with Craig Bouchard Q & A
IMPO: What would you say is the primary theme of the book?
CB: The theme is maybe not what you think it is. We began the
process not even thinking about Caterpillar. What we wanted to
try to do was to write a book that was a modern follow-up to the
themes of Good to Great. What does it mean in today’s mixed up
world to be a well-managed company? A lot has changed. James
Koch has been my mentor for my whole business career, and he
has been my advisor on many things over the years. We started saying, ‘What does it mean to be a well managed company
today? Let’s build a model.’ In the book, we list 25 variables. We
looked at ten companies and assigned a weighted average score
to each of those 25 variables — and CAT won easily. So we wanted to look at why that is.
Part of our idea was to write a book that Main Street could read,
not Wall Street. Because for a lot of people, if they’re going to
start a business, it would be nice to know what it takes to make a
good business. Then you take the other half, who have their jobs
but their 401Ks may have been slaughtered during the recession:
they want to know what kinds of companies to invest their money
in. The world has gotten away from picking stocks based on management because it’s so hard to evaluate the management of a
big company. We’ve gotten away from saying, ‘I’m putting my
money with the best management teams’ because you can’t figure
out who they are. So we wanted to say in common sense words:
what does it mean for these big, global companies to be well
managed?’ Those were the principles for the start of the book. And
once CAT said we could come in, we spent a year interviewing
people – all the living CEOs, the directors, EVPs, factory people,
analysts, union people – and we told their story.
IMPO: How did you find that CAT was really an ideal case study
on business ingenuity once you started talking to these folks?
CB: I’m the CEO of a company, and have been the CEO of a cou-
ple of companies. I tend to think from the management challeng-
es side, so what happened with CAT is remarkable from my per-
spective. In a period of thirty years, they made five or six huge
company-changing management decisions — things that just
turned the whole place upside down each time. Those are risky
things to do, and they’re often not well done. But CAT got them
all right. This collection of decisions, which were interrelated to
each other, allowed them to scale from $10 billion to $20 billion,
and shatter the barrier where most companies can’t go any high-
er. What sets CAT apart is their incredible string of successes
with huge risky decisions. I haven’t seen any company able to
(successfully) make that many consecutive gigantic decisions.
IMPO: Do you believe that the average company has both the
smarts to identify their fundamental flaws, and also the guts to
change business models?
CB: I think very few companies do. What does it mean to be a
well-managed big company, which is very different from being a
well-managed small company? I think we tend to get confused.
We tend to look at the CEO and say that man or woman is a
good CEO, or not. We make a decision on a person, and then we
extrapolate that if that person is a good CEO, then the company
is well managed. But it doesn’t work like that, and the bigger
you get the more it doesn’t work like that. Management of companies is complex, and the bigger they get the more complex it
is. So that’s why we looked at 25 factors in how we evaluated
what a well-managed company is. It’s a very complex thing, and
you’ve got to do well on almost all of those 25. But of course no
one personally can do all that. There are people who manage
supply chains, people who do branding and marketing, and handle financial risk, people that handle customers, and people who
keep their fingers on the pulse of the ethics of a company. Some
companies do that well, and some have no control, but it’s got
nothing to do with the CEO — it’s the process inside a very large
The construction and mining giant Caterpillar is the world’s largest manufacturer of construction and
mining equipment, diesel and natural gas engines. In recent years it’s had incredible performance
and growth, the darling of financial analysts. But it wasn’t always so: In the 1980s, some observers
wondered whether CAT could survive as it hemorrhaged financial losses.
THE CATERPILLAR WAY: Lessons in Leadership, Growth, and Shareholder Value chronicles
how the company bounced back, with a reorganization as seismic as it was productive. With original
interviews with top execs, board members, union officials, investors, and Wall Street analysts, this
is an inside look at how the company’s emphasis on core values edged up its margins even
through difficult times.
The book, co-written by Craig Bouchard and James V. Koch, also theorizes that
analysts have consistently undervalued the company, and looks at long-term
trends in mining and global resources which offer an optimistic view for CAT’s future.
Bouchard is Founder and CEO of Shale-Inland, LLC, a leading industrial supplier of products used in the transportation of
water, food, energy, and information. He spoke with IMPO about what every business can learn from CAT's success.