Thesis Colin de Rivas

How companies can achieve outstanding results and be sustainable from implementing policies? 2


ACKNOWLEDGEMENTS

I would like to thank my supervisor, Prof. Pierre Chaix, who by his advices and support

has guided me in my work. I am very grateful for his constant availability, responding to

my queries very promptly, and always with relevant recommendations.

I am also grateful to the teachers who, throughout my studies at the Espeme, encouraged

my curiosity in learning, guided me and opened me up to the world.

Finally, I wish to thank Mr. Curzi for his kindness and advices.


TABLE OF CONTENTS INTRODUCTION ....................................................................................................................................................... 6

Part I : Literature Review .......................................................................................................... 8

A. Some evidence supports the view that companies implementing long-term policies

obtain better results. ............................................................................................................................. 8 1. ‘Good to Great’ (Collins, 2001), a study based on 1435 companies ............................................. 8 2. ‘Great by Choice’ (Collins, Hansen, 2011), a study based on 20 400 companies ......................... 9

B. According to the relevant literature, five points characterize the long-term policies

undertook by successful companies. ................................................................................................. 10 1. Some definite characteristics might define an outstanding leader ............................................... 10

a. Leaders committed to achieve greatness are characterised by passion and expertise ............................. 11 b. Leaders have to constantly reassess the company’s situation i.e. challenges arising both internally

and externally .............................................................................................................................................. 12 c. What is the influence of luck on companies’ success? ............................................................................ 15

2. Commitment to long-term policies requires a massive adhesion from employees i.e. that

they acknowledge the unsustainable dimension of the status quo ................................................... 16 a. The urgency rate ...................................................................................................................................... 17 b. Gleicher’s Change Formula ..................................................................................................................... 18

3. Some organisational systems might facilitate the implementation of long-term policies ........... 19 a. The role of financial incentives ............................................................................................................... 19 b. Commitment must arise from the bottom as well as from the top of the company / Bottom-up and

Top-down approaches have to be promoted ................................................................................................ 20 Example of Teledyne: Henry Singleton the genius ................................................................................................... 21 Example of Apple: Stick to your vision ..................................................................................................................... 22

c. Employees represent the most important asset of any company ............................................................. 23 d. To what extent does the external environment constrain companies implementing long-term

policies ? ...................................................................................................................................................... 24 i. Influence on layoffs : Theory E and O ................................................................................................................... 24 Example of Archie Norman, ASDA CEO: how to embrace both theories ................................................................ 26 Example of Alan Wurtzel, Circuit City CEO: How to avoid layoffs or it bad effects .............................................. 26 ii. Influences on acquisitions ...................................................................................................................................... 27

4. Communication contributes to a major extent to the building up of the company vision and

thus to the implementation of long-term policies ............................................................................ 28 a. Why vision is important ........................................................................................................................... 28 b. Communication has to take place through every channels ...................................................................... 30

First step, stick to your core values and be optimist / proud / realist ......................................................................... 31 Second part of the message, details about strategies ................................................................................................. 31


Third Step: Do not forget to anticipate employees’ reaction ..................................................................................... 32 5. Efficient long-term strategies emphasises steady growth rather than exceptional results on

the short run ..................................................................................................................................... 32 a. Exceptional results and innovation might not induce great results over the long term ........................... 33 b. Not growing too fast ................................................................................................................................ 34

Example of Southwest Airlines ................................................................................................................................. 34 Example of Intel ......................................................................................................................................................... 34

Part II. Empirical analysis : To what extent do theoretical insights supporting long-

term strategies contribute to the understanding and the improvement of the strategies

of three selected companies? .................................................................................................... 36 A. Companies’ introduction .............................................................................................................. 36

1. Continental International Moving ................................................................................................ 36 2. ArglyDuckling and Yuan Asociates ............................................................................................ 37

B. To what extent do theoretical insights related to the implementation of long-term

strategies contribute to shed light on companies’ action? .............................................................. 38 1. A comprehensive analysis of the market, and more specifically of the relevant regulations,

has enabled the two companies to achieve successes on the long-term ........................................... 38 2. Within recently created companies characterised by limited financial resources, employees’

involvement in the company’s strategic decisions might be a way to foster their motivation. ....... 39 3. Communicating the company’s vision to partners and consumers is crucial for any new

company to build up its uniqueness and, enhance partners’ and consumers’ adhesion to the

company. .......................................................................................................................................... 40 4. The success of long-term strategies relies on short-term wins to create a momentum that

enables the company to achieve its long-term goals. ....................................................................... 42 5. The success of long-term strategies relies upon short-term wins to the extent that they

might impulse a momentum enabling the company to achieve its long-term goals. ........................ 42 FURTHER DEVELOPMENTS……………………………………………………………………………….........44

CONCLUSION .......................................................................................................................................................... 45 SOURCES……………………………………………………………………………………….……………….…47 ANNEXS………………………………………………………………………………………….…………….......50


INTRODUCTION

According to newspapers’ headlines, CEOs of major multinational companies

appear to be modern wizards. Indeed, when a major company seems to be in trouble, the

company will attempt to find another leader to replace the current one. Such picture

implies that leaders are a crucial element in the success of a company. More subtly, it also

seems to imply that leaders have magic recipes, which could bring immediate remedies to

the problems the company. As a result, when a new CEO joins a company, huge

expectations are being placed on him. If there is an absence of spectacular results over a

short period of time, these leaders are often perceived as an acute failure.

The emphasis on short-run results partly explains the expectations in relation to the

influence that a CEO has on a company’s results. The emphasis on the short-run

investment horizon can be explained by the ownership structure of the company and how

shareholders conduct trade-offs between the return on investment of their capital. In other

words, investors have a definite capital to invest in projects. Thus, they will maximise their

capital, i.e. they will invest it in the most profitable investments, so companies that provide

the highest returns on investments will succeed in securing capital from investors and will

be able to expand their activities. However, companies with lower investment returns over

the short run might face difficulties in financing their activities, which might lead to a

weak financial portfolio, with a tendency to bankrupt. However, it is arguable that short-

term gains might be detrimental to the company’s growth over the long run as profits

might be either redistributed to shareholders or reinvested in the company’s projects.

