Culture of radical innovation and long-term performance in capital-intensive industries: the cases of Maillefer and Secheron in the Swiss electrical industry 1960-1982

Yazid Alaoui    

Supervisor: Prof. Mary O’Sullivan Jury: Prof. Juan Flores 2015

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I. Table of Contents

I.   Introduction  ...................................................................................................................  3  

II.   Firm performance between economic and culture paradigms  ...........................  5  

1)   Economic  and  culture  paradigms  in  business  history  ..........................................  5  a.   Drivers  of  firm  performance  in  the  economic  paradigm  ...............................................  5  b.   Relevance,  origin  and  definition  of  corporate  culture  ...................................................  8  c.   Creation,  transmission  and  sustainability  of  corporate  culture  ...............................  13  

2)   Corporate  culture  and  performance  ........................................................................  17  a.   Strong,  mission  driven  and  adaptation  cultures’  influence  on  performance  .....  17  b.   Culture  content  and  performance  .........................................................................................  27  c.   Culture  of  radical  innovation  ...................................................................................................  32  

3)   Research  question,  methodology  and  sources  .....................................................  34  a.   Research  question  ........................................................................................................................  34  b.   Methodology  ...................................................................................................................................  35  c.   Sources  ..............................................................................................................................................  37  

III.  Culture of radical innovation and firm performance  ........................................  38  

1)   The  culture  of  Maillefer  1960-­‐1982  .........................................................................  38  a.   The  origin  of  Maillefer’s  culture  of  radical  innovation  .................................................  38  b.   Establishment  of  culture  of  radical  innovation  ...............................................................  42  c.   Radical  innovations,  distribution,  production  and  management  ............................  49  

2)   The  culture  of  Secheron  1960-­‐1969  .........................................................................  62  a.   Culture  of  caution  .........................................................................................................................  62  b.   Culture  of  collaboration  and  independence  .....................................................................  68  c.   Culture  of  caution  and  collaboration  in  times  of  crisis  .................................................  73  

3)   Culture  of  radical  innovation  and  performance  ..................................................  78  a.   Maillefer  and  Secheron’s  performance  ...............................................................................  78  b.   Culture  of  radical  innovation  and  performance,  an  interpretation  ........................  81  c.   Limits  .................................................................................................................................................  84  

IV.  Conclusion  ...................................................................................................................  86  

V.   Bibliography:  .............................................................................................................  87  

VI.  Appendix  .....................................................................................................................  94  

 

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I. Introduction  

The subject of economic performance of firms has been a constant in the

business history literature. Understanding why a once dominant industry leader

become an obsolete irrelevant enterprise, what explains divergent performance within

an industry or seizing the factors behind organisational failure have been recurrent

questions business historians have studied1. Furthermore, capturing the performance

of specific influential organisations such as De Beers, Fairchild or Pearson has been a

window of exploration of events or processes of broader historical significance2.

Controlling or adapting to the environment has been a mainstream view in to

explain organisational performance. The natural tendency of business history to

highlight the importance of the broader economic, social and political environment an

organisation operates into or its use of economic models to understand historical

phenomena have favoured the emergence of a view where the environment plays a

prominent role in accounting for firm performance3. This latter is perceived as

dependent on a company’s ability to control or adapt to its environment.

Focus on endogenous factors at firm level has been a shift in understanding

firm performance. Chandler’s three ponged investments in production, distribution

and management has brought a new paradigm where internal organisational factors

were no more irrelevant but at the forefront of the discussion on performance4.

Technological leadership, strategic vision and execution, innovation and financial

management were amongst other key factors highlighted in the literature5.

                                                                                                               1  McDonald,  “Western  Union’s  Failed  Reinvention”;  Sull,  “The  Dynamics  of  Standing  Still”;  Chan,  “Personal  Styles,  Cultural  Values  and  Management”;  Stanger,  “From  Factory  to  Family”;  Rae,  “The  Electric  Vehicle  Company.”  2  Newbury,  “Technology,  Capital,  and  Consolidation”;  Berlin,  “Robert  Noyce  and  Fairchild  Semiconductor,  1957-­‐1968”;  Bud-­‐Frierman,  Godley,  and  Wale,  “Weetman  Pearson  in  Mexico  and  the  Emergence  of  a  British  Oil  Major,  1901-­‐1919”;  Kornblith,  “The  Craftsman  as  Industrialist.”  3  Newbury,  “Technology,  Capital,  and  Consolidation”;  Reich,  “Lighting  the  Path  to  Profit”;  McFadden,  “Monopoly  in  Barbed  Wire”;  Porter,  “Origins  of  the  American  Tobacco  Company.”  4  CHANDLER,  Scale  and  Scope;  Chandler,  “The  Emergence  of  Managerial  Capitalism.”  5  Berlin,  “Robert  Noyce  and  Fairchild  Semiconductor,  1957-­‐1968”;  Porter,  “Origins  of  the  American  Tobacco  Company”;  Burhop,  “Pharmaceutical  Research  in  Wilhelmine  Germany”;  Mass,  “Mechanical  and  Organizational  Innovation”;  French,  “Structure,  Personality,  and  Business  Strategy  in  the  U.S.  Tire  Industry”;  

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The emergence of corporate culture as a novel but performance defining

insight in organisational theory triggered an interest in business history literature. Its

potential to go beyond the dominant structural functional approach marked by

technology, markets, firm structure and self-interested competition in explaining

organisational behaviour and performance has brought a fresh air to a maturing

literature6. A limited number of studies link organisational performance to cultures

with a specific content. Strong, mission driven and adaptation cultures are the main

types relating to performance in the literature. They account for short to medium term

performance. However, they stop short of explaining long-term performance. Their

inability to deal with technological revolutions is their common limit.

Culture of radical innovation has the potential to overcome this limit. It is

defined as a culture fostering relentless innovation. It aims to ensure a firm is

constantly at the leading edge of innovation. It consists of three attitudes and three

practices. The attitudes are the willingness to cannibalize assets, future orientation and

tolerance of risk. The practices that engender and sustain these attitudes are the

empowerment of product champions, the establishment of incentives for enterprise as

well as the creation and maintenance of internal markets7. The commercialization of

radical innovations translates into companies’ financial performance8. A culture of

radical innovation is not only a set of attitudes but also requires the concrete

allocation of tangible resources within the organisation9. No studies on the link

between culture of radical innovation and long-term performance exist. This research

aims to fill this gap.

We use a comparative methodology based on the cases of Secheron and

Maillefer in the Swiss electrical industry to address our research question. Current

studies on corporate culture and performance rely mostly on a single case study to the

                                                                                                                                                                                                                                                                                                                             Petrik,  “The  House  That  Parcheesi  Built”;  Newbury,  “Technology,  Capital,  and  Consolidation.”  6  Lipartito,  “Culture  and  the  Practice  of  Business  History”;  Dellheim,  “Business  in  Time”;  Dellheim,  “The  Creation  of  a  Company  Culture.”  7  Tellis,  Prabhu,  and  Chandy,  “Radical  Innovation  across  Nations.”  8  Ibid.  9  Eberhart,  Maxwell,  and  Siddique,  “An  Examination  of  Long-­‐Term  Abnormal  Stock  Returns  and  Operating  Performance  Following  R&D  Increases”;  Tellis,  Prabhu,  and  Chandy,  “Radical  Innovation  across  Nations”;  Leonard,  “Research  and  Development  in  Industrial  Growth.”  

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exception of Churella’s locomotive industry. The similarities between Secheron and

Maillefer in terms of environment, industry, history, international orientation and their

marked divergent performance from 1960 to 1982 offers an excellent opportunity to

conduct this exercise and to control for the culture of radical innovation factor

Archival sources available enable us to answer our questions. Maillefer and

Secheron’s minutes of the board of directors and annual reports are the two prime

sources used to capture culture and performance. Complementary documents

designed for third parties such as company journals, memoires of critical actors,

internal history, prospectus for public listings can additionally provide us with an idea

of their culture at a more symbolic level.

II. Firm performance 1) Economic and culture paradigms in business history

performance

a. Drivers of firm performance in the economic paradigm  

The question of performance has been one of the major areas of inquiry in

business history literature10. It has been treated either directly or indirectly. Both are

similarly important in understanding the phenomena. In the direct perspective, we can

find studies on Western Union, Electrical Vehicle Company, GE, Firestone, De Beers,

Sincere and Wing on, Draper and Philips11. In the cases of Western Union, Firestone,

Draper and Philips, the authors’ central concern is to explore the dynamics that led

once an industry leader to lose its dominant position and fade into obscurity12. Rae

John studies the blatant business failure of the Electrical Vehicle Company, a

                                                                                                               10  Dellheim,  “The  Creation  of  a  Company  Culture”;  Lipartito,  “Culture  and  the  Practice  of  Business  History”;  Hansen,  “Business  History.”  11  McDonald,  “Western  Union’s  Failed  Reinvention”;  Rae,  “The  Electric  Vehicle  Company”;  Reich,  “Lighting  the  Path  to  Profit”;  Sull,  “The  Dynamics  of  Standing  Still”;  Mass,  “Mechanical  and  Organizational  Innovation”;  Newbury,  “Technology,  Capital,  and  Consolidation”;  Chan,  “Personal  Styles,  Cultural  Values  and  Management”;  Davids  and  Verbong,  “Intraorganizational  Alignment  and  Innovation  Processes.”  12  McDonald,  “Western  Union’s  Failed  Reinvention”;  Mass,  “Mechanical  and  Organizational  Innovation”;  Davids  and  Verbong,  “Intraorganizational  Alignment  and  Innovation  Processes.”  

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monopoly hopeful in an industry that never materialised13. As for GE and De Beers,

the focus is on understanding the reverse process, which is how these companies rose

to industry leadership14. Finally, Wellington Chan tries to explain the divergent

performance over time of two pioneering Chinese department stores15. In the indirect

perspective, companies’ performance has been treated with equal rigor, except that

the authors’ central question is rooted in a broader historical cultural context. As such,

Pearson’s performance study is inscribed within the British entrepreneurship decline

in the late Victorian and Edwardian periods debate16. Chickering’s performance is

explored within the questioning of the role of artisan entrepreneurship and craftsmen

in the origins and early progress of the American industrial revolution17. Fairchild is

treated within the framework of Silicon Valley and semiconductor industry growth18.

Several studies with a similar logic engage in the exercise19. Last, another strand in

the literature deals with how companies reacted to change in their environment or

investigates the role of specific organisational features such as family ownership20.

 Control of the environment, a firm’s ability to adapt to it and internal

organisational factors are the three main drivers of performance identified in business

history literature.

A first view on performance relies on companies controlling their environment to

ensure optimal results. These latter tried to build a dominant market position through

consolidation of their industry. American Steel and Wire as well as American

                                                                                                               13  Rae,  “The  Electric  Vehicle  Company.”  14  Reich,  “Lighting  the  Path  to  Profit”;  Newbury,  “Technology,  Capital,  and  Consolidation.”  15  Chan,  “Personal  Styles,  Cultural  Values  and  Management.”  16  Bud-­‐Frierman,  Godley,  and  Wale,  “Weetman  Pearson  in  Mexico  and  the  Emergence  of  a  British  Oil  Major,  1901-­‐1919.”  17  Kornblith,  “The  Craftsman  as  Industrialist.”  18  Berlin,  “Robert  Noyce  and  Fairchild  Semiconductor,  1957-­‐1968.”  19  Fauri,  “The  Role  of  Fiat  in  the  Development  of  the  Italian  Car  Industry  in  the  1950’s”;  Mabry,  “The  Rise  and  Fall  of  Ace  Records”;  Klassen,  “T.  C.  Power  &  Bro.”;  McFadden,  “Monopoly  in  Barbed  Wire.”  20  Bakker,  “The  Making  of  a  Music  Multinational”;  Petrik,  “The  House  That  Parcheesi  Built”;  French,  “The  Emergence  of  a  US  Multinational  Enterprise”;  Boyce,  “The  Development  of  the  Cargo  Fleet  Iron  Company,  1900-­‐1914”;  French,  “Structure,  Personality,  and  Business  Strategy  in  the  U.S.  Tire  Industry”;  Burhop,  “Pharmaceutical  Research  in  Wilhelmine  Germany.”  

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Tobacco are prime examples of this approach21. Access to capital and privileged

relationships with financiers have proven to be crucial in that effort as in the cases of

Pearson and De Beers22. This competitive advantage was important enough as to

determine which company emerged as the major winner in the industry. Finally,

building a monopoly position and leveraging market power to establish and

consolidate a firm’s dominance has also been identified. GE engaged in

discriminatory agreements with suppliers, cartel arrangements to control prices and

legal formalisms to build an undisputed place in the electrical industry23.

A second view privileges the interaction between the organisation and its

environment. It states that adaptation is the key to performance. Finding the right fit

between the organisation and its environment is said to be the sure formula for

success or else, business failure is inevitable. Adaptation can go as deep as building,

changing and designing a company’s organisational structure in order to reflect the

nature of the company’s environment as well as embody the major factors identified

behind success in the marketplace. Polygram and Cargo Fleet Iron Company

consciously built a structure that fits their environment24. Adaptation also means

flexibility. It is this flexibility that De Beers and Pearson were well known for. Their

management effectively operated in their political, economic and social environment.

They understood the needs of all the chains of their business and manoeuvred to find

the right balance between their interests25.

Last but not least, a segment of the literature focuses on internal driven organisational

factors to explain organisational success or failure. Chandler suggests proactive first

movers that invested in production, distribution and management built a significant

competitive advantage and enduring industry leadership 26 . Chickering Pianos

                                                                                                               21  McFadden,  “Monopoly  in  Barbed  Wire”;  Porter,  “Origins  of  the  American  Tobacco  Company.”  22  Bud-­‐Frierman,  Godley,  and  Wale,  “Weetman  Pearson  in  Mexico  and  the  Emergence  of  a  British  Oil  Major,  1901-­‐1919”;  Newbury,  “Technology,  Capital,  and  Consolidation.”  23  Reich,  “Lighting  the  Path  to  Profit.”  24  Bakker,  “The  Making  of  a  Music  Multinational”;  Boyce,  “The  Development  of  the  Cargo  Fleet  Iron  Company,  1900-­‐1914.”  25  Newbury,  “Technology,  Capital,  and  Consolidation”;  Bud-­‐Frierman,  Godley,  and  Wale,  “Weetman  Pearson  in  Mexico  and  the  Emergence  of  a  British  Oil  Major,  1901-­‐1919.”  26  CHANDLER,  Scale  and  Scope.  p.  604-­‐605  ”  

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followed this approach to turn from a craft business into a large modern industrial

enterprise27. Some authors see building a technological edge through innovation is

crucial for performance. Fairchild Semiconductor, Draper, American Tobacco, Fiat

and GE are captured from this perspective28. This technological edge can only be

achieved through envisioning and making the right strategic choices. The Electric

Vehicle Company failed in this point. It ended in bankruptcy whilst E.Merck

succeeded29. This latter maintained the relevance of an overpowered and under

resourced family company in the increasingly competitive environment of the

pharmaceutical industry during a period of major scientific discoveries that

transformed the business30. Without the right strategic vision, a company can engage

in Donald Sull’s ‘active inertia’31. Firestone Rubber and Seiberling responded to

major technological change and shift in their competitive environment by scaling up

the same investments that allowed it to succeed in the past. In doing so, they

accelerated their demise32. Anticipating the right strategic moves is not enough

though. Strategic vision requires the company’s ability to execute it. The

foresightedness of Western Union’s leadership did not save the once major US

telecommunications company from a brutal decline. Rather, the company’s inability

to put its strategy in place and its constraining ‘momentum’ sealed the company’s

fate33. Finally, financial decisions have also been highlighted as an important factor.

De Beers’s superior finance technique and Selchow&Righter’s prudent approach

enabled the first to reach global leadership. It ensured the enduring survival of the

second in its volatile market34.

b. Relevance, origin and definition of corporate culture                                                                                                                  27  Kornblith,  “The  Craftsman  as  Industrialist.”  28  Berlin,  “Robert  Noyce  and  Fairchild  Semiconductor,  1957-­‐1968”;  Mass,  “Mechanical  and  Organizational  Innovation”;  Porter,  “Origins  of  the  American  Tobacco  Company”;  Fauri,  “The  Role  of  Fiat  in  the  Development  of  the  Italian  Car  Industry  in  the  1950’s”;  Reich,  “Lighting  the  Path  to  Profit.”  29  Rae,  “The  Electric  Vehicle  Company.”  30  Burhop,  “Pharmaceutical  Research  in  Wilhelmine  Germany.”  31  Sull,  “The  Dynamics  of  Standing  Still.”  32  Ibid.;  French,  “Structure,  Personality,  and  Business  Strategy  in  the  U.S.  Tire  Industry.”  33  McDonald,  “Western  Union’s  Failed  Reinvention.”  34  Newbury,  “Technology,  Capital,  and  Consolidation”;  Petrik,  “The  House  That  Parcheesi  Built.”  

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Corporate culture entered the debate on organisational performance in

business history literature to bring a fresh perspective. Dulheim states that corporate

culture is no peripheral to performance. It affects productivity by shaping the use of

human resources35. Churella sees no other explanation than in corporate culture for

the dramatic change of fortunes of AlCo after a revolutionary technological change in

the industry 36. Similarly, Stranger attributes Larkin’s success to its unique corporate

culture37.

Corporate culture goes beyond the structural functional paradigm dominating

business history literature where technologies, markets and self-interested competition

drive understanding of organisational behaviour and performance and separate the

activities of the firm from culture. As such, they ignore this latter’s impact on

economic decisions38. Lipartito shows the limits of this paradigm in explaining

divergent organisational behaviour amongst competitors. He draws on corporate

culture to potentially overcome them. He states that ‘capabilities understood as

cultural values specific to individuals firms or entire national economies may be more

important than formal structures like multidivisional organization in explaining

performance’ and that culture can provide a novel appreciation of the relationship

between a firm and its environment39. A new approach is therefore suggested. Studies

of structure and strategy are to be complemented with attitudes and meanings to

account for organisational behaviour and performance40.

The concept of corporate culture emerged as a promising solution to the

structural competitive difficulties witnessed in the 1970’s by US companies. The

1970s were a turbulent period. Japan was rising as international economic

powerhouse. It was able to compete, challenge and even outperform the United States

in some industries in global markets. The intensification of business competition both

in the local and international environments initiated a reflexion on the importance of

competitive advantage building. Finally, within this highly competitive environment,

                                                                                                               35  Dellheim,  “Business  in  Time.”  36  Churella,  “Corporate  Culture  and  Marketing  in  the  American  Railway  Locomotive  Industry.”  37  Stanger,  “From  Factory  to  Family”;  Stanger,  “The  Larkin  Clubs  of  Ten.”  38  Dellheim,  “The  Creation  of  a  Company  Culture”;  Lipartito,  “Culture  and  the  Practice  of  Business  History.”  39  Lipartito,  “Culture  and  the  Practice  of  Business  History.”  40  Dellheim,  “The  Creation  of  a  Company  Culture.”  

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some US companies proved to be consistently outperforming their peers. These three

factors exposed by Heskett and Kotter (1992) led to the following question: How can

companies effectively strive and outperform within increasingly intensive competitive

local and international environments?41 Research on the highly performing Japanese

and US companies was undertaken. The main insight derived was the centrality of

corporate culture in generating performance42. Many viewed it then as superior to all

organisational factors (strategy, structure, management systems, financial analysis,

leadership…) that were mainly discussed so far in defining organisational

performance43 . Thirty years of research provide today more perspective on the

concept, away from the hype that may have characterised research at the beginning.

