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Defining events can make or break a company

How does your company deal?

Posted: September 2, 2008 8:12 p.m.
Updated: November 4, 2008 5:00 a.m.
I did some re-reading of the best selling book "Good to Great" by Jim Collins. This was triggered by a recent interview I read of former president Jimmy Carter in the press.

Carter said that whether he (John McCain) was asked about religion, domestic or foreign affairs, every answer came back to McCain's five and a half years as a POW. "John McCain was able to weave in his experience in a Vietnam prison camp, no matter what the question was," Carter said.

In "Good to Great," Collins writes of the Stockdale Paradox, which refers to Admiral Jim Stockdale, the highest ranking officer captured and held as a prisoner in North Vietnam from 1965 to 1973.

The Stockdale Paradox, as developed by Collins, states, "You must 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."

Many years later, when being interviewed by Collins for "Good to Great," Stockdale was quoted as saying, "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."

Collins thought for a long time that the Stockdale Paradox applied only to individuals. Later, when Collins told his research staff what he discussed and learned from Stockdale, his staff had a big "ah-ha!"

As potential "Good to Great" companies were being vetted, each of the researchers ran across the same essential findings, which was that the successful companies, unknowingly, adhered to the Stockdale Paradox.

How companies deal with the defining events that challenge their very existence becomes the prism from which they see and operate in, similar to what we do as individuals.

Legend has it that Herb Kelleher and one of his law clients, Texas businessman Rollin King, created the concept that later became Southwest Airlines on a cocktail napkin in a restaurant.

Most people who have heard the story understand that the napkin had three dots on it, representing the cities of Dallas, Houston and San Antonio, and that Kelleher and King would have their planes fly in turn to each city. They felt confident that they could make the business work, that they could prevail and build an airline that did things differently.

While they were confident in the long-term viability and success of the company, they had some issues to deal with. One of them, not well remembered or even mentioned much to the outside world, was that Southwest spent a year fighting legal challenges from competitors who did not want Southwest to take that first flight.

The legal challenge and victory over their competition, is likely the prism which the airline and its people continue to operate even now, decades after that fight. I don't mean to suggest that there is a legal challenge around every corner, or that people are paranoid.

I do believe that the company is driven by the need to succeed due directly to their difficult start.
Southwest Airlines is not only the envy of its industry from a service, profitability and human relations perspective, it has a business model that many companies in other industries seek to emulate.

Part of that competitive spirit is the adherence to the simplicity of the business, as demonstrated on that napkin. They stay focused on one main thing, which is to get and keep planes in the air, because that is how they satisfy customers and that is how they make money.

Year end results for 2007 marked Southwest's 35th consecutive year of profitability, unheard of in the industry; actually, unheard of in almost any industry. Southwest operates more than 3,400 flights a day coast-to-coast, making it the largest U.S. carrier based on domestic departures.

Every company, like every individual, has at least one defining event, perhaps more. I worked for a company about 20 years ago that, sadly, had its defining event when it paid employees with cashier's checks.

I also worked for a company that was 100 years old, hit difficult times and made a payroll when the president got a second mortgage on his family home. In the first case, the company went into bankruptcy, in the second, the company grew to a billion dollars.

Guess which company still has product on the supermarket shelf?



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