Confront The Brutal Facts [Yet Never Lose Faith] Chapter 4 Team 6

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Confront The Brutal FactsYet Never Lose
FaithChapter 4Team 6

• Jessica Aragon
• Raynee Bradley
• John Cayo
• Lawrence Griffith
• Cole Naylor
• Jessica Wilson
• Brandy Wolfe

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Confront the Brutal Facts

• Facts are better than dreams.
• A climate where the truth is heard.
• Unwavering faith amid the brutal facts.
• The Stockdale paradox.

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AP vs. Kroger

• In the 1950s , AP was the largest retailing
  organization in the world and one of the largest
  corporations in the U.S.
• Kroger in contrast, stood as an unspectacular
  grocery chain, less than half the size of AP,
  with performance that barely kept up with the
  general market.
• Then In the 1960s, AP began to falter while
  Kroger began to transition into a great company.
• From 1959 to 1973 both companies lagged behind
  the market, with Kroger just barely ahead of AP.
• After that, the two companies completely
  diverged, and Kroger generated cumulative returns
  ten time the market and eighty times better than
  AP.

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Kroger, AP, and the marketCumulative value of
1 invested1959-1973

• Notes
• Kroger transition point occurred in 1973.
• Chart shows value of 1 invested on January 1,
  1959.
• Cumulative returns, dividends reinvested, to
  January 1, 1973

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Kroger, AP, and the marketCumulative value of
1 invested1973-1998

• Notes
• Kroger transition point occurred in 1973.
• Chart shows value of 1 invested on January 1,
  1973.
• Cumulative returns, dividends reinvested, to
  January 1, 1998

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AP vs. Kroger continued

• In the first half of the twentieth century, when
  the two world wars and a depression were going
  on, Americans were frugal and wanted cheap,
  plentiful groceries.
• In the second half of the twentieth century,
  Americans changed. They wanted nicer stores,
  bigger stores, and more choices.
• Both companies had knowledge of how the world
  around them was changing. However only one
  company confronted the brutal facts of reality
  head-on and completely changed its entire system
  in response the other company stuck its head in
  the sand.
• AP did some research and opened up the Golden
  Key . This store had new departments and was very
  similar to a modern superstore, it was a well
  liked by customers.
• Because the executives did not like the answers
  that Golden Key gave they closed the store.
• This led to other ideas such as price cutting,
  which ultimately led to cost cutting and this
  continued to drive away customers.

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AP vs. Kroger conclusion

• Meanwhile Kroger had tested the superstore
  concept and their executives came to the
  conclusion the old model grocery store was going
  to become extinct.
• Unlike AP Kroger confronted this brutal truth
  and acted on it.
• Kroger decided to eliminate, change, or replace
  every single store and depart every region that
  did not fit the new realities.
• By the early 1990s, Kroger had rebuilt its entire
  system on the new model and was well on the way
  to becoming the number one grocery chain in
  America.
• Whereas AP still had over half its stores in the
  old 1950s size and had become a distant memory of
  a once-great American institution.

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Best Buy vs. Circuit City

• The problems began a decade ago, when Circuit
  City failed to secure prime real estate. Where as
  best buy was buying up hundreds of prime
  locations and building newer, nicer, bigger
  stores.
• Several other mistakes that Circuit City made was
  the decision to stop selling appliances. It
  didn't move as aggressively into gaming as it
  should have. And it missed out on big in-store
  promotions with thriving companies like Apple
  Computer. That created an opening for Best Buy,
  now the top electronics chain in the U.S.
  Finally, the cherry on top Circuit City
  neglected to improve its Web presence, and they
  lacked good customer service.
• It is very easy to tell which company acted on
  the brutal facts of the electronic industry.

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Facts are Better Than Dreams

• The good-to-great companies (such as Kroger)
  displayed two distinct forms of disciplined
  thought.
• This section begins talking about the first of
  these, which is the importance of listening to
  the brutal facts of reality rather than just
  dreaming.

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Pitney Bowes Vs. Addressography

• Both companies held near-monopoly market
  positions with virtually the same customer base.
• Pitney Bowes in postage meters and Addressography
  in address-duplicating machines.
• Until 1973, they had similar revenues, profits,
  of employees, and stock charts.
• Both faced imminent reality of losing their
  monopolies.

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Pitney Bowes

• Pitney Bowes succeeded growing to over 30,000
  employees and revenues excess of 4 billion.
• They outperformed Addressography by 3,581 to 1.
  (3,581 times better)

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What happened to Addressography??