The definition of corporate culture varies depending on the view the author

positions himself within the literature. Martin (1987) singles out three central views

differentiated by their perception of the degree of consensus amongst members to a

culture within an organisation, the degree of consistency of the manifestations of

culture and the reaction to ambiguity44. For the integration view, the consensus is

organisational wide, the manifestations are consistent and ambiguity is limited. For

the differentiation view, the degree of consensus is limited with the existence of

subcultures within the organisation, the manifestations are inconsistent and ambiguity

is given greater importance. Finally, the ambiguity view perceives a lack of clarity

and irreconcilable inconsistencies in the manifestations of culture, embraces

ambiguity as a fact and rejects organisation wide consensus as an unrealistic ideal.

Our position lies within the integration view. The notion of alignment to a corporate

culture to a high degree of consistency and consensus within an organisation cannot

be separated from the concept itself. Otherwise, it may indicate an inexistence of

corporate culture itself. As such, it is then of little relevance to explore its relationship

with performance.

Within the Integration view, Schein’s (1985) definition of corporate culture is

dominant. The majority of authors within the corporate culture literature use Schein

                                                                                                               41  Kotter,  Corporate  Culture  and  Performance,  2008.  42  Pascale  and  Athos,  “The  Art  of  Japanese  Management”;  Deal  and  Kennedy,  Corporate  Cultures.  43  Kotter,  Corporate  Culture  and  Performance,  2008.  44  Meyerson  and  Martin,  “Cultural  Change.”  

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inspired definitions to conduct their research45. Schein defines corporate culture as

follow: ‘a pattern of basic assumptions – invented, discovered or developed by a

given group as it learns to cope with its problems of external adaptation and internal

integration – that has worked well enough to be considered valid and, therefore, to be

taught to new members as the correct way to perceive, think and feel in relation to

those problems’46. Schein (1985) distinguished three levels of corporate culture. At

the deepest level, there are the basic assumptions. These capture the view an

organisation holds often unconsciously of itself and of the nature of the environment,

human nature, human activity and relationships. At a more apparent level, there are

values. These latter are the solutions developed by an organisation that are apparent in

their organisational processes, their organisational ideology and philosophy. Finally,

the third level is about artefacts. These are the different expressions of a corporate

culture that are visible or explicited such as mission statements, behavioural norms,

rituals or any other type of manifestations47.

The concept of corporate culture can be better defined by adding Pettigrew’s

(1979) emphasis on meaning to Schein’s definition. Schein provides a dynamic view

of corporate culture. It is basically composed of the solutions developed to cope with

problems an organisation faces and that have proven to be effective a sufficient

number of times to become implicit unconscious basic assumptions. However, the

starting point of these problems seems to be assumed as to how to maximise profits.

Whilst this belief may be true for a significant number of organisations, it cannot be

generalised. Some of them may hold beliefs that are not centred on money but on

prestige, the nation, society, the environment or humanity amongst others that are of

                                                                                                               45  See  Schneider,  Gunnarson,  and  Niles-­‐Jolly,  “Creating  the  Climate  and  Culture  of  Success”;  Booth  and  Hamer,  “Corporate  Culture  and  Financial  Performance”;  Zheng,  Yang,  and  McLean,  “Linking  Organizational  Culture,  Structure,  Strategy,  and  Organizational  Effectiveness”;  Ulijn  and  Brown,  “Innovation,  Entrepreneurship  and  Culture,  a  Matter  of  Interaction  between  Technology,  Progress  and  Economic  Growth?”;  Rashid,  Sambasivan,  and  Johari,  “The  Influence  of  Corporate  Culture  and  Organisational  Commitment  on  Performance”;  Wilson,  “Understanding  Organisational  Culture  and  the  Implications  for  Corporate  Marketing”;  Kotrba  et  al.,  “Do  Consistent  Corporate  Cultures  Have  Better  Business  Performance?”;  Salama,  “Privatization  and  Culture  Change”;  Ogbonna  and  Harris,  “Organizational  Culture”;  Fey  and  Denison,  “Organizational  Culture  and  Effectiveness.”  46  Schein,  Organizational  Culture  and  Leadership.  47  Ibid.  

  12  

greater importance to them. These latter may better correspond to the meaning they

provide to their lives. This can actually be a fundamental point of differentiation

between organisations. Pettigrew’s (1979) focus on meaning in his definition provides

us the tool to capture the diverse central beliefs and starting points of Schein’s

dynamic corporate culture definition48. Thus, we add a fourth level we would call

‘central belief’ to put it into perspective.

Brinkman’s (1999) introduction of a tangible dimension of corporate culture is

a necessary addition for a complete definition of the concept. Most authors in the

literature suggest that corporate culture is intangible. Brinkman (1999) supports a

definition corporate culture as a dynamic concept in the line of Schein (1985). He

acknowledges its intangible side but also argues that corporate culture has a tangible

dimension49. The solutions and insights developed within organisations to advance

toward their vision based on their central belief are added to the content of the

corporate culture. They are then transformed into tangible resources and processes.

For example, if an organisation realizes that the way to effectively advance toward

their vision is through innovation, then the company may allocate parts of its tangible

economical resources to establish this new insight within the organisation. It may

allocate resources to build a research and development department, hire researchers,

build partnerships with universities and take other forms of tangible actions instigated

by the new insight.

In conclusion, we define corporate culture as a dynamic concept that has both

intangible and tangible dimensions. This dynamic begins with a central belief around

which a vision is developed. The question arises then on how to advance toward that

vision. The fundamental insights and answers to this question provide the content of

the corporate culture. These insights are then established into organisational processes

and are expressed in a very specific clear way in how the organisation solves its

inherent internal integration and external adaptation problems. These latter become

norms and standards every organisational member has to align and behave according

to. They are then perpetuated through a set of mechanisms. The insights are also

established through the concrete allocation of resources that transform them into a

tangible organisational reality.

                                                                                                               48  Pettigrew,  “On  Studying  Organizational  Cultures.”  49  Brinkman,  “The  Dynamics  of  Corporate  Culture.”  

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c. Creation, transmission and sustainability of corporate culture   The case of Cargill shows the role the founder and early leaders in the creation

of a unique corporate culture. Since the founding of Cargill in 1865, the company

only had 5 chief executives in its 130 years history50. Three have been from the

founding and owning families. The two others did not have any linkage to the

dynasty. Still, two of the first leaders have played an enduring role in shaping

Cargill’s culture. These are John Sr and John Jr. The first came leadership at a critical

stage for the company. Cargill was encountering severe difficulties. It was on the

brink of bankruptcy. The determined resilient cautious personality of John Sr enabled

the company to survive this dangerous phase. It took several years of dealing with

creditors and using his already heightened financial skills to turn the organization

around. Bankruptcy was averted. John Sr was a fine manager of his people. He

brought innovative accounting practices and gained strong loyalties from his

employees. He put into place a corporate culture of consistency, caution and honesty.

It reflected his personal values. Whilst his extreme caution proved to be instrumental

in pulling the company through these difficult times, it became an impediment to

growth. His lack of opportunity orientation refrained Cargill from pursuing further

growth51. This however prepared the ground for John Jr, the next influential leader.

He built on these values and brought of his own to further develop and cement a

unique corporate culture. According to Broehl, John Macmillan, Jr, exerted a

tremendous influence on Cargill’s values from the early 1930s to his death in 1960.

His thoroughgoing entrepreneurship, his exciting leadership, and his willingness to

take on ‘close calls’ in trading battles were all legendary. Overall, he provided a

unique form of leadership for Cargill. John Jr had an incredible impact on Cargill52.

In studying corporate culture and performance, one should clearly differentiate

between a purposefully designed corporate culture as opposed to a spontaneous one.

Schein (1985) provides a general framework capturing how culture is formed within

an organisation based on group theory. As such, all organisations develop

spontaneously a corporate culture over time when a group comes together to achieve a

                                                                                                               50  Broehl  and  Chandler,  Cargill.p2  51  Ibid.p4    52  Ibid.p5  

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common objective53. From this perspective, all organisations adopt the same approach

naturally and therefore a spontaneous corporate culture in itself cannot be a

competitive advantage that is leveraged to generate high sustainable performance. At

best, short-term performance can occur when a set of uncontrolled circumstances mix

to create an effective corporate culture. However it cannot be maintained over the

long-term as the process for its perpetuation is not established (Heskett and Kotter,

1992). Studying corporate culture and performance is studying an intentionally

developed one that is formed and perpetuated on purpose. The existence of such

culture can only be claimed when a set of mechanisms are systematically present

within an organisation.

Heskett and Kotter (1992), Schein (1985) and Chatman (2007) highlight these

mechanisms defining the existence of a strong culture in details54. The founder is

perceived as the main figure behind the creation of corporate culture. The founder

anchors the central belief, the insights, the underlying values and the business

philosophy that form the content of the corporate culture55. This latter is then

expressed into all organisational processes and perpetuated through a set of

mechanisms. Leaders that follow the founder in leading these companies were

selected based on their alignment to these values. As such, they are organisational role

models that embody the culture, coach and train employees on that basis, constantly

communicate them within the organisation and align their choices accordingly within

all the organisational processes. Leaders pay particular attention to the maintenance

of the culture across all functions. They establish measure and control systems as well

as reward and status allocation criteria on a basis that highlights the content of the

corporate culture. They need to remain committed to it at all times, including during

crises. Additionally, the decisions of recruitment, selection, promotion, retirement and

excommunication of employees are also based on it 56

The cases of Norton and Cadbury show the mechanisms of transmission and

maintenance of corporate culture in action. The founders of Norton shared a deep

commitment for direct control. The timely arrival of talented, interested sons assured                                                                                                                53  Schein,  Organizational  Culture  and  Leadership.  54  Kotter,  Corporate  Culture  and  Performance,  1992;  p7  Schein,  Organizational  Culture  and  Leadership;  Lyons,  Chatman,  and  Joyce,  “Innovation  in  Services.”  55  Schein,  “The  Role  of  the  Founder  in  Creating  Organizational  Culture.”  56  Schein,  Organizational  Culture  and  Leadership;  Kotter,  Corporate  Culture  and  Performance,  1992;  Lyons,  Chatman,  and  Joyce,  “Innovation  in  Services.”  

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continuity and endurance of the value on which the company was originally built. The

tutelage of Charles Allen, Jeppson and Higgins institutionalized these founder values.

They firmly established the pattern of continued owner-operation. This latter has been

perceived as crucial to the preservation of Norton values. It gained fundamental

importance for following generations of management. In this logic, Jeppson and

Higgins recruited and trained descendants for top positions. However, this dynastic

approach did not entail the absence of any meritocratic basis. To the opposite, the

large family provided a rich pool from which to draw and nurture individuals with

great talents to become the future leaders of Norton57. Cheape notes that employment

of various sons, nephews, brothers in law, cousins, and other male offspring from four

of seven founders made nepotism obvious, but advancement at the top was not

reserved to any family or individual. Those with less talent were held to lower or

middle management jobs until they quit or retired; those with aptitude were moved

and promoted. Many applied but few were chosen58. Norton’s experience makes clear

that whilst the personalities of the founding members were important to the

company’s heritage, it is the institutionalisation and perpetuation of their values in the

company’s structure and strategy through the selection and training of its top people

that carried Norton’s culture59.

Cadbury offers equally an interesting example showing the mechanisms underlying

the existence of a corporate culture. The death of the founders of the company did not

mean the death of the values on which they built Cadbury. To the opposite, the next

generation of leaders drew on the values transmitted and built on them in continuity.

The fundamental objectives remained the same. However, the ways to achieve these

objectives were subject to much exploration paving the way for the industrial

experimentation initiatives that characterised Cadbury. The joint pursuit of business

efficiency and industrial reform was the motto of the second generation. This

generation of leaders embodied the culture, behaved consistently to the values they

stated and encouraged. They were role models for the younger generations. Particular

attention has been given to these latter. A person could get employed at Cadbury as

soon as at 14 years of age. She was subsequently trained and nurtured within this

culture. Promotion was almost exclusively from within. Those who best seized and                                                                                                                57  Cheape,  Family  Firm  to  Modern  Multinational.p357    59  Cheape,  Family  Firm  to  Modern  Multinational.  P359  

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acted in accordance with Cadbury values were given positions of responsibility. It

ensured both the perpetuation of Cadbury’s culture as well as an unshakable

commitment and loyalty to the company.

The sustainability of a corporate culture over the long term or its demise

depends mainly on the controlling owners of the organisation60. The controlling

owners ultimately hold the company’s power of decision. Corporate culture is lived

and transmitted through making decisions at all organisational levels according to the

values of the firm. It is therefore necessary that the controlling owners live up this

culture as well as have the decision power to carry it out. Financial independence is

thus critical. The second leader of Cargill understood the importance of this lesson.

He stepped up in times of severe financial difficulty. Cargill was at the mercy of

creditors. It was difficult to lead the company according to the values he was trying to

instil. Once the situation changed for the better, the resentment and fear of being

deprived of power were transmitted to the next generation. Throughout his leadership

and that of John Jr,, Cargill always chose to finance its projects on its own according

to its means rather than seek for external finance that would undermine the company’s

independence. This latter also ensured Cargill’s ability to move quickly and

decisively on its own information and analysis. It came to be one of its main strengths

in its highly competitive industry. The company adopted and maintained a policy of

small dividends with most profits funnelled back to invested capital. This policy

endured ever since through the following generations61. The Norton case reaches the

same conclusion. The company’s deep attachment to its values and unique corporate

culture resulted in a great emphasis to ensure the financial independence necessary to

carry it out. The way it did so was clearly summed up: ‘self finance assured

independence, and success and thrift assured self-finance’62. The company’s high

returns from its premium products generated ample cash flow. Moderate dividend

policy marked by a high percentage of reinvested earnings (32% between 1975-1979)

channelled these funds to reinvestment to sustain and generate further growth.

Norton’s strong financial position enabled it to contract short-term loans for

                                                                                                               60  Broehl  and  Chandler,  Cargill;  Cheape  and  Chandler,  Family  Firm  to  Modern  Multinational;  Stanger,  “From  Factory  to  Family”;  Stanger,  “Failing  at  Retailing.”  61  Broehl  and  Chandler,  Cargill.  Trading  the  world’s  grain.  P789  62  Cheape  and  Chandler,  Family  Firm  to  Modern  Multinational.  P357  

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additional capital without needing to surrender any power to creditors63. Finally,

Cadbury further sustain this point. It is most obvious in the great reluctance of George

Cadbury to sell any shares. He feared stockholders would reject the social aims that

have been an integral part of Cadbury culture. Even when the company went public in

1912, the family retained controlling power. This independence provided Cadbury

leaders with the ability to finance their unorthodox industrial and social experiments64.

A note of caution has to be issued. It is critical the controlling owners be immersed

and aligned to the corporate culture to sustain it. Otherwise, these controlling owners

can be the primer destroyers of their inherited culture. The case of Larkin

demonstrates it. The son of the founder assumed leadership using his ownership

power. He was not trained within the company or nurtured within its culture. He

caused the departure of key leaders behind its previous success. They were the

representatives and models of Larkin culture. He quickly dismantled the company’s

culture and led it to bankruptcy65.

2) Corporate culture and performance

a. Strong, mission driven and adaptation cultures’ influence on performance  

Three corporate cultures have been linked to organisational performance in the

literature: strong culture, mission driven culture and adaptation culture. In the

following, we explore the mechanisms through which they supposedly influence firm

performance. We equally assess their actual impact on performance as measured in

the literature.

A strong corporate culture is said to generate many benefits within the

organisation by solving internal integration problems that stimulate performance.

The influence of a strong corporate culture on employees is surely one of the

main mechanisms the literature insists upon. Accordingly, it is important to explore

this point in great details. The concept of fit between organisational culture and the

employee’s values is central in this assessment. Posner finds clearly articulated

organizational values make a significant difference in the lives of employees, as well

as in their organization’s performance. His findings reveal that efforts to clarify and

merge personal and corporate values can have a significant payoff for both managers                                                                                                                63  Ibid.  64  Dellheim,  “The  Creation  of  a  Company  Culture.”p352  65  Stanger,  “From  Factory  to  Family.”  

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and their organizations. The strength of the congruence between values of an

organization and its employees affects quality of managerial commitment, direction of

energy and effort willingness on behalf of the organization. Strong shared values

provide individuals with a sense of success and fulfilment, a healthy assessment of the

values and ethics of their colleagues, subordinates, and managers as well as a greater

regard for organizational objectives. More specifically, managers who felt that their

values were particularly compatible with those of the organization were significantly

more confident they would remain with their current employer for the next five years.

They were more likely to work long hours for their employer66. Similarly, O’Reilly

(1991) finds that person-organization fit predicts job satisfaction and organizational

commitment a year after fit was measured and actual employee turnover after two

years67. Person-organization fit is a significant predictor of normative commitment,

job satisfaction, and intentions to leave, independently of age, gender, and tenure68.

Shared values matter to organizational goals. These latter were more important for

employees who felt their values were aligned with the organization. They highly

ranked the goals of effectiveness, productivity, reputation, morale, profit

maximization and stability. Hence, clarity, consensus, and intensity about vision and

values are presented as producing significant results for the organization. Last, shared

values are associated with concern for stakeholders. Managers’ alignment to the

organisation’s values affects their orientation, attention and concern for various

stakeholders in the activities of the corporation69.

Firms with a strong culture attract, motivate and satisfy employees with similar

beliefs as well as generate their alignment without interventionism. Van den Steen

(2005) finds that the firm with a strong culture attracts precisely those employees who

take action according to its manager’s beliefs. The sorting effect systematically aligns

the beliefs of employees as well as their actions. It directly eliminates one major cost:

employee demotivation due to difference with manager’s vision. While the manager’s

opinion has an important influence on the decisions of the employee, it is also a key

determinant for the employee’s effort and utility, that is, his motivation and

satisfaction. A stronger belief of the manager motivates the employee and increases

                                                                                                               66  Posner,  Kouzes,  and  Schmidt,  “Shared  Values  Make  a  Difference.”  67  O’Reilly,  Chatman,  and  Caldwell,  “People  and  Organizational  Culture.”  68  Ibid.  69  Posner,  Kouzes,  and  Schmidt,  “Shared  Values  Make  a  Difference.”  

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his utility when the employee’s belief acts according to the manager’s beliefs.

Employees with a strong opinion about the correct path of action are very motivated

under managers who agree with them. They are however demotivated under

managers with a different opinion. Employees get higher utility working for firms that

espouse a vision they agree with as in the case of strong culture companies.

Consequently, they get higher productivity from employees who agree with their

vision. Delegation is more compelling. It requires no efforts of supervision within a

strong culture. In his latter, employees’ actions are influenced by their managers’

beliefs. Since they are unified, they become more aligned. When employees choose

their projects without intervention from the top, they choose what management would

want them to choose. Ultimately, employees are aligned without any explicit

coordination mechanism resulting in more delegation70. Besides greater delegation, a

strong culture leads to less monitoring, higher utility (or satisfaction), higher

execution effort (or motivation), faster coordination, less influence activities, and

more communication. The fundamental intuition behind these effects is in in agency

theory. Shared beliefs and values reduce differences in objectives. It intrinsically

affects every type of agency issue. The time to coordination increases in the level of

belief heterogeneity. The homogeneity in a strong culture makes coordination thus

faster and easier. Furthermore, an employee is more likely to hold information if he

differs with manager’s beliefs and values. Therefore, strong culture leads to higher

exchange of information71.

