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Be Careful: Fast-Moving Trends Often Don't Continue

Mar 13, 2008
Put the average company into a high-growth situation (for its industry) for the first time, and you'll soon see overoptimism sprouting everywhere. In the aftermath of the Arab oil embargo and the subsequent rise in the cost of energy, Americans began using all sorts of new ways to reduce their energy use and costs.

One idea for heating your home was to cut your own wood to burn in wood stoves and fireplaces. Soon, every wooded neighborhood was abuzz with the sound of busy chain saws.

Prior to the oil shortage, chain saws had been avoided like the plague by suburbanites who didn't want to be confused with the woodcutters and gardeners they hired. Now, you couldn't stand tall unless you could buzz through trees and limbs with the best of them.

McCulloch was the leading chain saw manufacturer at the time. Black & Decker, the home power-tool giant, quickly purchased McCulloch at a hefty price to be able to benefit from the seemingly limitless potential of chain saws.

Soon, Black & Decker was optimistically describing itself as a company about to be transformed by its chain saw business. Capacity could not be expanded fast enough. And business did, indeed, take off . . . for a while.

Within a few years, though, everyone who thought they wanted or needed a chain saw had one. Many people who took to the backyard woods found that cutting down trees and making smaller pieces out of the logs with a small chain saw was hard, dangerous work repaying little for the time and effort. The person using the chain saw also had to cope with a tremendous racket, obnoxious fumes from a gas engine, and an irritating need to keep sharpening the small chain-saw blade.

Many of these nouveau woodspeople didn't know that wood has to be dried and aged before it will burn properly. So they often experienced smoky, smoldering fires that left the whole house smelling terrible and provided little heat.

Wood is a poor way to heat most houses. The fireplace sucks the heat from the house up through the chimney, leaving the rest of the house colder.

A wood stove is great if you are at exactly the right distance from it, but too hot or too cold otherwise. And it's a real drag to have to constantly haul wood to feed the fires and clean out the ashes.

Pretty soon, suburbanites found that they liked warm clothes better than wood fires as a way to save money. Used chain saws began to be sold at garage sales for a few dollars. Moreover, even those who loved cutting with their chain saws usually had no use for more than one.

Black & Decker basked in the glow of its then remarkable record of growing earnings from quarter to quarter at 15 percent per year. That past success led them to see chain saws as being the same as their bread-and-butter power tools.

They missed some important differences. Power tools are inexpensive, and if you add a new feature, many householders will buy a new one to get the benefit of the feature. Chain saws are much more expensive, and few people were willing to replace them. That's where the irresistible forces took hold.

Entranced by the rising sales numbers, chain saw competitors proliferated and the market was jammed with products. Then chain saw sales dived.

Black & Decker reversed course, and dumped its chain saw business. A lot of money went up in smoke in the process. Overoptimism was costly in this case because the irresistible forces driving chain saw sales were not understood by Black & Decker before it entered the business.
About the Author
Donald Mitchell is an author of seven books including Adventures of an Optimist, The 2,000 Percent Squared Solution, The 2,000 Percent Solution, The 2,000 Percent Solution Workbook, The Irresistible Growth Enterprise, and The Ultimate Competitive Advantage. Read about creating breakthroughs through 2,000 percent solutions and receive tips by e-mail by registering for free at

http://www.2000percentsolution.com .
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