ENTREPRENEURS IN A COMPETITIVE WORLD
April 25, 1985
The President Catherine R. Charlton, M.A., Chairman
Honoured guests, ladies and gentlemen: Our speaker today is one of the new breed of exciting executives. Not only do they run their company but they are personally identified with their company's products, which they themselves advertise to the public.
Mr. Victor Kiam has taken this one step further. He sold himself first and then bought the company. The story of his purchase of Remington Products in 1979 is widely known through his popular television advertisement for Remington shavers. Not- only did he buy the company, but he paid off the bank debt in less than twelve months, and increased sales and profits. A senior executive of the Chase Commercial Corporation, in the understatement of the year, classes Mr. Kiam as "an outstanding retailer and merchandiser".
Mr. Kiam's success with Remington Products follows a career of business successes, beginning with a B.A. degree from Yale and an M.B.A. from Harvard in 1951. He began in sales with Lever Brothers, moved on to the International Latex Corporation, where he became Executive Vice President, and then in 1968 he became President of the Benrus Corporation, a diversified manufacturer of industrial components and consumer products. This brings us up to 1979 when he began his adventure as Chairman, President and Chief Executive Officer of Remington Products Incorporated, manufacturers of electric razors and other products such as pool alarms, leather goods and accessories, cigarette lighters and men's ties.
Mr. Kiam has also been active in many business and philanthropic organizations including the Young Presidents, the World Business Council, the Child Welfare League, the United Way, and others. In 1984, he was executive-in-residence at Washington State University. He speaks widely both here and in Europe and is bilingual in French and English. I am given to understand that he speaks Japanese for his television commercials in Japan.
Ladies and gentlemen, one of America's best recognized executives - Mr. Victor Kiam.
President Charlton, President-elect Seymour, distinguished members of the dais and members and guests of the Empire Club: I am honoured to be here today because the Empire Club is much more than a club in my book. I deal with many people, and this club has not only a long tradition and history but it is peopled by entrepreneurs.
I have contact with numerous people who have asked me to speak and appear but this group was so persistent, so entrepreneurial, that they just overwhelmed me. President Charlton said that I speak often. That is not true. Actually, you will notice that in a couple of seconds I am going to close my eyes because I have learned that is the way to do it. The other night I closed my eyes when I began to speak and I spoke for thirty minutes. When I opened my eyes, I looked out and the audience had left except for one person. I looked at him and said, "What are you still doing here?" He said, "I'm the next speaker."
Webster describes an entrepreneur as a person who organizes, operates and assumes the risk for business, especially an impresario. It comes from the French word entreprendre which means "to undertake". I do not want to dispute Mr. Webster who has a great following throughout the world. However, I think his description is only fifty per cent of what an entrepreneur really is. Yes, an entrepreneur organizes, operates and assumes the risk - that is true. But the entrepreneur has another fifty per cent and I feel that this is really what separates the entrepreneur from other individuals. That other fifty per cent is a dedication and a commitment - a dedication and commitment to success. And it is not monetary success alone. Money is a way of keeping score because, if you are not successful, you will soon go out of business; and if you are successful, you want to be judged as to how successful you are. But an entrepreneur is an individual whose adrenalin flows by accomplishment and that is what generates the drive and the commitment and the dedication. President Reagan, about three weeks ago, addressed a university. The headlines of the New York Times said that President Reagan stated that this was the "age of the entrepreneur" and that there is an economic shift in America. It is the individual that is important.
I do not believe that today is any different from twenty years ago, fifty years ago or two hundred years ago as far as the entrepreneurial spirit living in North America. You can go back to the frontier days and the wagon trains that rolled west. Those people were entrepreneurs. If you think about the people who populated North America from Europe - those people were entrepreneurs.
All of a sudden there is an awareness of the importance of the individual, of the entrepreneur. In the 1960s - that was the era of conglomeration - large corporations were put together and the larger the company became the better it was supposed to be. These individual pieces, many of which did not relate to the others, were put together in a loose-knit form controlled by a superior body. This body was an administrative body and individual companies stultified. They became lost in the maze of bureaucratic paperwork. An individual can be an entrepreneurial individual; a company can be an entrepreneurial company; and a government can be an entrepreneurial government. If, in each of those cases, there is to be success, the entrepreneurial spirit must exist.
