Speaker Name: William R. Holland
Speaker Title: Chairman and CEO
Speaker Company: United Dominion Industries
It is a pleasure--indeed I'm flattered--to have an opportunity to speak at this excellent program, which honors such a distinguished North Carolinian, and to follow the outstanding gentlemen who have preceded me. Dean Peacock, what you and your associates are doing here at Appalachian is exciting and, incidentally, fits my theme today perfectly in illustrating why I have the attitude about America that I do.
A prophet of old made the statement that, "Without a vision, the people perish." While perhaps somewhat metaphoric relative to my comments, this statement certainly underscores my strong belief that successful countries, companies, institutions and even individuals need a plan--a criteria path or a road map--if they are to overcome the natural obstacles and inevitable changing circumstances of life.
I prefer the word "vision" in this context to the word "plan" because, to me, it embraces the notion of inspiration in charting your course, as well as the obvious ingredient of perspiration. There clearly is no substitute at any level of life for hard work and dedication, but excellence and superior accomplishment are also usually accomplished by inspiration as well. This is what I refer to as "vision."
America needs a vision. If given a vision, Americas people--as they always have--will fulfill it.
Unfortunately, we are barraged with facts, figures and news that suggest we are failures, or failing; that American workers are lazy and losing out to more effective competition; and that we do not have the will to be in the next century what we have been in this one--indeed, that were leaving a legacy of decline and ultimate demise to our posterity.
For example, the Competitive Policy Council issued its first annual report--called Building a Competitive America--to the President and Congress last March. Reading this recitation about Americas declining competitiveness in virtually all areas of commerce, education and other vital areas is indeed depressing. The council points to three familiar but critical reasons for this overall decline:
- short-termism, or the tendency to dwell only on the near term and not to invest in the future;
- perverse incentives, primarily rooted in tax legislation, that emphasize so-called "immediate gratification;" and,
- globalization, which in this context means Americas failure to think globally, as opposed to dwelling on our vast home markets and resources.
The upshot of these observations, according to the council, is that America, as a society, will inevitably continue to decline relative to other countries, especially Japan and those in Europe, unless we give attention to six priority issues:
- savings and investment,
- education and training,
- corporate governance and financial markets,
- health care costs, and
- trade policy.
In the context of what I am talking about today, such initiatives should be an integral part of the larger vision that will keep our country fully competitive in the emerging global marketplace and propel us successfully into the next century.
Reports such as the one I refer to, taken in isolation, cannot be refuted and indeed they add to the necessary debate which shapes policy in a pluralistic society such as the United States. However, they clearly do not tell the full story about the strength inherent in this nation and in its institutions and people.
Michael Prowse, a Washington-based writer for the Financial Times of London, dissected this question of "declinism" in a recent Harvard Business Review article1. He said that declinism misses the point because what is really happening in America today "may be less the product of actual decline than a response to rapid economic and social change"...and that, he noted, "change is always disturbing and often perceived negatively." The real challenges facing America and its institutions today are not decline, according to Prowse, but the "increased equality among advanced industrial nations" such as Japan and Germany..."increased social inequality at home"...and the need to address "the social implications of the new economy."
Overcoming those kinds of obstacles will obviously require a vision . . . and plenty of perspiration and inspiration. At the same time, I find it ironic that much of what we see today in terms of rising competition from all corners of the globe is the product of Americas efforts to export social and economic freedom over the last 40 years.
There are many distinct signs that we have already begun to draw on our nations inherent strengths and arrest a relative decline, if indeed there is one. For example, take the subject of productivity, which is the indispensable ingredient to both maintaining competitiveness of American manufacturers in the world marketplace and producing a higher standard of living here at home--jobs.
I am very encouraged by what I see in the everyday work world and even in recently reported statistics about our nations productivity growth. The statistics show a sharp contrast to conditions in the early 1980s, when we were struggling with high inflation and high interest rates, recession and a flood of imports made possible by an enormously high U.S. dollar.
