But before we go too far down this path, let's get clear about the kind of trouble the American brand is really in. Yes, a boldly pro-American president, Nicolas Sarkozy, was recently elected in France, and the leaders of Britain and Germany are also U.S. supporters. And yes, the number of people trying to get into America has never been higher. But broadly speaking, America has undoubtedly lost respect on the world's political stage. Leaders from countries like Venezuela and Iran, emboldened by the changing geopolitical balance of power, feel no compunction whatsoever denouncing America. Sarkozy's opponent, Ségolène Royal, made anti-American sentiment a cornerstone of her campaign, and 47% of the populace apparently thought she picked the right villain. Even Russia, which held hands with America while in the process of returning to the global economy, has started treating the U.S. government with the impudence of a teenager toward his dumb, blundering dad.
But if America's political reputation has faltered, its business reputation decidedly has not. Today, American companies and entrepreneurs operate around the world with unparalleled vitality and access. Europe is still the largest investor in the U.S., which is in turn the largest foreign investor in France. Indeed, in all of our travels over the past several years in literally dozens of countries, we have never heard of a single business deal, joint venture, or acquisition that has fallen through because one party said, "I just can't. They're American."
Maybe the simple reason is that businesspeople are mercenary. They care more about profits than politics. Whatever the logic, the end result is that business has become part of the glue that keeps the world from blowing apart. Most people agree, for instance, that India's nuclear restraint against Pakistan in 2002 had as much to do with international economics as with international diplomacy.
Now, we'd never suggest that America's strong business reputation will totally wipe away the country's geopolitical tarnish. But we would assert that the American brand is multifaceted—and thanks to that, hardly ready to be junked.If you're part of a diversified company, when do you give up hope on fixing a broken business? — Ron Adner, Fontainebleau, France
Big companies hold on to failing businesses for all kinds of reasons: sentimental value, false hope, and culture, to name just three. For decades in Japan, for example, businesses were treated like shrines—untouchable. Similarly, citing "tradition," PanAm sold off its profitable hotels in 1986 and kept its struggling airline business. We all know the end of that story.
In most cases, though, inertia is what stops companies from letting go of broken companies. It's just so hard to sell an old operation—so messy. After all, getting rid of a fixer-upper takes patience and often the willingness to take a loss. Who has the time or wherewithal for that?
Which is why letting go of a business has to be a corporate discipline for it to happen at all. Companies should only keep trying to fix businesses as long as they serve a strategic purpose. And they should face reality and "give up hope," as you put it, as soon as they don't.
Look, there will always be times when companies will pour money into a floundering business to establish a position in a developing country. China was just such a place, and few companies who bought or built businesses there, especially in its early open-door days, escaped a few years of "learning curve" losses. Similarly, a fundamental belief in an emergent technology often means years of struggle prior to profitability. In such cases, you have to hang on. Your strategy depends on it.
But prolonged attempts to fix a business that no longer serves such a purpose rarely make sense. Without corporate life support—which peripheral businesses usually don't get, for obvious reasons—such businesses must fend for themselves. It's a slow death for everyone involved. How much better, then, to give your people their best hope for a better future. The company buying your "failure" usually has grand plans for its resurrection. Fight your inertia, and let them go for it. Jack and Suzy Welch look forward to answering your questions about business, company, or career challenges. Please e-mail them at thewelchway@BusinessWeek.com For their podcast discussion of this column, go to www.businessweek.com/search/podcasting.htm