Sunday, November 27, 2011

Thinking Inside the Box

Many years ago we had a shareholder who would visit from time to time to offer advice.  I valued these visits, though I’m not sure I always completely understood the counsel I received.  In particular, I was told on a periodic basis that I should “put it in a sock before I put it in the bag.”

I thought perhaps my shareholder friend, a native Norwegian who emigrated to America after WWII and made his fortune, was simply mistranslating some Old World advice. Maybe the word for “sock” in Norwegian was, well, I don’t know.  But not “sock.”

Anyway, he always said it in such a way, sort of with a wink, that I was embarrassed to inquire further.  I felt by asking I might violate some sacred code of the Sock and Bag Guild.

I was reminded of this advice the other day by none other than Peter Drucker, writing about people attempting to fix problems by innovating in all the wrong places.  

In the early 1950s, ocean-going freight was in big trouble.  Costs were rising, ports becoming congested, deliveries slowing and air freight looking better all the time.   The industry was innovating by trying to build faster vessels that required less fuel and smaller crews, all good ideas.

The game-saving innovation was launched quietly enough in April 1956 when a trucking entrepreneur placed 58 containers aboard a ship headed from New Jersey to Texas.  “Containers” means “big metal boxes.”  In took ten years, but in 1966 a Sea-Land ship carried the first international shipment of containers.  By 1975 vessels and ports were being built to accommodate thousands of big metal boxes.

We now think of this as “the container revolution.”  You might think of it as blueberries on your cereal in January, or maybe just an extraordinarily better standard of living.  It all came from metal-benders, guys who were losing jobs and prestige to technology innovators even as they were changing the world.

The secret to the innovation, of course, was decoupling two activities traditionally done serially but, with a simple metal box, now done in parallel.  While the ship was sailing, all of the packing could be done on land.  The result was ships spending 75% less time in port, a 60% reduction in shipping costs, and a five-fold increase in volume over three decades.  

There are some interesting lessons here.  Sometimes the simple solution has the greatest impact.  Low tech can rock.  Look to tough competitors (like truckers) for profitable solutions.  Never overlook process.  Peter Drucker is still worth reading.

The most important lesson for me, however, was finally making sense of my old shareholder’s advice.  Even though I was never, ever sure if I successfully “put it in a sock before I put it in the bag,”  I am now completely convinced that I should always “put it in a box before I put it in the boat.” 

Maybe that's what he meant all along.