Good to Great Chapter 4 Team 6 Andrew Etlinger Ashley Harris Blake Green David Styers Carolynn Schnaubelt

Facts are Better than Dreams For a company to go from good-to-great, they must make more good decisions than bad decisions. Kroger decided to throw out all of their current resources after the depression to accommodate a new standard of living and create a superstore.

Facts are Better than Dreams (cont.) Our company, Coca Cola, also made good decisions during times of war in order for their business to thrive. They made good decisions to change up their advertising and offer Coca-Cola to the military at a discounted price. This increased the popularity of the drink and made Coca-Cola known as an “essential part of the American War Effort.

Facts are Better than Dreams (cont.) Good-to-great companies display two unique forms of disciplined thought. Confronting the brutal facts -It is impossible to make good decisions unless you deal with the brutal facts 2. Develop a frame of reference - This is discussed in Chapter 5

Facts are Better than Dreams (cont.) Pitney Bowes is an example of a company who investigated the brutal facts which led them to the top. Their competitor, Addressograph, had a charismatic leader who was trying to drive the company to bigger and better things rather than figuring out how to fix the brutal facts of their previous decisions. This led to filing bankruptcy.

Facts are Better than Dreams (cont.) Winston Churchill was also a charismatic man, but knew how to balance out his strong personality. Churchill had a determined attitude, but also confronted the brutal facts, which kept him from failure. Churchill created a Statistical Office, which contained the most brutal facts of reality from people who knew the facts. Churchill believed this eased his mind as he wrote, “Facts are better than dreams.”

A Climate Where the Truth is Heard “Doesn’t motivation flow chiefly from a compelling vision?” No Expending energy trying to motivate people is a waste of time If you have the right people on the bus they will be self-motivated 4 practices to create a climate where the truth can be heard

1. Lead with questions, not answers Alan Wurtzel, CEO of Wards Brought the company back from brink of bankruptcy Instead of having the “all the answers” he asked questions During meetings there was no script, agenda, or set of actions, instead they asked questions and created a forum Failing companies must grasp the fact that they do not yet understand enough to have the answers, and must ask questions that lead them to valuable insights.

2. Engage in dialogue and debate, not coercion Ken Iverson, CEO of Nucore, a level 5 leader promoted from within the company Dreamed of building a great company, but refused to begin with the answers Instead, he became a moderator in a series of debates at all levels of the company The company strategy “evolved through many agonizing arguments and fights”

3. Conducting Autopsies without Blame In the 1970’s Philip Morris bought 7UP and sold it as a loss eight years later. Executive Joe Cullman exemplifies that the blame to the downfall of 7UP should not be anyone but his own “ Joe Cullman, standing in front of the mirror, pointing the finger at himself” The people who were responsible showed humility by giving credit to where its due, and took responsibility for the mal-actions that lead to its downfall. Companies that practice an autopsy without blame state of mind, tend to create an environment where truth is more easily heard rather than not.

4. Building “Red Flag” Mechanisms Having a red flag mechanism, like we have in class tends to give employees, and students a right to speak what they have on their mind. Red Flag mechanisms focuses more on the gaining more information about different aspects and views of people Bruce Woolpert came up with the red flag idea and also introduced a tool called “Short Pay’ Short Pay is the concept that gives the customer full discretionary power to decide whether and how much to pay on an invoice based upon his own subjective evaluation of how satisfied he feels with a product or service. Gaining information about a customer or client Acts as an early warning system and how to fix a problem way before you lose a customer in the long run.

Unwavering Faith Amid the Brutal Facts Ex: In the late 1960’s P&G decided to enter the paper market, and by all accounts it seemed that they would soon completely take over the market.

Two Paths So, after seeing that P&G were going to enter the market the two main paper competitors, Scott Paper and Kimberly-Clark, decided to take two different approaches. Scott Paper decided simply to concede and allow P&G to take over and be content with second place and being in the “B” category. However, Kimberly-Clark decided they would do their best to compete with the much larger P&G because it would help make them a better company.

Kimberly-Clark Kimberly-Clark’s president, Darwin Smith instilled in everyone that even though they were smaller, the company could still beat out P&G in the paper market. This made everyone from the executives to people working on the floor work harder to beat out P&G, making the whole company better because they were competing against the best and at a higher level.

Good To Great This is just a great example of how companies can go from good to great. Scott Paper was good company that was willing to remain good because they did not want to compete against the best, so they stayed mediocre. While Kimberly-Clark was willing to work hard and compete against the best, transforming them from good to great.

The Stockdale Paradox Admiral Jim Stockdale The highest ranking United States military officer in the “Hanoi Hilton” prisoner of war camp during the Vietnam war. He was imprisoned from 1965-1973 and was tortured over twenty times. During his imprisonment he had no rights, no set release date, and no idea if he was going to even be released. Stockdale instituted rules to help others to deal with torture and an elaborate internal communications system to help ease the feeling of isolation. Became the first three-star officer in the history of the navy to wear both aviator wings and the Congressional Medal of honor.

The Stockdale Paradox You must retain faith that you will prevail in the end AND at the same time you must also confront the most brutal facts of your current reality. All good-to-great companies faced adversity on the way to greatness such as Wells Fargo and deregulation and Abbott Labs and a huge product recall. In every case of great companies the management team used this psychological dual to overcome it. According to Admiral Stockdale the ones that don’t make it out are the optimist. If you are able to adopt this paradox, you will dramatically increase the odds of making a series of good decisions and ultimately discovering a simple, yet insightful, concept for making the really big choices. Once you get this you are on your way to making a sustained transition to breakthrough results.

Take-Away Making a company go from good to great, it is imperative it to make more good decisions that bad ones Good to great companies exhibits two unique forms of disciplinary thoughts Confronting brutal facts Developing a frame of reference Four basic practices to enable that the truth gets heard Leading with questions, not answers Engage in dialogue and debate, not concern Conduct proper autopsies, with out assessing blame Building “Red Flag” mechanisms Retaining faith that you will prevail to the end and at the same time confronting brutal facts along the way