This chapter focuses on the Great Atlantic and Pacific Tea Company and Kroger as examples of companies that embody the main message of the chapter. It explores several key points to help businesses go from being good to great, emphasizing their significance and usefulness. Furthermore, it analyzes how both A&P and Kroger applied these points, demonstrating which company effectively utilized them and which did not.
The chapter immediately addresses the concept of facing harsh realities within your company. This can be challenging for individuals since these realities may not always be what they desire, but they are crucial for transforming a good company into a great one. The initial point to be emphasized regarding confronting these harsh realities is that decisions must be grounded in factual information. As the title suggests, you are confronting the brutal FACTS, which implies that you must possess actual facts. Consequently, conducting research is necessary for obtaining facts as they do not simply materialize on their own.
Various methods exist for collecting factual information, such as customer surveys, focus groups, and trial applications in specific market segments. After conducting these studies, it is essential to analyze the gathered information to uncover the crucial facts. Relying solely on intuition is inadequate, as explained in this chapter. Even with extensive experience, intuition alone offers only limited guidance. It is factual information that ultimately leads to success. So now, what should we do with the collected facts?
Once the necessary facts have been identified, it is crucial to act upon them. Merely having access to the brute facts is pointless if they are not utilized effectively. In essence, when the facts highlight problems within your company, it is essential to make changes. Simply acknowledging that something is wrong does not add any value. Instead, new strategies should be implemented to improve effectiveness or restructuring may be necessary to ensure that the right people are in the right roles. Taking action based on the facts is what truly drives exceptional company development as it shows adaptability and evolution.
Adaptability is essential in today’s fast-paced and ever-changing business landscape, as demonstrated by Kroger and A&P. Both companies acknowledged the necessity of facing the harsh realities they were confronted with. Through research and analysis, they realized that their traditional small grocery stores were becoming obsolete. To address this issue, Kroger took action by developing expansive superstores that met the demands of customers, providing a diverse selection of products and multiple checkout lines. Conversely, A&P relied on intuition and past experiences, mistakenly believing that reducing prices alone would be sufficient.
Using their intuition eventually led to A&P going out of business, while Kroger confronted the facts and became one of the largest grocers in the U. S. If A&P had confronted the brutal facts and acted on them, they may still be a dominant force, but they didn’t and their competition did. Now, the chapter leads us into the concept that facts are better than dreams. Collins starts out the “Facts are Better than Dreams” section of Chapter 4 by stating that one dominant theme throughout his research was that breakthrough results are achieved through a series of good decisions executed one after another.
You may believe that certain successful companies achieved their status by chance, but according to Collins, these great companies demonstrate two specific types of disciplined thinking. Initially, they incorporate the harsh realities of the situation into their entire process. The second type, which is discussed in the subsequent chapter, involves these companies developing a straightforward yet profoundly enlightening perspective for making decisions. In this part of the chapter, Collins makes a comparison between two companies, Pitney Bowes (PB) and Addressograph (AG).
Roy Ash, the CEO of AG, was a leader who failed to confront the harsh reality. AG, a small company with approximately 670 employees, aimed to outperform industry giants such as IBM, Xerox, and Kodak in office automation. However, this ambitious plan was not well-thought-out as AG had previously excelled only in the envelope-address-duplication sector. Despite evidence indicating the plan’s inevitable failure and the potential downfall of the entire company, Ash ignored these facts. Instead, he continued to deplete AG’s resources until the company eventually filed for bankruptcy and dismissed Ash from his position.
PB and AG were similar companies until 1973, with similar revenue, profits, numbers of employees, and stock charts. They both had a near monopoly in the market with the same customer base. However, both companies almost lost everything. Collins explains how PB was able to turn things around. By 2000, PB had grown to nearly 30,000 employees and revenues exceeding $4 billion. PB outperformed AG in shares by a ratio of 3,581 to 1. PB’s success can be attributed to their mindset of constant improvement. One PB executive stated that they always strive to make their products better, faster, more cost-effective, even after achieving great accomplishments. Additionally, PB’s sales meetings were unique – the entire management team would openly address questions and concerns from the whole company.
The company established a longstanding forum for individuals to voice their concerns to senior executives and have them addressed. It is crucial to thoroughly analyze all facts before implementing processes or proposing new ideas, as a single mistake can have detrimental consequences for an entire company. While no company is infallible in their decision-making, successful ones tend to make more good choices than bad ones. The chapter concludes by discussing the Stockdale Paradox.
Admiral Jim Stockdale, a survivor of a prisoner-of-war camp during the Vietnam War, is known for the Stockdale paradox. Despite enduring torture over twenty times during his eight-year imprisonment from 1965 to 1973, Stockdale faced an uncertain future without prisoner’s rights or a set release date. He recognized the importance of maintaining faith in eventual victory while also confronting the harsh realities of his present situation. According to Stockdale, one must never lose faith in the ultimate triumph and simultaneously acknowledge and deal with the brutal facts of one’s current circumstances. This psychological concept is crucial for achieving greatness and learning. The book provides an example of the grocery store rivalry between Kroger and A&P. A&P took a proactive approach by opening a store called “The Golden Key,” where they experimented with new methods, innovative departments, and ideas. Over time, this store transformed into a modern superstore that appealed to customers.
A&P’s top management failed to recognize the reality that their business model needed modernization. As a result, they decided to close “The Golden Key” due to customer preference for the new store. Similarly, Kroger also experimented with superstores in the 1960s but faced the truth in the 1970s that the traditional grocery store model was no longer viable. Consequently, Kroger chose to eliminate, alter, or replace all its stores. By the 1990s, Kroger successfully rebuilt its entire system and began its journey towards becoming America’s leading grocery store.
Kroger and A&P were compared to Stockdale and the optimist in terms of their outlook. While Kroger was like Stockdale, believing that they would prevail as a great company, A&P was like the optimist who had hopes of being out by Christmas. All the Good to Great companies shared the same unwavering faith in their success. They also developed a relentless discipline in facing the harsh realities of their present situation. The leaders of these companies were skilled at ignoring distractions and focusing solely on the few things that would make a significant impact. They skillfully balanced both sides of the Stockdale Paradox, ensuring that one side didn’t overshadow the other.