Geoffrey Owen has written an impressive, well-sourced history of Courtaulds from a strategic management perspective. For much of the 20th century, it was Britain's leading viscose (rayon) fibre producer and one of the most admired: ‘Why cannot we get a director from Courtaulds on our Board, to show us how to make profits?’ (p. 13). By the mid-1970s, Courtaulds was Britain's fifth largest manufacturing company, with over 100,000 employees; it was a major apparel supplier to Marks & Spencer, and a global producer of industrial paints and coatings as well as cellophane for packaging. Courtaulds unravelled after the 1980s, so in order to create focus and boost profitability, the company demerged its textile lines from its fibre, cellophane and coatings business in 1990; but all of them failed to survive on their own. The Dutch company Akzo Nobel took over Courtaulds’ remaining viscose fibre and coatings operations in 1998, and the American company Sara Lee took over its textile lines in 2000. (Owen had access to internal, non-public company documents held at Akzo Nobel because of this takeover.) Thus a nearly two-centuries-old leading company that began with silk weaving failed to reach the 21st century. Unlike many business histories that focus on why businesses succeed, the bulk of Owen's book focuses on why Courtaulds—a great company that was ‘built to last’—instead failed. It is also a major contribution to our knowledge of how firms confronted the massive structural crises post-1973 and the rise of Asian emerging market competition.

Owen offers an extended critique of Jim Collins’ Built to Last (1994) as if longevity were the ultimate goal, and questions whether it equates with success. He finds no inner strength, corporate culture or ‘core ideology’ that can explain extended good performance over time. He asks instead whether a firm is worth retaining, and makes a case for timely exit from declining businesses and for developing better alternatives that better enhance value. Otherwise the company should fail. Owen stresses that other firms continued to develop the product lines taken over from Courtaulds, or unwound them (textiles) in the face of more competitive firms. One might retitle the book ‘Why Great Companies with Good Executives Who Make Reasonable Decisions are Still Not Good Enough’.

Owen is most interested in how fundamentally solid companies face strategic inflection points (Andy Grove) when the fundamentals of entire industry shift under the feet of the company: in this case the rise of Japanese competition, but especially Chinese competition in artificial fibres that acted as a sort of 10X shock. (Note that ‘Courtaulds’ lies in the subtitle of the book, not the title.) Examining things in this light, the book is structured as a series of crucial inflection points whereby Owen elucidates the logic and decision-making behind critical new initiatives. Although the bulk of the book concerns the firm's decision-making after 1975, Owen provides a long-term perspective since Courtaulds moved into rayon at the turn of the 20th century. Importantly, the rise of low-cost Asian competition was not the only shock in Courtaulds’ history—just the most deadly. One of the highlights of the book is Owen's deft ability to link the backgrounds and personalities of new chairmen with new strategies to overcome these inflection points—at least up until the end. Of Frank Kearton, chairman between 1962 and 1975 who guided Courtaulds into apparel, Owen says: ‘A good scientist does not necessarily have the skills needed to run a lingerie business’ (p. 83). For major changes in strategy, there was usually considerable change in leadership. As one of Britain's leading silk weavers, Courtaulds made a dramatic shift to man-made viscose fibres (rayon) in 1904; it faced intensifying European and to some extent Japanese competition by the 1920s and 1930s; it faced major technological challenges with the rise of nylon from DuPont, IG Farben and ICI, as well as the loss of its US viscose subsidiary through the arrangements of the Lend-Lease Act in the 1920s and 1930s; and it faced the multiplication of substitute fibre compounds in the 1950s and 1960s from nylon, polyester (Terylene), acrylics (most importantly carbon fibres, which had the greatest future potential), polypropylene (cellophane, carpets), Orlon, aramid fibres (most famously Kevlar) and elastomeric fibres (most famously Spandex). It survived a hostile takeover bid from ICI in 1960/1. It survived the loss of its major customers with the decline of the Lancashire spinning industry by vertically integrating and helping to consolidate the industry to achieve greater scale in the 1960s, so that it became a major textile producer by the 1970s in the teeth of overall industry decline. Chairman Frank Kearton stated in 1965: ‘textiles in this country have ceased to be a declining industry and have every prospect, in the next few years, of becoming a growth industry once more’ (p. 62). Moreover, Courtaulds diversified into industrial paints and coatings for marine and aerospace purposes, as well as into upstream cellophane manufacturing for packaging, and last—and seemingly most promisingly but unsuccessfully—into high-tech carbon fibre for the aerospace industry. Courtaulds was ‘great’ and ‘built to last’ precisely because it managed to overcome these fundamental shocks over the course of the 20th century.