Intuitively, the second option might bring better prospects for the company in enabling

sufficient funds to generating new projects, and sustaining its growth over the long run.

From this point of view, adopting a longer-term strategy might be a better

alternative for most companies. This dissertation will argue that companies adopting long-

term strategies might be more successful than companies reacting to unforeseen events

over the short run. In its first part, it will highlight the success of companies using long-

term policies compared to those which did not (Collins, 2001; Collins and Hansen, 2011).

Then, it will discuss the five points supporting a long-tern strategy, i.e. (i) leadership, (ii)

building up of employees’ commitment, (iii) human resource management (iv)

communication on the vision, (v) steady long term growth. In its empirical part, the


dissertation will apply a case-study to investigate the extent to which the theoretical

considerations mentioned earlier contribute to the successes or failures of the three

companies. With my internship experiences at these companies, the importance of

contribution of theoretical insights in enhancing a company’s performance will be

discussed based on my observations.


Part I : Literature Review

A. Some evidence supports the view that companies implementing long-term

policies obtain better results.

1. ‘Good to Great’ (Collins, 2001), a study based on 1435 companies

According to the book “Good to Great” (Collins, 2001), a team of 21 management

researchers conducted a 5-year study using 1,435 companies from the Fortune 500

rankings; 6,000 articles and 2,000 pages worth of interview transcripts from high-ranking

executives in those companies. The key study shows how executives’ key positions pushed

their corporations’ standards from “good” to “great”. In defining “great” companies, there

are six criteria to be fulfilled:

1. The 11 companies selected are considered “great” because they show a “shift era”. A

shift era is defined by a “cumulative total stock return stock return of at least three times

the general market for the period from the point of transition through fifteen years (T + 15)

“ (Collins, 2001, p.219). In order to pick companies that showed incredible productivity,

the requirement “three times the market” was chosen. Despite their solid stock investments

returns, here are some examples of successful corporations that did not fit into the first

criteria: “Boeing, Coca-Cola, GE, Hewlett-Packard, Intel, Johnson & Johnson, Merck,

Motorola, Pepsi, Procter & Gamble, Wal-Mart, and Walt Disney” (Collins, 2001, p.6).

Interestingly, over the set of the companies chosen, only two were well known: Phillip

Morris and Gillette. The incredible performance of those eleven companies is compared to

the comparison companies (Annex 1): companies in the same industry, same environment

(opportunities and threats), with the same characteristics before the shift (size and return

on investment) although they didn’t produce results. Example is Wallgreens, which

performed the general market by an average of 2.4 times (Annex 2)

2. The shift of three times of the general market should not only be relative to the market

but also in the industry the company is involved.


3. The company is well established before the shift: 25 years in operation and publicly

traded for 10 years.

4. The shift occurred before 1985, allowing the author with a wide set of data to prove a

sustainable shift.

5. The companies have to be in the Fortune 500 rankings.

6. The companies have to display consistent growth at the time of the selection.

In addition, to confirm the statistical significance of the study, a question was posed

to two professors from the University of Colorado – Jeffery T. Luftig and William P. Briffs,

“What is the probability of finding by chance, a group of eleven companies, all of whose

members display the primary traits you discovered while the direct comparisons do not

possess those traits? “(Collins, 2001, p.212). It appears that the probably was less than 1 in

17 million.

2. ‘Great by Choice’ (Collins, Hansen, 2011), a study based on 20 400

companies

In enabling a deeper reflection about the roots of performance in companies

consider as ‘Great’, a team of reseachers, led by Morten T. Hansen and Jim Collins,

conducted a 9-year study. “Great by Choice: Uncertainty, Chaos, and Luck. Why Some

Thrive Despite Them All” (Collins and Hansen, 2011), describes a set of 7 companies that

achieved great performance and explains how those companies achieved their goals despite

non-conducive environment.

From a list of 20,400 companies, 11 cuts were made, including only the cases who met the

three criteria (Collins and Hansen, 2011, p.218) :

1. In relation to the general stock market and its industry, the company must show great

results for more than 15 years


2. The company must have achieved the great results in a fast moving, uncertain and

potentially harmful environment.

3. The company began to show great results when it is not well implemented yet (start-up

for example).

Those researches, cuts and criteria enable them to finalise a set of 7 companies that

achieved “great” results, characterised by performance relative to the market and its

industry at least 10 times higher than the comparison company (called 10X in this study)

(Annex 5).

The ‘comparison companies’ were chosen on the same criteria except Great

performance (similar size went the companies went public) but also because they were

evolving in a similar environment: same industry, almost same opportunities and during

the same era. This enables us to look at companies who achieved greatness since the

beginning (not creating a shift after many years of existence), in a very uncertain world,

performance relative to the market and the industry (Annex 6). This is not a coincidence

that we see companies like Microsoft or Intel in the set of companies who had performance

10 times better than the comparison companies, not only because they are know for being

Great, but also because we know that they are evolving in one of the most difficult

environment (fast moving technologies, competitive industry were one step miss in the

innovation can stroke the company forever).

B. According to the relevant literature, five points characterise the long-term

policies undertook by successful companies

1. Some definite characteristics might define an outstanding leader

Most of the people might have the preconception that most of the CEOs leading

important companies share definite characteristics. For instance, people might believe that,

when a leader’s ego is high, it results in a fancy way of life, which is reflected in the way a

company is being run. According to some employees, CEOs seem to only apply showy


programs emphasising their leadership in the company. Due to their supposed “ability” to

drive economic results, they are very often “airdropped” from the outside of the company,

which implies that - instead of passion for the industry, profits might be the fundamental

goal of a company.

