'Nothing fails like success.' That line from American guru Richard Pascale deserves immortality - because even so sweeping a success as Benetton carries within it the seeds of its own decay.
The Benetton family's saga reads like the classic entrepreneurial dream. Lorry-driver father dies. Daughter Giuliana makes money sewing sweaters for the sprawling, bustling Veneto textile trade - and then turns to knitwear herself.
Her first woollens, made on a home knitting machine, are sold from shop to shop by Luciano, who knows the trade from working in a menswear store. In 1965, the Benettons open a factory. Three years later, the first store follows, leading to a revolutionary concept: a fashion chain selling only its own products.
Gilberto and Carlo taste the honey and join a business which grows with unexampled, worldwide vitality. By the late Eighties, 3,500 stores in 54 countries are expanding by one per day, and sales have topped $500 million. Yet in spring 1995, the success was at best stagnating. Why?
Any business can outgrow the proprietors' reach. At $1.69 billion of sales, Benetton would challenge the most professional management. In January, though, an imported managing director quit after only two years amid growing suspicions that the family (owning 71%) was losing its zing.
What sometimes happens to creative talent can also hit businesses - for the entrepreneur is essentially creative. The proprietors can't rekindle the magic fire of the past. If the firm has stayed under family control, nobody else can supply the missing spark.
In any business, large or small, the tendency is to consecrate the principles that brought past success. In fast-changing times and trades, that guarantees eventual failure - and fashion is a byword for abrupt, radical, unexpected change. The once-revolutionary Benettons now look conservative.
One rival, The Gap, changes styles every four to six weeks, according to Business Week. Zala of Spain also changes gear almost monthly. Benetton is wedded to only two collections a year, and that, says Luciano, is 'perfect': a word that's perfectly worrying.
It suggests that the user is impervious to criticism. Nothing's perfect. Those who reject internal critics, moreover, move easily to ignoring critics outside, including customers and others on whom the business depends. In the Benettons' case, that dependence is peculiarly sensitive.
Their wonderful innovations included use of franchising to force-feed that amazing growth. The franchisees financed the store expansion with their capital. There's a catch. Such people are naturally independent, and are liable to assert that independence.
Happy customers don't emerge from unhappy shops. Part of Benetton chain's misery stemmed from mismanagement. American shops were opened too close to each other - and were allegedly undersupplied. The number of US outlets fell by two-thirds, leaving a load of litigious, angry shopkeepers.
In Europe, those sensational ads featuring gory images upset the retailers, giving German ones (whose sales are tumbling) an excuse to withhold payment for goods - and to get sued by Benetton. You don't need a management education to see that suing the hand that feeds you is bad for business.
The far-out ads stopped. Rumour says that on this and other issues, the Benettons, however united their colours, are deeply divided. The brothers and sister are now middle-aged and multi-multi-millioned, which may help to explain their faltering fashion touch, and more.
Getting richer and older weakens the main force for cohesion: the desire to build a bigger, better business. Lately, the family has been buying, not building. It owns privately all or most of Prince tennis racquets, Autogrill restaurants, superstores, etc., with collective sales over double Benetton's.
That's some consolation for the slump in Benetton's value, measured by the US share price, which has halved since outside investors (who are unconsoled) bought 29% of the stock. Maybe the clothing chain will make a comeback. But entrepreneurs should hearken to clear warnings.
You won't rejuvenate a business without rejuvenating top management: the four Benetton ages ranged from 22 to 30 when the first factory opened. Second, diversifying makes financial sense for a family, but can do worse than nothing for the foundation business. An old maxim is particularly apposite to Benetton. Stick to the knitting.
