Arrow Electronics

**The company as it exists dates from 1968**, when three recent Harvard Business School graduates working at a New York investment bank - B. Duke Glenn Jr., Roger E. Green and John C. Waddell - led an investor group that bought control for about $1M of borrowed money. They also bought a business that reclaimed lead from old car batteries, which tells you something about the state of the opportunity as they found it.

They were right about electronic parts distribution. By 1979 Arrow had acquired Cramer Electronics, then the second largest distributor of electronic parts in the United States at around $150M of annual sales, and was a serious national business.

**On 4 December 1980 the senior management team gathered at a hotel conference centre in Harrison, New York for the annual budget meetings. A fire in the building killed thirteen of them.** The dead included Glenn, by then chairman, Green, then an executive vice-president, and every department head of the electronics distribution division. Waddell survived because he was not there: he had stayed at headquarters to field questions about a two-for-one stock split announced earlier that day.

The day after the fire, Lynn Glenn - the chief executive's widow - came to the company's headquarters and spoke to the staff. She told them she did not know their faces but would know their names, because her husband had talked about them.

**Waddell took over a company that had lost most of the people who knew how it worked.** He recruited Stephen Kaufman from McKinsey in 1982; Kaufman became chief executive in 1986 and chairman in 1994, and led the consolidation of American electronics distribution and the expansion into Europe and Asia. Arrow recovered within about three years, and the episode produced changes in succession planning that a company only makes after it has needed them.

The 1988 acquisition of Kierulff Electronics shows the method: Arrow closed all four of Kierulff's warehouses, and the combined business went from a $16M loss in 1987 to $10M of operating profit within a year. That is distribution economics in one sentence - the value is in the network and the working capital, not in the buildings.

**Read beside the other distributors here, Arrow is the oldest and the one whose history is least about strategy.** Ingram Micro was founded by teachers, ScanSource by a thesis about transitional products, Westcon by acquisition and Network1 by being bought. Arrow's defining moment was an afternoon nobody planned for, and what it demonstrates is something no strategy document covers: that an organisation is not only its people, because this one lost thirteen of the most senior at once and still existed three years later - and also that it is nothing but its people, because rebuilding took three years and a stranger from a consulting firm.