Transcript Slides

A&P
1950’s
 Largest retailing organization in the world
 One of the largest corporations in the United States
behind General Motors
 1959-1973 A&P lagged behind the market
Kroger
1950’s
 Unspectacular grocery chain
 Less than half the size of A&P
 1959-1973 Kroger lagged behind the market
Returns (1959-1973)
Returns (1973-1998)
Overview
 Facts are better than dreams
 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
 Unwavering faith amid the brutal facts
 The Stockdale Paradox
Why?
 Why was there such a drastic change in Kroger’s
fortune?
Brutal Facts
 A&P
 A major Economic Depression
 Two world wars
 Good for: Frugal Model (traditional grocery store)
 Kroger
 After 1970, the US society was becoming affluent
 Nicer, bigger, stores with more choices
 Fresh bread, flower, health foods, forty-five choices of
cereal, ten types of milk, banking, flu shots…etc.
 Good for: Super Store (one-stop shopping)
Observing the trends
Liability of Charismatic Leaders
 Vision (dream) is important to motivate people
 Most important is…
 Do not de-motivate people
 Right people on the bus (first who…then what), so we do
not need to motivate people
 Let the brutal facts faces people
 The moment a leader allows himself to become the
primary reality people worry about, rather than reality
being the primary reality, you have a recipe for
mediocrity, or worse.
A Climate
Where the Truth is Heard
 The question then becomes:
-How do you manage in such a way as not to demotivate people?
 There are 4 ways to confront the brutal facts…
1. Lead with Questions,
not Answers
 Informal meetings
 Used questions to gain understanding; not for
manipulation or as a way to blame, or put-down others
2. Engage in Dialogue and Debate,
not Coercion
 7 Habits: no participation, no commitment
 Allowing the employees to argue and debate
3. Conduct Autopsies,
without Blame
 Joe Cullman, Philip Morris executive
 Points the finger right at himself
 Had he listened, the disaster might have been averted
 Gave credit where credit was due
 Conducting autopsies without blame = truth is heard
 You should almost never need to assign blame, but
need only to search for understanding and learning
4. Build “red flag” Mechanisms
 Jim Collins’ red flag mechanism
 Questioning style stood in the way of people’s learning
 The key lies not in better information, but in turning
information into information that cannot be ignored
 Creates a climate where the truth is heard
The Stockdale Paradox
The 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.
Admiral Jim Stockdale
 Highest-ranking U.S. military officer in the “Hanoi
Hilton” POW camp
 Tortured over 20 times
 Imprisoned for 8 years from 1965 to 1973
 Lived out the war with no rights, no set release
date, and no certainty of survival
 Fought attempts to be used as propaganda,
instituted rules to survive torture, exchanged
information with wife, instituted internal
communications system
Admiral Jim Stockdale
 “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.”
 “This is a very important lesson. You must never
confuse faith that you will prevail in the end-
which you can never afford to lose- with the
discipline to confront the most brutal facts of your
current reality, whatever they might be.”
Amazon: An example to illustrate
“brutal facts-frugal and
demanding customers”
 Amazon is the champ of customer service (BusinessWeek)
 How?
 Fulfillment by Amazon: the control of sales flow



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1. Suppliers send boxes to the Warehouse
2. 3 million units sold in 2008
3. Sending trucks to pick up things from suppliers
4. Every employee spends two days on the service desk
 1-click Ordering
 Lower shipping fees
 Amazon Prime: $79 a year to get free two-day shipping
Amazon (cont.)
 Results
 Sales are up 40%
 Return rates are down 70%
Safeguarding Service
 Flex your workforce: cross-training your employees
 Spoil surviving staff: at least keep the front lines happy
with flexibility and other rewards
 Invest in simple technology
 Baby your best customers
Remember…
 Confront the Brutal Facts and never loose your
faith…
 http://www.youtube.com:80/watch?v=VJMbk9dtp
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