There is a common shared idea that the role of leaders (especially the CEO) is

predominant to drive a company through success. This idea was confirmed by the analysis

of all the data collected. Moreover, results also showed that only a certain type of leaders

who create good performance results fitted in the companies.

a. Leaders committed to achieve greatness are characterised by passion and

expertise The data shows that no “air-drop” CEOs can succeed in implementing change in a

corporation yet be non-passionate about it. According to the research team of Good to

Great (Collins, 2001) the CEO’s of the 11 ‘Great’ companies were passionate about their

jobs. That enabled them to be stimulated, thus, creating a company that is not only driven

by economic performance, but a strategic vision as well. For these CEOs, their passion and

expertise are converted into an unwavering willingness to construct a “great” company

because pushing a corporation beyond greatness is more than holding a corporate status as

a CEO (Goleman, 1995). Nonetheless, most people aiming to become CEO might be

driven by their personal ambitions to receive social and monetary advantages rather than

the opportunity to develop something new and original (Goffee, Jones, 2006).

The passionate leaders are also experts in their fields, mainly because they have

evolved in their companies for many years. In the study, it appears that the 11 companies

that achieved “greatness” have a 4.76% “air-dropped” CEOs compared to the 30.7% from

the other companies (Collins, 2001). There is a striking fact that, out of the 11 successful

companies, 10 CEOs were picked from the organizations internally.

It is the doings of passion and constant hard work that pushed the CEOs, bringing the

companies to greater heights. These CEOs are not well known but displayed a sense of

humility during all the interviews. Instead of claiming the rewards of their hard work, they

credited specific people in the organization (Collins, 2001).


Here is a quotation from Jim Hlavaceck board member of Nucor (one of the 11

companies selected), speaking about Ken Iverson, CEO of the company during the

transition economic state of an American leading steel : “Ken is a very modest and humble

man. I've never known a person as successful in doing what he's done that's as modest.

And, I work for a lot of CEOs of large companies.”(Collins, 2001) Ever since Ken Iverson

overtook the reins of the company, it has emerged from bankruptcy and even beat its

historical huge competitor Bethlehem Steel. After 2000, the ratio in margin difference of

investments of Bethlehem to Nucor was 1:200.

Another CEO from one of the eleven companies, explicitly describes his will to

create an everlasting “great” company so he can look back at “one of the great companies

in the world” and proudly claim that “I used to work there”. This credits the fact that more

than 60% of the CEOs whose companies were not in the set of the 11 “great” companies

have selected their successors based on their weak ability to succeed (Collins, 2001). As

discussed previously, the interests of those CEOs is not the success of the company or

building a company that will last, but for the purpose of their egos-building and the

importance of holding a high ranking status in a corporation (George, Sims, McLean,2007),

b. Leaders have to constantly reassess the company’s situation i.e. challenges

arising both internally and externally

In the previous discussion, it was stated that the most successful leaders are driven

by their willingness and determination, and armed with passion and expertise to achieve

something great for the company’s development. All these characteristics enable them to

analyse the situation realistically.

John P. Kotter, Professor of Leadership at Harvard Business School, describes in

the article “Leading Change, Why Transformation Efforts Fail” (Kotter, 2007) the

numerous stages that allow creating and implementing the right actions to have the best

chances in achieving an effective change in companies. His observation shows that most of

the leaders who try to implement changes through initiatives that generate “lukewarm

results”, usually fail. However, if a leader understands the importance of producing long-


term results in an organization and follows the different stages in avoiding pitfalls, it is

simple to implement changes.

First of all, leaders have to examine the current situation of the company by looking at the

company in relation to the market and it competitors, in terms of the risks; opportunities

and threats. Many companies often look for a “single-stroke” solution to their problems by

firing, and hiring CEOs without analysing the barriers faced by the company and the kinds

of changes needed.

In contrast, John P. Kotter argues that change is a renewal process, and one of the

first steps of this process is to conduct a survey (Kotter, 2007). The survey should be

conducted by the leaders so it would allow them to have a clear understanding of the

current situation. The specific characteristics of a leader achieving greatness are calmness

and modesty. Good leaders are not “larger than life” people, which allow them to not be

disconnected from the team of managers they lead. Because of their wish to know the truth,

performing leaders establish an atmosphere where people who explain the current reality

by explaining facts (even bad news) will not be blamed (Collins, 2001)

Employees should be allowed to participate in voicing their opinions in the work

environment so the leaders will have a clearer understanding the current situation of the

company and executive better decisions. Usually, if leaders analyse a situation alone, it’s

only through one prism - themselves, being disconnect from the realities.

What good leaders do is to ask all their managers their point of view, remarks, continually

asking questions. Asking question first allows them to hear the truth that sometimes they

cannot examine themselves as they are leading: people might fear to give bad news. Giving

the opportunity to be heard is the key here. It will finally allow a much better

understanding of the situation, and permit them to take the right decision, when most of the

CEO have instead a big ego, saying to themselves: “you must have the solution yourself,

don’t ask other people what is the situation or what can be the solution” “if you ask this,

why are you here?”.

Good leaders are willing to reveal their “weaknesses” and work together with the managers

cohesively. Being a more “human” leader builds rapport with employees and creates a

more trustable collaboration. “Exposing a weakness establishes trust and thus helps get

folks on board. Indeed, if executives try to communicate that they’re perfect at everything,


there will be no need for anyone to help them with anything. They won’t need followers.

They’ll signal that they can do it all themselves.” (Goffee and Jones, 2006),

One of the best examples of leader who developed a change in a company who

produce amazing results that lasted even after his departure is Alan Wurtzel. He joined

Circuit City in 1996, one of the “great” 11 companies shown in the 5-year study. He was

CEO from 1972 to 1986, and led the company to beat the general market by 20 times from

1982 to 2000 (Annex 3). In his book “Good to Great to Gone: The 60 Year Rise and Fall

of Circuit City”, Wurtzel describes six habits of mind which allowed him to achieve great

performance when he was CEO (Wurtzel, 2012). That is applicable to any CEOs who want

to apply effective changes (Annex 4). The three first steps are tied in an intuitive idea, that

the humility of the great CEOs allows them to understand the reality that the company is

facing. The first stage shows that CEOs have to continually question their understanding of

the situation. In trying to understand the situation, they have to work together with

managers. As Wurtzel puts in, “leaders should ask tough questions and leverage employees’

collective intelligence, rather than just providing solutions” (Heifetz and Laurie, 2001),

Once they have all the information’s, they must follow the step 3 “confront the brutal

facts”, because according to Wurtzel again “If you don’t confront the brutal facts now,

they’ll confront you later” (Wurtzel, 2012).

