The Caterpillar Way: Lessons in Leadership, Growth, and Shareholder Value

by Craig T. Bouchard, James V. Koch

How one tenacious company found the drive to succeed--on a global scale In the early 1980s, Caterpillar, Inc. lost one million dollars per day for three consecutive years. Its continuing existence came into question. Today, "CAT" is the world's most profitable manufacturer of construction and mining equipment and large engines. The now legendary global company made numerous well-calculated, though risky decisions for three consecutive decades--in the process scaling to heights unimaginable to even the finest business enterprises. How did they do it? The Caterpillar Way . Senior management at CAT facilitated the authors' one-year odyssey through the hallways and intriguing history of the construction industry giant. This inspiring book takes you behind the scenes with the CEOs, executive vice presidents, managers, dealers, customers, union bosses, and Wall Street analysts who were players in Caterpillar's drive to global dominance. You'll discover:

Genres: Business

368 pages, Hardcover

First published January 1, 2013

Reviews

[Jay French · Rating 3 out of 5]

Review of recent past of Caterpillar’s business decisions by some self-proclaimed non-insiders. The authors had interviewed many leaders within Caterpillar from the past decade or so, and seems to have based much of the first 2/3 of the book on that timeframe and at that level of decision-making. What is described is exclusively pronounced as correct business moves, outside for one mention that they had made two mistakes earlier, paying too much for acquisitions, but had learned from those mistakes and wouldn’t make them again. Caterpillar comes across as a company lead by strategic thinkers, from the board to the management. Topics include dealing with unions, Cat’s beneficial dealer relationships, and managing governmental relationships within the States. The last third of the book is described as a review of Cat stock, but it seems pretty similar to the earlier sections – with financial evaluations replacing the personal interviews in the early sections. If I understood the reasoning they provided in the last chapter for continuing interest in investing in Cat stock, it is this: the stock has historically outperformed stock evaluators’ forecasts, so it should continue to do so. Seems a bit weak to me, but you’re not going to get much better in a book. I found this valuable for the company-friendly descriptions of the markets that Cat operates in, the business decisions they have faced, and the prospects for the future. If you are doing business with Cat, this might explain how they operate differently than other companies. Note, though, that this is not critical of the company in any manner.

[Pavel Tumakov · Rating 1 out of 5]

Модель Бушара-Коха

Книга даёт возможность показать, как составляется классическое нерелевантное экономическое предсказание. Очень внушительное по виду, очень подробно мотивированное, очень тщательно проработанное оно. В котором ответ заведомо известен автору. А доводы лишь подтаскиваются под него.
Замечательные, включая эксклюзивные, факты: звучат отдельно от исследования и призваны в основном внушать ему доверие. Объём написанного - преследует ту же цель: внушать. Итог получается аховым для доверчивого пользователя.

🤡Отдельный пункт для любителей финансовых моделей. Их приложено к книге: несколько десятков страниц. Красивых таких табличек. С расчётами.

Книга - прекрасный образчик искусства прогнозирования "или ишак сдохнет, или падишах": поэтому разберём её в этом посту подробнее.

Итак. Рецепт фуфельного издания в экономике (таких большинство):

🤞В книге обязательно должно быть много фактов. Факты: внушают доверие. Факты двух типов: а)это такие специально размещённые в книге всем известные константы, которые можно пойти и проверить и убедиться, что так оно и есть и б)это эксклюзивная информация, которой нельзя не доверять - ведь у авторов близость к первоисточнику.
Первая группа призвана включать первую хитрость: типа, раз эти факты оказались верны - очевидно, и остальные тоже будут.
Вторая - вызывает восторг и уважение в силу причастности авторов к источнику знаний. Плюс дают читающему надежду воспользоваться эксклюзивом - в ущерб тем, кто не прочёл.

📌Вниманию составителя фуфела: факты, ясен пень, совершенно не обязательно далее использовать в сборке. Они в книге не для этого - они для внушения.

👉Книга обязательно должна быть по форме, как исследование. Вот это вот всё: аппендиксы, ссылки-сноски, комментарии, интервью. Таблицы и графики. Нумерация. Название глав. Упоминание трендов.
Псевдонаучность не должна бросаться в глаза никому, кроме понимающих. Назвали свой фуфел "Моделью Бушара-Коха" и понесли его в массы: расписав на несколько глав благоглупости.