A strong culture impacts performance by influencing strategy execution and

customer satisfaction. Chatman (2003) builds her argument on the effect strong

cultures create on employees as detailed above. It pushes it further by linking it to an

organisation’s strategic level. This link is identified as of crucial importance to an

organisation’s success or failure. The nature and content of strategy formulation, no

matter how competent and appropriate, can remain but a strateg. The analyses of

different companies showed it is not strategy formulation that is of outmost

importance but an organisation’s ability to execute it effectively. This depends on

how on how clearly employees understand the culture and how intensely they feel

about it. A strong culture plays this bonding role between strategy formulation and

                                                                                                               70  Steen,  “Organizational  Beliefs  and  Managerial  Vision.”  71  Van  den  Steen,  “Culture  Clash.”  

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strategy execution. First, a strong culture energizes employees. It appeals to their

higher ideals and values. It rallies them around a set of meaningful, unified goals.

These ideals excite employee commitment and effort to achieve them because they

are inherently engaging and fill voids in identity and meaning. Second, strong

cultures shape and coordinate employees’ behaviour in a very effective and efficient

way. Company’s values and norms focus employees’ attention on organizational

priorities that then guide their behaviour and decision-making at their own level. It

turns complex strategic organisational objectives into manageable clear goals

employees relate to and are eager to reach72. The efficiency with which strong culture

organisations fulfil this function creates an important competitive advantage.

Chatman clearly expresses it in the following: ‘ They do so without impinging, as

formal control systems do, on the autonomy necessary for excellent performance

under changing conditions. The irony of leadership through culture is that the less

formal direction you give employees about how to execute strategy, the more

ownership they take over their actions and the better they perform. Strong norms

increase members’ clarity about priorities and expectations as well as their bonds with

one another. Unlike formal rules, policies, and procedures, culture empowers

employees to think and act on their own in pursuit of strategic objectives, increasing

their commitment to those goals. Organizational culture can be a powerful force that

clarifies what’s important and coordinates members’ efforts without the costs and

inefficiencies of close supervision.’73

The superior coordination ability in strong cultures is related to customer satisfaction

according to Denison. The ability to coordinate service delivery in a consistent way is

a critically important aspect of customer satisfaction. Strong cultures ensure it. They

are related to customer fidelity and repeated purchases. They ensure continuous

streams of revenues over the long term. As such, they impact organisational

performance74. Last among strong culture beneifts, Kilman suggests it is central to the

success for both innovation and corporate mergers75.

                                                                                                               72  Chatman,  “Leading  by  Leveraging  Culture.”  73  Ibid.  74  Gillespie  et  al.,  “Linking  Organizational  Culture  and  Customer  Satisfaction.”  75  Sørensen,  “The  Strength  of  Corporate  Culture  and  the  Reliability  of  Firm  Performance.”  

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A strong corporate culture can equally have disadvantages that can offset the

benefits mentioned above. The alignment, consistency, homogeneity and uniformity

a strong culture generates are seen as critical advantages. They facilitate important

organizational processes and performance. However, another strand of the literature

points out to limits and impediments they also create. The main limit is strong

culture’s inability to deal with change in the environment. Sorensen (2002) asserts

strong cultures are appropriate in stable environments. They excel in exploiting

established competencies. However, in changing environments, these strengths

become weaknesses. The discovery of new competencies becomes critical in volatile

environmental conditions. Exploration rather than exploitation is the key. Strong

cultures are ill suited in that exercise, They lack internal diversity and heterogeneity

of perspectives. Adaptation is thus more difficult. Similarly, Nemeth and Staw (1989)

single out a common assumption in strong cultures: truth is correlated with consensus.

Thus, consensus is maintained even in changing circumstances. With this uniformity,

strong culture organisations are likely to fail to adjust to shifts in the environment.

Moreover, pressures for uniformity equally cause rush to judgment and an inability to

make careful, deliberate and divergent decisions76.

Strong culture is detrimental to innovation. The agreement to conform to established

behavioral patterns is a psychological tendency in strong cultures. Decrease in

innovation and detection of error are noticed. The majority influence narrows the

alternatives for a given situation. It reduces the quality of decisions made. Thus, it

stifles innovation. Organizational members’ insistence over established courses of

action reduce individual initiative to identify and correct organizational errors77. Van

den Steen argues difference in beliefs rather than their homogeneity makes people

collect more information to convince the other party. In a strong culture, the inherent

agreement between parties does not provide any incentive. Hence, there is

organizational loss when parties constantly agree. In a similar logic, diversity of

beliefs is linked to more experimentation. It is defined as ‘trying different things and

learning about the payoffs of different actions’. When beliefs are heterogeneous, more

courses of action are experimented. They may result in innovations or in the

                                                                                                               76  Staw  and  Nemeth,  “THE  TRADEOFF  S  OF  SOCIAL  CONTROL  AND  INNOVATION  IN  GROUPS  AND  ORGANIZATIONS.”  77  Ibid.  

  22  

discovery of better courses of action than those deeply rooted in a strong culture78.

Chatman (2007) challenges these arguments. Strong culture limits innovation only

when it is not in the content of the strong culture. Otherwise, it is the opposite

dynamic. A strong culture characterized by innovation can be an important stimulator

of innovation within an organization79. It turns divergent thinking a value shared by

all members instead of establishing uniformity80.

The second type of culture linked to organisational performance in

organisational theory and business history literature is the mission driven culture.

Corporate culture starts from a belief on which a vision is built. Within the corporate

world, the natural widespread belief is profit. All organisational efforts are

exclusively directed towards that goal. A mission driven culture is different. Its

central belief is not profits or self-interested competition. This difference is said to

create a unique culture that relates better to performance. We explore how.

Collins (2004) attributes distinguished superior performance of elite companies or

‘visionary companies’ to their mission driven culture. These are organisation

ideologically rather than profit driven. Their beliefs are apparent in their statements

and embraced in their very perception of profits. Profit is allegedly like oxygen. It is

necessary for life but not the point of it. These basic beliefs outline the purpose and

ideology of the company. They are forces shaping everything the organisation does.

The organisation’s core ideology waves the fabric of the firm. It is translated in every

organisational function from the design of goals, jobs, strategies, tactics,

compensation systems and cultural practices to more artificial edifices such as

building layouts. It is the essence driving the company with messages consistent and

reinforcing. Every organisational member understands it and behaves accordingly81.

Kotter (1992) further supports the idea. Companies with a managerial culture giving

great importance to all organisational constituencies (customers, employees,

stockholders) perform better82. When managers care about all constituencies, they

perform well financially. In a competitive industry, it can only be achieved by taking

care of customers. In a competitive labour market, it means taking care of those

                                                                                                               78  Van  den  Steen,  “Culture  Clash.”  79  Lyons,  Chatman,  and  Joyce,  “Innovation  in  Services.”  80  Ibid.  81  Collins  and  Porras,  Built  to  Last.  P40    

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whose who serve customers: employees83. It is difficult to assert every constituency

hold the same importance. However, no group has been ignored. Fairness to all

constituencies has been the underlying principle84. On the opposite, a culture lacking

care for the three constituencies generate a limiting dynamic. It refrains a company’s

ability to effectively adapt. It negatively impacts performance. Finally, Denison

(1995) finds combination of economic and non-economic objectives is important for

organisational effectiveness. It provides purpose and direction to its members. The

organisations studied showed compelling evidence of the close relationship between

the overall purpose and direction of the firm, and the actual meaning held by each

employee. Crises occurred when the basic mission was questioned or altered. The loss

of meaning and direction coincided with significant losses in momentum and

effectiveness85.

Specific organisational capabilities develop as a result of mission driven

culture. It creates unique competitive advantages that stimulate performance.

Vrdenburg (1998) studied the impact of a mission driven culture built on care for the

environment. Companies placing the environment at the heart of their culture

developed proactive environmental strategies and unique competitive capabilities in

their industry. These capabilities include superior stakeholder integration, a capacity

for higher order learning and continuous innovation. It differentiated competitors

without proactive environmental strategies. These unique organisational capabilities

of environment driven cultures account from more than 50 percent of the firm’s

variance in competitive benefits (process, product, operational innovations, cost

reductions, improved corporate reputations and better employee moral) and directly

influence performance86. A mission driven culture shifts the focus from the individual

to the collective. Chatman (1998) shows how collectivistic cultures stimulate the

emergence of benefits of demographic diversity favourable to performance 87 .

Collectivistic values positively interacted with demographic composition to influence

                                                                                                               83  Kotter,  Corporate  Culture  and  Performance,  1992.p46  84  Ibid.  p52  85  Denison  and  Mishra,  “Toward  a  Theory  of  Organizational  Culture  and  Effectiveness.”  86  Sharma  and  Vredenburg,  “Proactive  Corporate  Environmental  Strategy  and  the  Development  of  Competitively  Valuable  Organizational  Capabilities.”  87  Chatman  et  al.,  “Being  Different  yet  Feeling  Similar.”  

  24  

social interaction, conflict, productivity and creativity within the firm. Individualistic

values did not. A collectivistic culture makes organisational membership salient and

encourages people to perceive other members as having the organisation’s interests

and goals in common. The opposite happens individualistic cultures. Distinctiveness

between members is the driver. The social categorisation process is fundamentally

different. In collectivistic cultures, demographic as a social categorisation loses

emphasis towards a categorisation defined by the values of the organisation. As such,

the demographic dimension that can be a barrier in the interaction and harmony

between organisational members is bridged. It facilitates cooperation and

coordination. Expectedly, individualistic cultures generated more conflict. Difference

between individual goals and values lead to tensions and conflict. This was not the

case in collectivistic cultures. Furthermore, collectivistic cultures perceived conflict as

a positive experience increasing learning and improving chances of reaching

organisational outcomes. In individualistic cultures, they were perceived as

detrimental. Last but not least, collectivistic cultures stimulate greater creativity than

individualistic cultures. Trust in collectivistic cultures unlocks diversity of ideas

characteristic of divergent demographic backgrounds, Productivity in collectivistic

cultures is thus higher than in individual cultures88.

The cases of Cadbury and Cargill are prime examples in business history of

the way mission driven culture can relate to performance. Delheim (1987) seized

Cadbury’s mission driven culture. The Cadbury family was deeply religious. They

were highly active Quakers. The Quaker philosophy had central place in their

perception of business and the objectives it served. This approach differed from

mainstream business. It resulted in a unique unorthodox vision of business and

organisational processes. The primary objective was not profit driven. Rather, it has

been stated as the advancement of the social, moral and physical well-being of all

connected with the company. The Quaker philosophy was behind the very

assumptions upon which crucial business practices have been formed. It is clear in

Cadbury’s labour practices. George Cadbury deeply believed all men are equal to God

and that man was saved to serve: ‘The real joy rest and joy in life is to have an

assurance that we are felling up the place, which God has appointed us’. This deeply

                                                                                                               88  Ibid.  

  25  

held belief initiated one of the most progressive labour policies of the era. Employee

welfare was central. The company committed to ensure employment for its workforce

even in times of hardships. It enlarged its recruitment to underprivileged spheres to

offer an opportunity for a better life. In turn, these policies resulted in greater

productivity and harmony. During times of labour manifestations and strikes in

Britain, Cadbury was not affected. The demands of strikers were already met and

exceeded in Cadbury. The mission driven culture also translated in their value

proposition, the selection of product categories and the quality they pursued. Cocoa

and chocolate were seen as having social benefits. They were chosen to be the main

product categories for this reason. The company’s strategy was ‘to provide high

quality products at good value to the consumer’89. Cadburys’ policy to only use the

very best raw materials compelled the elevation of the industry standards, to the great

disappointment of its competitors. It reduced their profit margins. Finally, the mission

driven culture brought a long-term approach to building the company. An employee

recalls that ‘George and Richard Cadbury took the long-term view in running their

business. They weren’t looking for immediate profit but were building for the future

when their children would reap the advantage’. In Cadbury’s case, the mission driven

culture proved to crucial to the high performance they registered90. Cargill’s situation

is no different. Its underlying belief is captured upon accession of her fourth leader.

Broehl states ‘there was no doubt that MacMillan was a visionary who wanted

passionately to be the best in improving the living standards for the five billion people

of the world.’ Right from the start of his leadership, he was very strict on placing

critical importance on company ethics at a time where the industry was marked by a

slippage in morality.91

Culture of adaptation is the third type of culture associated with performance.

The Electromotive Company in the American railway locomotive industry perfectly

captures this culture and the way it influences performance. Churella;s (1995) study

of American railway locomotive industry explains divergent performance between the

two main competitors by culture of adaptation. The American Locomotive Company

dominated stream locomotive industry. It had a culture suited for it. However, it was

                                                                                                               89  Dellheim,  “The  Creation  of  a  Company  Culture.”  90  Ibid.  91  Broehl,  Cargill,  1998.p252  

  26  

ill suited for the technological shift to diesel locomotives. This ‘maladaptive culture’

cost American Locomotive Company its well-established dominant position to the

detriment of its less resourceful but culturally better-equipped challenger, the

Electromotive Company92 . The American Locomotive Company had no future

orientation. It solely focused on the existent technology. It failed to see the radical

technological change forthcoming. Its leaders perceived innovation and technological

advance as a matter of incremental innovations driven by the continuous

improvements on current technology rather than in terms of major technological

shifts. They could not comprehend how the widespread dominant steam technology

could become obsolete. Thus, they strengthened organisational processes and

capabilities for steam technology only. Manufacturing was based on batch production.

Marketing relied on loyalty. They yielded significant success in steam locomotives.

At the same time, leaders perceived the nascent diesel locomotives technology as a

fad. Consequently, they did not commit resources to develop it. Instead, they provided

abnormally high dividends and invested in their existent abilities. They did not adapt

their capabilities to suit the different model diesel technology required. Batch

production and client loyalty were of limited relevance in this optic. At the same time,

the Electromotive Company was new organisation in the industry. It had very limited

resources compared to the American Locomotive Company and but a tiny market

share. However, its leaders quickly recognised the major shift diesel technology was

to create and instantly committed all their resources to this new technological

paradigm. Its founders built a culture of experimentation and innovation centred on

the development of diesel technology. It developed unique organisational capabilities

perfectly adapted to the requirements of diesel technology. It created new distribution

techniques and invested heavily in assisting, teaching and coaching its users to diffuse

it. Consequently, the company held a privileged position when the technological shift

towards diesel technology occurred. The under resourced Electromotive Company

drove once dominant American Locomotive Company to bankruptcy in a few years.

The company’s ability to anticipate and adapt to its environment has been therefore

credited for both the demise of a dominant player and the emergence of a new

                                                                                                               92  Churella,  “Corporate  Culture  and  Marketing  in  the  American  Railway  Locomotive  Industry.”  

  27  

leader93.

Now that the three cultures relating to performance have been identified and the

ways they influence performance have been explored, we focus on each culture type’s

link to financial performance in both organisational theory and business history.

b. Culture content and performance  

A strong corporate culture ensures the reliability of performance within a

stable environment. It has a relationship with short-term performance. However, it

does not guarantee long-term performance. Sorensen (2002) found companies with a

strong corporate culture have a more reliable (less variable) and a superior

performance in relatively stable environments than others. The consensus surrounding

organizational goals and values characterizing strong culture enhance their ability to

exploit established competencies. However, this reliability and superiority in

performance is only enduring as long as the environment is stable. In more volatile

environments, the benefits derived from strong culture attenuate and disappear

because of the difficulty strong culture firms encounter to explore and discover new

competencies better suiting their environmental conditions. Firms with strong cultures

thus incur therefore a trade off with respect to their adaptability in the face of

environmental change94. Di Tomaso (1992) finds the extent to which individuals agree

in their view of the total culture is predictive of short-term performance. More

specifically, strong culture measured as consistency of survey responses within

organizations, is related to organizational performance in ensuing years 95 . It

strengthens the same conclusion reached by Denison (1990)96. However, Kotter

(1992) questions these findings. In his study, strong culture has but a modest positive

relationship with performance. The statement strong culture creates excellent

performance is hardly verifiable in a reliable way and cannot be asserted. A strong

culture can have the opposite effect when its content contains dysfunctional elements.

It can lead even thoughtful reasonable people in the wrong direction. At best, a strong

                                                                                                               93  Ibid.  94  Sørensen,  “The  Strength  of  Corporate  Culture  and  the  Reliability  of  Firm  Performance.”  95  Gordon  and  DiTomaso,  “Predicting  Corporate  Performance  from  Organizational  Culture*.”  96  Denison,  Corporate  Culture  and  Organizational  Effectiveness.  

  28  

culture has a modest relationship to short term performance97.

The cases of Larkin, Nuffield and Norton in business history support the link

presented above between strong cultures and performance. Stranger (2000) suggests

Larkin Company’s initial positive performance was a result of its strong culture. It

aligned management, employees and customers. It solved internal problems and

smoothed operations unifying major company stakeholders around clear single

organisational objectives and common interests. This strong culture has been

characteristic of the first generation under the leadership of the founder John Larkin.

The move to the second generation changed the company’s fortunes. The death of the

founder was the beginning of the weakening of the Larkin culture. The leadership

assumed by his son led to rapid degradation of the strong culture. The unity that has

been holding management, employees and customers gave way to divergence and

open conflict. The management that has been instrumental in developing its fruitful

mail ordering business and that embodied Larkin culture quickly distanced itself from

the company they built from scratch following a series of conflicts with the new

Larkin leader. This weakening and destruction of the strong culture consequently led

company to bankruptcy in a very short time98. Nuffield experienced a similar scenario.

Morris founded the company. He was the first to move towards high volume

production in British automobile industry, inspired by the Ford model. He built a

strong engineering team and assembled a handpicked talented team of managers

around a clear vision. The strong culture he built quickly proved fruitful. Nuffield

occupied a prime place in British automobile industry. His retirement however was a

turning point. As in the case of Larkin, the void the founder’s departure left led to the

weakening of culture and to a downward spiral. The once cohesive company guided

by clear vision soon turned into internal division, competition and uncertainty as to

managers’ role. Furthermore, the maintenance of completely independent

subsidiaries, the sacking of key figures, the inconsistency of the values preached with

the empowerment yet punishment of management for taking initiative turned a strong

culture into chaos. Confusion about the company’s direction, lack of communication

and planning rapidly turned a prosperous company into one in difficulty, forced to

                                                                                                               97  Kotter,  Corporate  Culture  and  Performance,  1992.p22-­‐23  98  Stanger,  “From  Factory  to  Family”;  Stanger,  “Failing  at  Retailing.”  

  29  

merge with a bitter rival to survive99. Last, Norton equally showcases the same

dynamic. The founding generation deeply rooted a strong culture by which they

conducted business and stood firmly. By World War I, they financed, built and

maintained control of a large, integrated, industrial company. It was the world’s

largest manufacturer of grinding wheels and other bonded abrasives. They had the

clairvoyance to nurture a second generation able to uphold the strong culture and

perpetuate it in business operations. Unlike Larkin, the second generation proved able

and further cemented the company’s success.100 The shift to the third generation

proved to be the pitfall instigating culture weakening. The expansion of the company

and the insistence of the subsequent generation to maintain direct control proved to be

a deadly combination. This generation did not nurture and develop talents to hold

leadership positions across the growing and complex organisation. They were

compelled to hire external managers foreign to the unique Norton culture into

important managerial positions. The strong culture diluted. Scores of acquisitions

granted complete autonomy accentuated this tendency101. Poor performance and

important financial difficulties followed. In the three cases, strong culture linked to

performance but only in a short to medium term horizon, in line with organisational

theory findings.

Mission driven culture also generates short to medium term performance.