This mix of professionalism will help in prevalence to a “great” company. The

idea that you must “confront the brutal facts” is summarised in the Stockdale paradox,

explained by Jim Collins in “Good to Great” (Collins, 2001). Jim Stockdale, Admiral in

the United States Army, awarded by the Medal of Honor inspired the Stockdale paradox.

He was a prisoner at the Vietnam War and was tortured more than 20 times during his 8

years of imprisonment in 1965 to 1973. Jim Stockdale was one of the few who survived of

the torturous imprisonment.

Most of CEOs who achieve organisations’ “greatness” embrace the paradox of

Stockdale, which enables them to be successful thanks to their disciplined behaviors and

not luck. In an interview, Jim Stockdale said, “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.” (Collins, 2001, p.85).

Jim Stockdale termed those prisoners who never lost faith in being released alive

from the prison one day as “optimists”, as they never confronted their hope to the brutal

reality (while nothing said that they will be released alive one day). Here is one of his

quotation: “The optimists. Oh, they were the ones who said, 'We're going to be out by

Christmas. And Christmas would come, and Christmas would go. Then they'd say, We're

going to be out by Easter. And Easter would come, and Easter would go. And then

Thanksgiving, and then it would be Christmas again. And they died of a broken heart"

(Collins, 2001, p.85).

c. What is the influence of luck on companies’ success?

The Stockdale behavior is linked to one of the characteristics of great leaders

because in building great things, failure is not an option.

During the interview, Stockdale said “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, 2001, p.85). We can link this to

“What doesn’t kill you makes you stronger” from Friedrich Nietzsche (Nietzsche, 1889).

Stockdale took advantage of his brutal past to build his future.

In relation to luck, this brings an understanding of the different relation between

“great” and “average” CEOs. Leaders who took responsibilities for poor results instead of

blaming it on bad luck, who challenge themselves, who question their doubts, who try to

understand the situation, learn from it and who implement change are those who set out a

corporation for “greatness”.

Regardless of the outcomes of the situations, Stockdale or the great CEOs do not

rely on luck. It can be deduced that realism allows great leaders to understand the

importance of understanding a situation before implementing a change in the organisation.


It also allows them to know that in order to achieve “greatness”, luck does not help in

achieving goals. However, if there is such a thing called “luck”, one should extract the

most benefits out of it.

Different people have different interpretations of luck. Most of the people see “luck”

as opportunities and threats. Luck is not tangible, predicable or avoidable. It is defined by a

“completely independent of the actions of the key actors in the enterprise” (Collins and

Hansen, 2011). Based on the likening between companies who achieved 10 times

performances and the comparison companies, the team of researchers studied 230 events,

which were potentially “lucky”, and selected 105 events, which, has the closest meaning to

the definition, stated above. It appears that after coding the same times of year (average of

29,2 years) for the 7 companies (10X) and their comparison companies, they had

approximately the same number of “good luck” events (Annex 7).

In “bad luck” events, as shown in Annex 8, with the same methodology and

number of years coded, companies that achieved “greatness” had the same number of “bad

luck” events as their comparison companies.

These studies (Collins and Hansen, 2011) show that companies that achieved

“greatness” had less “good luck” events and more “bad luck events” than their comparison

companies. Hence, luck has nothing to do with performances in a “great” company. They

merely learn from “bad luck”, never blaming it on bad results. This idea will be explained

further in the next chapter as to how company that achieved great results produce a huge

return based on luck, while other companies did not.

2. Commitment to long-term policies requires a massive adhesion from

employees i.e. that they acknowledge the unsustainable dimension of the

status quo

As part of the renewal processes of a company, one of the biggest enemies of

change is to maintain the status quo of the company and adopt complacency attitudes

(Mellina, 2002). As Wurtzel (2012) described in the first step of the “Habits of Mind”


(Annex 4) – “The arrogance of success is to think that what you did yesterday will be

sufficient for tomorrow”, it probes leaders. As soon as leaders try to examine the current

reality of a company (who did not achieve great results on the long term) with honesty and

intelligence through a deep survey, they will have to “establish a sense of urgency” (Kotter,

2007). Most of the employees are in a comfort zone, because as they did not investigate the

current reality that the company is facing, they underestimate the fact that a total

mobilisation of the people in the company has to be achieved, including themselves, to

create an effective change.

There are many reasons why situations are not examined or evaluated – some

leaders are paralysed by fear and the appropriate actions to take, to implement changes that

would benefit the organisation in the long term. . They tend to not examine or evaluate

how “bad” the situation might be: some people become paralysed by the situation and do

not know how to react to it, how to implement changes that can lead to better results in the

long-term future of the company. Some people simply do not look at the situation and

disregard with honesty or discipline when they handle situations. Other people are simply

disconnected from the top management, and lack of management information.

One might also point out that, some people are too comfortable at where they are

and fear change. Some are reluctant to undertake it because they have witnessed many

CEO or managers trying to implement change without much success. Hence, this results in

defensive or fearful behaviors, pushing them to “focus on self-preservation, not creative

solutions or progress” (Kotter and Cohen, 2012).

a. The urgency rate

To mobilise all the workforces in a company, leaders have to convince at least 75%

of its employees that status quo is unacceptable in the long haul: “When is the urgency rate

high enough? From what I have seen, the answer is when about 75% of a company’s

management is honestly convinced that business as usual is totally unacceptable “(Kotter,

2007). According to John P. Kotter (2007) more than 50% of the companies examined

failed in enlisting the right people because they underestimated the difficulty to drive

people out of their comfort zones. As David A. Garvin and Michael A. Roberto said in his

study of “Change Through Persuasion”, “Our research into organizational transformation


has involved settings as diverse as multinational corporations, government agencies,

nonprofits, and high-performing teams like mountaineering expeditions and firefighting

crews. We’ve found that for change to stick, leaders must design and run an effective

persuasion campaign—one that begins weeks or months before the actual turnaround plan

is set in concrete” (Garvin and Roberto, 2005, p18)

Most of the CEO or leaders fail to implement appropriate changes in an

organisation because they tend to undertake corrective actions even before they examine

the situation properly. “Management’s mandate is to minimize risk and to keep the current

system operating” (Kotter, 2007). This stresses the importance of a good CEO and the way

the management is working within its complacency zone. CEOs play a critical role in

bringing an organization out of its old system.