The New York Times some months ago ran a page discussing entrepreneurism. I disputed its content. They implied that an entrepreneur exists in a small environment. That is not true. Entrepreneurism is a state of mind. It is not a condition of size. An entrepreneur does not believe that the company, the individual or the government should run on consensus opinion. Consensus opinion leads to mediocrity. The individual should not have the courage of someone else's convictions. He must stand for what he believes in. He must be counted. He must be true to his faith and his beliefs and he cannot be caught up in the so-called corporate ball-game or the governmental pressures so that he violates his own basic principles.
Recently I spoke at the American Association of Collegiate Business Schools and Graduate Business Schools in the United States, representing seven hundred and eighty universities in the United States. The subject was: "Can Entrepreneurism Be Taught?" It was, and is, a very highly-contested issue in the educational process of the United States. My feeling is that you cannot instill the feeling of entrepreneurism in an individual; but you can direct it and you can point out guidelines and the dangers. You must point out, for example, that the entrepreneur lives a very lonely life, because he makes the ultimate decisions and the buck stops with him. The entrepreneur does not believe in consultants. To him a consultant is like a castrated bull - he can advise but he cannot perform. My apologies to anyone in that profession here.
... Can entrepreneurism be taught? ...
How is it that each year more inventions, more patents come from small companies and individuals than from the very large corporations? How is it that in the last year there was more job creation in individual enterprise and small business than there was in large corporations? The world is changing, and the entrepreneur is ready, if he is an entrepreneur, to seize the opportunity.
In my opinion, life is a game. You play it to win. And if you think of yourselves and your life, you realize of course that there are twenty-four hours in a day and you sleep perhaps eight hours. That leaves sixteen hours remaining. In your lifetime you will probably work fifty per cent of those waking hours - eight hours a day! If that is what you are going to be doing, you should do it as well as you can.
... life is a game. You play it to win ...
The Empire Club is a group of achievers. You have worked beyond the norm. But for the average person out there, up until within the last three or four years, work and business was something to be shunned. It was something to get through as quickly as possible, no matter how you performed the job. Quality was lost. Interest was lost. Your goal, if you were one of them, was to get through whatever you had to do to earn a living so that you could go home and have a bottle of beer and watch the Remington commercials on the television set. It has changed now. The youth today look at business as an opportunity. They look at playing this game. When I graduated from the Harvard Business School, I had no place to go. I did not have a family business. I did not have any relationship with a large corporation. I looked at my peers at the school and I thought I was as good as they were, but unless I were to do something that was different, I would not have the successes they would have. So, when I started to work - and I searched for a position that I thought my abilities would assist me in, which was then foreign trade - I went to Lever Brothers. I ended up in "foreign trade" - I sold cosmetics in Cleveland.
I did something a little different from most of my competitors in the Lever organization, and most of my competitors from Procter and Gamble and Colgate - Lever's two major competitors in the United States. I would get to work at eight o'clock in the morning and I used to go to play the game. I did not go to work. I played to win. And I would work from eight o'clock in the morning until nine o'clock at night. I was a salesman calling on drug stores, corner grocery stores, department stores. I worked, not five days a week, but six days a week, because Saturday was a good day. I was the only salesman on the road. Of course some of the buyers were busy and perhaps a couple of them said I was inconveniencing them by coming in on Saturday, but they were willing to see me. While I would work seventytwo hours a week, my competitors were working nine to five with an hour off for lunch, five days a week - thiry-five hours a week. I found that the time that I devoted to selling, produced results. I was promoted, became a supervisor, and was sent to manage the boys in North and South Dakota, Minnesota, Wisconsin, Iowa, Nebraska, and Illinois. At that time I was relatively young, operating out of Minneapolis with eight people spread out, non-visible - I never knew how or when they would go to work or when they would stop. This was the real test. I could motivate myself; but how could I motivate these people and give them the basic drive when they ranged from the older man, who had been with the company thirty-one years to a young chap who had joined the company three months before? I decided, and it has been my basic philosophy ever since, that in managing, you should be very simplistic. Just have a policy of "do as I do, not as I say".