Denison (1995) finds in mission driven culture a strong predictor of performance. The

profitability criteria are best captured by the mission trait of a culture. His research

however is only applicable for the next few following years without providing

insights as to the long-term horizon102. Delheim (1987)’s study of Cadbury shows the

impact of its mission driven culture on performance. The company went from a

failing company to the 24th largest manufacturing company from 1879 to 1931. It is

even more impressive as it prospered within the context of broad national industrial

British decline103. It is however not sufficient to claim mission driven culture

generates and sustains long term performance. Similarly, Collins (2004) used

                                                                                                               99  Church,  “Deconstructing  Nuffield.”  100  Cheape  and  Chandler,  Family  Firm  to  Modern  Multinational.p352  101  Ibid.p353  102  Denison  and  Mishra,  “Toward  a  Theory  of  Organizational  Culture  and  Effectiveness.”  103  Dellheim,  “The  Creation  of  a  Company  Culture.”  

  30  

companies’ market performance in assessing the relationship between a driven

mission culture and performance. Mission driven culture companies had stock-return

performance of fifteen times the general market. He claims they stood the test of time.

We do not consider the stock-return performance as an intrinsic measure that truly

captures performance. For this reason, mission driven culture being predictive of

long-term performance remains but an unproved statement104.

Culture of adaptation does not better than strong and mission driven cultures.

It is also limited to short and medium term performance. Corporate cultures with a

good environment fits can only explain short to medium term performance at best.

Highly performing companies reported better culture-environment fit than their

counterparts 105 . However, a change in the environment can hurt long-term

performance. Most of lower performers had a significantly better culture/environment

at an earlier time and registered excellent performance. However, they could not

maintain it106 . Thus, culture of adaptation can only account for short to medium

horizon performance. The case of the Electromotive Company does not contradict this

conclusion. It started to lose ground the same way it gained from the industry’s

previous leader. The Electromotive Company developed the organisational

capabilities necessary to navigate the diesel revolution. However, it did nothing but

maintain and strengthen these existent capabilities. It was not preparing for the next

environment shift. The entry of GE into its market with an innovative product built on

a new technology far superior to existent products quickly eroded its market share.107.

Thus, adaptation culture does not ensure long-term performance.

The case of Cargill is the exception. It is the only case that registered sustained

long-term performance. However, given the nature of its industry, no lessons can be

transposed to capital-intensive technology industries. Since John Jr’s turnaround of

the company in early 1920s, the company has been in an upward spiral consistently

maintained through the following generations. It combined the three types of culture

at once. It had a strong culture, a mission driven one as well as a culture of adaptation.

                                                                                                               104  Collins  and  Porras,  Built  to  Last.p40  105  Kotter,  Corporate  Culture  and  Performance,  1992.p37  106  Ibid.p40  107  Churella,  “Corporate  Culture  and  Marketing  in  the  American  Railway  Locomotive  Industry.”  

  31  

It is unclear though if the combination of these different attributes is the reason

behind its continued success. Cargill moved from a Midwestern company in the early

1920s to a respected major national force by the 1940s108. Under the leadership of

John Jr,, it became the world leader of grain trade by 1961, respected, envied and

even fear by whose who had to deal with it109. By the time of transition from John Jr

to the next leader of Cargill, it was widely recognised by the public as the number one

in the industry110. It continued its upward performance curve with steady growth in

sales, net worth and profits between 1977 and 1991. It maintained its relentless pace

and advantage over its traditional rivals in the grained trade and fended off new

challengers111. Cargill remained top of its industry throughout decades. It had superior

abilities in almost any trading situation112. Thus, Cargill surely represent the best

template in business history literature to derive understanding of the culture type that

best relate to long-term performance. However, the nature of the industry plays an

important role. No such case exists in corporate culture literature for capital-intensive

technologically driven industries. The quest for seizing the corporate culture behind

long-term performance in these specific industries remains wide open in the literature.

We have seen so far that the three types of culture could only account for short

to medium term performance at best. They fail to explain long-term performance. A

major common issue is emerging. It could enlighten the reason why these cultures fall

short in that exercise. Independently from the type of culture, their long-term

performance seems to be hindered by a common factor: technological advance and

change. The rise of the Electromotive Company was due to its early commitment to

the new technological shift from steam towards diesel whilst its decline was equally

led by the development of GE of a novel technology replacing the existent one113.

Larkin’s rapid demise coincided with the industry’s shift from mail ordering business

to a new business paradigm. It was enable to embrace this major change114. Norton’s

inability to maintain its technological edge and develop innovative premium high                                                                                                                108  Broehl,  Cargill  :  Trading  the  world's  grain.p854  109  Ibid.p867  110  Broehl,  Cargill,  Going  global  1998.p367    111  Broehl,  Cargill,  Trading  the  worlds'  grain  1992.  p876  112  Broehl,  Cargill,  From  commodities  to  customers  2008.  P9  113  Churella,  “Corporate  Culture  and  Marketing  in  the  American  Railway  Locomotive  Industry.”  114  Stanger,  “Failing  at  Retailing”;  Stanger,  “From  Factory  to  Family.”  

  32  

margin products behind its prior success was a major reason for its subsequent

difficulties115. Thus, the major shortage facing all three types of culture is their

inability to drive technological progress, create technological revolutions or at least

recognise, embrace and commit to major technological shifts at their early stages

when the short window of opportunity is still open. Culture of radical innovation has

the potential to overcome this fundamental limit and unlock the puzzle of long-term

performance in capital-intensive technology industries.

c. Culture of radical innovation  

Culture of radical innovation is defined as a culture that fosters relentless

innovation that aims to ensure a firm is constantly at the leading edge of innovation.

According to Tellis (2009), a radical innovation has transformational effects. It

merges markets, create new ones and destroy old ones. It differs from incremental

innovations that are the result of improvements of existing technologies and products.

Rather, a radical innovation can take the form of completely new product categories

enabled by major advances or complete shifts in underlying technology. It makes

what was impossible yesterday possible today. Radical innovations can propel small

outsiders in position of industry leadership and bring down dominant players that fail

to launch or embrace these radical innovations. Firms at the leading edge of radical

innovation tend to dominate world markets. Radical innovations have thus the power

to drive market growth, a company’s success and a nation’s economic growth. These

radical innovations are however results and the fructification of a whole process.

Amongst all factors, corporate culture is clearly identified as the most important

driver behind the generation of radical innovations. Thus, a culture of radical

innovation is basically a corporate culture geared towards the continuous generation

of radical innovations116.

A culture of radical innovation consists of three attitudes. The attitudes are

future orientation, the willingness to cannibalise assets and tolerance of risk. The

future orientation attitude means the company is constantly looking ahead and

focusing on the next major technology. A future orientation forces a firm to realize

the limitations of current technology no matter how advanced it is and orients its

                                                                                                               115  Cheape  and  Chandler,  Family  Firm  to  Modern  Multinational.  P354  116  Tellis,  Prabhu,  and  Chandy,  “Radical  Innovation  across  Nations.”  

  33  

attention towards the emergence of the next generation of technology that may

become dominant in the future. It shifts the focus from the temptation to channel its

efforts into small improvements and resolution of micro problems of current

technology towards the development of an entirely new and superior technology that

would make the existent technology obsolete in the future. Future orientation has to

be backed by resources allocation. Willingness to cannibalize assets is crucial. In

order to develop the next major technology, the company may have to sacrifice the

stream of profits from current products and services. Finally, trading a current, sure

stream of profits for a future, uncertain stream of profits is perceived as risk.

Tolerance of risk is necessary117.

A culture of radical innovation is not only a set of attitudes but also requires

the concrete allocation of tangible resources within the organisation. Allocation of

resources towards the activities that organisationally and functionally establish and

sustain the culture of radical innovation is of major importance. These activities

typically are research and development efforts. A culture of radical innovation places

great emphasis in developing major innovations from within its laboratories. They are

more prone to commit significant stream of cash flows towards research activities

than the average company. Eberhart (2004) singles out the effect a commitment to

research and development has on performance. He finds that a significant increase of

research and development expenditures generated abnormal positive long-term

operating and stock performance118. These increases were beneficial investments

despite the slowness of the market to recognise it. It lead to abnormally high

profitability. This impact was even more marked in high technology companies.

Research and development allocation of resources is a managerial decision. Thus, it

intrinsically relates to corporate culture. Similarly, Leonard (1971) found research

intensity as measured by company research and development spending, relates to

growth rates of sales, assets, net incomes and other variables through the stimulation

of real output rate of growth. This relationship appears two years following the

commitment of funds and gains influence as new products developed occupy a rising

                                                                                                               117  Ibid.  118  Eberhart,  Maxwell,  and  Siddique,  “An  Examination  of  Long-­‐Term  Abnormal  Stock  Returns  and  Operating  Performance  Following  R&D  Increases.”  

  34  

proportion of sales119. Last, Tellis (2009) finds that research and developments

activities, measured as the percentage of R&D employees to all employees have a

significant positive effect on radical innovation. It captures the degree of a firm’s

commitment to innovation, especially in technology-driven markets. Investment in

skilled labour is a necessity in such cutlure120.

A culture of radical innovation is a strong driver of performance in

organisational theory. However, the horizon of the studies conducted only refers to

short-term performance. The commercialization of radical innovations translates into

companies’ financial performance. It significantly increases the market to book value.

Culture of radical innovation is a strong predictor of financial performance121.

However, the limited time scope of this study does not allow for the assessment of the

link between culture of radical innovation and long-term performance. Doubt

concerning this relationship is even more reinforced given the difficulty of

maintaining a culture of radical innovation through time. Success in one generation of

technology can breed attitudes of complacency and invulnerability with a focus on

managing current products and protecting current profits. These latter can reduce firm

commitment radical innovations. Maintaining a culture of relentless innovation is

difficult. Thus, absence of studies in organizational theory and business history

exploring specifically the link between culture of radical innovation and long-term

performance makes it difficult to lean in a way or another.

3) Research question, methodology and sources

a. Research question  

We have established that corporate culture plays an important role in

organisational performance. We identified the three main cultures associated with

performance. We explored the ways they influenced organisational results, We found

they only relate to short to medium term performance in capital intensive

technologically driven industries. They fail to explain long-term performance. The

limit shared by these cultures is their vulnerability to technological advance and

change. Culture of radical innovation has the potential to overcome this limit. It is

orientated towards creating technological revolutions or at least embrace them at their                                                                                                                119  Leonard,  “Research  and  Development  in  Industrial  Growth.”  120  Tellis,  Prabhu,  and  Chandy,  “Radical  Innovation  across  Nations.”  121  Ibid.  

  35  

very early stages through heavy allocation of resources and an unshakable

commitment to the future. Existent studies on the link between culture of radical

innovation and performance only capture the short-term horizon. It is unclear whether

culture of radical innovation really overcomes the limit of technological change and

offer plausible explanation concerning drivers of long-term performance. It is this gap

in the literature that this research seeks to address. Thus, our research question is:

Is culture of radical innovation linked to long-term firm performance in capital-

intensive industries?

b. Methodology  

We used a comparative methodology to explore our research question. Our

approach has been to identify two companies in a capital-intensive technological

driven industry: one with a culture of radical innovation and one without. Both

companies needed to share the same environment to fix this variable and isolate the

culture of radical innovation factor. We then explored both companies’ cultures in

details and followed their performance over a long-term horizon. Based on this

analysis, we then concluded within the scope of this methodology and the limits of

this comparison whether there is a link between culture of radical innovation and

long-term performance.

Our first step was to select a capital-intensive technologically driven industry

where Switzerland was a pioneer or at least a competitive global player. This industry

had to meet the conditions presented in our research design. The watchmaking and

electrical industries emerged. Feasibility issues narrowed down our selection.

Archives of the watchmaking industry were not accessible. Those of the electrical

industry were open for consultation. Two major companies subsequently were

identified as important players in the Swiss electrical industry: Secheron and

Maillefer. A primary analysis of both companies led us to dress the following profiles

in terms of performance and nature of culture to verify their match with our

methodology:

Secheron was created in 1918. It started off strongly. It was the main actor behind the

electrification of Switzerland upon the decision of les Chemins de Fer Federaux to

launch the project in 1916. The company went on entering new markets and

broadening its products range with many innovations in the process. Accordingly,

Sécheron started producing welding, electrodes, rectifier mercury free vacuums

  36  

respectively in 1925, 1927 and 1937. Its absolute performance though declined and

stagnated from 1924 to 1942. The neutrality of Switzerland and the important

external demand during the post-war rebuilding efforts contributed to its subsequent

growth. Secheron recorded its best results between 1942 and 1964122. It then suffered

severe difficulties upon the intensification of its competitive environment. It turned it

a loss making business for the first time in its history. Secheron was compelled to

lose its independence. BBC acquired it on 1969123. On the other hand, Maillefer

started from humble beginnings in 1900 manufacturing file tools cutting machines. It

faced important difficulties to remain afloat during the first two decades. The second

generation of the Maillefer dynasty stabilised the company from 1920 to 1960124

through a strategy of product diversification becoming profitable in 1945 for the first

time. Under the leadership of Charles Edmond Maillefer, third generation of the

business dynasty, Maillefer specialised in the production of cabling machines mostly

for the booming electrical energy distribution and telecommunications industries. It

became the undisputed global leader in the market and spurred spectacular

performance from 1960 to 1987. Further primary investigation in the archives

indicated that Maillefer’s culture under the leadership of Charles Maillefer Fils fitted

our culture of radical innovation definition. On the other hand, Secheron did not.

Thus, the Swiss electrical industry provided a fertile ground to put in practice our

research design and investigate the following refined research question:

Does culture of radical innovation relate to long-term performance in capital-intensive

industries? The cases of Maillefer and Secheron in the Swiss electrical industry 1960-

1982

                                                                                                               122  CH  AVG,  SA  1.2  18-­‐24,  Rapports  annuels  du  conseil  d`administration,  1918-­‐1924,  CH  AVG,  SA  1.2  24-­‐42,  Rapports  annuels  du  conseil  d`administration,  1924-­‐1942Administration,  Values,  Nature,  and  Culture  in  the  American  Corporation.    CH  AVG,  SA  1.2  42-­‐69,  Rapports  annuels  du  conseil  d`administration,  1942-­‐1969  123  Benguigui,  Sécheron.  124  Archives  Cantonales  Vaudoises,  Maillefer  S.A,  http://www.davel.etat-­‐de-­‐vaud.ch/detail.aspx?ID=196023  Accessed  21  April  2015  

  37  

c. Sources  Archival sources available enable us to answer our research question. Maillfer’s

archives have been unused. The breath of their content is at least similar to those used

in current studies on corporate culture125. Maillefer’s archives comprise the minutes of

the board of directors. They date from1920 to 1966. Annual reports spans until

1982126. Maillefer was a private family controlled company. Its leader had dominant

ownership of over 70%, the second shareholder being at 5%. From an agency theory

perspective, the opposition between the core principal and agent is limited. They are

equivalent. The interests and aspirations are aligned consequently127. When the

principal and agent are different entities, the risk of overstatements is significantly

higher than in this particular case. The content of Maillefer’s annual reports is

therefore less prone to intentional bias. There is less incentive to do so. They can be

consequently considered as an adequate source from which to draw Maillefer’s

corporate culture alongside the minutes of the board of directors. Annual reports with

data on financial performance are equally available during the period studied. Last,

many complementary documents designed for third parties such as company journals,

memoires of critical actors, internal history, prospectus for public listings can provide

us with an idea of Maillefer culture at a symbolic level in a similar fashion to existent

studies on culture. Secheron’s archives contain an uninterrupted series of minutes of

board of directors for the period we are interested in. These latter are used as the main

source to capture the company’s culture. Annual reports provide the financial

information needed.

                                                                                                               125  Stanger,  “From  Factory  to  Family”;  Dellheim,  “The  Creation  of  a  Company  Culture”;  Church,  “Deconstructing  Nuffield”;  Churella,  “Corporate  Culture  and  Marketing  in  the  American  Railway  Locomotive  Industry.”  126  Archives  Cantonales  Vaudoises,  Maillefer  S.A,  http://www.davel.etat-­‐de-­‐vaud.ch/detail.aspx?ID=196023  Accessed  21  April  2015  127  Eisenhardt,  “Agency  Theory.”  

  38  

III. Culture of radical innovation and firm performance 1) The culture of Maillefer 1960-1982

a. The origin of Maillefer’s culture of radical innovation  

The corporate culture inherited by Charles Maillefer Fils is best captured in

the personalities of the top two leaders of the previous generation. Charles Maillefer

Pere took the realm of Maillefer in 1920. It was in an extremely vulnerable financial

position. It was on the brink of bankruptcy heading without any clear vision or

discipline. Much like John Sr for Cargill, Charles Maillefer Pere was able leader. He

succeeded to turn around the company. His cautious resilient personality found great

motivation in dealing with the extreme difficulties of the time. He provided Maillefer

with direction at a critical moment of its existence, He then went on to instil discipline

in the company’s ranks. He built a capable team that stirred away Maillefer from

severe financial difficulties to profitability for first time in its then 40 years history128.

Amongst the team he built, Camille Cuendet stood out, He was his number two. His

values and qualities clearly reflected the kind of culture Charles Maillefer Pere

established. Camille Cuendet entered Maillefer in 1923 during the company’s

turbulent times His objective judgement, business intelligence, vivid energy, tenacity

and determination instantly made him a valuable organisational member. He caught

the eye of Charles Maillefer Pere. As a result, he quickly climbed the ladders and

joined the board of directors in 1935129. Since then, he remained as a member of the

board of directors, serving under Charles Maillfer Fils. This latter chose to upheld the

strong corporate culture based on the values of discipline installed by his father and

perpetuated by the leaders he developed such as Camille Cuendet.

Charles Maillefer Fils built on the strong culture he inherited and continued its

value.s He brought his touch by establishing a culture of radical innovation non-

existent in the previous generation. The following statement the year Charles

Maillefer Fils became the leader of the company perfectly captures the culture he

sought to establish:

                                                                                                               128  PP  837/30,  Archives  Cantonales  Vaudoises,  Maillefer  S.A,  Rapport  annuel  du  conseil  d`administration,  1960.    129  PP  837/30,  Archives  Cantonales  Vaudoises,  Maillefer  S.A,  Rapport  annuel  du  conseil  d`administration,  1966.  

  39  

‘Ces etudes de caractere passage ne doivent pas nous faire perdre de vue les

recherché de developpement dont nos produits doivent beneficier regulierement. Il

n’est pas une seule de nos machines qui ne se vendre que grace a ses qualities

intrinseques, a ses avantages par rapport a celles de la concurrence.

Or, notre concurrence se manifeste sans cesse et se perfctionne aussi

constamment. Si l’industrie Suisse doit son development et son success au serieux

et a l’adequat de ses constructions, si l’on estime que l’exportation peut rencontrer

des moments difficiles dans les prochaines annees, le Marche Commum ne

semblent pas s’ouvrir pour demain, nous ne devons jamais oublier que

l’opiniatrete dans la recherche et l’intelligence dans la construction ont ete dans le

passé notre meilleur atout et que c’est aussi pour l’avenir la plus sure Assurance-

Vie qu’il soit possible de contracter. Nous pouvons affirmer qu’il n’y a pas de jour

ou notre bureau technique ne cherche a ameliorer la conception d’une machine ou

une autre, a rationaliser un element et a trouver l’idee, l’etincelle qui ouvre des

perspectives interessentes. Il ne suffit pas de reflechir. Il faut trouver, et la

trouvaille doit toujours subir, dans notre metier, le test de la pratique. A l’effort

intellectuel de nos constructeurs-chefs de branche doit succeder le jugement de

notre local d’essais. Tous les jours ne sont pas fastes, pourtant il arrive que l’effort

soit recompense. Il ne l’est vraiement que lorsque le client reconnait la

superirorite de nos machines’ 130

The central belief around which Charles Maillefer Fils built the culture is beating the

competition. It is the dominant organisational objective. Competition is seen as the

main dynamic inherent force Maillefer has to deal with and overcome131 It is

portrayed in both a favourable and negative light but always with realism. The

competition’s efforts never cease. They are laudable. It makes the task harder for

Maillefer but as the same time acts as a stimulating driver for the company’s own

progress. This competition is merciless and fierce. It fights Maillefer for clients with

all its power132. It is ready to use any tactics possible to get ahead. Competition is ever

increasing and has the ability to copy technical advances of Maillefer with ease and in                                                                                                                130  PP  837/30,  Archives  Cantonales  Vaudoises,  Maillefer  S.A,  Rapport  annuel  du  conseil  d`administration,  1961.  131  PP  837/30,  Archives  Cantonales  Vaudoises,  Maillefer  S.A,  Rapport  annuel  du  conseil  d`administration,  1966.  132  PP  837/30,  Archives  Cantonales  Vaudoises,  Maillefer  S.A,  Rapport  annuel  du  conseil  d`administration,  1970.  