In addition to the survey of the leaders, CEOs can also rely upon their

demonstration that change is urgent from the analysts from Wall Street, consultants or

even conduct a poll carried out of customers (Collins, 2001). This will either confirm the

ascertainments of the good CEO when he examined the brutal fact of the reality that the

company is facing, but also bring another argument on his demonstration: people will

realise that the summarised drawing is not only asserted from the inside of the company,

but also from an external point of view.

b. Gleicher’s Change Formula .

David Gleicher devised a formula that explains when the company is ready for

adopting change on the long term, Richard Beckhard and Reuben T. Harris call it the

“change readiness formula” (Richard Beckhard, Reuben T. Harris, 1987)

The formula is resumed by C = (adb) > X.

C = Change

A = compelling vivid vision of desired future state

B = Dissatisfaction with the status quo (pain message)

D = Practical first steps, strategies or action plans that can close the gap

X = perceived costs of change (personal / organizational


In “Large Group Interventions: Engaging the Whole System for Rapid Change”

written by Barbara Benedict Bunker and Billie T. Alban, it further confirms that, a key

point in successful changes is established by a sense of urgency as it produces a rejection

of the current (Bunker, Alban, 1996).

The “Gleicher’s formula” was simplified and adapted for the better understanding

of consultants and managers by Kathie Dannemiller :

DxVxF>R

D = Dissatisfaction with the current reality

V = Vision of what we can do in the future

F = First step of actions implemented in order to carry out the vision

R = Resistance of change that can be found in people

The resistance of change usually diminishes when people realise that the financial

difficulties faced by a company. People are more susceptible to changes in an organisation

if it benefits in the long run, not being made redundant in the organization etc.

3. Some organisational systems might facilitate the implementation of long-

term policies To promote change within an organisational culture, a right person has to take the

lead. Forming a powerful guiding coalition and setting a new direction have to be aligned

with the urgency of change, leading to motivation in willing to partake in organisational

changes.

a. The role of financial incentives

If a company lacks the right people with the right attitudes, there might be a lack of

motivation in the company. The motivation of working in the company should be more

than money. The difficulties arising from the lack of employees’ motivation are also

confirmed by a vicious cycle, which companies are facing when they try to implement

changes without following specific processes and steps. Usually, companies wish to

implement change as they face poor financial results, and money should be invested in


strategies to execute the new mission or vision of the company, often leading pay-cuts of

employees, or dismissals.

This is where the monetary compensation is important. As much as an organisation

uses top dollars to retain employees, they should work towards in achieving a common

goal (Kotter, 2007).

b. Commitment must arise from the bottom as well as from the top of the

company / Bottom-up and Top-down approaches have to be promoted

In the hierarchy of an organisation, all employees have to be recruited carefully as

to fitting with the organizations’ cultures and sharing the same vision. A common

misconception in management is that, employees on the bottom line of an organisation’s

hierarchy are not considered as assets. The founder of retailers, Walmart, Sam Walton

pointed out the most important origin of his marketing initiatives in an interview “Our

greatest marketing is when the guy in parcel pick-up gently places the parcel on the back

seat of the car with a smile”(McGrath, 2012).

This underlines the importance that to implement a change in an organisation, all

levels of management in the organisation should be involved, from the top-down

management to the bottom-up management. In order to materialise this coalition, the top

management has to “create” a vision for the company, develop strategies, plan and execute

actions to implement this vision. This will allow the company to have all its employees

mobilised, creating results on the long term.

In the first few years of a renewal effort, the size of the team might be small, but it

tends to get bigger later in the years. Within biger-sized corporations, 20 to 50 people

assemble a team whereas 3 to 5 people assemble a team in small-sized corporations,

usually from the senior management (Kotter, 2007). However, during the next step in the

change process, the guiding team has to be selective of ideas, not to biased towards the top

management because “ideas will come from all levels of the company” (Kotter and Cohen,

2012). Usually companies fail in this task as there is a lack of teamwork or the

organisation’s hierarchy is not strong and competent enough.


This is why, in companies with successful major transformations people involved

in the change implementation worked outside the formal structure of the company in terms

of hierarchy, protocol and short-term results. Instead, time was taken to think carefully

about how to transform the company.

In Jim Collin’s model of “The genius and thousand of helpers”, it describes a great

leader as a genius because he could by himself run the company through Greatness

(Collins, 2001). When he left the company, the employees who were considered “helpers”

had no idea what to do next because the “genius” never built a management team – he was

flying solo. This highlights a point in an earlier discussion: a CEO bringing his

organisation to greater heights and want it to be sustainable in the long run needs a well-

trained management team, good enough to run it when he departs. The need of alignment

between the CEO vision and the help get from the team of senior managers leading the

change effort is more based on the long term, because many people are included in this

process, and people will in the future feel that this plan belong to them, and will push them

to act with ambition and a strong will. At variance there is a lot of companies who follow

the model described by the team researcher of the book Good to Great (Collins, 2001).

Example of Teledyne: Henry Singleton the genius

The best presentation of this is Teledyne Corporation. Henry Singleton is

considered as the genius - after obtaining his PhD from the MIT, he built a company,

which evolved from a small enterprise to rank 293th of the Fortune 500 ranking in less

than six years. He was a great leader in many things except he did not follow the order of

the process of change. He was able to set the vision of the company, explain to the

managers how to execute his plan and strategies in order to achieve his mission. However,

his lack of planning can be found in an interview “I like to steer the boat each day rather

than plan ahead way into the future” (Nyo Staff, 2003). As another article from the Forbes

magazine in 1978 underlined it, Singleton was disciplined and talented enough to only ask

his colleagues to help him in order to implement his decisions, but not to figure out what

decisions or strategies have to be made: “If there is a single weakness in this otherwise

brilliant picture it is this: Teledyne is not so much a system as it is the reflection of one

man's singular discipline" (Collins, 2001).


