NCIC: Conclusion

Finished reading NCIC. Overall, the book has helped me to appreciate the significant role of political risk in the life of a company. The story of Schering seems like a twisted and horrifying parody based on novels of Ayn Rand. While Rand writes about excellence and mediocrity as clearly defined and antagonistic groups working against each other, the truth is much more complicated. In making her characters so one-dimensional, Rand does manage to crystallize the essence of creativity and mediocrity. NCIC highlights the shades of grey that dictate human behaviour in the real world. This book on Schering, however, demonstrates how these colours can play with each other to produce many variations.

Between the world wars the German business, despite of its several advantages, succumbed to a destructive Nazi rule and, in some cases, even fuelled the ambitions of a destructive, racist regime. Companies like Schering simply tried to find a balance in order to ensure survival, but those like IG Farben actively exploited the adverse circumstances for profit. Schering's excellent marketing, scientific research and quality of manufacturing helped it to build a formidable brand and maintain profitability even in the most adverse of circumstances. Nevertheless, as politics took precedence over economics and as chauvinistic nationalism became fashionable, Schering struggled. Business, in general, either refused or failed to understand the power it wielded. Perhaps, the behaviour is not very different from citizens who do not vote, avoid participating in politics and complain about the quality of politicians. It is definitely not the first time that inertia and narrowly defined self-interest have caused problems for a society, but it is appalling to note that the same pattern has repeated itself for centuries without people learning from it. Indeed, who do not learn from history will be condemned to repeat it.

Concluding, there are a plenty of things to learn, both what to do and what not to do, from the story of Schering. The book will also enhance your understanding of the development of the German business in particular and knowledge-based industries in general. Finally, it will help you to appreciate the reason why the political environment of a country is critical to the success and sustainability of a business and how the culture of a country can be critical in determining an organization's strengths and weaknesses.

NCIC: Between the Wars

Between the two world wars, Schering did reasonably well. This was done by spending substantial amount of revenues on marketing, establishing foreign subsidiaries, investing in research, taking care of its employees, localizing the product, giving cultural training to young managers and forging alliances. Marketing and advertising alone consumed as much as 30% of revenues. The wars, turbulent political and economic circumstances, rise of protectionism after the Great Depression, hostility to German products after WW1 and Schering's own bent towards socialist policies prevented the company from realizing its complete potential. To make the reader understand the circumstances in a better way the writer takes great pains to elaborate the effects of WW1, the problems faced (and created) by the Weimar Republic and the final havoc unleashed by the Third Reich. In modern context, when I read about Germany, I am reminded of how Beirut passed from total prosperity to total chaos. Something similar happened to Germany with WW1. It is a wonder that Germany is what it is today despite all the hardships suffered and problems faced. I can make out as much that the writer has a soft corner for Germany. Nevertheless, the book makes me feel pretty curious about Germans.

Another thing that strikes me is that power dynamics has witnessed an incredible amount of change in the last 150 years. The number of wars and turbulent circumstances has been shocking, and all countries have had their share of troubles. This has not only defined their attitude towards the world but also their own self-perception and way they organize themselves. Unfortunately, sometimes the response to mitigate an adverse situation makes things worse. Particularly, a culture of entitlement or one of seeking more rights and powers but lesser responsibilities and accountability can really eat away the vitals of an economy like termites. The understanding of history, politics and economics can seriously increase the efficiency of a business man, giving him a wider vision of the world in which his business operates.

NCIC: Story Before WW2

Read till just after the WW1. Pharmaceuticals industry was historically closely related with the chemicals industry. Camphor, rubber, oil, coal, wood and turpentine oil were some key raw materials. The growth of pharmaceuticals as an important part of the economy has been phenomenal. The demarcation between a purely "chemicals" based business and pharmaceuticals was a blurry one. IG Farben, Bayer and Merck come up as the big German players in the industry. In context of the book, Du Pont also comes up as a major player; a name that before reading this book I had associated more closely with chemicals and its close relation with GM. Schering, though a smaller player, comes across an important player with many innovations, including economically viable synthetic camphor, attributed to it. Its contribution to photography chemicals and contrasting agents also stands out.

Nevertheless, I find the company a bundle of contradictions. Its innovations contrast sharply with its conservative, inward looking, relationships based approach. The way it resisted international investments and engaged in cartels are not exactly the hallmarks of a confident company. I understand that nationalistic passions were running pretty high at that point of time in the history. Germany's bitter experience with WW1 did not help things either. Nevertheless, the fearful attitude and shortage of good managers did affect the growth negatively. Relating it with the history of Deutsche Bank, I also feel that relying on private contacts and relationships was very much a part of business in those days. So much for merit, intelligence and hard-work. Connections and being in the right family could be the making or breaking point. It is good to note that in today's world the number of opportunities has increased, though not equally in all countries. I am not sure if nepotism and elitism will ever go away, but information technology advances have definitely enabled and empowered people to start a business more easily. Three cheers for IT!

Finally, after reading a lot of sugar-coated management books, it is good (though a bit bitter) to read a book grounded in facts. Hard-nosed realism. The complexity and shades of grey that it brings out are, well, enlightening. The sooth-sayers are not wrong, but it is good to know and realize that not everybody is in business with the same motive. Business history ultimately judges a company by its ability to build perception and the end results. It also brings out the role of politics and luck in the life of an enterprise. It demonstrates that there can be umpteen ways to reach the same place, and it is alright as long as you are willing to make the journey.

National Cultures and International Competition (NCIC): Connecting Dots

Continuing my reading blitzkrieg, I am now reading; " National Cultures and International Competition:The Experience of Schering AG, 1851–1950" by Christopher Kobrak. Down the first 100 pages, the book looks interesting.

The first thing that I gather from this book is a better understanding about German historical attitude towards business. The presence of two boards in German companies, developing a "community of interests" and legalization of cartels to counter effects of economic difficulties and capitalism, the effect of wars on German economy (and psyche) and why coal and iron were so politicized are few key points to learn. In fact, it relates very well with why coal and steel were the primary focus in the 1957 treaty of Rome. For the first time I am able to appreciate the difference in business attitudes in Germany from UK, US and India. History does help you to appreciate the present and to avoid mistakes in the future.

The second thing I realize is that Germany was in a very formidable position before WW1, with only US hoping to do as good. With WW1, US expropriated 506 German companies and 12000 German patents. This, along with the American capacity to organize and think big, the managerial revolution, elimination of its biggest rival, a favourable geographic location and war sales bonanza transformed US forever. Whatever was left was sealed by WW2, when dollar finally replaced pound. The more I read, the more events interconnect and make sense. I guess victor's justice is a truth of life, and I have to also watch out for the personal bias of authors keeping in mind that this is but one side of the story.

All in all, an interesting start. Will keep you posted.