  40  

a short time, especially in simple products categories. Charles Maillefer also

recognises environmental advantages competition holds such as the cost advantages

of foreign competitors or easier access to markets such as the Common Market133.

The only way to beat the competition according to Charles Maillefer Fils is to be

constantly ahead in terms of technological progress, develop distinguished products

substantially superior technically providing higher intrinsic benefits for clients. The

company’s whole success and survival depends uniquely on that single factor: ‘La

leitmotiv de Maillefer S.A reste ‘l’avance technique. Tout l’avenir de notre societe

reside la. Bien que specialistes dans le domaine de la cablerie, nous devons etre en

avance, supeieurs a nos concurents’134.

Specific organisational processes need to be established in order to achieve

technological advance and technical superiority. These latter depend mainly on the

company’s research and development efforts 135 . They should result in the

development of superior technical processes, the continuous improvement of the most

complex machines of Maillefer as well as the creation of completely novel

machines136 Charles Maillefer recognises these deeply rooted underlying processes

require much patience, trial and error as well as perseverance in order to yield any

results. They also require continuous care and attention. Their outcomes are uncertain.

Though, he puts his entire faith and commits substantial resources to this belief. He

has no doubt these efforts are going to be fruitful and will ensure a prosperous future

for his company137. These are but assumptions and beliefs though. Charles Maillefer

put them forward without any particular prior personal success proving their validity.

Still, from the first day, he demonstrated an unshakable conviction it is the right

                                                                                                               133  PP  837/30,  Archives  Cantonales  Vaudoises,  Maillefer  S.A,  Rapport  annuel  du  conseil  d`administration,  1963.  134  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1970.  135  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1968.  136  PP  837/30,  Archives  Cantonales  Vaudoises,  Maillefer  S.A,  Rapport  annuel  du  conseil  d`administration,  1963.  PP  837/30,  Archives  Cantonales  Vaudoises,  Maillefer  S.A,  Rapport  annuel  du  conseil  d`administration,  1965.  PP  837/30,  Archives  Cantonales  Vaudoises,  Maillefer  S.A,  Rapport  annuel  du  conseil  d`administration,  1966.  PP  837/30,  Archives  Cantonales  Vaudoises,  Maillefer  S.A,  Rapport  annuel  du  conseil  d`administration,  1968.  137  PP  837/30,  Archives  Cantonales  Vaudoises,  Maillefer  S.A,  Rapport  annuel  du  conseil  d`administration,  1965.  

  41  

course of action to stir the company towards greater success. Prior generation has

proven one could achieve reasonable performance by ensuring clients a decent

quality-price value proposition combined with efficient, reliable and timely deliver of

orders. In this light, Charles Maillefer’s approach marked a complete shift of strategy

with a focus on developing distinguished superior quality products at premium prices.

From the first day, it constituted the single most influential bet Charles Maillefer that

marked his whole leadership era. He took the company to an unchartered territory to

pursue new opportunities for expansion and development.

Once the insights and assumptions of Charles Maillefer experienced success in the

field through significant increase of performance, another critical value in the

established corporate culture became apparent. Whilst many may be tempted to feel

invulnerable and slide into complacency, Charles Maillefer insists more than ever in

the necessity to maintain the culture of radical innovation. He states that to

consolidate Maillefer’s situation, it needs to put in place new machines using the

progress realised in the applied sciences and by studying the latest processes of

production of cables. He singles out Maillefer’s unique capability to develop rational

machines and makes it an objective to further build on that by pouring even further

time, energy and capital into it138. Furthermore, he points to the interlinked processes

enabling Maillefer to grow and insists on keeping the pace in order to maintain these

capabilities. It is crucial the company keeps progressing constantly and regularly to

achieve the profitability required collecting growing revenues to consolidate and

compensate the human resources, technical and financial resources behind these

results. For Charles Maillefer, there is no time to rest. Rather, positive performance

requires even more creative energy and determination to remain above competition

and further strengthen Maillefer’s unique position. Research and development efforts

have to be constant 139. Last, Charles Maillefer expands his assumptions and insights

to the national level when talking about Switzerland’s competitiveness. He urges the

Swiss industry to give particular importance to superior technical advance tby

                                                                                                               138  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1966  139    PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1970.  

  42  

sustaining its research and development efforts at a high level. He attributes much of

its competitive advantage in the global scene to this factor. 140

b. Establishment of culture of radical innovation   Charles Maillefer put in place an organisational structure geared towards

innovation. It conducted a precise extensive systematic research and development

process. The creation of new business lines based on this latter has been a prime

occupation. In difficult times, the company remained committed to research and

development.

Charles Maillefer established an organisational structure based on research and

development, directed towards the production of both incremental and radical

innovations. In 1961, Charles Maillefer reshuffled the management board previously

composed of a combination of technical and commercial profiles. From this date,

engineers with extensive technical knowledge exclusively formed the board141. This

move can be interpreted as a manifestation of the supreme importance technical

superiority occupied in Charles Maillfer’s mind. Managers had to understand the

technology underlying the company’s machines. They were expected to contribute

towards the company’s future orientation by recognising and suggesting major

technological developments to shape the industry. The foundational reorganisation

occurred in 1966. Two new departments have been created. The first department is

the Bureau d’Etudes. Its role was to continuously develop existent Maillefer products

and processes 142 . It had to ensure incremental innovations that maintain the

company’s technological superiority though constant upgrading of their capabilities.

The second department was research and development143. This department was

created for the first time in the company’s 66 years of existence. Its focus was the

pursuit of fundamental research to produce major innovations that go beyond simply

improving existent products. It had to create new generations of machines or

                                                                                                               140PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1963.  141  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1961,  p2.  142  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1961,p2.  143  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1966,p2.  

  43  

applications resulting from the development of novel underlying technology deriving

from fundamental discoveries. Charles Maillefer personally took charge of leading the

department144. He had an extensive technical background. He received a doctorate

from the Ecole Polytechnique Federale de Lausanne. He was therefore trained in

rigorous scientific research. As such, he was in a favourable place to anticipate if not

to create the major technological developments the future of his industry depended

upon. His position of head of research and development surely focused the company

on the constant pursuit of the next major technology. Besides the two new

departments, an independent entity called Constructions Machines pour Plastiques

(CMP) has also been created. Its goal was to provide a better research environment

than inside Maillefer. Disconnecting researchers from daily operations would

stimulate further creativity and radical ideas. It would push Maillefer’s research

efforts to a new dimension possibly resulting in the development of completely new

activities. The company’s future technological orientation was further apparent. It

allocated twenty persons within its research and development department and external

research company CMP to dedicate their entire efforts to prepare the production

programs for the next couple of years. The primary domains of research had to be

within its core capabilities ranging from cabling machines to plastic industry145

Maillefer’s research and development efforts focused on three areas:

processes, machines and installations. The design of novel machines was the

cornerstone of these efforts. Incremental developments and rigorous quality control

have also been am important part of the process.

Maillefer’s research and development process targeted advances in the domains of

processes, machines and installations. A recurrent feature has been the development

of more sophisticated technological solutions to improve the processes of production.

A clear example concerns the rotating reception collator component. It was an

important piece in the production system of Maillefer. The company consequently

launched detailed studies on the subject146 The theoretical insights and development

efforts led to the creation of a new process. The production program has been

                                                                                                               144  Ibid  145    PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1968,p2.  146  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1963,  p3.  

  44  

consequently enriched. It increased its efficiency by reducing the delivery time.

Maillefer equally developed a process called MONOSIL and its formulation for

cables and tubes at average tension as well as the EMAILEX process designed for

double isolation of new materials147. An example for the installations segment is the

development of programming for their computer control, the optimisation of

telephonic cables set up and the use of a more powerful computer system to equip its

lines148.

The heart of Maillefer’s research rested on the development of new generations of

machines marked by significant technological leaps. Maillefer developed a systematic

process to carry out this research. It started by the design of new machines. This phase

rested on the translation of the accumulated knowledge within Maillefer laboratories

into the theoretical conception of a new machine superior in terms of capacities and

functionalities to previous generation. The theoretical design then became the basis of

the physical construction of a prototype. The company regularly constructed several

prototypes on a yearly basis. These were mainly concentrated in its core activities of

cabling and plastic transformer machines149. These prototypes then moved to the

crucial phase of testing. They were tested initially in house to verify the projected

benefits and technical improvements match the reality of the functionality of the

prototype. If this latter passes this test, another round is organised. This last testing

step then defined whether the designed prototype was to a viable machine. Maillefer

sent accordingly its prototypes to a number of clients for industrial testing150. Their

feedback completed the process. If testing clients found significant advantages in the

use of their prototypes compared to existing machines, Maillefer them moved it out of

                                                                                                               147  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1982,p2.  148  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1982,p3.  149  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1963,  .  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1965.  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1971.  150  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1965.  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1974.  

  45  

its laboratories to be produced and commercialised151 .The drawing caterpillar of

types QK and QII as well as the cabling machine of type AN for copper cables are

examples of a design that went all through to commercialisation stage152. In the case

of negative feedback, the prototype remained but a prototype. It was sent back for

further research and development efforts embracing the information gathered in the

industrial testing phase. The success of the process was all but guaranteed to generate

new innovations. There was no fixed regularity of its success. Rather, in some years,

several new machines and products were fully developed153 . In others, the pace was

slow and only few developments reached commercialisation154.

Maillefer’s research and development efforts were also engaged in the continuous

improvement of its existent processes, machines and installations. It also ensured the

quality control function. The commercialisation of a machine was the ultimate

achievement. However, it was not the end. As soon as a machine was marketed,

efforts to improve it ensued. The resolution of minor problems related to its

underlying technology, the improvement of some unresolved inefficiencies and the

elevation of certain inherent capacities through different ways of optimization were

under way. However, this kind of efforts differed from the previous one. The

development of new machines required completely new technologies. In the present

case, the focus was on the improvement of the existent technology by stretching its

capabilities to the maximum through adjustments and modifications. The actual users’

feedback in the market also provided a valuable source of information to orient the

effort towards the areas most needed. The commercialised machines of Maillefer

went systematically through this process resulting sometimes in major

improvements155 .For instance, its cabling machines type SZ benefited from a major

                                                                                                               151  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1971,  p4  152  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1963,  153  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1982  154  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1965.  155  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1971,  p4  

  46  

boost in capacity through the optimisation of its alternate tension mechanism156.

Finally, Maillefer’s Bureau d’Etudes played a central role in the setting and

maintaining quality standards that aimed to ensure a consistent user experience.

Before expediting and setting up its complex installations, it systematically engaged

in the control of the quality of all its components and processes. It intensified upon

the increasing reliance on computer technology in operating its installations 157.

Maillefer consistently oriented its energy in developing new business lines sparked

from discoveries or novel applications of its research and development efforts. It

recognised the limits of relying solely on its existent products and operations to

generate its revenues. It therefore engaged from an early stage in a conscious

approach to broaden its products range and activities158 . The key to this strategy was

in its research and development structures. It launched several studies to assess the

fields it could best leverage its core capabilities and knowledge 159. Out of that

conscious process emerged new opportunities Maillefer decided to pursue. In 1968,

Maillefer added Engineering to its main cabling machines business line. Maillefer

moved from a manufacturing only company to one offering services closely

associated with its products. As such, it started establishing complete engineering

solutions setting up manufacturing plants equipped with its cabling machines160 . The

logistics of plant operation became an important element of the engineering solution.

Accordingly, the company pushed its research and development efforts further in that

direction with the objective of creating optimal plants operation efficiency solutions

to clients. Similarly, the company launched another business line in 1971. It entered

the market of plastic transformers161. The firm saw great potential of progression

ahead for this market. It has been developing this technology since 5 years before

deciding to enter the market. The confidence of the company’s ability to produce                                                                                                                156  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1973  157  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1981  158  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1973.  159  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1963,p3  160  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1968  161  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1971  

  47  

significantly superior technical products is the axiom behind its expansion rationale.

If the firm was not confident enough, it did not make the leap.

Maillefer’s commitment to its research and development efforts was even clearer in

difficult times. When the economic socio-political environment became extremely

harsh and hostile to Maillefer’s operations, it did not stop or cut the energy put into its

research and development structures. The opposite happened. Instead, it gave it even

greater importance and doubled its efforts. The Bureau d’Etudes delivered the designs

for production in record times. Maillefer maintained its high pace of design, prototype

development and industrial testing defining its research process. Thus, numerous new

machines have been designed during that phase. Installations of productions were in

industrial trial at Maillefer clients whilst incremental developments of its existing

processes and machines were undertaken as usual 162. Last, the company always kept a

close check on the technological developments and advances in its industry through a

systematic follow up. It aimed to ensure its products were constantly at the edge and

that it was well positioned for the next major technological shift163

Maillefer’s resources allocation philosophy matches culture of radical

innovation as defined by Tellis (2009). It is marked by substantial resources allocation

to research and development efforts, willingness to cannibalise assets and tolerance of

risk. Maillefer consistently allocated significant resources to back its research and

development efforts and increase its capabilities. This commitment is the critical

bridge between the description of the culture of radical innovation Charles Maillefer

wished to establish presented earlier and reality. In absolute, the role of a manager is

to allocate resources. The analysis of resources allocation distribution is a great

indicator of the underlying beliefs, values and cultures the manager ingrains. There is

consistency between the culture presented by Charles Maillefer and the company’s

resources allocation philosophy. Technological progress and superiority is not only at

the heart of Maillefer’s culture but also the driver of his resources allocation.

Maillefer maintained an average of 5% of revenues directed purely to research and

                                                                                                               162  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1977  163  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1968  

  48  

development164. Neither the hostile environment the company faced nor reaching the

top of its industry did result in the decline of this number165. In all weathers, the firm

remained committed. This significant budget was mainly spent in building greater

research and development facilities. It supported the underlying research process of

design, prototyping and industrial testing by providing resources necessary for their

undertaking166. By 1971, 50 engineers, technicians and designers were assigned the

sole function of developing new machines and improving existent ones167 . Maillefer

also used its research budget once to defend its technological advance. In 1973,

companies from Japan and Luxembourg achieved important technical developments.

Their acquisition by rival companies threatened to reduce technological gap with its

competitors. Therefore, the company exceptionally used its resources to obtain these

patents at a premium price168

The company’s commitment to research and development also led it to situations of

cannibalisation of assets and short-term profits. Each time the heavy weight of

research and development budget threatened to reduce its profits, the firm did not

hesitate to make the sacrifice. This willingness to cannibalise assets is most apparent

in the following situation as described by Charles Maillefer :

‘En 1968, notre chiffre d’affaires net a atteint CH 15 400 000 et notre benefice CH

566 000. La diminution de ce dernier par rapport a l’exerice precedent resulte d’une

part de l’accroissement de nos frais de recherche et d’autre part d’etudes couteuses

realises par notre bureau technique a l’occasion d’une grosse commande (plus de 2

millions) pour deux machines de conception nouvelles. Nous sommes certains que les

investissements de cette sorte, que nous avons ete conduits a faire en 1968, se

reveleront rentables a breve echeance : en effet, ce sont eux qui nous ont prepare a

                                                                                                               164  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1968.  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1970-­‐1971.  165  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1972  166  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1961  167  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1971  168  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1973  

  49  

disposter maintenant d’une gamme etendue de machines competititves tant au point

de vue commercial qu’au niveau technique’169

The company tolerated the risk of substantial allocation of resources to research

initiatives. Their results were uncertain. The risk they do not yield in any development

and deplete shareholders’ value is constant. Yet, the firm tolerated that risk believing

it would beneficial. The situation of its subsidiary CMP is an example. Maillefer

invested important resources to turn this company into an external research and

development centre as well as to penetrate the new market of plastic transformers170

.Still, the firm could not become financially independent on its own as planned. Yet,

Maillefer kept fuelling resources to support its efforts. It ended up wholly acquiring it

despite the uncertainty associated with the benefits of its activities instead of ending

its operations171

c. Radical innovations, distribution, production and management  

Maillefer’s three main innovations from 1960 to 1982 were the extruders BM,

its complete installations range and its plastic transformer machines. Incremental

innovations assisted these innovations to maintain their technological superiority.

The first radical innovation under Charles Maillefer’s era has been the extruder BM in

1961. The characterisation of the extruder BM as a radical innovation lays in its

notable distinguished superior capabilities. It is more productive and efficient than

any Maillefer’s competitor machines worldwide. This superiority lays in the

technology behind its screw172. The market received the innovation favourably173 The

significance of this innovation is such that Charles Maillefer refused to engage in any

licensing before patenting174. During the two years following its development, it is a

lengthy legal process that Maillefer pursued freezing all agreements despite heavy

                                                                                                               169  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1968  170  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1969  171  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1971,p1  172  PP  837/25,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Séance  du  conseil  d’administration  22  February  1962.  173  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1961  174  PP  837/25,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Séance  du  conseil  d’administration  7  June  1962  .  

  50  

interest from companies to enter in licensing either for production or sales. Extensive

care was given to ensure no legal flaws compromised Maillefer’s attribution of this

superior technology175. It is only in 1963 that Maillefer provided the first licenses to

produce and sell its extruders BM176. This radical innovation remained the driver of a

significant part of its revenues for the next two decades.

The second major innovation was its complete installations. In 1968, the cooperation

between Maillefer’s research and development department with its external research

company CMP resulted in the development of complete installations with high

performance for the isolation of high tension plastic cables. These installations

successfully passed through Maillefer’s design, prototyping and industrial testing

leading to its commercialisation 177 . Similarly to its extruders BM, Maillefer’s

complete installations found important appeal in the market. Their technological

superiority was unequalled worldwide positioning Maillefer as a dominant leader in

this market. It quickly became an important source of growth for the company

generating strong cash flows and occupying an increasing position in Maillefer’s

operations178.

The third radical innovation was Maillefer’s plastic transformer machines in 1969.

Maillefer’s interest in the plastic industry was first mentioned in 1965179 A year later,

Maillefer established an external independent company focused on research and

development geared mainly towards the development of machines for the plastic

industry as its name suggested (Constructions pour Machines Plastiques – CMP).

Since then, CMP undertook research in this area. It is only in 1969 that these efforts

yielded in the development of a satisfying machine by Maillefer standards.

Maillefer’s plastic transformer machine became the one to beat. It had a speed three

                                                                                                               175  PP  837/25,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Séance  du  conseil  d’administration  19  September  1962.  176  PP  837/25,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Séance  du  conseil  d’administration  15  January  1963.  177  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1968  178  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1969  179  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1965  

  51  

times the one of the competition180. Subsequently, these plastic transformer machines

became a novel source of revenues with high growth potential. Ultimately, these three

radical innovations and the distinguished technological superiority they provided put

Maillefer in the position of a dominant leader in these markets. They were the major

drivers of revenues and profits growth Maillefer registered from 196o to 1982.