Yet by the end of the 1970s, Courtaulds was ‘on the rack.’ It appeared to make a comeback after the mid-1980s as it demerged to refocus the chemical and textile sides of the business in 1989/90 as more focused independent businesses. At the same time, the clothing market returned to cottons and soft cellulose fibres, such as Courtaulds’ promising Tencel, with its biodegradable and absorbent properties, which chief executive Sipko Huismans thought would save the company as a fibre producer: ‘Courtaulds without fibres would not be Courtaulds’ (p. 165). Disappointingly, Tencel went on to have a great future at an Austrian company, Lenzing, and carbon fibres became core competencies of Japanese companies such as Toray, Toho Rayon, Mitsubishi Rayon and Asahi Kasei for aerospace purposes—and golf clubs. This decision to stick to fibres might be most analogous to Grove's Intel, if Intel had stuck with memory chips in the face of Japanese competition rather than shifting to microprocessors. Intense competitive pressure from Chinese producers by the 1990s (p. 152) and Courtaulds’ heavy dependence on Marks & Spencer—which went through its own crisis in the mid-1990s—left Courtaulds’ textiles vulnerable to a hostile takeover bid by Sara Lee (pp. 193–5). With attractive offers from both PPG and Akzo Nobel, the famous Courtaulds name on its core fibre business disappeared in 1998 (pp. 173–8). Courtaulds failed.

Probably the most controversial argument put forth by Owen is that the failure of Courtaulds (and ICI by extension) and the passing of viable product lines to foreign firms ‘is not a cause for national lamentation’ (p. 305). Management made mistakes such as moving into textiles, doing too many things at once, and not—as one potential option followed by the Austrian Lenzing—focusing relentlessly on one thing (its core fibre competency) by divesting less profitable lines; Courtaulds fundamentally lacked ‘clarity about what sort of company it wanted to be’ (p. 176). Most of Courtaulds’ other products effectively continued with other companies, who were ‘better owners’ (p. 220). In an excellent comparative discussion about incumbent competitors’ reactions, Owen stresses that Courtaulds’ competitors—such as DuPont, Monsanto, Bayer and Akzo Nobel—fundamentally reinvented themselves in the face of the new Asian competition, while ICI, Hoechst and Rhone-Poulenc were taken over, and Montedison and Snia Viscosa declined dramatically. Only the three main Japanese competitors continued with fibres as a ‘foundation business’ and identity: Toray, Teijin and Asahi Kasei. Owen argues that the more stakeholder-oriented Japanese system, built on patient capital, values corporate continuity as an end in itself, but has the drawback of delaying difficult choices and slowing the allocation of capital into more high-growth sectors, unlike a capital market system based on dispersed ownership, shareholder value and hostile takeovers: ‘Courtaulds paid for its mistakes by losing its independence. That is how the British system works’ (p. 307).

What is particularly good about Owen's portrayal is that the ‘mistakes’ of management were not necessarily obvious at the time; Courtaulds’ management often took what seemed to be smart, reasoned, even innovative decisions. Shareholders were patient with Courtaulds for two decades as it struggled to find its way, but the relentless onslaught of new Chinese, Taiwanese, Korean, Indian and even Turkish fibre firms proved too much for most European companies. By 2008 the largest producers were dominated by the Chinese; by far the largest producer of polyester was the Indian company, Reliance. However, we do not learn exactly how the Chinese, Taiwanese (and Indian) companies became so competitive. This Asian juggernaut remains mysterious. The new Asian leaders are listed in Table 11.9 (p. 263). Since the artificial fibre industry is not the same as the labour-intensive apparel industry, where did it gain such competitive chemical capabilities? Courtaulds’ Austrian competitor, Lenzing, remained a leading player, but built plants in Asia as did Toray and Teijin. Why did Courtaulds not move more aggressively abroad to low-cost locations? The 1980s were an accelerated period of globalization for other companies moving overseas.

Finally, Owen shows that companies with longevity actually reinvent themselves dramatically in the short term, as did Bayer, DuPont, Akzo Nobel and Monsanto. Managing fundamental shocks in the short term is key to building a ‘great’ company in the long term. Yet it is precisely in the short term that financial pressures to exit are greatest. In Good to Great (2001), Jim Collins relates how Colman Mockler of Gillette countered three hostile takeover attacks; one of these would have gained shareholders 44% more on their shares, yet Mockler convinced shareholders to bet on the future value of the shares because of huge investments in novel three-blade razors, the Sensor and Mach3. Likewise, Courtaulds bet on Tencel (eventually a success at Lenzing). Carbon fibre appeared to have a high potential future, although no senior executive championed it, and it would in any case be a long-term risky investment. But capital markets often invest long term too if management can make a convincing case for exciting long-term rewards; see Monsanto. It is perhaps less a ‘capital market’ versus stakeholder ‘patient capital’ story than the loss of faith of executives and shareholders in Courtaulds’ ability to reinvent itself in the short term one more time. It would seem that Courtaulds’ management lost the ability to bring fundamentally new products into the pipeline and the belief in itself to reinvent itself again that would convince investors of the future earnings potential of the company.