Many knowledgeable people were predicting then that manufacturing would virtually die in this country and be replaced by an information-based, service-oriented society. Articles in business magazines cited our deteriorating productivity in manufacturing as the culprit that would inevitably result in lack of competitiveness. Business Week had an article called "The Hollow Corporation," meaning that manufacturing was disappearing from our shores.
The fact is that this trend has been very substantially reversed, with our share of the world manufacturing actually on the increase for the first time in 40 years. In spite of poor tax policy during most of this time, companies have invested in new tools of productivity and simply have learned to do things more efficiently and to make better products. Manufacturing has remained constant as a part of our gross domestic product although the number of people employed in that sector has declined in recent years, leading to further manufacturing productivity gains.
By contrast, it is widely recognized that productivity in the services sector over the last 20 years has been sorely lagging and must be improved because it is impeding real growth and income by sapping our economy more than it should. At the same time, while service productivity advances are difficult to measure and thus cloud the productivity picture overall, there is growing evidence again that even U.S. businesses in the services sector are beginning to achieve significant productivity improvements in the 1990s, primarily as the result of new computer-related technologies.
Let me cite some practical examples that are very encouraging. I visited a leading investment firm recently that has essentially all internal communication on voice mail, cutting down markedly on redundant paperwork and meetings. A distribution services company on whose board I serve has introduced a computer system to its customers which allows them to order a bill of materials, design parts of the order themselves, price the ordered parts and calculate their own costs, as well as other features, in a matter of minutes compared to hours of work that previously had been required including the customer going to the store, which is no longer necessary.
In my own company, we recently introduced a PC-based design system to our builders in the pre-engineered metal building industry which allows them to go through multiple iterations quickly and efficiently in designing a building, pricing it and, in some cases, producing the actual drawings for shop fabrication. This system is an enormous stride forward in productivity which will redound to the benefit of manufacturer, builder and customer. It also gives our Varco-Pruden unit a competitive advantage in the markets it serves.
It also is important to note that productivity gains do not necessarily result in a loss of jobs. For instance, at Litwin Engineers & Constructors--our energy engineering business based in Houston--United Dominion employees are exploiting their "high-quality, fast-track" engineering capabilities through the use of computer-aided, three-dimensional design tools and achieving levels of productivity and profitability that were not even dreamed of a few years ago. The number of engineers and technical people at Litwin has quadrupled since 1987 to more than 1,300 today, and Litwin is now competing very successfully around the globe.
There are thousands of such cases in industry after industry, largely based on the electronics revolution occurring worldwide in which the United States, especially in the vital area of software, is a leader. Furthermore, we are seeing thousands of embryonic efforts across America flourish and spread to enhance our productivity, and hence competitiveness, tremendously.
A new study of the big five industrialized nations conducted by the McKinsey Global Institute revealed that U.S. workers are more productive than their counterparts. According to the study, the value of goods and services produced by an average full-time worker in the United States was $49,600 in 1990, or 12 percent more than in Germany and 30 percent greater than in Japan.
I also believe that BMWs selection of nearby Greer, S.C. as the site for a huge new auto assembly facility speaks very well for the world's view of manufacturing productivity, technology and product quality possible today in the "good ole" USA and right here in our own region.
Nor do I share the bleak conclusions about education to which the statistics normally cited would lead us. The fact is that we are educating--and in a superb manner--millions of students at all levels of the educational process. We still have the best university system in the world, and the students graduating from them, by and large, have the tools with which to be highly creative and productive. The recent program that brought nine Russians to this campus to study how we do business in the United States underscores my point and is an excellent example of the kind of vision needed to keep American institutions of higher learning at the forefront.
Clearly, we need to improve the public school system and that deficiency is being addressed vigorously in thousands of communities throughout the country. I am convinced that the system will be improved through visionary efforts that seem to be taking shape and beginning to yield encouraging results.