Despite its incredible growth, the growth of Teledyne began to slow down after

mid 1980’s, with the minimal participation of Henry Singleton from the day-to-day tasks

in the management. The company crashed when Singleton withdrew himself from the

operating control of his company in 1989 (Annex 10). Analysts attributed the weaknesses

of the management made by Singleton during the growth of Teledyne, by not planning the

future of the company in the long term. One of this analysis from the Wall Street Journal

concluded: “The company hasn’t said in the past what it plans to do. It doesn’t address

analyst groups or grant many interviews. Teledyne’s news releases and stockholder reports

are models of brevity. Some securities analysts have given up following the company

because they can’t get enough information” (Collins, 2001).

Example of Apple: Stick to your vision

The “people are your most important asset” idea in business was verified in the two

studies - who discover great companies who achieve great results on the long term, with

“Good to Great” (Collins, 2001) and the cut of 11 companies, and “Great by Choice” with

the 7 companies (Collins, Hansen, 2011). The two studies argue that it is not only the

number of people but having the right people who shared similar characteristics as the

CEO and fitting into the organisational culture. As the 9-year research study conducted by

Morten T. Hansen and Jim Collins, “Great by Choice” stresses that Steve Jobs is one of the

great leaders who can achieve greatness on the long term because he was a great product

leader. Before his leave in 1985, where he founded Next, and Pixar, he “figured out” how

to run a company with a vision. After his come-back in 1996, Steve Jobs not only created

great products, but respected his vision. This is evidenced in one of his quotations from an

interview at a technology conference : “we built product that we want to use ourselves”

(Kara Swisher, Walt Mossber, 2007). When the first Apple computer was released (Apple

II), they were sold based on a slogan, “the computer for the rest us”.

Steve Jobs understood that he should stick to his first vision of reliability,

simplicity and easy accessibility yet is able to differentiate itself from its competitors. This

success can be seen from its first creation of the Ipod. At the same time, he released

another simple product, less “protected” with the Imac. The software, Microsoft became

available on Apple computers (Office), and even the Microsoft OS could be now installed


on a Macintosh and for the microprocessor. In order to minimise costs, Apple established a

partnership with Intel in having Intel processors in all Apple computers. In 2007, Apple

applied the same vision to Iphone and after for the Ipad in 2010. Steve Jobs admitted that

he stuck to what he was supposed to do at the beginning, accomplishing the vision of

creating great product “for the rest of us”: “the great thing is that Apple’s DNA hasn’t

changed” (Schlender, 2005)“Apple had to remember who apple was, because he forgot

who apple was” (Swisher and Mossber, 2007).

c. Employees represent the most important asset of any company

“Putting profits after people and products was magical at Ford “ Don Petersen,

Former Ceo, Ford, 1994 (J. Jeffrey Spahn, 2002)

During one of the most important conferences about high technologies (the D5

conference), two journalists interviewed Bill Gates and Steve Jobs about how they built

their respective companies, and how they saw the future. Steve Jobs said, “building a

company is very hard, it requires your greatest persuasive ability to hire the best people

you can and keep them at your company, and keep them working doing the best work of

their lives”(Swisher and Mossber, 2007). His humility showed further when he mentioned

Bill Gates and him were both incredibly lucky to have great partners, that they started the

company with, and attracted great people.

In 2010, after Apple has overtook Microsoft in market share, a journalist asked

Steve Jobs how Apple had emerged from bankruptcy when he came back in 1996 (Swisher

and Mossberg, 2010). Steve Jobs first commented the fact that Apple overtook Microsoft

“it’s not important, it’s not what make you come at work in the morning” and stressed that

“Apple was about 90 days to going bankrupt back then […] I expected all the good people

would have left, and I found this miraculous people, great people […] I said ‘why are you

still here?’ and a lot of them had this little phrase ‘because I believe in six colors which

was the reference of the apple logo” “this was the code of what this place stand for or at

least stood for and that made them went to work that much harder to have those values

survive and bring it back” (Swisher and Mossberg, 2010). For linking the Apple case to the

fact that great leaders who prepared their leave, Tim Cook was hired by Steve Jobs in 1998

as “Senior Vice President for Worldwide Operations” 2 years only after his come back,


when most of the people thought that this hiring was useless. After 14 years inside the

company, Tim Cook became CEO of apple in 2012 after the death of Steve Jobs, leading

the biggest company in the world in term of market share, having the best CEO salary in

the world (Gupta, 2011; Ngak, 2012).

Those facts bring out one of the rules for leading the change in the study “Good to

Great” : “Put your best people on your biggest opportunities, not your biggest problems”

(Collins, 2001). At the time Apple was falling into bankruptcy, and instead of just trying to

emerge, Steve Jobs did something more than just “survive” : he built a strategy oriented for

the long term, hiring the best people he can (Tim Cook from Compaq), and put them on the

biggest opportunities as soon as possible (Tim Cook was hired in order to settle the

operations, when the urgent need wasn’t this).

d. To what extent does the external environment constrain companies

implementing long-term policies ?

i. Influence on layoffs : Theory E and O

In the first study ‘Good to Great’ (Collins 2001), the team of researchers looked at

the differences in terms of using layoffs between the 11 companies selected for having

achieved great results and the companies who did not. Out of the set of 11 companies

considered as “great”, four of them only did one or two layoffs, when the six other never

did so whereas the comparison companies used layoffs five times more often. This can be

explained as the CEOs of the 11 companies understood that if one needs to restructure the

company, it is critical to understand the importance of people’s efforts across all levels of

management.

We do not have to expect the right behaviors from the wrong people (Collins,

2001). When leaders need to hire new managers, they have to keep in mind that it has more

to do with character traits, innate aptitude than with specific knowledge, background, or

skills. This confirms that the heart of change is this innate capability of people to act and

react with effectiveness thanks to their professional will or passion. As the example of

Apple stresses it, the most important is that your employees fit with the core values and


ideology of the company. Skills are of course important, but if there is a lack of knowledge

you can always make people evolve, which is much more difficult or impossible with the

others aptitude or character traits define by in globality by the will to fit to the mission of

the company.

