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[Yet Never Lose Faith]Andrei Gololobov, Svetlana Grimes, Laura McMannis
What are “The Brutal Facts?”
One word “Reality”Changing consumer preferencesChanges in consumer spendingDevelopment of new markets
Companies FailBecause of Stubbornness
Avoid becoming a bloated king in a crumbling castleDon’t measure the success of your business by its historyDon’t shun new and potentially innovative ideasDon’t make last minute decisions (they will fail)
100 year old business model of bland frugal storesLooked to its past for successChanging consumers, wanted more from grocery stores
Smaller competitor Kroger adapted with the superstore conceptA&P tried to adapt with its own superstore, the Golden keyGolden Key closed by conservative executivesBegan scorched earth policy (price slashing) reducing quality of stores & service
Breakthroughs come from great decisionsKroger’s superstore conceptGreat decisions cannot come before confronting the brutal factsOnce a company knows the gravity of its situation, only then will it be inclined to make the rights decisions
“Facts are better than dreams”-Winston Churchill
Charisma is Not Necessarily a Good Thing
A highly charismatic leader is more likely to drive a company into the ground than a non charismatic leaderA Charismatic leader’s visions may be inconsistent with realitySo they already fail to confront the brutal facts
Charisma is Not Necessarily a Good Thing
Charisma is a liabilitySome leaders filter good news and bad newsNon-Charismatic leaders seem more “Down to Earth” on their company’s situationPitney Bowes: Executives are never satisfied
Pitney Bowes VS Addressograph
Addressograph Leader: Roy AshCharismatic leaderObsessed with addressograph becoming industry leaderFailed to confront mounting evidence his plan was doomed to fail
Johnsons & JohnsonAnd The Brutal Facts
Ethics makes J&J the leader in the pharmaceutical and medical supplies industryPharmaceutical industry has always been controversialPatents, unintended side-effects from medications, potential dangersNumerous litigations
Johnson & JohnsonAbbot Laboratories
What should a company do if something goes wrongJohnson & Johnson: Tylenol case of 1982Put people’s safety before sales & profitAbbot Laboratories andOxyContinFailure to warn of a potentially harmful side-effect
A climate where the truth is heard
Do managers need to motivate their employees?What about compelling vision?Get the right people on the busDon’t de-motivate
Creating the environment
“Having your say” vs. giving an opportunity to be heard- Johnson & Johnson credoManagement styles: Permissive and Directive DemocratsFour steps to creating favorable environment
I. Lead with questions, not answers
Have humility to grasp the fact that you don’t understand everythingSeek information and ask questions instead of having prepared answers for all the problemsCircuit City, AlanWurtzel- Socratic styleEdifice complex“Do not celebrate the statistics you like” (“Denial” by RichardTedlow)
J&J’s challenges
DecentralizationRegulatory forcesSafetyCostsToxic Tylenol case
II. Engage in dialogue and debate, not coercion
Don’t fear the contradiction if it is a factDiscuss, debate, argue, deliberateNucor, Ken Iverson
III. Conduct autopsies, without blame
Don’t kill the messengerUnderstand and learn (Right people on the bus!!)Philip Morris, Joe Cullman7Up mistake
IV. Build “red flag” mechanisms
Do NOT ignore the information you possessCreate “red flags” systemGraniterock, BruceWoolpertLevel5 Leadersmay not need “red flags”
Two philosophical forces that drive leadersto confront brutal facts
DisciplineEntrepreneurial spirit
Unwavering Faith Amid the Brutal Facts
Competition is an assetStronger and more resilient“Winners never quit and quitters never win” Attitude
Study of Victimization
People fall into three general categoriesPermanently dispirited by the eventLife back to normalExperience made them strongerGood-to-great companies
The Stockdale Paradox
Faced with significant adversityAccepted the brutal facts of realityMaintained an unwavering faith in the endgameCommitted to prevail as a great company despite the brutal facts
Important Lessons(Stockdale Paradox)
Don’t be overly optimisticDon’t loose faith that you will prevail in the endDo confront the brutal facts of your realityEvery person faces difficulties
Applied to Good-to-Great Companies(Stockdale Paradox)
Maintained unwavering faith that they would prevail as a great companyBecame relentlessly disciplined at confronting the most brutal facts of their current realityFocused on the things that would have the greatest impactNever let one side overshadow the other
Stockdale ParadoxRetain 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.Motivating PeopleIf you have the right people, they will already be self-motivated. The biggest mistake managers can make is de-motivating their people.





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