The Stockdale Paradox
by Fred Roed on 10/09/07 at 4:07 pm
1 comment
The following article has been lifted from Pete’s newsletter (PetesWeekly.com – go and subscribe!) ‘The Stockdale Paradox’ is a chapter in possibly the best business book out there, Good to Great. This article is required reading for all of us small businesses in South Africa. The current environment needs us to be sharp, ek se.
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It’s absolutely vital for your future as a business owner to retain faith that you will prevail in the end, regardless of the difficulties.
We little guys know this, and we’re pretty good at it, given the challenges. Yet 96% of us fail in the first decade. I have been battling with this number since 1992 – trying to find out exactly why. (Read Richard Gerber’s The E-Myth Revisited for an explanation of the numbers.)
I have also lost count of the number of aspirant Richard Branson wannabees who have assured me that their faith can move mountains, and how dare I try and confuse them with the facts, because they are destined for greatness. Most of them are now gainfully employed by others, or still struggling as the equivalent of entrepreneurial hunter-gatherers. (Richard Branson – using this same analogy – is like a feudal lord of the manor!)
What are we doing wrong?
I am glad you asked, because there is a frightfully simple answer. Jim Collins, in his excellent book Good to Great, talks about The Stockdale Paradox – the balancing act a business must work with if it is ever to achieve greatness. (By his reckoning and deep research of the US market over the past 30 years, only 11 firms make the grade – and they are not the firms you might first think of.)
Yet each of these firms was a boringly good firm until, one day, for whatever reason, they embarked on a series of exercises (no fanfare, no press, just a gentle series of changes in the way they did things). These changes, over the next 15 years, made these 11 firms dramatically outperform all the firms in their sectors
They simply did the following:
retained faith that they would prevail in the end, regardless of the difficulties,
AND at the same time,
they confronted the most brutal facts of their current reality, whatever those facts might be.
We little guys are great with the optimism and retain faith thing, but we tend to be the world’s biggest ostriches when it comes time to confronting our reality.
Our world is changing. Macro-economically the various entities of the SA government are taking steps that are not good for the future of most Petes Weekly readers. The crime and violence issue is affecting our incomes and lifestyles.
Yet, I still have people asking if they should venture forth into this commercial wilderness and open a store in a village with population 47 during the year (92 over holidays), without even considering the long term lease (and surety), the cost of setting up (and surety when the funds are borrowed), the security and insurance costs, the costs of stock, …
If Richard Branson ran his airline business like this all his planes would have made unexpected terminal landings miles away from airports!
The thing I battle to understand, to be honest, is why anyone would want to invest R500,000 in setting up a physical store (with all the above-mentioned challenges) when it costs about one hundredth of that to set up an Internet store with a market 10 million times bigger?
It can’t be that they know nothing about the Internet, because they also know nothing about business at this point.
If you don’t take time out to confront the facts, no matter how brutal, you’re not going to be around for long.
Winston Churchill once said “Facts are better than dreams.” I’d hate to ignore advice from him!
- Peter Carruthers
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[Thanks Pete!]
Fred Roed is the marketing guy in the Ideate crew. Fred is the CEO of web marketing company World Wide Creative and the co-founder of online learning portal Heavy Chef. Fred loves writing about people out there doing marketing right. Follow Fred on Twitter here. View more articles by Fred Roed.
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[...] again, I refer to the Stockdale Paradox, from Jim Collins’ book Good to Great, where he talks about the balance of dreams and [...]