About the Books

Lessons from Titan is a summary of key lessons that one can learn from the successes and failures of Older Industrial Giants. Each company’s story helps one to understand the various factors at play that lead to business success or failure

Key Learnings from Companies

GE

Success Reasons

• Attack cost base as a key strategy to ensure turnaround.
• Aggressive internal and external investment is possible.
• Cash flow is the best way to ensure survival.
• Link incentives to company focus.
• Benchmarking and clear accountability are crucial.
• Analyze employee turnover to determine what is best for your business.

Failure Reasons

• High success can lead to arrogance, which can become the default culture.
• Don’t lose focus on benchmarking and team accountability.
• Have a small advisor group that can play devil’s advocate when needed.
• Capital should have a clear focus on risk and return.

Game-changing is often game over.

• Going big to just meet sales targets rarely works.
• Don’t lose focus on the operational aspects of your business. Focusing on moonshots or big projects cannot be the main growth mantra. A lot of small things done properly can provide the same result.
• High focus on growth in EPS, as in older eras, work due to certain conditions, not prevalent currently

Boeing

• Innovation and growth may go hand in hand, but one should keep in mind the inherent risks.
• Success can lead to arrogance, which may result in downfall, as observed in GE.
• Innovation needs to focus on financial viability, not just on engineering or disruption focus.
• Don’t let financial focus get in the way of innovative ideas. Evaluate ideas based on merit and risk.
• Business objectives need to change with time.
• Understand your ability to handle risk and stakeholders. If you are not the right person, pave the way for another person who can handle it better.

Danaher

• Lean is a method that provides great results.
• Let the people on the ground make most of the decisions for quick turnaround, rather than a top-down approach.
• Small improvements done continuously can lead to massive change with time. A 1% daily improvement leads to 31.8X growth in a year. Small changes stack up quickly and are easy to implement.
• Focus on making a process for everything.
• Tools are meant to help you focus, and having focused employees matters the most.
• Humility, transparency, and high expectations are the best cultural traits to develop.
• In today’s world, financial complexity is high. It’s important to have a strong finance person, and you should be well-versed in the same.
• Compounding should be the theme in every aspect of your business.
• It’s easier to improve margins in high-margin products than in low-margin ones. Customers find low-value margin products less appealing, so it’s hard to improve margins.
• Focus heavily on risk, as one bad deal can override everything good done in one shot.

Honeywell

• As your business grows, complexity and bureaucracy become the norm, as seen in GE. Danaher focused on being lean, avoiding the same issues.
• When things are bad, make difficult and unpopular decisions as soon as possible, instead of avoiding them until the last moment.
• Focus on ensuring that costs and liabilities are properly controlled before shifting to growth mode.
• Keep a tight leash on fixed costs. When people hire more people, leading to low productivity, it can lead to issues, as seen in GE.
• Pay people for what you expect them to do tomorrow, not just for today.
• Local strategies yield better results than global ones.

What you think, what you say, and what you do should not be separate decisions.

United Technologies

• Incentives drive organisational behaviour. Ensure that they are adjusted and aligned as per changing times. Focus more on driving long-term and systematic growth within organisations.
• Don’t underinvest for short-term gains, as it always leads to problems very quickly.
• Feedback on what’s wrong should be given high focus, and people should feel open to air their views.

Intelligence is the ability to hold 2 extreme views on the issue.

Caterpillar

• Market volatility is inherent in most businesses. Forecasting for the long term is not possible. GE made the mistake of forecasting too long, leading to wrong bets.
• Tackle problems systematically and quickly rather than trying to solve all at once.
• There are no shortcuts to continuous improvement. It needs to be a way of life, not a short-term solution.
• An outside perspective should be allowed to ensure that new challenges are faced better.
• It is important to ensure that employees at every level are engaged in changes and improvements.
• Accountability and incentive structures are vital, as seen in Danaher. Bad habits persist for long, so it is important to keep changing continuously.

Roper

• Focus on a few basic drivers of value and keep things simple.
• A simple compensation scheme based on profit and cash flow growth is best.
• Some niche segments can have high margins but low prices, so you can use this to acquire companies.
• Incremental cash returns on capital are important. Cash flow is important and not accounting profit.
• High margins and low working capital are a powerful combination.
• Compounding works if you give it time in operations and finance.
• Underinvestment in sales and marketing and over investment in product development and back office is a general trend, which is bad for business.

TransDigm

• Even a good business can be better.
• Focus on your unique advantage and maximise it.
• Simple goals create focused outcomes, while complex ones lead to confusion.
• Employees should be made to think and compensated as owners.
• Pricing is a key lever that can be used to drive higher value in a falling market. Lower competition provides scope for increasing prices without any need to invest while focusing on keeping costs low.
• Bottom-up management is far more effective than top-down, like GE.

Stanley Black & Decker

• Cost-cutting is painful but necessary for survival.
• Sustained, focused effort can transform and revive old businesses.
• Business systems need to adapt to the times and not be stuck in the time when they were designed. Every system has a life and needs to adapt.
• Accepting new ideas requires openness, external networks, collaboration tools, and repeatable processes.

United Rentals

• Continuous improvement is as important to service businesses as it is to manufacturing.
• Developing an operational edge over others is very powerful in a hyper-competitive industry.
• Incentives need to evolve as per the needs of organisations.
• Employee feedback creates a virtuous cycle, leading to a great source of ideas.
• Offloading assets outside does not remove the asset from the equation, but doing so leads to less control. Assets are still needed for the business to operate. Uber may not own any cars, but not owning any leads to complex challenges, which in the end do not provide any cost advantages.

General Learnings

• Growth Algorithm: Focus on investing in businesses that provide solid returns. This will lead to an increment in profits faster than GDP. Profits will slowly rise to be better than peers.
• Long-term success is achieved if you focus on customer needs, treat suppliers as partners, and employees as the biggest assets, and invest in communities.
• Focus on what you can control in a culture: fostering a humble culture, continuous improvement, holding a tight leash on costs, focusing on service/product/manufacturing excellence, and disciplined capital allocation focus that moves cash to high-return assets.
• Business benchmarking and systems keep you grounded in reality.
• The sign of arrogance is the most common attribute of failure.