• They had a CEO named Roy Ash who was a
  charismatic visionary leader and a self-described
  conglomerateur.
• He set forth a vision to dominate big companies
  like IBM, Xerox, and Kodak.
• He refused to acknowledge the evidence that his
  plan was doomed to fail and might take down the
  rest of the company with it.

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Contd

• Key people bailed out of the company, dispirited
  by their inability to get top management to deal
  with the facts.
• Due to all of this, Ash was thrown out of the
  office and the company had filed for bankruptcy.
• Basically, the problem was that Ash turned a
  blind eye to any reality inconsistent with his
  own vision.

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• There is nothing wrong with pursuing a vision
  for greatness. After all, the good-to-great
  companies also set out to create greatness. But,
  unlike the comparison companies, the
  good-to-great companies continually refined the
  path to greatness with the brutal facts of
  reality.

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A Climate Where the Truth is Heard

• Leadership is about vision. But leadership is
  equally about creating a climate where the truth
  is heard and the brutal facts confronted.
• The energy exerted trying to motivate people is
  largely a waste of time. If you have the right
  people, they will be self-motivated.
• Theres a huge difference between the opportunity
  to have your say and the opportunity to be
  heard.
• How do you create a climate where the truth is
  heard?

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A Climate Where the Truth is Heard

• Lead with questions, not answers.
• Use questions to gain understanding, not as a
  form of manipulation
• Examples
• Whats on your mind?
• Can you tell me about that?
• What should we be worried about?
• Leading from good to great does not mean coming
  up with the answers and then motivating everyone
  to follow your vision. It means having the
  humility to grasp the fact that you do not yet
  understand enough to have the answers and then to
  ask the questions that will lead to the best
  possible insights.

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A Climate Where the Truth is Heard

• Engage in dialogue and debate, not coercion.
• Healthy conflict often leads to a new circulation
  of ideas and motivation
• Dont be afraid to express your opinion!
• Conduct autopsies, without blame.
• When you conduct autopsies without blame, you go
  a long way toward creating a climate where the
  truth is heard
• If you have the right people, you should never
  need to assign blame but need only to search for
  understanding and learning

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A Climate Where the Truth is Heard

• Build red flag mechanisms.
• Companies rarely stumble because the lack
  information. The key is turning information into
  information that cannot be ignored and creating a
  climate where the truth is heard
• Red flag mechanisms allow for real-time feedback
  from customers, employees, and any other relevant
  information channel
• Successful red flag mechanisms make the user pay
  more attention to the details of the information
  being received

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Unwavering Faith Amid The Brutal Facts

• Scott Paper vs. Kimberly-Clark
• Confront the brutal facts or face the
  consequences
• Robert Aders of Kroger
• Strong Willed
• Persistent
• Cirque du Soleil
• Rapid growth in a declining industry
• By confronting the facts, Cirque acquired a Blue
  Ocean

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The Hardiness Factor

• Three factors
• Permanently emotionally scarred
• Normal life resumes
• Defining moment which makes them stronger
• Sheikh Yamani
• Named one of the worlds most influential people
  by BBC News
• Survived being taken hostage by notorious
  terrorist Carlos the Jackal
• Displayed hardiness after the incident and
  achieved many great things

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Fannie Mae

• David Maxwell and a newly assembled team
• Put the right people in the right spots on the
  bus and did away with the rest
• Never lost faith or thought about failure as an
  option
• Rebuilt the entire business model and reshaped
  the corporate culture
• Overcame obstacles and prevailed in the end

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Stockdale Paradox

• Introduction
• Not all good-to-great companies faced a dire
  crisis. (Fannie Mae)
• However, every good-to-great company faced
  significant adversity along the way to greatness.
• Examples
• Gillette and the takeover battles
• Nucor and imports
• Wells Fargo and deregulation
• Pitney Bowes losing its monopoly
• Abbott Labs and a huge product recall
• Kroger and the need to replace nearly 100 percent
  of its stores
• Management response powerful psychological
  duality
• Accepted the brutal facts of reality
• Maintained an unwavering faith in the endgame,
  and a commitment to prevail.
• Stockdale Paradox