📌Вниманию составителя фуфела: фигню местами нужно перемежать действительными фактами и находками (это самое важное), что создаёт очевидный флёр нового знания, основанного на правде.

Авторы конкретного издания совершенно справедливо указали на феноменальные достижения Caterpiller и её глобальные преимущества, как то:
🤞умение выживать на спадах экономики
🤞интегрированная в бизнес модель "бритва-лезвие", когда заметную часть выручки бывшая производственная компания, став сервисно-производственной, получает от текущих и часто неизбежных платежей покупателей, подсаженных на иглу: в виде ТО, дополнительного (навесного и прочего) оборудования и пр.
🤞собственная финансовая компания, обеспечивающая лизинг, охват-захват и оборону рынка через денежные услуги
👉силу дистрибьюторов и дилеров, чья стоимость чистых активов превышала $20 млрд, а четверо из них - сами котируются на бирже (!) - причём все четыре сотрудничают с компанией десятилетиями. Семейными династиями.
👉интегрированность компании в экономику США: прямые поставки продукции ВПК, госзаказ на прочую технику; давление - оказываемое на конкурентов - политическим ресурсом
👉умение работать с профсоюзами (говоря прямым текстом - CAT их просто высекла)

👉 Неудобное, непонятное или не входящее в наш интерес в книге - просто игнорируем.
Кох и Бушар, в частности, занолили:
🤞потолок развития компании: когда ты рисуешь клюшка-график, про него лучше не вспоминать
🤞системные проблемы в американской экономике. которые не были исчерпаны кризисом 2008-го
🤞проблема (не)управляемости компании, которая вышла на сверхглобальный уровень: по сути, корпорация - размером со страну
🤞конкуренция со стороны взлетающих звёзд новой экономики - FAANG - за деньги на фондовом рынке
и многое другое.

📌Вниманию составителя фуфела: что не знаем - заноляем. Так же поступаем с непонятным, не понятым и просто не нужным для целей доказательства будущего факта: включаем режим игнора.

Напомню результат: в книге они обещали с 70% вероятностью сбычу наиболее вероятного (среднего) прогноза по росту акций. По нему акции должны были стоить в 2020-м году в 4-7 раз дороже, чем в 2013-м - до $500 за штуку. Внимательный и разумный читатель усомнился бы в таком результате. И правильно бы сделал. Потому что 4 года акции болтались в боковике. Затем, за четыре года двумя волнами они показали двойник: но каждая волна сопровождалась спадом (вторая - тоже будет).

С этого дня цинично все подобного рода модели я буду именовать "Моделью Бушара-Коха".
Попрошу коллег поддержать начинание. Надо формировать свой язык - язык для понимающих - употребляйте это сочетание в смысле "загнанный лохам псевдонаучный трёп о будущем". Звучное название позволит вам избегать ненужных коннотаций: причём независимо от того, сапёр вы сегодня или минёр. Пользуйтесь 😊

[Bob · Rating 3 out of 5]

Impressive documentation. Caterpillar has had an ability to reinvent itself, at the right time, with the financial horsepower to do the expensive process of change. They did this in the 1980’s — in the midst of a decade of abysmal sales — with their plant with a future (PWAF) program. Which rebuilt their factories from the inside out, and changed the manufacturing processes from the old one-man-one-machine concept into the use of machining centers. With a dramatic improvement in productivity and quality. Had they not done this, their factories would have become obsolete well before the 1990’s, when demand increased to record levels. Currently (2019 and 2020 timeframe) they are closing numerous plants and moving production elsewhere. It is yet to be seen how well this will do; so far, they are meeting demand without losing quality.

What is emphasized in this book is the strength of Caterpillar’s leadership; what is missing is the loss of that class of top executives. The old guard, which was decades in creating, has gone away. Imported talent, which lacks the depth of commitment of the former “bled yellow” generation, now occupies the driving seats. With their slash and burn, short term but attractive-to-Wall Street results, to stay in good graces with the tyrants of the quarter.

