The metal container industry in the early 1960s was a brutal, low-margin business. The entire industry was focused on economies of scale, running as fast and efficiently as possible.
Enter John F. Connelly, the notoriously tight-fisted CEO of Crown Cork & Seal. He took over the company and evaluated this hyper-efficient industry landscape. And in it, he found a fundamental flaw in his competitors’ approach: they were running as fast and as efficiently as possible, as if they were buyers’ captive units. Essentially, they all were at the mercy of the buyers, and all for a miserable 4-5% return on assets.
So, he did the exact opposite. Instead of trying to out-hustle competitors to pursue operational efficiency, he chose to be deliberate and to focus on a highly differentiated strategic position.
He focused on shorter production runs, smaller customers, and rush orders. He specialized the company in “hard-to-hold” applications such as aerosols and carbonated soft drinks, providing intensive technical assistance and rapid response to customer emergencies.
This positioned the company as a specialist in solving complex problems and responding to emergencies for less price-sensitive customers, and hence, they could command a premium price that more than covered their higher manufacturing costs.
Connelly’s strategy made CCS 50-60% more profitable than its massive rivals. Under his leadership, the company delivered an average annual return to shareholders of 19% over the next 35 years.
I think Connelly’s stance of deliberate positioning was a fearless move, given that the whole industry had just one operating model — obsessing on the economies of scale. He chose to do the exact opposite — allowing his company to focus on what others weren’t even thinking about. Everyone else was racing to the bottom. Connelly built a platform to stand apart.