I could cite many other reasons why my vision for America is one of optimism and hope. Despite their obvious weaknesses, both our political and economic systems are resilient and self-purging and have demonstrated their ability to adjust to the vicissitudes of time as effectively as any ever devised. Our people, as recent studies reveal, are working longer and harder than ever before, in part adjusting to the fact that their real income has indeed declined in recent years. I do not share the view that this downward trend in disposable income will continue, again based on my belief that productivity is improving, and will continue to do so, throughout various parts of our economy.
Certainly, if the economic demise of the United States is truly imminent, why would hundreds of millions of people around the world today be working so hard to build new market-based economies rooted on our economic successes and on our social freedoms?
Yet, many people would disagree with my optimistic vision for our country's future and our ability to stem this apparent tide of deterioration. A recent public opinion poll conducted by the Gallup organization indicated that fully two-thirds of U.S. residents believe that the country has suffered diminished competitive standing and will experience further economic decline. Such opinion is certainly not spurious and is a view that, of course, could prevail. Those who are negative on our nation's future point to signs such as the shrinking middle class, the trend toward more concentration of wealth, the aging of our population, our seeming frustration in solving issues related to minorities and the lack of dynamic leadership to forge a new direction.
Undoubtedly, these are ominous warning signals. What those people say who put forth a pessimistic view of our future has much validity. I personally believe that the need for dynamic and consensus-forming leadership clearly may be the decisive issue as to which view ultimately develops.
I also analogize the ups and downs in the direction of a country to those typically experienced by individuals and institutions. Baseball players go into a slump; institutions get tired and lose direction; and we as individuals from time to time simply run out of steam in our own careers.
We experienced this kind of slump in our 110-year-old company--United Dominion Industries. The company was founded in Canada in 1882 and grew over the ensuing 75 years or so to be a major fabricator-contractor which built much of that country's infrastructure. In the next era, the company embarked on a diversification program both geographically and product-wise that produced rapid growth during the 1960s, 70s and early 80s.
However, our own growth and success may have become something of a trap. In the 1980s, we encountered recession, high leverage and excessive interest costs, as well as a deteriorating competitive position in a number of our businesses. Like much of industrial North America, we were faced with restructuring the company, paying down excessive debt and literally rebuilding the strength and vitality of the company.
I can tell you from our first-hand experiences and 80-hour weeks--this was no simple task. With tremendous dedication from our people and by forging a clear vision of the direction in which we wished to take the company, we have managed to revitalize our affairs, redress the company's balance sheet and move back into profitability. We emerged from this period of transformation as a much more focused and streamlined enterprise.
Today United Dominion is an industrial products manufacturing company . . . an engineering company . . . and a construction products and services company--all with a common thread of engineering. We have close to 11,000 employees and this year and next well do the better part of $2 billion in revenues. As we have reshaped and rebuilt the company since the mid-1980s, we have concentrated on fairly large, homogeneous market leader businesses that either rank number one or two in their respective markets, or which serve a particular market niche.
Our on-going plan--our vision--is one of continuing internal growth and corporate development initiatives designed to strengthen our core operations and, over the longer term, to add new businesses that offer double-digit growth potential. We have identified very specific performance criteria and targets for each of our businesses and, in turn, developed and articulated overall financial goals for the company.
We recognize that many of our markets will likely grow at a faster rate abroad over the balance of this decade which is why we are seeking to increase the international component of our sales from about 20 percent today to 35 percent by the middle of the decade. We are also working to achieve a better mix between our construction and industrial products businesses to minimize cyclical risks. These are typical of the strategies that evolve when you develop a clear vision of where you are trying to take a company.
I've brought copies of a little booklet which summarizes very concisely our vision for United Dominion. I believe as a CEO it is my responsibility to tell my shareholders where we are taking the company and what we are trying to achieve over a reasonable time horizon.
