fact that they all survived is proof enough at times when corporate giants such as Lehman Brothers break apart. To evaluate their behavior during the crisis I would rather wait a few more years when we can take a more objective long-term perspective on events.

• Can you briefly describe Enduring Success Project? What was the triggering point for undertaking such a laborious and long-drawn project?
  I was always fascinated by the richness of history and greatly frustrated that companies often spend millions on strategy evaluations without doing the obvious: learn from their past experience, study what they and other companies did in similar situations and how this affected competitive advantage. On rare occasions we remember that we can learn a lot from history. For example in the past year many scholars, practitioners, and politicians were able to draw important lessons from the Great Depression or the Asian Financial Crisis. I think that we can leverage historymuchmore often. Our project is an attempt to do exactly this. In a nutshell we selected 9 companies that outperformed stock markets by at least the factor 15 over the past 50 years and were around for more than 100 years and matched each of them with a comparison company that did well but not quite as well. The excitement after my article in the Harvard Business Review indicates that there is indeed a lot of interest in learning from the past.

• The project yielded four main findings which you called the four principles of enduring success? What are those four principles and what are the organizational implications of those four principles?
  The principles are:

1. Exploit before you explore. Throughout their history, the great companies in our sample have all emphasized exploiting existing assets and capabilities over exploring for new ones.
2. Diversify your business portfolio. Good companies tend to stick to their knitting, but the great companies know when to diversify. They are careful also to maintain a wide range of suppliers and a broad base of customers.
3. Remember your mistakes. Great companies tell and retell stories of past failures to make sure they don’t repeat them.
4. Be conservative about change. Great companies very seldom make radical changes – and take great care in their planning and implementation.

• You have observed while elaborating on the first principle (Exploit Before You Explore) that great companies don’t innovate their way to growth – they grow by efficiently exploiting the fullest potential of existing innovations. Can Xerox’s PARC be a good example of exploring instead of exploiting? Can you elaborate on the purpose of this principle?
  I think Xerox’s PARC is an excellent example. Their research contributed greatly for example in the area of information technology but Xerox was never able to fully exploit its knowledge. Being at the frontier of innovation is exciting and can be beneficial but companies have to remember that they need to pay great attention to howthey can exploit their knowledge.