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Admiral Jim Stockdale

• Highest ranking United States military officer in
  the Hanoi Hilton prisoner-of-war camp
• Vietnam War
• Tortured over 28 times during his 8 year
  imprisonment (1965-1973).
• No prisoners rights, no set release date, and no
  certainty he would even survive to see his family
  again.
• Internal War (avoid being an example of a
  well-treated prisoner.)
• Exchanged secret intelligence (wife)

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Admiral Jim Stockdale contd

• Instituted rules to help people to deal with
  torture
• After x minutes, you can say certain things
• Internal communication system (tap codes)
• Reduce sense of isolation
• After being released
• 1st three-star officer in the history of the Navy
  to wear both Aviator wings and the Congressional
  Medal of Honor
• Book In Love and War
• President of Naval War College
• VP candidate for Ross Perots Independent Party
  (1992)
• Level 5 Leader Who am I? What am I doing here?

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An Afternoon with Stockdale

• While reading his book, Collins became
  depressedeven though he knew the ending!
• Uncertainty of his faith/Brutality of his
  captors.
• How on did Stockdale deal with this?
• I never lost faith in the end of the story. I
  never doubted not only that I would get out, but
  also that I would prevail in the end and turn the
  experience into the defining event of my life,
  which, in retrospect, I would not trade.

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Who didnt make it out???

• The optimists
• Were going to be out by Christmas. And
  Christmas would come, and Christmas would go.
  Then theyd say, Were going to be out by
  Easter. (etc.)
• died of a broken heart
• Lesson You must never confuse faith that you
  will prevail in the end with the discipline to
  confront the most brutal facts of your current
  reality.

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What Did Collins Learn?

• Life can be unfair. (can be an advantage or
  disadvantage)
• We will all experience disappointments somewhere
  along the way setbacks for which there is no
  reason, no one to blame.
• What separates people is not the presence or
  absence of difficulty, but how they deal with the
  inevitable difficulties of life.
• Stockdale Paradox has proved to be powerful for
  coming back stronger from difficulties.

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Stockdale Paradox

• Retain faith that you will prevail in the end,
  regardless of the difficulties.

• Confront the most brutal facts of your current
  reality, whatever they are.

AND
Key Have a Plan! When starting a company 1)
Believe that your vision will come true, 2) do
everything to make it happen, and 3) NEVER let
your belief or faith cloud reality. Example
The Little Engine that could Always push
forward (Steven Bunnell, Thermofisher Scientific)
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Stockdale Paradox contd

• Kroger vs. AP Stockdale Paradox vs. The
  Optimist
• Ronald Reagan vs. Communism
• Maintain confidence during the Cold war, by
  confronting the Brutal facts.
• Current Economy
• Companies are quick to blame the economy and give
  up, but this is NOT a time to concede!
• (Blue Ocean Opportunity) Creativity, Innovation,
  and Resolve.
• Seize the opportunity to grow! Value Innovate

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Stockdale Paradox contd

• The great companies do just that they adjust
  their tactics to ride the waves of the
  marketrecognizing the challenges that face us,
  while never losing faith in our resilience over
  time.
• (Ginger Sorvari, Best Buy co.)
• It is foolish to ignore this reality but also
  just as foolish to throw in the towel and do
  nothing about it.
• (Robert Zarracina, Flight Ventures)
• The Stockdale Paradox is paramount to companies
  in our industry right nowopportunity for us to
  grow instead of a threat to our survival.
• (Steve Palmer, North Central Door)

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Stockdale Paradox contd

• Ultimately, the Stockdale Paradox is a signature
  of all those who create greatness.
• Deceptively, simple and straightforward
• The good-to-great leaders were able to strip away
  noise and clutter and just focus on the few
  things that would have the greatest impact. (BOS
  Analytical Tools and Framework)
• Never let one side of the paradox overshadow the
  other.

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Summary

• Kroger vs. AP
• Facts are Better Than Dreams
• Distinctive process, not just luck
• A Climate Where the Truth is Heard
• Lead with questions, not answers
• Engage in dialogue and debate, not coercion
• Conduct autopsies, without blame
• Build red flag mechanisms

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• Unwavering Faith Amid the Brutal Facts
• Procter Gamble, Scott Paper and Kimberly-Clark
• The Hardiness Factor and Fannie Mae
• The Stockdale Paradox
• Admiral Jim Stockdale
• Dont be an optimist
• Sources
• http//en.wikipedia.org/wiki/Ahmed_Zaki_Yamani
• http//news.bbc.co.uk/hi/middle_east/3055760.stm