Innovate or Die
From plows to seats
At Chenmark, we seek to purchase businesses we can own for the long-term, which to us, is measured in decades. As a result, one of our key deal criteria is evaluating the durability of demand for any given good or service. We have operations in sectors such as food manufacturing, power equipment, landscaping, and paint, among others. While none of these are high-growth areas per se, they are steady, which suits our long-term orientation.
We do understand, however, that despite our best efforts at modeling stability, in reality, things change, often in unforeseeable ways. Local and national politics can shift policies that impact our operations. The macroeconomic environment can impact demand. Consumer preferences change. Technology disrupts sleepy industries. Being a long-term investor and operator does not give us permission to be complacent. Quite the opposite, in fact.
A few weeks ago we were reminded of this reality when our team went to a Q&A session with Maine Senator Angus King. The session focused on leadership, its role in King’s career in politics, and how it has evolved over his time as both Governor (from 1995- 2003) and United States Senator (since 2003). An Independent since 1993, Senator King has often found himself bridging a gap between an increasingly divided electorate, which gives him a unique perspective. King had a few memorable quotes in our Q&A, but one of them was short and simple: “Innovate or die.”
To articulate the point, King told a brief history of Hussey Seating, one of Maine’s oldest companies. Established in 1835, the company originally built plows (the agricultural ones, not the snow versions). After a fire at their production facility and facing changes in the economy, the company pivoted in 1895 to fire escapes, bridge supports, and ski lifts. It wasn’t until 1931 that Hussey developed their first outdoor bleachers, and in 1952 they launched the “closed-deck” telescopic gym seating system that they are still known for today.
Often “innovation” is a term reserved for avant-garde technology companies. The story of Hussey’s 188-year history is a stark reminder that all companies, regardless of industry, must be willing to adapt if they want to survive. Most 19th-century plow companies no longer exist because they were unable to respond to threats and opportunities. A recent Hidden Brain podcast segment with Loran Nordgren, a professor of psychology at Northwestern University’s Kellogg School of Management, highlighted how difficult this type of change can be:
Shankar Vedantam: Loran, you call this reactance. Can you explain what you mean by that term?
Loran Nordgren: Yeah. Reactance is the idea. It’s the human impulse to want to push back against change, and it is rooted in our desire for autonomy. Humans, like most other animals, have a fundamental need to exert control and influence over their environment. Innovation, creating change and influence is incompatible with that basic human need. What is the innovator in the conventional sense, trying to do? They’re trying to get them to follow a particular direction. Well, that’s a restriction of freedom. And when we feel that freedom being restricted, the human impulse is to push back in order to restore our autonomy or control.
….Shankar Vedantam: One of the pernicious forms of friction [is] reactance. We often respond like small children when someone suggests something to us, our first reaction is often to object. Even if it’s something we might like, or at least eventually like.
… Loran Nordgren: Yes. Ideas are also like kids, in that we always love our own more than any other. The intuitive role of the innovator is to have the idea and to push for change. A master of influence and innovation is going to understand that through some process of co-design through co-ownership, we want people to commit themselves to these ideas.”
The Hussey Seating story is a wonderful example of durability, persistence, and innovation. Today, we have various “boring” businesses. What those companies evolve into decades from now is unknown, and we’re OK with that. While we are only 8 years into our story, we believe that a steadfast commitment to the long-term combined with an organizational willingness to be open to new ideas will, at the very least, give us a shot at being around for the next 180. Innovate or die…
Have a great week,
Your Chenmark Team