Welch's 21 Steps to Management Greatness - 21
Be Number 1 or Number 2
"When you're number four or five in a market, when number one sneezes, you get pneumonia. When you're number one, you control your destiny. The number fours keep merging; they have difficult times."
One thing to keep in mind in Welch's comment above, is he was referring to companies that had multiple businesses. So when he talks about a company that is in the number four position, but it's their only business, he considered it a different ball game. In that case he said it was a matter of finding strategic ways of getting stronger.
But when you run a company that has multiple products across multiple industries, you are at the mercy of the companies in the No. 1 or No. 2 positions; the reason he said it was imperative to be there with whatever you're providing for customers.
If you look at probably any industry, you'll find those in the lower positions are always in the place of responding to the market leaders in whatever they do. That's what Welch meant when he said if they sneeze, lower companies get pneumonia. You must respond to what they're doing.
Their market leader position forces you to follow in their footsteps, keeping a company forever in its position.
Those that attempt mergers, in most cases aren't really able to bring the companies together in a way that makes sense. They end up struggling to synergize, while putting pressure on who they are.
The point is these things don't have to be worried about with those in the No. 1 or No. 2 positions. They can focus on maintaining market leadership while building new products and services people will respond to first.
Again, this is referring to companies that hold a number of companies and categories under their belt, not companies in one business.
Other Jack Welch Resources:
Jack Welch's advice to MIT Sloan students
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