It also helps to be open to change . . . and not to be blinded by your own vision, your technology or even the obvious superiority of your products. In an era of shorter and shorter product life cycles, it is more important than ever to be adaptive to change--not only for the opportunities that come with change but to avoid the potholes as well.
For example, Wang Laboratories--the computer company which virtually invented "word processing" a little more than a decade ago--filed for bankruptcy protection this summer in large part because it had failed to adapt to successful market penetration by personal computers.
I might also add that there can be just as much danger in the planning process as merit, if it is not done right. The planning process is only as good as the management team that puts a plan together and manages the process going forward.
To you who are here at Appalachian, my vision of Americas future says that you and millions of others like you have the prospects for a bright future. Don't look at just today, the job market, but look out over your career. Each of you needs to fashion your plan--your vision--for the future in a way that uniquely fits you, your aptitude and your preferences. In doing so, I would encourage you to dwell on a few important--and perhaps self-evident--issues or developments that will have a profound influence on you during the 30 to 40 years of your career.
Just imagine some of the changes you will surely see during your work lives: supersonic jets that travel to the edge of space to transport passengers from New York to Tokyo in less than two hours; micro components in home appliances that today we would regard as supercomputers; undersea mining and farming; space stations designed for research as well as manufacturing; bio-technology that will enhance and lengthen our lives; and communications technologies that will surely forge a world culture, while hopefully preserving our heritage and individual customs.
In view of everything that lies ahead, your education should embrace to some considerable extent a more technical orientation than was required in the past--for example, when I was educated. This includes mathematics and computer literacy at a minimum. Some knowledge of other technical areas is desirable but can be acquired with experience and individual effort. The ability to write and communicate clearly is now simply expected to accompany technical or professional proficiency.
I encourage you to analyze the trends in products and services or to focus on "where the action is" or will be during your career. For example, look at any list of the most successful small companies. Certain observations leap out about the types of companies and the industries which are enjoying the most rapid growth today and which have the best outlook. These companies illustrate, in my view, much of what I've said about our country and the depth of talent and know-how that exists. Entrepreneurism is alive and well and will continue to be in our form of society. It is also the part of our economy generating the most new jobs today, especially as more and more large companies either shrink their work force or create new entrepreneurial business units themselves.
Such evolving enterprises also can be "fun" and exciting places in which to work and, of course, they can be very lucrative opportunities if they fit the vision you create for yourself.
You will have to work harder in your career in the face of increasing competition--just as American business is working harder today to be more competitive. In 1960, about the time I was preparing to embark on my career, American colleges and universities were graduating about 5,000 MBAs each year. By 1991 that annual output had risen to more than 76,000 and, remember, that's just your domestic competition. Clearly hard work--the perspiration I mentioned at the beginning--will be vitally important to fulfilling your vision.
I'll close by wishing you good luck--with your vision and your careers. I continue to be excited about what's happening in our world, in our society and in industry, despite the fact that many people today have a dim view of our prospects. I believe that vision--incorporating both perspiration and inspiration--will ensure a strong and prosperous future for America, for business and industry and for us as individuals, as we move toward the new millennium.
In an excellent essay in Time magazine, Henry Grunwald recently posed the question, "The Year 2000: Is it the end--or just the beginning?" In the article2, he concluded with the following statement:
"The year 2000 could very well open a second American Century, given a major, national effort of will. Absent that, it could also be the beginning of the end of the U.S. as a significant power, and we could (to vary what Beyond the Fringe once said about Britain) sink, not giggling but grumbling, into the sea. The outcome is up to us."
1 Reprinted by permission of Harvard Business Review. "Is America in Decline?" by Michael Prowse, July-August 1992. Copyright © 1992 by the President and Fellows of Harvard College; all rights reserved.
2 Henry Grunwald, "The Year 2000: Is it the end--or just the beginning?" Time, March 30, 1992, p. 76. Copyright © 1992, The Time Inc. Magazine Company. Reprinted by permission.