Good to Great Chapter 4: Confront the Brutal Facts (But Never Lose Faith)

1. Good to GreatChapter 4: Confront the Brutal Facts (But Never Lose Faith) Team 6 Will kerlick Molly Murdock Reece macdonaldbRyanFetterman John Fletcher “There is no worse mistake in public leadership than to hold out false hopes soon to be swept away” -Winston Churchill

2. Confront the Brutal Facts BREAKTHROUGH BUILD UP Level 5 First Who Confront the HedgeHogCulture of Technology Leadership Then What Brutal Facts ConceptDiscipline Accelerations Disciplined People Disciplined Thought Disciplined Action FLYWHEEL

3. Confront the Brutal Facts Facts are better then dreams A climate where truth is heard Unwavering faith amid the brutal facts The Stockdale paradox

4. Facts Are Better Than Dreams

5. Disciplined Thought • Good to Great companies showed to have two distinct forms of disciplined thought • Companies infused the entire process with the brutal facts of reality • Basis of this chapter • Next, they developed a simple, yet deeply insightful, frame of reference for all decisions • Covered in later chapters

6. Good Decisions • All Good to Great companies made multiple good decisions, diligently executed thataccumulated one on top of the other. • The process to success was constantly refined. • Before a company can make a series of good decisions, it must face the brutal facts. • Once the brutal facts were faced, the right decisions often became self-evident.

7. Facing Brutal Facts…. • Old-model grocery stores were becoming extinct • Kroger’s CEO Lyle Everingham said, “The super combination stores were the way of the future…once we looked at the facts, there was really no question what we had to do.” • Kroger transformed allof their stores therefore reconstructing traditional market boundaries to break from the competition and create a Blue Ocean. • A&P opened The Golden Key in order to experiment with the new trends in the market • A&P didn’t like the facts they faced and shut down the new successful store in order to preserve the traditional store, which soon failed.

8. A Second Example • Mr. Ash of Addressograph had a vision to emerge above IBM, Xerox, and Kodak in office automation • Addressograph had previously only dominated the envelope-address-duplication business • Ash refused to face evidence that his plan was doomed to fail • After Ash was thrown out of office and the company had filed for bankruptcy, he still refused to confront reality, saying: “We lost some battles, but we were winning the war,” • There is nothing wrong with pursuing a vision for greatness, but Good to Great companies continually refined the path to greatness with brutal facts of reality.

9. Leaders • Strong charismatic leaders can become the de facto reality driving the company • You don’t want celebrity leaders • Fear of the leader causes employees to be more afraid of what the leader would say or think then what external forces could do to the company. • Employees don’t give honest opinions but instead say what they think the CEO would like to hear

10. Pitney Bowes Example • There is no fear of executives at Pitney Bowes. Instead they hold sales meetings where the entire management team opens themselves up for searing questions and challenges from the sales people who deal directly with customers. • Instead of bragging, Pitney Bowes executives think that their accomplishments, no matter how great, are never good enough to sustain the company. • Pushes them from good to great

11. A Climate Where the Truth is Heard

12. Four Basic Practices for Creating the Right Climate Lead with questions, not answers Engage in dialogue and debate, not coercion Conduct autopsies, without blame Build red flag mechanisms

13. Lead with Questions, Not Answers • Questions are used to gain a better understanding • They are not a form of manipulation or used to blame others or put people down • Ask questions that will lead to the best possible insights • Many Good to Great companies conducted informal meetings with no agenda where current realities tended to bubble to the surface after asking conversational questions • So, What’s on your mind? • Can you tell me about that? • What should we be worried about? • Can you help me understand?

14. Engage in Dialogue and Debate, NOT Coercion Intense dialogues, arguments, and debates often allow companies to iron out issues. Ken Iverson of Nucor acted simply as a mediator for debates that turned Nucor from a nuclear business to a steel producer. The process is more like a heated scientific debate, with people engaged in a search for the best answers.

15. Conduct Autopsies, without Blame Phillip Morris’s acquisition of 7UP was a complete failure, but executives aren’t ashamed of the downfall. Instead they talk about it and analyze the situation. Dissect mistakes and learn from them as Phillip Morris did. Do not place blame for failure, only search for understanding and learning

16. Build Red Flag Mechanisms All companies in any given industry have the same access to information. The key, then, lies in turning information into information that CAN NOT be ignored Red flags cause immediate attention to important information.

17. Unwavering Faith Amid the Brutal Facts

18. Persistence is Key • When P&G entered the market, Scott Paper immediately threw in the towel and accepted defeat. • With P&G as number 1, Scott Paper only sought to keep afloat in their industry. • Kimberly-Clark, however, decided to fight back. • Kimberly-Clark is about the only company that P&G didn’t trump. • They were exhilarated by the idea of going up against the best, seeing it as an opportunity to make Kimberly-Clark better and stronger

19. Unwavering Faith • Good to Great companies face competition and leave themselves stronger and more resilient rather than weak and more dispirited. • They use difficult experiences as defining events • Never entertain the possibility that you might fail, but instead have confidence that you will prevail in the end.

20. The Stockdale Paradox

21. Stockdale Paradox Stockdale paradox is the duality of stoically accepting the brutal facts and maintaining an unwavering faith. It’s not the presence or absence of difficulty, but how you deal with the inevitable difficulties in life. In adopting this duality you will dramatically increase your odds of making a series of good decisions and ultimately discovering a simple, yet deeply insightful concept for making really big choices.

22. Stockdale Paradox Retain faith that you will prevail in the end, regardless of the difficulties. AND at the same time Confront the most brutal facts of your current reality, Whatever they might be. “Once you have that simple, unifying concept, you will be very close to make a sustained transition to breakthrough results.” -Jim Collins