These radical innovations established an initial comfortable technological superiority.

It is however the incremental innovations in the business lines they generated that

ensured the endurance of Maillefer’s technical advance over its competitors during

the two following decades. The list of actual improvements on these three segments

accumulated from year on year. The modifications on the extruder lines ranged from

stretching the crucial BM screw technology further181 to the development of efficiency

of other components, notably the machine’s coil182. Maillefer’s complete installations

were also subject to continuous improvements. The major area of development was in

the introduction of computer technology and optimisation of automation that provided

Maillefer’s installations an unrivalled operating efficiency and simplicity of use183.

Maillefer’s technological cutting edge was not uniform. However, its obsession with

technical superiority allowed recovery from unpleasant situations. For example, in

1970, the company realised the extent of its inferior technical position in automatic

coils. Since then, it engaged in extensive research and development efforts not only to

reduce the gap but also to create a positive one. In three years, Maillefer moved from

a lagging company in automatic coils to a pioneering one opening novel applications

for that component in telephonic, electric and heavy cables184 .

                                                                                                               180  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1971  181  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1968.  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1971.  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1973.  182  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1969-­‐1971.  183  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1974.  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1978.  184  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1970.  

  52  

The extruders and complete installations radical innovations were the

dominant revenues generating business lines. Armed with the technological

superiority of their products, Maillefer expanded worldwide beyond its traditional

markets. A strong bond with clients characterised their relationship. A host of

commercial initiatives were launched to build an efficient distribution machine.

The extruders and complete installations were Maillefer’s prime sources of revenue

from 1960 to 1982. Together, they consistently represented over 60% of their

revenues 185 . By 1978, they reached 76%. Their plastic transformer machines

accounted for 10% and were growing steadily since a few years186. The relationship

between the radical innovations generated by Maillefer’s culture and the company’s

growing sales is quiet clear. Maillefer’s turnover moved from CH 5 millions 1960187

to CH 80 millions in 1982188 with most of its revenues generated by the new major

innovations developed under Charles Maillefer’s watch. .

Maillefer’s expansion to new geographical markets was a priority. Once it established

its technological superiority, Maillfer’s distribution strategy was to diversify its

markets189 West Europe was its number one market in 1970. It heavily depended on it

despite registering sales in 33 countries. In response to the danger of this dependence

and the risk exposure to the environment of these markets, Maillefer engaged in

reducing the weight of this traditional market. Accordingly, Maillefer started efforts

in 1970 to reach out to new regions. It concluded contracts in East Europe

(Yugoslavia, Hungary and Bulgaria). It launched negotiations in Romania to deliver

important orders of its extruder lines. It established a contact with the USSR and

Tchecoslovakia190. Maillefer relied on licensing to penetrate markets it had no

commercial capabilities to reach and where it was non competitive due to tariff

                                                                                                               185  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1970-­‐71.  186  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1972-­‐74.  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1978.  187  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1961,p1.  188  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1982,p3.  189  PP  837/25,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Séance  du  conseil  d’administration  15  October  1965.  190  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1970.  

  53  

barriers. Asia is a prime example. It authorised a license of its extruders BM to a

Japanese company, which had the right to use it in different Asian markets from

South Korea, Thailand, Cambodia, Laos to Vietnam191. Besides East Europe and Asia,

Maillefer had an eye on the US market. In 1971, it commissioned a study of the US

market with a view to establish a representation there. However, environmental forces

compelled Maillefer to delay its planned expansion. The Nixon announcement of

1971 marking the end of the fixed exchange-rate monetary system created a period of

great turmoil and uncertainty192. This delay was but temporary though. In 1973,

Maillefer put a firm foot in the US market by delivering 16 extruders to the three

major US cabling machines193. The next major target was the Middle East. The

company succeeded to channel its products and services to this market. It proved to be

instrumental in Maillefer’s resilience to the shutdown of many of its Eastern Europe

markets. By 1981, the once heavily dependent on West Europe Maillefer registered

60% of its revenues outside this previously dominant market194.

Maillefer established a strong relationship with its clients on the basis of its

technologically superior products. The continuous rise of production costs of

Maillefer due to the growing labour costs characterising Switzerland put the company

in a sensitive situation. Yet, time and again, Maillefer succeeded in transferring this

inherent beyond control cost to its clients in a smooth way. In 1969, the majority of its

clients accepted Maillefer’s price increase195. The same happened again in 1974 and

1981196. The ease it succeeded this difficult exercise was the result of the noted

technical advance of its products relative to competition. Maillefer’s machines were

not commodity products reliant on low prices. Rather, they were sophisticated

products clients paid a premium price for. Although repetition of its price increase

                                                                                                               191  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1970-­‐71  192  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1971.  193  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1973.  194  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1981,p2.  195  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1969.  196  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1974.  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1981.  

  54  

under the pressure of its production costs and the disadvantage of a strong Swiss

Franc reduced in part its competitive position, it registered nonetheless growing sales

and remained the leader in its industry197. Only the technological distinction of its

products and services Maillefer insisted upon in its overall strategy allowed for such

deviations to go unnoticed in a competitive price sensitive market.

Maillefer’s distribution structure and strategy gained fundamental importance when

the company established the roots of technological superiority. Maillefer realized it

was crucial to develop contact with clients. It put it at the heart of its new commercial

system and strategy in 1968. Accordingly, it reinforced the sales team with new

collaborators, exempted it from administrative functions and refocused it around

increased visits to clients and participation to fairs198. Maillefer introduced several

commercial initiatives and backed them with important resources allocation to

facilitate the work of its salesmen and foreign representatives. New methods such as

standard offer, list of prices and technical bulletins were induced199. Maillefer’s

insistence on pushing for the technological superiority argument in sales was apparent

in the development of the massive Technicum. It was a demonstration facility. In

1977, the company initiated the upgrade of the Technicum capacities with the

construction of a new hall. It could show to clients as much as 10 different complete

installations for the first time200. The facility was finished the following year201. Its

unique design, state of the art technique and visual quality were all geared to further

boost the perception of the technological superiority of its products to prospective

clients. Last, the technological complexity of Maillefer machines required a

consequent after sales team to provide technical support. 18 engineers assumed this

function. By 1978, the team intervened 280 times to advise clients or repair

breakdowns. It set up 70 complete installations. By 1981, the after sales team added

                                                                                                               197  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1981.  198  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1968.  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1977.    199  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1965.  200  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1977.  201  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1978..  

  55  

12 engineers to its team to assist in the increasing number of interventions required

and provide further support due to the growing complexity of Maillefer machines and

installations. 11% of Maillfer’s sales were registered by this unit through channeling

repairing parts to clients202.

Despite Maillefer’s product technological superiority, its commercial machine faced

important difficulties when the environment became extremely unfavourable. The

dramatic strengthening of the Swiss Franc and the economic socio-political turmoil in

global markets in the end of 1970’s challenged Maillefer’s commercial structure in a

dramatic way203. Special measures were adopted. Maillefer intensified its salesmen’s

visits to clients and participation in fairs204. It multiplied its after sales service’s visits

and intervention with clients to demonstrate the company’s commitment to their

satisfaction. It also tried to keep the sales team’s ambition high by setting challenging

targets. For the first time, it made concession in its prices and accepted to temporarily

to reduce its profit margin to maintain a normal rate of production occupation 205.

Maillefer invested heavily and constantly to upgrade its production

capabilities from 1960 to 1982. It streamlined, rationalised and increased its

production processes efficiency. Despite these efforts, the company could not satisfy

the ever-growing demand and developed alternative ways to reduce the burden on its

production system. In difficult times, Maillefer adopted exceptional production

measures. Overall, the combination of these factors significantly improved Maillefer’s

production performance.

Maillefer engaged in an active pursuit to develop its production capabilities from

1960 to 1982. In 1960, it launched the study for a future plant in Ecublens with

greater capacity than its existent one in Renens206. The following year, the company

                                                                                                               202  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1981,p5.  203  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1978,p1  204  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1977.  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1978.p6  205  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1977.  206  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1960.  

  56  

decided to approve the construction of the new plant in Ecublens207. It developed a

construction program in two phases to maintain the financial security and

independence of the firm208. It initiated the increase of Maillefer’s capital to assist in

the financial effort. The objective of Maillefer was to finance the plant with minimal

if no assistance from banks209. Despite taking the decision to proceed forward in 1961,

Maillefer faced legal hurdles. It delayed the start of its plant construction for two

years. A landlord in a surrounding area opposed the construction210. Two years of

legal battles followed. In 1963, Maillefer finally received authorisation for its

Ecublens plant211. In 1965, the Ecublens plant was inaugurated212. This new plant

represented the first piece around which a broader industrial complex was built.

Rapidly, Maillefer engaged in the construction of a third hall213. It was finalised after

10 months of intensive work 214. The next major move was the construction of a new

plant in Ecublens. In 1969, Maillefer considered the expansion of the Ecublens

complex by disposing of its Renens plant and using the liberated resources to create

another plant in Ecublens215 .Two years later, this plan was approved and the company

invested CH 9 millions for this operation. CH 4.5 millions came from Renens plant

sale216. In 1972, Maillefer inaugurated its second plant in Ecublens and relocated all

its production capabilities from Renens to its new site. The company did not refrain

the pace though. Further aggrandisement of the Ecublens industrial complex was                                                                                                                207  PP  837/25,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Séance  du  conseil  d’administration  15  November  1961  208  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1961.  209  PP  837/25,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Séance  du  conseil  d’administration  15  January  1963.  210  PP  837/25,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Séance  du  conseil  d’administration  7  June  1962.  PP  837/25,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Séance  du  conseil  d’administration  19  September  1962.  211  PP  837/25,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Séance  du  conseil  d’administration  15  January  1963.  212  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1965.  213  PP  837/25,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Séance  du  conseil  d’administration  25  March  1966.  214  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1966.  215  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1969  216  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1971.  

  57  

under way with the acquisition of new land in the area217. Finally, Maillefer also

invested in the machine-tools material its plants used. In 1974, renewed its production

kit. In this wave, it paid particular attention to acquire the latest technological

development in industrial engineering in the form of numerical orders218.

Maillefer’s efforts to increase its production processes’ efficiency ranged in two

directions: rationalisation and shift to production in series. The rationalization effort

drove several changes. The creation of a finished parts store for their systematic

grouping before assembly , the establishment of a new more rational routing of parts ,

the introduction of a smoother traffic, the codificaton of types of machines produced,

establishment of internal morms as well as the list of tools were all measures

introduced219. Maillefer also engaged in cutting the production of machines with low

demand to the benefit of a stronger production for machines with high demand220. By

1965, Maillefer finished the construction of its Ecublens plant. Maillefer’s ownership

of these two plants created an opportunity to improve production processes by

facilitating the coordination between the two plants221. A separation of tasks in a

synergistc complementary became a major concern. New methods were hence

developed. For instance, parts were now machined and controlled in Renens . They

were then forwarded to Ecublens, stored , then assembled, controlled and shipped222.

The second most important measure adopted to increase production efficiency was the

exclusive focus on production in series. Before 1969, Maillefer’s production was

divided between production on demand and production in series. The first type

required highly specialised labour and more time. Maillefer’s prototyping and testing

of novel machines shifted instructors, group chief and foremen’ attention toward this

new effort. In 1969, the company decided to shift solely to the prodution in series and

                                                                                                               217  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1972.  218  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1974  219  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1960.  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1965.  220  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1961.  221  PP  837/25,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Séance  du  conseil  d’administration  15  October  1965  222  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1965.  

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to gradually discontinue the production on demand223. By 1970, this latter represented

but 10% of total production. Subsequent productivity gains in terms of quality and

quantity were reported as a result224.

Maillefer’s production processes and the underlying technological complexity of their

machines required highly skilled labour. Not only did these workers need to have high

initial skills but they also needed substantial further training and specialisation in

Maillefer’s cabling machines to become operational225. Maillefer has built a training

school to provide apprenticeships and model its workers to master its precise

technological requirements226. Despite these effort, Maillefer faced the challenge of

lack of labour. The restrictive Swiss Federal policies on foreign workers were the

reason227. At the same time, the demand for Maillefer’s products was growing228.

Maillefer’s major investments in production capabilities and the rationalisation of its

processes were not enough to satisfy this demand. The lack of qualified labour further

constrained this action. Maillefer was compelled to find alternative ways to resolve

the problem. Subcontracting and the acquisition of a production company were its

solutions. Maillefer first considered subcontracting in 1965. The dangers of this

practice were clear: technical copying and increase of administration and control

costs229. It was the price for expansion. From then on, subcontracting gained weight

and became a non-negligible source of production covering a volume of 10% by

1968230. Maillefer’s growing demand turned subcontracting in a necessity not only to

absorb peaks and short time deliveries but also as a door to benefit from workers

                                                                                                               223  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1969.  224  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1970.  225  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1968.  226  PP  837/25,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Séance  du  conseil  d’administration  12  January  1962.  227  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1965.  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1969.  228  PP  837/25,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Séance  du  conseil  d’administration  22  February  1962  229  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1965  230  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1968  

  59  

outside its constraining quotas231. Maillefer further increased its capabilities by

acquiring a US production company in 1975. It produced mechanical tools at the time.

It was chosen amongst 30 firms. Its possession of adequate buildings, appropriate

machine tools and its easy access to qualified labour in its region made it the perfect

candidate to ensure part of Maillefer’s production. Its lack of knowledge in certain

areas forced Maillefer to assign one of its engineers as technical director to correct

this flaw. Maillefer took it over. Within months it was fully occupied with the

production of Maillefer’s machines232.

Maillefer’s production performance significantly improved as a result of the

investments, rationalisation and development of external production capabilities. The

major problem Maillefer faced was its delivery time. In 1960, it was so high

compared to competition that Charles Maillefer feared losing to companies producing

low technical quality for the same price of Maillefer’s machines233. Maillfer’s average

delivery time was of 24 months. Competition did it in 3 to 4 months234 . In two years,

Maillefer reduced the gap moving from 24 months to 8 months for production on

demand and to 2 months for production in series235. The company maintained these

steady efforts until registering one of the lowest delivery times in its industry. In

absolute, Maillefer production performance moved from the equivalent of CH 16

millions delivered in 1969 to CH 70 millions in 1982 relying on its internal

production capabilities alone236. Maillefer’s important demand consistently used

100% of its capabilities if not overused it during some years237. There are exceptions

however during the extremely challenging times of the end of 1970s.

                                                                                                               231  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1969.  232  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1975.  233  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1960.  234  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1961.  235  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1963.  236  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1969,  p6.    PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1982,p4.  237  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1970-­‐71.  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1981,p2.  

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The hostile external environment Maillefer witnessed during this period stimulated

the adoption of exceptional measures. It accepted numerous special orders to deliver

in a very short time. These were highly individualised compared to normal times and

required more efforts to be completed. Still, despite these difficulties, the company

remained committed to its work force and maintained their employment238. However,

the worsening of the situation ultimately led the company to shield the seemingly

unbreakable loyalty to its labour. In introduced partial unemployment for two months

for 40% of its workforce, then proceeded to a rationalisation of its costs laying out 11

workers in the process239.

Maillefer empowered its management with clarity and simplicity of its policy,

large delegation of power and autonomy as well as the creation of a learning

environment. The company extensively used the latest technological developments to

assist its managerial force’s function.

Maillefer’s management was empowered to conduct their activities with large

autonomy under clear guidelines. Charles Maillefer submitted to the board a

document called ‘Les politiques’ in 1962240. It outlined a management philosophy

every organisational member should adhere to. The objective was to introduce

explicit values to guide the company’s operations at all levels, including management.

These policies were accepted by the board. They constituted since the ethos behind

managerial behaviour. A management system based on objectives and large

delegation of power characterised Maillefer241. Each head of department and each of

his collaborators were responsible to achieve particular targets in their own way as

long as it fit Maillefer’s broad managerial values. They had fixed budgets to manage

to reach their operational targets. The company gave extensive responsibility and a

sense of ownership to its superiors to strive and succeed in their projects. Further

autonomy was introduced. The ersonnel of the administrative, commercial, and

technical services were put on a free schedule. They could organise their time at their                                                                                                                238  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1977.  239  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1978,  p5-­‐6  240  PP  837/25,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Séance  du  conseil  d’administration  12  January  1962.  241  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1970.    

  61  

convenience. They were not compelled to observe a particular number of hours nor be

constantly present in the workplace242. Last, the company encouraged initiatives to

stimulate learning at its managerial level. Seminars for executives were regularly

organised. The international nature of Maillefer’s markets was also captured in the

language courses offered. Finally, Maillefer created an open space where managers

could bring their own input as to how best they could collaborate and be most

effective. Meetings to discuss the subject of collaboration, participation and

effectiveness at Maillefer were held. Both top management and lower levels of

management attended243. Despite Maillefer’s seemingly strong commitment to its

personnel, the company did not hesitate to dismiss 17 employees in its administrative

department when Maillefer faced a hostile external environment 244.

Maillefer extensively used technological developments to equip its managers with

tools to facilitate their function. The company acquired a sophisticated accounting

machine and an IBM planning machine245. A host of new possibilities were opened.

The accounting function gained greater precision and provided managers with instant

information that could inform their decisions, identify problems in a shorter time and

orient their strategies. Salaries and production bonuses could be calculated at the end

of each month for the first time. The costs of production and the state of advancement

of any order could be known instantly. The management of raw material stores, spare

parts and stocks was facilitated with the calculation of exact measures. More

importantly, the company’s performance measurement was significantly improved.

Management could now calculate profits at the end of every month instead of waiting

for the annual accounts. They could seize variations and make corrective decisions in

live time.

                                                                                                               242  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1970.  243  Ibid  244  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1978,p6.  245  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1965-­‐1966.    

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2) The culture of Secheron 1960-1969

a. Culture of caution

Secheron’s culture between 1960 and 1970 was one of caution. It focused on

improving efficiency of existing operations. It only invested in activities with proven

results and tangible prospects. It inhibited the pursuit of any radical innovations due

to uncertainty. It was resilient in times of difficulties, ready to allocate substantial

resources to turn the situation around.

Secheron’s underlying belief was that the key to success in the market came

through optimal efficiency of its operations. This focus on improving efficiency of

existent activities was a recurrent feature. In 1960, its chief executive officer Mr

Kronauer underlined the necessity to move production of its electrodes division from

its Geneva plant towards a new structure. The increasing demand for this product put

pressure on its production capabilities. They were not sufficient anymore. He also

argued the technical direction of the welding division found the development of a new

production structure to reduce labour costs by up to 30%. The board approved this

proposition246. It is during times of difficulties this culture of caution was brought to

light further.. The very understanding of Secheron’s board on the reasons behind the

drop of results and loss of competitiveness manifested the assumptions they used in

running the company. When difficulties first surfaced in 1965, the board

unanimously saw the problem as a lag in operations efficiency247. It continued to do so

when the crisis intensified248. For example, Secheron was seen to be uncompetitive in

the welding market because its welding machines could only produce in limited series

whilst its competitors could do in continuous series249 Increase of production costs

driven by the growth of labour costs year on year was an unfair competitive

disadvantage compared to foreign rivals. They benefited from low labour wages250.

                                                                                                               246  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    7  December  1960  247SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration  9  March  1965    248  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    22  May  1967  249  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    9  March  1965  250  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    1  March  1967  

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The waste and inefficiencies within the organisation reported by the CEO were

decried with great intensity and blamed for Secheron;s decline251. This perception

shaped the board’s response. All measures taken were consequently centred on the

improvement of organisational efficiency and the limitation of future investments252.

