In 1971, Kimberly-Clark was an old paper company whose stock, by Jim Collins’s count, had fallen 36 percent behind the general market over the previous 20 years. Its board named a new chief executive: Darwin E. Smith, the company’s mild-mannered in-house lawyer.
Smith had grown up on an Indiana farm, Collins wrote, and put himself through night school at Indiana University by working the day shift at International Harvester, then got into Harvard Law School. He wasn’t sure the board had chosen well. A director pulled him aside to remind him that he lacked some of the qualifications for the position.
Two months into the job, doctors diagnosed nose and throat cancer and told him he had less than a year to live. By Collins’s account, Smith informed the board but said he had no plans to die anytime soon, and kept his schedule while commuting weekly from Wisconsin to Houston for radiation therapy.
Then came the decision. Coated paper, made in the company’s own mills, was its traditional core business; the town of Kimberly, Wisconsin, was built around a Kimberly-Clark mill. Smith and his team concluded that the business was “doomed to mediocrity”: its economics were bad and its competition weak. In consumer paper products the economics were better and the competition, Procter & Gamble among it, was world class. That fire, they reasoned, would force the company to become great or perish.
Smith announced that Kimberly-Clark would sell its mills, even the one in Kimberly, and put the money into brands like Huggies and Kleenex. One director, Collins wrote, called it “the gutsiest decision I’ve ever seen a CEO make.” The business media called the move stupid, and Wall Street analysts downgraded the stock.
The New York Times obituary tells the same move with different verbs. Not long after he became chief executive, it says, Smith “sold off large interests in coated paper and closed down inefficient mills, including one in Kimberly, Wis.” Later in the 1970s he pushed a revamped disposable diaper, renamed Huggies, against Procter & Gamble’s Pampers. By his retirement in 1991, Huggies was the nation’s leading disposable diaper and brought in about 23 percent of the company’s $7 billion in annual revenue.
When a journalist asked him to describe his management style, Collins wrote, Smith stared back through thick black-rimmed glasses. After a long, uncomfortable silence, he said: “Eccentric.”
In July 1995, Kimberly-Clark announced a $9.4 billion merger with Scott Paper, one of the rivals Smith had set out to beat. Smith died that December, at 69, after collapsing at his home in Florida. In retirement, looking back on his record, he had said simply, by Collins’s account: “I never stopped trying to become qualified for the job.”