So you perform, and they perform. I went into Remington in a very difficult situation. First of all, it was high risk: it was a leverage buy-out. I had been steeped in entrepreneurism both in a large corporation and then as chairman of my own company which was a public company, but I did not have a big position in the stock. However, I felt that I knew how to run a business from a marketing and strategic sense; more than that - and most important - I knew how to deal with people. I walked into Remington borrowing $241/2 million of a $25 million purchase price and interest rates for us hit 231/2 per cent that year in the United States. We were borrowing at three and a half per cent over prime! When I walked in, the company was in a state of complete moral disintegration. The parent corporation, over a period of three to four years, had tried to sell this company and nobody wanted it. The Remington employees were worried about continuing in their jobs because they did not think that the company would continue. Why would I risk all that when I knew that the people were going to be a problem and that there was a terrible debt load? One reason: the product.`
... No matter what business you are in, if you have a superior product, it is worth the risk ...
No matter what business you are in, whether you are in a service business or whether you are in a product business or a manufacturing business, if you have a superior product, it is worth the risk. You have to figure out how to sell that product or that service or whatever it is you are offering, but if you do have something superior, do not let the odds stop you. The risk/ reward ratio is what should govern the decision. When I looked at the potential reward if we were successful, and when I looked at what I had to work with tangibly, the risks of the financial nature and the people-problem, became secondary. I went into Remington realizing that I had to do something quickly. I eliminated seventy thinkers, seventy consultants within the first week. They happened to be employed, but they were consultants. I reduced the payroll by $2 million. But what about the rest? There were many good people who were leaving. I didn't know what to do to stop the drain because this company now no longer had its umbilical cord attached to its parent. I told them there was no more money. We had to create a new type of company.
The first thing I did was to call everyone in the company together, in the factory area. I told them that we were just like the first settlers; we must circle the wagons and every group in that company must be responsible for their particular area. They had to fight in their sector. I also told them that there was no difference between any individual on the job: there would be no differentiation; there would be no blue collar; there would be no white collar; there was only one collar - a Remington collar. There would be no pay differences. When we began we found that the white-collar people received a different wage increase each year than the blue-collar people. We said there would be no perks. There would be no differentiation on the job. Of course, people were paid differently, there is no question about that; the chief financial officer made more than the fellow cleaning the parking lot. But if the fellow in the parking lot cleaned it up and it was beautiful, I would spend just as much time thanking him for a job well done as I did to the chief financial officer who may have managed $5, $10 or $15 million successfully.
As a result of that, we created a company that is not only operative from a point of view of no differences on the job, but is also operative on the basis of high incentive. Some of those incentives are measureable; others are arbitrary at the end of the year, based on the performance of the company. These are not meaningless percentages. The chief financial officer, for example, earned sixty per cent of his pay for 1984 from the incentive. The base salaries in our company are lousy. But the total earnings, if we are successful, are great!
Now, we are playing a tough ball-game. We are a little bit like Canada. Canada is not a super power yet - I believe it will get there. It has the resources. We are the smallest company in our industry. We now do $160 million. In my first year, which was five years ago, the company did $47 million. But, we are playing in an international ball-game - just like Canada is playing in the international ball-game. Our nearest competitor, Gillette which markets Braun, has an annual turnover of $3 billion. Our next competitor, Phillips, has a turnover of $22 billion, and our largest competitor, the parent of Panisonic, has a turnover of $50 billion. Yet, our sales of shavers have gone from 1,200,000 units in my first year to 4,800,000 units in 1984. We sell one out of every two electric shavers sold in the United States today - up from one out of every five; and one out of every four electric shavers sold in the world.
We are dedicated to being profitable - but we are also dedicated to win. Our goal is to be Number One in electric shavers in the world. We have never paid a dividend. Why? Because we cannot afford it. Yes, we make money but we are re-investing it in our business. We are not looking to make a quick buck nor are we green mailers. We are investors for long-term growth. In our company we are truly investing: our advertising budget has gone from $4'/a million in my first year to $32 million worldwide today. We are building for the future, and our people are not the 500 people that we employed when we started the company six years ago; worldwide Remington now numbers 2,100 people.
We are truly an entrepreneurial company, existing in a world where this will determine the success or failure of individuals, of government and, of course, of corporations. There is a marvellous exchange in Cyrano de Bergerac in which the Conte de Guiche, after referring to Don Quixote, reminds Cyrano that: "Windmills, if you fight with them, may swing round their huge arms, and cast you down into the mire." Or, as Cyrano said, "up among the stars".
The appreciation of the audience was expressed by MGen. Bruce J. Legge, Past President of the Club, and President, The Empire Club Foundation.