It reorganised two of its departments: Redresseurs and Reglages. This reorganisation

was to help solve the electronic problems both departments suffered253. Secheron

engaged in a heavy campaign of downsizing, cutting research activities in certain

areas, separating from its worst performing activities and focusing on ones providing

most satisfaction 254 . In a further effort to reduce costs, Secheron engaged in

collaboration with a supplier in its plant of Gland and reduced its personnel to the

very limit necessary to maintain its levels of production255. When a member of the

board suggested new product developments were the solution, the CEO was quick to

rebuff the idea, asserted it was not necessary and that the measures taken to improve

the company’s efficiency would see Secheron through256.

Secheron’s culture of caution shaped its investments policy. It only invested in

operations and financial participations with proven results on the ground and further

prospects of development. This rationale dominated all its investment activities.

Kronauer asked for the approval of investments to upgrade its production capabilities

for the division of rectifiers and for the creation of a testing material to ensure they

held sufficient power in anticipation of a major increase in its sales according to the

company’s projections. The board approved257. Similarly, the company moved to

launch a major investment in its production capacities for electrodes. This particular

case highlights Secheron’s investment approach. The company conducted a study on

the future of this segment. Already at this stage, a new technology was nascent, which

                                                                                                               251  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration  20  September  1967      252  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    9  March  1965  253  Ibid  254  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    1  March  1967  255  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    20  November  1967  256  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    20  September  1967  257  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    7  December  1960  

  64  

rendered Secheron’s current electrodes not obsolete but significantly inferior.

However, the sales projection was still positive and encouraging for the next couple

of years. The new type of electrodes was a threat but one that would only affects its

sales in the long term. Armed with this information, Secheron decided to invest

massively in its current electrodes by building a major plant rather than develop the

new technology electrodes258.

Financial participations in companies abroad were a non-negligible source of

revenues for Secheron. Given their past success, Kronauer suggested their

intensification by engaging in participations to maintain the company’s current

turnover. Various propositions in Portugal, India, Israel and Spain were presented to

the board. The CEO was given the green light to proceed forward to study these

projects in depth and take action at his discretion. The board also unlocked the

financial resources to carry out these operations259. This tendency to invest in what

was already working is seen in Secheron’s participation in a Spanish company in the

fields of welding and electrodes production. It was a growing company. It had

profitable current operations and bright future projections, Secheron was already a

shareholder. The company planned to triple its production capacity to respond to its

existent growing demand. Kronauer advised the board to increase its financial

participation to provide it with the resources necessary to undertake this expansion.

The board approved260. The same situation repeated itself for this same company a

few years later. Secheron agreed to increase its financial participation again under the

same decision pattern. In 1962, Laborke-Kupfter was a specialised leading company

with a growing name in its industry. It was known for the quality of its products. One

of the two partners owning and running the company was set to retire. Secheron saw

an opportunity to associate itself with an established successful company with

potential. It decided to acquire the retiring partner’s 50% ownership261.

The low tolerance of risk and lack of future orientation evidenced in its

investment approach inhibited the development of a culture of radical innovation.

                                                                                                               258  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    3  July  1961  259  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    18  October  1962,  p11-­‐12  260  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    27  April  1966  261  Ibid  

  65  

Secheron’s experiences between 1960 and 1970 were of a constant latecomer in

technological developments. The process through which it moved from the pursuit of

the nascent selenium plates technology to the silicon rectifiers to a position of licensee

depending on external companies is telling. By 1960, Secheron decided to enter in the

production of selenium plates. It was a new market spurred by recent technological

advances. However, other companies preceded Secheron’s entry in this market. They

were at the origin and remained at the forefront of this technology. As a latecomer,

Secheron had a 1-year gap in terms of quality relative. It engaged significant efforts to

reduce this gap. Important resources were assigned and Secheron’s selenium plates

quality was greatly improved. However, its competitors did not refrain their own

technological development. They were still a year ahead in terms of quality despite

Secheron’s progress. Kronauer hence told the board if Secheron was to close the

technological gap, further substantial investments were required. The final decision of

the board was to discontinue these operations and focus Secheron’s resources in the

development of the new silicon rectifiers technology262. In that front, Secheron’s

situation was no better. It was equally a latecomer. Siemens and Merck were already

at the forefront of the technology. They each developed a satisfying solution. They

were already bringing it to market and authorising licenses. At the same time,

Secheron’s research efforts conducted by the external company Institut Batelle had

developed a promising technique. It was not advanced enough to be commercialised

despite Secheron’s CH 1 million allocation to the institute263. Faced with this

technological lag again, Kronauer suggested the board a solution whereby it cuts its

research and development efforts for its silicon rectifiers and obtain instead a license

to produce them under Siemens’ technology264. Secheron paid a high price for its

technological shortage. Siemens requested demanding conditions to license Secheron.

The negotiations on the rate of loyalties dragged for years265. Secheron’s latecomer

                                                                                                               262  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    30  September  1960  263  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    7  December  1961,  p11-­‐13  264  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    30  September  1960  265  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    6  October  1966.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    5  June  1967.  SA  2A,  Archives  de  

  66  

position pushed it to purchase other patents in different markets to remain

technologically relevant 266 . Similarly, in the buoyant excitement about the

development of a Swiss nuclear technology, the company engaged in its own efforts

to participate whilst urging extreme caution as to the allocation of financial and

human resources267. This reluctance and hesitation about the future of this segment

quickly led the company to discontinue its operations a year later when problems at

the national level surfaced and the enthusiasm waded268.

Secheron’s board had no clear idea about the future of the company. Major

differences of views between the chief executive officers and the other three

executives were noted269. This uncertainty was further apparent in Secheron’s

decision to abstain from any major investments in 1965270. Since 1960, discussions of

the board on the long-term industrial future were inexistent. It is only in 1966 that it

requested the CEO to produce a report on the company’s future271 . By that time,

Secheron was already experiencing growing difficulties, perhaps due to the very ill

preparedness its focus on existing operations and ignorance of long term future

generated.

Secheron’s culture of caution was also expressed in its resilience to turn

around the situation of its Nancy subsidiary. Secheron acquired a production company

in France (Nancy) in 1958. It was financially independent at first. It also offered

Secheron valuable perspectives. Its qualified labour, its direct access to the European

Common Market and its production of specific product categories of interest to

                                                                                                                                                                                                                                                                                                                             la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    29  November  1967.  266  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    18  December  1963  267  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    9  March  1965  268  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    6  October  1966.  269  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    3  May  1963  270  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    2  July  1965.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    12  October  1965  271  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    6  October  1966.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    14  December  1966  

  67  

Secheron were assets the company was proud to have and keen to preserve272. This

was especially so given the constraining Switzerland environment marked by a lack

of qualified labour, high wages and its non belonging to the Common Market.

Secheron therefore tried to develop a close relationship with its subsidiary. It changed

directors that were perceived as hindering the quality of the collaboration between the

two entities 273 . However, the Nancy company begun to report difficulties and

registered losses in 1963 for the first time274. Secheron was compelled to pour capital

to assist Nancy’s struggles. It became a recurrent necessity as Nacny crisis

intensified275.

Nancy’s loss was not a one off situation. The crisis was not punctual but persistent. It

gained in intensity, weight and urgency. At first, Secheron tried to leverage its

collaborations and partnerships as well as minor improvements in the company’s

operations to handle the situation276. When this approach failed, it sought to dispose of

the company and started looking for a buyer to cut the negatives consequences Nancy

was beginning to create. Thus, Secheron received offers. The most notable one was in

1965. A company called CGE put forward a proposition to take over Nancy y.

However, the liquidation conditions were too constraining, the underlying loss too

important and the board felt it could get a better deal. Despite the failure of this first

attempt, Secheron maintained its research for a buyer277. Nancy raised interest of other

buyers but no concrete results were reached278 . By that time, Nancy situation

worsened. It was becoming a significant financial threat. The situation became

                                                                                                               272  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    9  October  1963  273  Ibid  274  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    18  December  1963  275  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    24  April  1964.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    23  April  1965.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    12  October  1965.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    9  December  1965  276  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    24  April  1964  277  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    23  April  1965  278  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    24  June  1965  

  68  

urgent279. Secheron’s inability to find a satisfying buyer, the degradation of the

situation and the increase of financial risk associated convinced the board to use its

own efforts to operationally turn around the company. Secheron’s CEO and its

technical division provided assistance to improve Nancy’s teamwork and technical

capabilities280. An audit of Nancy resulted in a more accurate vision of the problems.

Nancy had structural weaknesses at all organisational levels. Its main client EDF was

becoming dissatisfied. It was considering dropping the company281. It was clear a

more hands on approach was necessary. Secheron accordingly allocated its CEO,

technical and commercial directors as well as other experts to spend more time in

Nancy282. The objective was to turn Nancy from a poorly managed company to one

able to stand by its commitments and quality standards to limit the incurring losses,

improve its operations in the short term and sell it at a minimum loss283. The direct

efforts of Secheron associated with the collaboration of Nancy’s main stakeholders

resulted in the relative improvement of the situation284. The attractiveness of Nancy

increased. Secheron had two possibly satisfying solutions. The first was to liquidate

the company in reasonable terms. The second was selling it to a subsidiary of Brown,

Boveri & Cie (BBC) that intended to expand Nancy’s production and continue its

operations. It chose the second option to guarantee the personnel’s future285. The

company concluded the transaction with a reasonable loss286.

b. Culture of collaboration and independence  

                                                                                                               279  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    9  March  1965  280  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    23  April  1965  281  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    12  October  1965  282  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    9  December1965  283  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    9  March  1965  284  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    27  April  1966  285  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    6  October  1966  286  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    14  December  1966  

  69  

The second cornerstone of Secheron’s culture was collaboration. Secheron’s

board believed collaboration with partners was key to its success. It relied on this

mechanism to develop its internal organisational capabilities from research,

production to distribution. This culture of collaboration was consistent with

Secheron’s culture of caution. It was a way to reduce risk.

Secheron’s culture of collaboration used external exposure to develop and

strengthen fundamental internal organisational capabilities. This is clear in the way it

used collaboration to expand its research capacities. The company entered a

consortium of four companies to develop the immersed motors domain. These firms

were Sulzer Wintehour, Sulzer Leeds, Laurence and Laurence & Scott. Each firm had

advanced expertise in certain areas. Laurence & Scott was specialised in electric

motors. The collaboration was a non-financial agreement enabling the exchange of

technical information and designs. It limited however the commercial areas where

developed products could be distributed. Laurence & Scott was entitled to England

and Commonwealth market whilst Secheron and Sulzer shared the remaining regions.

Specific areas of research were targeted. Sulzer Wintehour and Secheron were to

develop complete standardisation solutions to immersed motors at low temperature.

Sulzer and Laurence & Scott were responsible to design a standardising system for

immersed motors at high temperature. Last, Secheron and Laurence & Scott were to

unify the dimensions and conceptions of the previous research assignment results.

They were also in charge of realising practical experiences and testing287 . This

collaboration initiative in research was not the exception but rather a systematic

practice. The welding division entered in a collaboration agreement with another

company in 1961288. Secheron launched collaboration with a Zurich based Frabqieu

Electrodes Buhrle. They engaged in common research on products of relevance to

their Swiss market 289. Further collaboration between both companies was conditioned

by the market reaction to this partnership290. In the field of silicon rectifiers, Secheron

                                                                                                               287  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    7  December  1960  288  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    15  March  1961  p4  289  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    14  June  1962,p14.  290  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    18  October  1962,p10.  

  70  

explored collaboration with Ateliers de construction Oerlikon after Secheron’s

frustration with Siemens’ attitude291. This partnership ended in failure292. In the same

field, Secheron collaborated with the Swiss watchmaking industry through exchange

of information of experiences with the Centre Electronique Hrologer and Ebauches

SA293, Finally, Secheron collaborated in research projects with Therm Atom and La

Savoisienne294.

Secheron’s collaboration was not limited to research. Production and distribution

were subject to the same practice. These agreements focused on three geographical

axes: India, Britain and Spain. Secheron collaborated with two leading Indian

companies: Gandhi Electric and Tata. This agreement concerned production and sales

in the Indian market295. Secheron equally collaborated with two Spanish companies in

Bilbao :Altos Hornos and De Baconi. They set up a production and a sales company

to serve the Spanish market296. Secheron further expanded its collaboration in Spain

by tying a licensing agreement with another company in 1965297. Last, Secheron

collaborated with a few British companies through production and sales licensing

agreements designed for the British market298.

                                                                                                               291  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    19  December  1962  292  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    7  December  1964  293  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    19  December  1962,p8.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    24  February  1964  294  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    24  April  1964.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    7  December  1964  295  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    4  March  1963,p5.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    4  June  1964.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    7  December  1964.  296  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration  19  December  1962.    297  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    4  June  1965  298  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    7  December  1964.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    23  April  1965.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  

  71  

Secheron’s culture of collaboration also found its expression in resolving the

difficulties of its subsidiaries in Nancy and Italy. When the Nancy problems first

surfaced, the board was unanimous. Developing collaboration with other companies

would quickly end the problem299. Secheron first tried to collaborate with Oerlikon

France. However, the deal collapsed. It looked for other candidates. Jeaumont and

C.G.E were in prime position. The first’s insistence on technical collaboration only

without any financial commitment made it an unattractive option. It was dropped. As

to C.G.E, research for effective ways to collaborate was under way300. All subsequent

efforts were with E.D.F and C.G.E301 . E.D.F was Nancy’s main client. It was

interested in Nancy’s supply and capabilities. E.D.F’s withdrawal would have cause

inevitable bankruptcy of Nancy. E.D.F therefore did not want to trigger this process.

It would seriously damage its image in an already tense social situation in Franc. It

consequently actively engaged in collaborating with Nancy to fill its order books,

facilitate financing access whilst trying to use its wide network to find buyers that

could maintain E.D.F’s supply and protect its brand302. Whilst this collaboration was

not enough to resolve the problem, it bought crucial time for Secheron to improve

Nancy’s operations and attractiveness. It was crucial to find a buyer and resolve the

problem. Secheron adopted a similar approach when its Italian subsidiary OCREN

was under threat. The Italian government was creating a national company. It would

render OCREN uncompetitive and thus cut a major source supplies for Secheron. To

face this situation, Secheron entered in an alliance with other shareholders of OCREN

                                                                                                                                                                                                                                                                                                                             d'Administration    4  June  1965.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    12  October  1965.  299  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    17  November  1961.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    14  June  1962.  300  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    14  June  1962,  p17-­‐18.  301  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    14  December  1961.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    7  December  1964.  302  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    18  October  1962.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration  19  December  1962,p6-­‐8.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    24  January  1964.  

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to deal with the challenge303. An agreement was sealed with Secheron’s Italian local

partners to develop a strategy to fight the new government sponsored competitor304.

Secheron participated alongside its partners in OCREN’s increase of capital305

  Secheron’s culture of collaboration was apparent in its attempt to enter in a

general collaboration with one of its direct rivals to improve its competitive position

in its increasingly concentrated industry. In this pursuit, the value of independence

emerged as the third critical value of Secheron’s culture.

Secheron’s board was worried by the recent concentration trends. It first attempted to

create a community of interest to fight this danger306. The limited impact of this

initiative led it to consider a different course of action. The Ateliers de Contructions

Oerlikon was a Swiss company and a director competitor of Secheron. It had a similar

size and comparable capabilities. Secheron engaged with Oerlikon with a view to

develop a general collaboration at all levels from the technical, production,

administrative to the distribution functions307. Talks between companies advanced.

Collaboration became more and more likely to occur. It benefited and strenghtned

their capacity to deal with their changing environment308, In these discussions, a

potential merger emerged as the optimal way to integrate both companies’ capabilities

and facilitate its management 309 . The merger option rapidly triggered a vivid

repositioning of Secheron’s position. It highlighted one of Secheron’s most important

values: Independence. Consequently, the board set clear and strict principles to guide

the negotiations with Oerlikon. Secheron was ready to allocate financial resources in

the collaboration. Secheron was ready to commit both legally and institutionally.

                                                                                                               303  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    14  June  1962.  304  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    18  October  1962.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    9  October  1963.  305  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    24  February  1964.  306  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    15  March  1961,p3-­‐4.  307  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    7  June  1961,p10.  308  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    3  July  1961.  309  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    17  November  1961.  

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However, the guarantee of its independence had to be part of any deal310. The

Oerlikon proposal maintained a complete merger between the two companies.

Secheron’s independence value was violated. It refused Oerlikon’s proposal but left

the doors open for any proposal embracing independence 311. The attachment of both

companies to their position failed the general collaboration. Its was official a year

after the beginning of negotiations312. Three years later, news surfaced about a

potential collaboration between Oerlikon and Secheron’s other bigger rival BBC.

Secheron regained interest in collaborating again with Oerlikon. It contacted Oerlkion

and stressed the importance of collaboration between the two companies for their

survival, despite the previous failure in talks313. In vain, BBC acquired Oerlikon. An

even stronger local rival was born.

c. Culture of caution and collaboration in times of crisis

Since 1966, Secheron entered a downward spiral. It engulfed the company in a

extremely severe crisis threatening its very survival. Secheron’s efforts to overcome

the crisis highlighted its culture of caution, collaboration and independence.

Secheron’s difficulties surfaced in 1966. It registered disappointing results. They

were completely disconnected from management’s previsions314. This was the start of

a downward spiral. Secheron’s subsequent results dropped year on year at an

important rate315 . The relatively serene stable situation the company enjoyed turned

into an urgent crisis overnight. The roots of this brutal decline were however years in

the making. The board reflected on the situation. A host of factors unravelled.                                                                                                                310  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    14  December  1961  311  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    1  March  1961,  p7-­‐9  312  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    26  March  1962  313  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    23  April  1964  314  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    6  October  1866.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    21  May  1968.  315  PV  29  Novebmer  1967.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration  2  October  1968.      SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    2  December  1968.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    21  May  1969.  

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Technological change had turned some of Secheron’s core products into less

attractive and competitive ones316. In certain situations, the most important product of

a whole department became obsolete leading the CEO to suggest disposing of the

concerned divisions317. Competition intensified in number. Previous foreign markets

now satisfied their needs locally318. It also intensified in dimension. The industry

became greatly concentrated319. The combination of a price war taking (dumping in

certain cases) and Secheron’s inability to differentiate its products from its rivals led

to a significant loss in competitiveness320. For instance, Secheron’s products in

transformers divisions were driven out of the market by its competitors. An entire

business line was in jeopardy321 At the same time as price war became the norm in a

fragmented industry, Secheron’s production costs were constantly increasing. The

wage bill was growing322. Secheron’s departing commercial director summed up the

situation upon his resignation. Secheron’s dramatic decline was the result of the

company’s loss of industrial competitiveness. Its heavy reliance on the internal

market driven by the relatively regular major orders from the Swiss national railway

company encouraged this technological complacency323. Secheron lost ground in

several central business lines. The development of new lines was under way. It was

not enough to compensate the shrinking of its existent operations. A newspaper article

attacked the uncertainty surrounding the Secheron situation further increasing the

need for a speedy solution324.

                                                                                                               316  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    1  March  1967.  317  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    5  June  1967  318  Ibid  319  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    13  October  1969  320  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    5  June  1967.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    13  October  1969  321  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    5  June  1967.  322  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    13  October  1969  323  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    28  February1968  324  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    5  June  1969  

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Secheron’s culture of caution, collaboration and independence between 1960

and 1969 governed the initial response to the crisis. The extreme seriousness of the

situation required however fundamental changes. Some of its key values were

dropped for survival and expansion.

