The key, we learned, is to harness the flywheel to manage these short- term pressures. One particularly elegant method for doing so
came from Abbott Laboratories, using a mechanism it called the Blue Plans. Each year, Abbott would tell Wall Street analysts that it expected to grow earnings a specified amount-say,
15 percent. At the same time, it would set an internal goal of
a much higher growth rate-say,
25 percent, or even
30 percent. Meanwhile, it kept a rank-ordered list of proposed entrepreneurial projects that had not yet been funded- the Blue Plans.
Toward the end of the year, Abbott would pick a number that exceeded analyst expectations but that fell short of its actual growth. It would then take the difference between the "make the analysts happy" growth and the actual growth and channel those funds into the Blue Plans. It was a brilliant mechanism for managing short-term pressures while systematically investing in the We found no evidence of anything like the Blue Plans at Abbott's comparison company. Instead, executives would pump up the stock with a sales job (Buy into our future, reverently intoning the phrase "investing for the long-term," especially when the company failed to deliver current continually threw money after harebrained projects like its Rogaine baldness cure, attempting to circumvent buildup and jump right to breakthrough with a big hit. Indeed,
reminded us of a gambler, putting a lot of chips on red at Las Vegas and saying, "See, we're investing for the future" Of course, when the future I arrived, the promised results rarely appeared.
Not surprisingly, Abbott became a consistent performer and a favorite holding on Wall Street, while became a consistent disappoint-
Collins ment. From 1959 to Abbott's point of breakthrough in 1974, the two stocks roughly tracked each other. Then they dramatically diverged, with falling more than six times behind Abbott before being acquired in 1995.
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