Is Idol the only American business that works?
American Idol works better than almost any American business I can think of. Last night's finale, with its 100 million votes, presented Idol (it leads the industry with 26.3 million weekly viewers) as an island of success in a sea of business failure. From banks to automobiles, American executives have been woefully out of touch with their customers, betting on financial engineering to make up for an inability to offer customers more compelling products than the competition.
But Idol -- which is a British import tailored to the U.S. market -- works because it taps into the American dream. Its basic premise is the American one: that talent, not pedigree, is what determines a person's economic fate. And throughout the season, advertisers, particularly Ford Motor (F) (the only U.S. automobile manufacturer not owned by the government) have tapped into Idol's popularity.
So have other special-trading-symbol companies such as AT&T (T) and Coca Cola (KO) -- not to mention all the aging legends like Lionel Ritchie and Cyndi Lauper who appeared last night on the finale. And one of the biggest financial beneficiaries of Idol's success, CKX (CKXE) -- which tried and failed to go private in 2007 -- enjoyed a 62 percent rise in its stock in the last six months and boosted its profits 70 percent in 2008.
Finally, America's choice of Kris "Conway crooner" Allen over Adam "over the top" Lambert reflects current American pop music tastes. There are plenty of current artists who sell Kris's style of music, while Lambert's dramatic wails most closely resemble KISS and Queen -- bands that peaked in the 1970s.
After its eighth season, Idol is an unquestionable business success story because it appeals to so many people. But Idol has something in common with the faded American business icons that had to be rescued by the government or are trying to maintain their relevance by advertising on Idol.
That something is that in order to stay on top, Idol will need to reinvent itself to continue to stay ahead of the pack. So far it has been able to do so. And ultimately, that's why it works.
The failure to do so -- along with excessive dependence on financial engineering to make up for uncompetitive mechanical and electrical engineering -- explains why former American leaders of the pack, like General Motors (GM), are in or headed towards bankruptcy.
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book isYou Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing. He has no financial interest in the securities mentioned.