By 1968, in the middle of a worsening crisis, Secheron’s chief executive officer still

believed competitiveness in one of Secheron’s key divisions was solely a question of

price, costs and efficiency of production325. Secheron’s main strength was seen until

then as its irreproachable efficiency and management cohesion. Yet, these very

strengths became questioned as the crisis unfolded. The commercial head of Secheron

disagreed with the CEO on fundamental issues and resigned326 Secheron’s president

departed327. Production problems, repetitive delays of delivery and inability to deal

with labour shortage were all issues highlighted by the direction as the roots of

Secheron’s difficulties328. A heavy campaign was then launched to restore the loss of

operations efficiency not only in production but at all organisational levels. At a

general stage, the CEO engaged in eliminating unrewarding activities with no more

potential and in improving existing divisions with good prospects329. An aggressive

downsizing of the work force in a drive to reduce production costs was carried.

Kronauer conducted this exercise until there was not another worker Secheron could

lay off without hindering its production requirements330. Other areas of cost reduction

were to be found. Research was perceived as a dispensable cost for the first time. The

board suggested Secheron use external patents rather than in house research. This

latter was costly and inefficient. Kronauer agreed to find way to improve research

efficiency. However, he defended maintenance of internal research. The human

                                                                                                               325  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    2  October  1968  326  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration  28  February  1968    327  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    5  July  1968  328  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    5  June  1969  329  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    28  February  1968  330  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    21  May  1968.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    21  February  1968.  

  76  

capital in Geneva was a valuable asset Secheron could not lose331. Secheron further

moved to liquidate some of its foreign participations to plough back resources and

reduce its exposure to risky ventures. The firm Secheron fought to save in Italy

(OCREN) was sold332. Secheron’s situation worsened to a degree it was taking on

orders with disadvantageous prices and margins to maintain its sliding level of

revenues 333 . Overall, Secheron’s purge into aggressive cost reduction and

improvement of efficiency was not effective to stop its decline334. It could not redress

the situation. The perspectives were only worsening. Another solution had to be

found.

Collaboration was identified as the solution. It was urgent to explore this option and

dedicate all the company’s efforts in that direction335. It actually became the main

solution in the board’s perception. They reached a point they were more interested in

discussing the development of collaboration talks rather than internal developments

and results at Secheron336. The firm was negotiating for a licensing agreement with

Siemens. Despite its dissatisfaction with Siemens’ terms, the board urged Secheron to

maintain a good relationship with a view of a future collaboration337. The objective of

any collaboration was in line with its previous strategy: reduce general costs by

sharing organisational capabilities from research, production to distribution

channels338. Secheron’s president further highlighted the purpose of any collaboration

was to reduce Secheron’s fundamental disequilibrium between its turnover and its

research costs339.

                                                                                                               331  Ibid  332  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    28  February  1968.    333  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    13  March  1967  334  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    13  October  1969  335  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    12  March  1969  336  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    20  September  1967  337  Ibid  338  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    21  May  1968.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    10  June  1968  339  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    21  May  1969  

  77  

Secheron explored collaborations with this objective in mind and the non-negotiable

principle of independence it insisted upon earlier during the Oerlikon general

collaboration discussions. Secheron shortlisted several potential partners: Siemens

(Germany), ASEA (Sweden), Burble (Switzerland) and I.T.E. Imperial (United

States)340. ASEA was dropped. It had a sensitive relationship with with B.B.C.

Secheron did not want to risk upsetting its bigger rival. Buhrle was interested in

purchasing Secheron’s Glant plant rather than collaboration. Discussions with I.T.E

Imperial were not promising 341 . Thus, from the beginning, Siemens was the

frontrunner. Both companies developed a very positive relationship during

collaboration discussions and multiplication of contacts between their equivalent

departments 342 . They identified concrete technical and commercial areas for

parternship343. Secheron suggested the creation of an independent company with its

own management and board. It would combine Secheron and Siemens’ plants in

welding and distribute profits between both firms344. During these negotiations,

Secheron insisted on retaining its independence. Any collaboration form should

include this condition345. When financial participation of Siemens in Secheron was

evoked, the company was quick to limit any potential ownership in Secheron to

25%346. At most, it could give up a third of its shareholdings347. After the numerous

visits made by Siemens to Secheron and close examination of the situation, Siemens’s

diagnostic was the following. There were two courses of action Secheron could take.

The first was an expansive one. Siemens would engage in a general collaboration with

                                                                                                               340  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    2  October  1968.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    2  December  1968  341  Ibid  342  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    10  June  1968.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    5  June  1969.  343  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    5  March  1969  344  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    21  March  1969  345  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    10  june  1968  346  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    2  October  1969  347  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    9  July  1969  

  78  

Secheron to reduce its immediate difficulties. It would fill its sales book with ordersa

and provide resources to spur revenues and size growth. In this case, Siemens would

need to take major financial participation. It promised to Secheron’s board large

margin of freedom. The second option was to shrink the company’s size and revenues

level by focusing it on a very few targeted profitable activities348. Secheron’s board

noted this second option had no future in a growingly concentrated industry. It would

not guarantee any better prospect349. Secheron equally entered in negotiations with

B.B.C. Similarly, Secheron’s proposal of collaboration without financial participation

was rebuffed350 . At the same time, Secheron’s financial crisis worsened. At this

stage, Secheron realised it had no choice but to trade its independence if it were to

survive and expand351. The late interest of B.B.C upon hearing of Secheron’s contact

with Siemens, surge in support for a Swiss rather than foreign contender within the

board, insistence on retaining Geneva’s intellectual capital and the reception of a

concrete satisfying acquisition proposal by B.B.C were enough to convince Secheron

to side with this latter despite its advanced discussions with Siemens352. Secheron was

acquired by B.B.C in 1969.

3) Culture of radical innovation and performance

a. Maillefer and Secheron’s performance

In both organisational theory and business history literatures, the measures used to

assess performance differed. No clear consensus emerged. Tellis (2009) used the

market to book ratio measure353. Similarly, Collins (2004 used a market driven

                                                                                                               348  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    5  March  1969  349  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    13  October  1969  350  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    21  March  1969.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    9  July  1969.  351  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    12  March  1969.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    17  October  1969.  352  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration    21  May  1969.  SA  2A,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Procès-­‐verbaux  du  Conseil  d'Administration  5  June  1969.        

  79  

indicator: stock return354. Denison (1995) and Di Tomaso (1992) used the Return on

Sales (ROS) and the Return on Investments (ROI) measures355. Eberheart (2004) used

variations of Earnings Before Interest and Tax (EBIT)356. Given the lack of consensus,

we use the net profit indicator. It captures the end objective organisations strive for.

The extent to which the company succeeds in this pursuit over time reflects its

broader underlying operational performance

Figure 1: Secheron’s net profit from 1960 to 1970357

Secheron’s performance was slightly growing from 1960 to 1965. It started a

free fall from then on until registering a loss on 1970. Secheron’s culture of caution

enabled the company to perform reasonably during the first phase due to a stable

environment. As evidenced by Sorensen (2002), strong cultures tend to perform in a

reliable way in these conditions. However, this reliability benefit disappears in times

of volatility and environmental change. This was the case in Secheron’s situation.

Secheron maintained its usual focus on improving efficiency. It was rewarded for it in                                                                                                                354  Eisenhardt,  “Agency  Theory.”p40  355  Denison  and  Mishra,  “Toward  a  Theory  of  Organizational  Culture  and  Effectiveness”;  Gordon  and  DiTomaso,  “Predicting  Corporate  Performance  from  Organizational  Culture*.”  356  Eberhart,  Maxwell,  and  Siddique,  “An  Examination  of  Long-­‐Term  Abnormal  Stock  Returns  and  Operating  Performance  Following  R&D  Increases.”  357  SA  1.2/71-­‐81,  Archives  de  la  ville  de  Geneve,  Secheron  S.A,  Rapport  annuel  du  Conseil  d’administration  1960-­‐1970  

0  

1  

2  

1960   1961   1962   1963   1964   1965   1966   1967   1968   1969   1970  

Net

pro

fit [m

illio

n C

H]

 

Years

  80  

a stagnating marketplace. However, the intensification of competition and occurrence

of major technological shifts Secheron was structurally ill prepared for quickly

changed the company’s fortunes. These structural problems were deep. B.B.C needed

three years of major changes to get Secheron out of its loss-making streak from 1969

to 1972.

Figure 2: Maillefer’s net profit from 1960 to 1982358

Maillefer’s long term dynamic was of strong growth, although it was tempered

by specific situations. Charles Maillefer inherited a strong culture. Like Secheron, it

registered a reliable performance at a stagnating level. This level was of CH 0.5

Millions. Under Charles Maillefer leadership, the company moved towards a culture

of radical innovation. Its establishment however required time. The first few years

were dedicated to this sole purpose. Major allocation of resources to research and

development as well as to upgrade Maillefr’s distribution and production capabilities

were made. The company benefited from the instant improvements made whilst this

                                                                                                               358  PP  837/30,  Archives  Cantonales  Vaudoises,  MailleferS.A,  Rapport  annuel  du  conseil  d`administration,  1960-­‐1982.    

0.00  

1.00  

2.00  

3.00  

4.00  

5.00  

6.00  

7.00  

Net

pro

fit [m

illio

n C

H]

Years

  81  

culture was being put in place. Maillefer thus tripled its net profit from 1960 to 1966.

In 1966, the rationalisation program and the structural reorganisation were just

finished. A few years later, these efforts reflected financially after the

commercialisation of its radical innovations (the extruder BM and complete

installations). From 1970 to 1977, Maillefer registered exceptional net profit figures

as a result. However, the extremely hostile environment of the 1977 to 1979 years

stopped this momentum. Maillefer then stabilised its performance when conditions in

world markets improved. Still, the net profit figure by 1982 was 6 times the one of

1960. Maillefer’s performance during these 22 years can thus be considered largely as

a positive performance, especially when considering the constraining Swiss

environment as well as the punctual tensions in global markets.

b. Culture of radical innovation and performance, an interpretation  

The existence of a culture of radical innovation is a likely factor explaining the

difference in performance between Maillefer and Secheron over the long term. We

showed that Charles Maillefer established a culture of radical innovation upon taking

the reigns of the company in 1960. We also showed Secheron’s culture was defined

by caution, collaboration and independence. It was inhibitive of any culture of radical

innovation. It stressed the focus on existing operations without orientation towards the

future. It had extremely low tolerance of risk and was unwilling to cannibalise short-

term assets to invest in the next generation of technological developments. At the

same time, both companies operated in a similar environment. They both faced the

difficulties of the Swiss constraints from shortage of labour, the strong Franc as well

as the broader global environment where their export oriented activities were

exercised. The only difference was the nature of their corporate culture. Maillefer’s

culture of radical innovation seemed to be more favourable to generate sustained

long-term performance. In the following, we delve into more details as to mechanisms

that explain their performance building on the extensive analysis developed in both

cases.

Maillefer’s culture of radical innovation drove the company’s strategy from

the essence of its underlying beliefs. Maillefer’s central objective was to beat the

competition. Technological superiority was the only way. From this sacred belief in

technological advance and superiority followed series of concrete decisions that

established this culture of radical innovation at all organisational levels in Maillefer.

  82  

First of all, the company put in place an organisational structure driven by research.

Two of its four departments and a subsidiary were exclusively research driven. A

systematic research and development process characterised by fundamental science

research, theoretical design, prototyping and industrial testing inhabited this

organisational structure. Furthermore, the company allocated substantial financial

resources to these efforts. It was constantly willing to cannibalise short-term profits to

develop technologies ensuring its long-term industrial future. It was also constantly

looking for new business lines, activities and markets to enter based on its existing

core capabilities to diversify and create new sources of growth. It tolerated the risk of

pouring significant resources in uncertain research and development projects. These

efforts resulted in three major radical innovations from 1960 to 1982. The first was

the extruders BM equipped with the special unique superior technology of its screw

BM. The second was the technically unmatched complete installations. The third was

its plastic transformer machine. Incremental innovations retained Maillefer’s

technological superiority and competitive advantage in these business lines over time.

In each of the three markets, Maillefer remained the leader during the period studied.

The noted superiority of Maillefer’s machines and services generated and sustained a

strong growing demand. It provided a significant sales argument that emboldened the

company to pursue an expansive policy in world markets. Its diversification from its

traditional European market allowed for flexibility and resilience during hostile

environments. In this expansive and diversification commercial policy, Maillefer

developed its distribution structure, organisation and capabilities to effectively

support its products. Growing demand meant the necessity for greater production

capabilities to satisfy it. Maillefer launched a major investment in a plant in Ecublens.

It used it as the cornerstone it built an expanding industrial complex around. Maillefer

increased the efficiency of its production processes through rationalisation. The

shortage of labour forced it to develop alternative solutions. It subsequently engaged

in subcontracting and acquired a production company. Last, the new volumes it dealt

with and the unprecedented dimension it reached required the development of

effective management. Policies based on objectives, delegation of power, autonomy

and learning were put in place. Maillefer invested in the latest technological tools to

further assist its management reach their objectives. To sum it up, Maillefer’s culture

radical innovation generated radical innovations. They drove strong sustainable

  83  

demand. It spurred the strengthening of the company’s distribution, production and

management capabilities. Growth and sustainable performance was the result.

On the other hand, Secheron’s culture was built on the cornerstones of caution

and collaboration. The board believed efficiency in running the organisation was the

key to its success. Accordingly, it focused its efforts on constantly improving the

efficiency of its existing operations. The board only invested in activities with proven

results on the ground with further potential of growth. It took foreign financial

participations using the same rationale. Secheron had a low tolerance of risk and was

unwilling to cannibalise current assets for uncertain future technological projects.

With this attitude, Secheron was in no position to create radical innovations. It was a

constant latecomer in nascent markets born out of important technological

developments. It assumed its latecomer position and engaged in significant allocation

of resources to fill the gap. However, time and again, its competitors remained ahead.

It was forced to enter in licensing agreements under constraining conditions leaving it

but with a limited inconsequent market share in growing business lines. Its cautious

culture also led it to devote substantial efforts and resources to try and turn around its

Nancy. Instead of looking ahead and build its industrial future, Secheron was battling

in its existent business lines, seemingly unaware of the dramatic technological

changes occurring in its environment. Another way to reduce the risk was through

collaboration. Secheron systematically engaged in this practice to develop its internal

organisational capabilities whilst limiting and spreading its resources allocation. Thus,

it developed numerous research, distribution and production agreements. Its culture of

collaboration was apparent in its attempt to seal a general agreement with a direct

rival of similar size to strengthen itself against the increasing competition and

consolidating industry. Both its culture of caution and collaboration did not yield into

any major technological innovation. It did not enabled to embrace significant

technological shifts in its industry whilst the short window of opportunity was still

open. Thus, its products were technically undistinguished. Its only weapon therefore

was the efficiency of its operations and its ability to offer a competitive price.

However, the increase of competition led to a price war Secheron could not support.

The continuous increase of its labour costs particular to Switzerland handicapped

Secheron compared to its foreign competitors. Furthermore, major technological

shifts were occurring. Consequently, the star product of many of its key divisions

  84  

such as the transformers was driven out of the market. This trend intensified. From

then on, Secheron was battered. Its performance went from bad to worse. The despair

of the situation forced it to give up the independence principle it valued deeply. Its

only option to survive was to be acquired by a bigger competitor. It was in 1969.

We can conclude in the cases of Maillefer and Secheron, the critical factor that

defined their long-term performance was their technological capability. Maillefer’s

culture of radical innovation spurred a constant technological superiority overs its

competitors through a combination of major and incremental innovations. Secheron’s

culture of caution and collaboration limited the development of the company’s

technological capacity. It was passively subject to the technological shifts in its

environment turning core products of its main revenues generation divisions into

obsolete uncompetitive offerings. In the light of this comparison, culture of radical

innovation seems to be related to long-term performance.

c. Limits

This research has many limits. The first methodological limit is that it compared

two companies in different sub industries. Maillefer and Secheron are both in the

electrical industry. They rely on the same fundamental science to design and develop

their products. They operate within the same Swiss and global environment.

However, there are certainly differences in some areas that particular to their sub

industries. These differences are not accounted for in this research despite the

conscious selection of this comparison to isolate uniquely the corporate culture factor.

It was though the closest we could get to with company archives accessible. The

second limit is the heavy reliance on annual reports to analyse the Maillefer case. The

minutes of the board of directors were not substantial enough to be the prime source

of our analysis of corporate culture. Rather, they were but indicative and stopped in

1966. However, our awareness of this methodological limit led us to use annual

reports with further caution. Our analysis therefore relied mainly on the objective

facts that are reported rather than the merits that are outlined. In the same line, we

omitted Maillefer archives that assisted the claim of a culture of radical innovation but

were only of symbolic nature or for public relation purpose. The intention was to

seize Maillefer’s culture through the underlined decisions, actions and initiatives only,

assisted by the corporate culture model of radical innovation outlined in the

organisational theory literature. The third methodological limit constrained again by

  85  

the nature of the archives is our inability to follow the Maillefer case until 1987. On

this year, Charles Maillefer sold the company. Instead, we stopped in 1982 due to the

lack of further annual reports to draw on. Another 5 years would have been welcome

additional data to observe whether there is continuous coherence in Maillefer’s

culture and its resulting behaviour. The fourth limit relates to the measure used for

performance. It would have been more appropriate to cross other indicators such as

revenues to have a clearer picture of Maillefer and Secheron performance. However,

such numbers were not equally available in both cases. The importance of gaps in

certain series pushed us to restrict the performance measure to net profit only in order

to present a comparable tangible set of data. We attached though other performance

indicators on Maillefer in the appendix, which would be useful to have a broader

understanding of the company’s evolution over time.

  86  

IV. Conclusion  

Firm performance in business history literature remains an open debate. The

purely economic inspired paradigm based on technology, markets and self-interested

competition embraced mainstream explanations concerning the drivers of

performance. Internal organisational factors, control and adaptation to the

environment remain the leading theories. The economic paradigm reached limits in

explaining organisational performance and behaviour. The culture framework opens a

new promising perspective to provide alternative and complementary explanations.

Corporate culture is of particular relevance to explore the question of firm

performance. Strong, mission driven and adaptation cultures were identified as the

three corporate cultures that best relate to performance. They are satisfactory to

explain short to medium term performance. However, they cannot account for long-

term performance. The central limit these cultures share is their inability to deal with

technological change. Culture of radical innovation had the potential to overcome this

limit. No studies on the link between culture of radical innovation and long-term

performance in capital-intensive industries were conducted in the literature. We

therefore investigated this question. We adopted a comparative methodology. We

chose the Swiss electrical industry. More specifically, we compared two of its key

players: Maillefer and Secheron. Both companies operated in a similar environment

and were active in global markets. Their intricate similarities enabled us to fix the

environment variable and isolate the culture of radical innovation factor. Companies’

divergent long-term performance and their unique corporate cultures created a fertile

ground to investigate our research question. Maillefer’s culture corresponded to a

culture of radical innovation as defined in the literature. Secheron’s culture was built

on the values of caution, collaboration and independence. Maillefer thrived over the

long-term. Secheron performed well within a stable environment. It collapsed in a

technologically shifting environment. The central result of this research within the

limits of its methodology is a positive link between culture of radical innovation and

long-term performance in capital-intensive industries. Further research integrating the

economic and cultural paradigms to explain firm performance would be a welcome

addition to the historiography.

 

  87  

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VI. Appendix    

Figure 1: Evolution of Maillefer turnover and workforce from 1920 to 1985