In “Cracking the Code of Change”, Michael Beer and Nitin Nohria studied more

than 40 years the nature of the corporate change, and explained why “about 70% of all

change initiatives fail” (Beer and Nohria, 2000). They concluded that there are two valid

approaches to implement change - theory E, which is considered as the “Hard” solution,

where change is based on economic value and theory O, the “soft” way of doing where

change is based on the use of organizational capability to change (Beer and Nohria, 2000).

The conclusion of this study is that most of the companies only focus on theory E,

where it is common to use layoffs and restructuration because they only value the

expectations of shareholders. The pressure of the financial markets can be felt by how

companies are being pushed hard to execute a fast turnaround in order to see visible

financial change rapidly. Even worse, most of the companies’ reward system uses the E

theory where the rewards leading the change is only financial, largely with stock option,

which means they are closely linked to the shareholders.

On the other hand, financial incentives were used in the theory O, where leading

changes is by developing corporate culture and strong human ability. It the short run,

results are not very amicable, which explains why companies seldom use this approach.

The recipe for a sustainable change in the long term is to embrace both theories:

“Companies that effectively combine hard and soft approaches to change can reap big

payoffs in profitability and productivity” (Beer and Nohria, 2000) This means that one has

to follow the E theory at the same time than the O theory: create substantial results on the

short term (for example restructuration) and in the same time build a strong workforce who

gather high committed employees together under the same core values define by the vision

because the gain obtained with the restructuration (less cost, better productivity) will not

be enough to create a change that can last on the long term.(Beer, Eisenstat and Spector,

1990). The use of theory E is more common in the United States than in Asia or Europe

due to the business cultures, as managers care and bet more about the employee’s


commitment, hence adopting the O theory.

Example of Archie Norman, ASDA CEO: how to embrace both theories

Embracing both theories can be a challenge for the company, as its employees are

generally inclined to mistrust leaders who just use both theories without effectively

combining them. This poor combination can be seen from examples where leaders act

accordingly to the two theories by undertaking layoffs and at the same time by expecting

people to be committed

To avoid such issues, Archie Norman, CEO of ASDA, a UK grocery chain, which

was close to bankruptcy in 1991, applied both theories simultaneously. He created a

culture of honesty, accountability and transparency. The company also multiplied its

shareholders’ value by 8 times in 1999. Since the beginning, Archie Norman was clear

about “management re-organisation”. In his first 3 years as the head of the company, he

closed many stores and made 5000 jobs redundant. He considered this experience

‘miserable’, saying about the people from the top management that ‘they had to be up for

challenge […] In a series of situations, I have had to recruit entirely new teams’

(Blackhurst, 2007).

One of the key reasons why Norman replace employees in the top management was

due to their inefficient policies and to a hierarchical system removal. “The old ASDA was

riddled with hierarchy, where people were afraid to come forward to talk about problems

in the business. We employed 60,000 people, many of whom knew where the problems

were and wanted it to come right and were frustrated with the management and the history.”

How the CEO of ASDA managed this ? He also explained in an interview that “[w]e had

to make Asda their choice and that meant creating a great workplace community, treating

them with respect and valuing what they did. Our attitude was that every task required a

special skill and that skill was a craft skill to be learnt and appreciated. Plus, if there was

anything wrong, they could write to me.” (Blackhurst, 2007).

Example of Alan Wurtzel, Circuit City CEO: How to avoid layoffs or it bad

effects


The best way to avoid layoffs is to follow the quote of Steve Jobs “hire the best

people you can and keep them at your company”. Alan Wurtzel from Circuit City says

“You don't compromise. We find another way to get through until we find the right people”

(Collins, 2001, p.55). Sometimes, companies grow too fast without thinking about the

long-term, when they should think about how to limit their hiring process to only great

persons. As the most important asset of a company is its people, the company’s size should

increase in correlation with its ability to attract people, but more specifically, only talented

people. If a company hires the right person beforehand, the probability of layoffs’

necessity might decrease, as well as the need to foster employees’ motivation (as we said

skill can be learnt, but not attitudes and behaviors). This might allow companies to save a

large amount of time, and to focus on the more important tasks.

Another way to avoid layoffs is to follow a simple rule that allows companies to

create change, by putting their most talented people more on the opportunity than on its

problems. Talented people will have the abilities to create great things if they are leading

the challenge of using well an opportunity. When a company has to overcome its

difficulties, people will be less prone to be fired, because they will have no more utility (as

contrary if a talented people is settle on an opportunity and succeed, he can lead this

opportunity on the future).

In conclusion, the best way to avoid layoffs is to hire only right and talented people

(Collins, 2001). If the company can’t find them, they have to wait and keep searching,

never forgetting that the capacity of hiring people is linked to the growth of the company.

Once companies have found the right people, they must keep them, by putting them on

their best opportunities and use financial incentives to avoid that they leave to work for

other companies, which might provide them with more rewarding and challenging

opportunities.

ii. Influences on acquisitions

As managers might not have a definite idea of the current reality of a company,

they might aim to protect their own “personal goals”, i.e. to protect their company rather

than aiming to implement a synergy. This synergy is achieved when their goals is identical

or complementary, which mean be together around the same vision, and not do


compromise (Jay Hall Conflict Management theory, Schema 5).

Most of the companies undertaking acquisitions fail because two bad companies

cannot be molded into a good one. Most of the CEOs undertake acquisitions because they

see a great opportunity, but by doing this, they often overlook the company they are

acquiring, i.e. whether the company will be in the same industry or more generally whether

the two companies can be merged under the same mission or vision, which will allow them

to create a synergy (Kotter, 2007). One of the executives of Phillip Morris explains that

one of the key reasons of the success of his company is in implementing change. In one of

the 6000 interviews made by the team of the book “Good to Great” ,this executive

explains: “they were always in search of the best answer. In the end, everybody stood

behind the decision. All of the debates were for the common good of the company, not

your own interest” (Collins, 2001, p.60),

4. Communication contributes to a major extent to the building up of the

company vision and thus to the implementation of long-term policies

a. Why vision is important

Once CEOs or top managers team have established a clear picture of the current

reality faced by the company, they will have to develop a vision and communicate on it, in

order to align employees across all levels of organization (Kotter and Cohen, 2012). In this

chapter, Gleicher’s formula will be revised: D (Dissatisfaction with the current reality) x

V(Vision of what we can do in the future) x F(First step of actions implemented in order to

carry out the vision) > R(Resistance of change that can be found in people), and it will

explain how to have the V element in the formula.

