Monday, August 11, 2008

Facts are Better than Dreams

In the book Good to Great, Jim Collins looks to understand what makes a good company "great." Why do some companies stagnate or grow anemically while others grow explosively and achieve long term success?

In re-reading his book recently, I was struck by a section called "Facts are Better than Dreams." From the book:

"...This, of course, begs a question. Are we merely studying a set of companies that just happened by luck to stumble into the right set of decision? Or was there something distinctive about their process that dramatically increased the likelihood of being right? The answer, it turns out, is that there was something quite distinctive about their process.

The good-to-great companies displayed two distinctive forms of disciplined thought. The that they infused the entire process with the brutal facts of reality. And the that they developed a simple, yet deeply insightful, frame of reference for all decisions. When, as in the Kroger case, you start with an honest and diligent effort to determine the truth of the situation, the right decisions often become self-evident. Not always, of course, but often. And even if all decisions do not become self-evident, one thing is certain: You absolutely cannot make a series of good decisions without first confronting the brutal facts. The good-to-great companies operated in accordance with this principle, and the comparison companies generally did not."

A topic we regularly discuss with prospective clients is their desire not to "embarrass" anyone with questions that are asked in the marketplace. For example, asking about a project milestone or key performance metric and potentially exposing bad news would be embarrassing for managers and so the initial reaction is the question should not be asked at all. Sometimes companies get beyond this initial fear and find the insight is actually worth the risk of embarrassment and other times we've been told a company simply could not stomach doing something that made information flow so transparent.

Looking back at my notes of conversations with companies over the past several months and plotting out an "organizational acceptance" graph, it was interesting to note the companies who had a primary concern about exposure of reality were typically those that were either struggling in their industry space or were already known as bastions of bureaucracy.

Those companies who were willing to introduce prediction markets were either companies who have always been innovators in how they run their business, or companies where a leader or maverick manager had made a commitment to make information flow more transparent, egg on face be damned.

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