Three Ways To Get It All Wrong

A multinational software company with headquarters outside the US had an office in Los Angeles to manage its US operations. The US operations had been insolvent for the vast majority of 8 years and the company had won barely any market share during this time.

Its top competitor for the US market share was spending $40-$50 million each year on promotion and advertising. Comparatively, this multinational software company felt strongly that its US office should, all by itself, fund all promotion and advertising for itself.

Of course, it was insolvent most of the time and thus was spending only $80,000-$100,000 annually on promotion and advertising. This was as effective as throwing a glass of water on a forest fire. The matter was further compounded by having 30% of its revenues scooped off the top by the parent company for royalties. Their retail presence in the States consisted of approximately 150 stores and they were doing very poorly in the corporate volume licensing market compounded by the fact that they had higher prices than their competitors.

So how did international management of this multinational software company first attempt to solve this problem? Answer: They appointed a General Manager for their US office and gave him an annual sales quota. When he didn’t make it they fired him, hired another General Manager, gave him an annual sales quota and when he didn’t make it, they fired him, hired another General Manager and so on…for 8 years. It was astounding but true that there had been 8 GMs in as many years without anyone at the parent company realizing that this annual musical chairs event had not solved anything. And so the US operations remained flat and then began to contract.

The problem was a common one. The wrong “solution” was just as common.

But the right solution was laid out in an article written by L. Ron Hubbard in 1965:

“No empire stands still. They expand or shrink. They expand by (1) intelligent promotion and (2) good administration and (3) sensible economy, in that order. They shrink by using the wrong order – (1) economy, (2) more administration and (3) some promotion. They shrink because they never regain the former position by administrative management alone and the economy has nothing to economize on.”

In the example above, headquarters was attempting to solve the problem with administration (the second step of the Expansion Sequence above). When the problem was instead tackled with intelligent promotion (which included dropping the price, a package redesign, and much, much more), they expanded their retail presence to over 3,500 stores, began to see highest ever sales in the corporate markets, were solvent within 4 months, and enjoyed the healthiest financial period in the history of the US operations.

The secret is in the sequence.

Another, smaller example: A dental office was having financial problems. It had an inadequate volume of patients. It was sending out promotion and the promotion was getting a decent response percentage (indicating it was “intelligent” promotion). However, it was only sending out a small trickle of promotion. Why? They were trying to save money as a solution to not having enough money. This is the third step of the Expansion Sequence (economy) above, when they were clearly needing to apply the first step (promotion). They already had smart promo. They just needed to increase its volume. Within two weeks of increasing the volume by 4 times what they had been sending out, they had more business walking in than they could handle.


Inadequate business volume resulting in a current or predicted financial slump is solved by engaging in INTELLIGENT PROMOTION. There is, of course, more technology involved in ratcheting up the IQ of a company’s promotional exhale than can be discussed in one article.

When that business volume is so resolved, the increased traffic of new business will then begin to blow up whatever organization is there. It is therefore logical to then begin building an organization (good administration) that can accommodate the increasing traffic flow (without halting the high IQ promotional outflow).

And, of course, if these first two steps are handled smartly, a company will find itself making a considerable higher volume of money. And this is when things become dangerous again because the first impulse is to make imprudent financial decisions that drive the overhead higher and higher. Thus the third step of “sensible” economy becomes the focus. More financial discipline, not less, becomes the order of the day.

Are you using the correct sequence?

(Excerpt from an article written by L. Ron Hubbard on 22 February, 1965, Issue III.)

Bill Johonnesson

Bill Johonnesson

Bill is Johonnesson Hubbard Management consultant for over 30 years. His extensive knowledge of administration and marketing actually a consultant and speaker who enjoyed it uses worldwide.
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