Business Insight Zone

If you want to suceed, you need to cultivate your ability — and your organization’s ability — to do these two HARD things at the same time:

1. Stay firm in your belief that you will prevail in the end;
2. Confront the brutal facts around you.

In his landmark book Good to Great, Jim Collins described this as the “Stockdale Paradox.” It’s named after Admiral James Stockdale (that’s him in the picture, complete with his Medal of Honor), who survived more than seven years as a POW during the Vietnam War and went on to be Ross Perot’s running mate in the 1992 U.S. presidential election.

You can read the full account of the Stockdale Paradox on Collins’s Web site. But here’s the key quote, straight from Stockdale:

“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.”

This is a wonderful lesson for personal development, but Collins found that it also meshed perfectly with what he and his research team found when they studied ordinary companies that had made the tough transition to greatness:

In every case, the management team responded with a powerful psychological duality. On the one hand, they stoically accepted the brutal facts of reality. On the other hand, they maintained an unwavering faith in the endgame, and a commitment to prevail as a great company despite the brutal facts.

(A side note: the more I look, the more I see lessons like this that transcend scales — that apply just as well whether we’re talking about an individual performer, a small team, or a huge corporation. More on this theme in later posts.)

Hoping for the Best, Prepared for the Worst

I thought of Stockdale’s Paradox while I was writing about the paradox of speed several weeks ago, but it came to mind forcefully earlier today. In the wake of yesterday’s confront-the-brutal-facts post, “What if the economy is worse than you think?,” I got a response on Twitter this morning that said, in so many words, “What if the economy is better than you think?”

Anyone who knows me will tell you that I’m an optimist. I can be prone to negative thoughts like anybody, but I always find myself coming back around to the sunny side of life. So please believe me when I tell you that I hope the economy is better than I think, I hope we have a soft landing and a quick conclusion to this recession, and I’m confident — on raw faith alone, if it comes down to it — that we’ll prevail in the end.

BUT . . .

That’s not the way to lay your bets. And it’s certainly not the way to run your business or view your career in the current environment. (By the way, if you think I’m pessimistic about continuing with business as usual, you should read Umair Haque. In fact, you should just read him anyway — super-smart guy.)

By all means, be optimistic. But discipline yourself to prepare for the worst, too.

You Win Either Way

Here’s the thing: if I’m wrong — and the economy isn’t as bad as we think — then preparing for the worst helps you anyway. Think about what goes into preparing for radical changes in the business landscape:

• cleaning up your balance sheet
• building incredible rigor around analyses of costs and benefits
• demonstrating slavish devotion to discovering and meeting your customers’ needs
• planning ahead for possible disruptive market trends
• insulating against downside risks while seeking upside gains
• . . .

All of these things are hallmarks of the best companies — and the best individual performers — already. A few examples:

• Applied Materials has thrived atop one of the world’s most volatile industries for decades by anticipating trends and by exercising fiscal discipline at a level that most companies only dream of.
• Cisco Systems is hurting (some) along with the rest of its industry, but its timeless practices of prudent management and systematic innovation have it poised to excel in this climate as much as any other.
• The economic downturn has been brutal for Toyota just like for other auto makers. But do you have any doubt that it’s able to weather this storm?
• It’s a horrible time to be in banking . . . except for JPMorgan, Wells Fargo, and the other well-run banks that have kept their powder dry in case of bad weather. (By the way, there are plenty of local and regional banks in the U.S. that never departed from their old-school, safety-first, community-based lending practices. They’re making hay at this point while some of their bigger competitors are contracting.)
• Et cetera. (Which companies would YOU put in this category?)

The moral to this story:

Let this economic downturn — no matter how much worse it gets, or how much longer it lasts — be the kick in the pants you need to make your OWN transformation from good to great.

Do it by living out the Stockdale Paradox, keeping your spirits high WHILE you deal with the most brutal facts that confront you.

An Example to Follow

You’d be hard-pressed to find a better model for this than Hjörtur Smárason, the Icelandic marketer I talked about three months ago in “Hard times call for an entrepreneurial outlook.” This father of five watched as his country’s economy melted down around him — and promptly wrote a post titled “Never Lose Your Spirit.”

Right in line with Admiral Stockdale, Hjörtur is facing the brutal facts of his economic environment — which are much worse than those in the United States — and making the most of it.

Are you willing to do the same?

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Related posts:

• Paradox of success: Speed.
• Economic forecasting: How’s the weather for YOU?
• Landscape and weather, redux.

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Image via Wikipedia.

Category: Economics,The working life