The book was published in 2013; Caterpillar was raided by the FBI in 2017. This was a huge shock: Caterpillar is not an Enron. At least, it never was. Caterpillar had an, until then, rock solid reputation for honest book keeping. Which extended to all levels of their operation, including zero tolerance for internal fraud. Demonstrated by the abrupt termination of any employee, regardless of their position, who took bribes, stood, etc. Is that still the policy?

Whatever. The future will have to take care of itself, hopefully without any major scandals involving Caterpillar.

[Richard Gombert · Rating 1 out of 5]

The authors state in the introduction that they have no political axe to grind. Then the harp about the need to end Government entitlements.
Many chapter later in the book they complain that the state ( Illinois ) and federal governments do not give enough entitlements to Caterpillar.
Over all the authors do a very poor job hiding their extreme conservatism.
There are good points to make about Caterpillar and the management of the company. Long term ( 5+ years ) outlook instead of a quarterly wall street outlook.
This book has not aged well.

[Ngee Poo · Rating 4 out of 5]

Book gives a great breakdown of the success factors of Caterpillar, including but not limited to it's individual profit centres, successful labour union negotiations and relations, wide dealership network etc. However the book seems to have a slant towards portraying Caterpillar in positive light and could do better with a more in depth analysis of the threats and weaknesses of the company to make it a more balanced assessment.

[Chris · Rating 3 out of 5]

A great book for economists, decent for actual business people.

Economists should read more in-depth analyses of single companies. Period. However, the "Bouchard-Koch model" is not impressive, and the management lessons are tepid.

[Felix Sun · Rating 3 out of 5]

not bad to understand the Caterpillar operations, but the author sells himself too much, which is completely irrelevant to Caterpillar.

[Derek · Rating 3 out of 5]

Felt like a book long letter to shareholders. It’s an advertisement to buy stocks in Cat. But admittedly it is impressive.

[I R · Rating 4 out of 5]

Interesting, though a bit repetitive.

[Jason · Rating 2 out of 5]

I was looking forward to some insights about the company that has its headquarters in the same state I reside in but was turned off by this book. There were some interesting details and history shared but it was hardly an objective perspective by outsiders as it bills itself. It was a business book turned marketing without any room for errors or regrets. The lack of balance led this book to its demise. Even mostly agreeing with the section on frustration with Illinois politics and looking at Right to Work states, the argument felt worthless because the bias had become so obvious.

It reminds me of the old scam you hear about:
A scam artist mails 100 different individuals with a different stock pick, promising them that the stock is going to increase.
A month later, the scammer tracks which stocks actually increased and mails those individuals with another set of stock picks, promising them that the stock is going to increase.
Another month goes by and the scammer again tracks the stocks and mails another pick to those that had stocks that increased.
By this point, the people that are still receiving the mail think this guy obviously knows what he talks about. He's three-for-three. Most people would be convinced that he can't go wrong, he has some secret to picking winning stocks and he is willing to share.

Now, the actual scam takes place and the scammer has them invest their money in his fake company or a stock where he gains some commission or other benefit by betting against the stock. Little did the victims know that the person was wrong plenty of times, he just stopped communicating with those individuals.

In that story, it feels like Caterpillar was one of the stock picks that made it through multiple rounds and you're supposed to assume that they have everything figured out to keep the company growing in that direction. With the heavy bias coming from supposed outsiders, it feels like they're trying to pull the wool over your eyes.

[Bob · Rating 2 out of 5]

Caterpillar is an impressive company, both for its products (they build the most rugged machines in existence) and for its treatment of employees (brutal). The authors of the book are presenting a highly upbeat view of this company, and I have to agree the financial results support this. Yet I greatly wonder if the author's analysis is really objective, or if it is mostly a sales job based on a well chosen collection of facts. Coupled with interviews with execs who are saying what Wall Street wants to hear.

[Jonathan Seger · Rating 4 out of 5]

Would have given it 5 stars if the last 3 chapters weren't weighted so heavily towards evaluating CAT with respect to the stock market. Not my cup of tea. I'm not saying their evaluation was bad or good, I was just less than interested in it.

[Heather · Rating 3 out of 5]

Written in more technical language regarding organizational stats and performance, the authors to tell the powerful story of a great company with outstanding values and a long look toward the future.

[Theodore Kinni · Rating 2 out of 5]

A hagiographic survey of the factors behind the heavy-equipment maker's longetivity and success