It was previously argued that employees have to be happy with the current reality

(at least 75%), and if they are not, the sense of urgency communicated earlier should make

them change their minds. But after this ascertainment, they will have to know what is the

next move, how the company is going to change its situation, in which direction the

strategies will be implemented. Here, the dissertation will discuss why the vision is


essential in an organisation.

Most of the CEOs first think of reacting quickly and undertaking rapid decisions,

building strategies without visions. Many companies build up strategies in order to

implement their plans with directives or actions but without stating clearly where all of

these will lead (Annex 13). Sometimes, it is because the top management did not

communicate on their “personal” vision of the company, thinking that other employee will

just follow the guidelines,

Finding the right vision for a company is a long-term process as it takes years to

find the right one. The prequel of founding a vision is the role of leadership. As said

previously, leaders have to look clearly at the situation, set up a coalition team of people

committed to lead the change. The coalition team will help the CEO to “found” or “create”

a vision, through their observation and propositions. Once they have done this, the CEO

will be able to steer the company in the right direction.

Once a company has elaborated on its vision, if leaders want to implement changes,

changes will be seen in business tasks; strategies and even culture of the company.

However, what the company’s vision and goals have to be clear and unchanged. (Collins

and Porras, 1995)(Annex13). This theory was developed in “built to last” by Jim Collins

and Jerry I. Porras from the idea of “preserve the core”, which are the values and vision of

the company (Collins andPorras, 1995). This can be illustrated by the speech of David

Packard (founder of Hewlett-Packard), during his first years as the head of the company, “I

want to discuss why a company exists in the first place. In other words, why are we here? I

think many people assume, wrongly, that a company exists simply to make money. While

this is an important result of a company’s existence, we have to go deeper and find the real

reasons for our being…. a group of people come together… to accomplish something

collectively that they could not accomplish separately-they make a contribution to society,

a phrase which sounds trite, but is fundamental ” (Williams, 2012, p.30).

The “Journal of Business Strategy” named the author Peter Senge “strategist of the

century” due to the impact he created in businesses are being conducted today.

In his book, “The Fifth Discipline: The art and practice of the learning

organization”, Peter Senge shared his leadership view, and why leaders succeed in the past


centuries when a vision is implemented. “To pursue the vision means to create

organizational and strategic alignment to preserve the core ideology and stimulate progress

toward the envisioned future. Alignment brings the vision of life, translating it from good

intentions to concrete reality” (Collins and Porras, 1995, P.253).

b. Communication has to take place through every channels

CEOs who only communicate their vision to a few employees in the top

management commit a huge mistake. As previously stressed, change is not possible until

the majority of the employees within the company work in the same direction. In “Leading

the Change”, an observation was made by John Paul Kotter, the companies he studied used

to under-communicate their vision, using only “0.0001% of the yearly intra-company

communication” and about only “0.0005% of the total yearly communication” (Kotter,

2007). This is why, instead of following such behavior, companies have to follow a set of

rules, leading to a credible communication, which will allow them to generate alignment.

In “Built to Last” Jerry I. Porras and James C. Collins conducted a 6-year research

at the Stanford University Graduate School of Business and studied great companies that

were “truly exceptional” in the way they evolved (Collins and Porras, 1995). In the study,

more than 700 CEOs, from the Fortune 500 industrial and service companies, and also the

inc. 500 private and public companies, asked them what were the best companies founded

to be perceived to have a good visionary. The result of this survey is the selection of 18

companies, who were studied in more details along the study, showing great results

(beating in average six times the comparison companies, and over fifteen times the general

market). (Annex 14)

During this study, the researchers look at how often the “visionary” companies use

communication in order to get their vision across the organisation. The result is that over

the 18 companies selected for their visionary pattern were communicating much more than

their comparison companies (except 4, who communicated the same amount) (Annex 15).

“In more successful transformation efforts, executives use all existing communication


channels to broadcast the vision. They turn boring, unread company newsletters into lively

articles about the vision.” (Kotter, 2007, p.8)

In “Change Through Persuasion”, David A. Garvin and Michael A. Roberto

conducted a research on the diversity of organisations such as multinational corporations,

government agencies, non-profits organization or high performing teams (like

mountaineering expeditions), and found that in every case where change has been

implemented and succeeded, leaders of those organizations ran an effective persuasion

campaign (Garvin and Roberto, 2005). This campaign was present during the first few

months of the implementation of the change process; in order to convince the more

reluctant employees, diminish doubts and setbacks. First, leaders must show their

employees how their new strategies differ from the previous ones and how beneficial it

will be in the long run. Leaders have to be clear on the current situation that is facing the

company without creating panic.

According to David A. Garvin and Michael A. Roberto (Garvin and Roberto, 2005),

leaders have to communicate the change based on three steps, which will allow employees

to interpret the message and the vision correctly. The framing of this turnaround plan will

avoid reluctance or backsliding:

First step, stick to your core values and be optimist, proud and realist

When leaders try to communicate their vision, they often communicate on the

future of their company through their personal values but not the core values of their

company. The respect of the core values can be made at the beginning of the message, to

add a touch of optimism, saying that employees have to be proud of their company. These

attitudes might strengthen employees’ moods, keeping them focused on achieving the

vision with motivation.

Second part of the message, details about strategies

Leaders have to communicate the details of their plan in order to implement the

vision within the company, explaining measures and goals. Most successful companies

base their strategies on external analysis, which give more sense to their plan and


recommendations. If the company has to apply the E theory (developed in Cracking the

Code of Change by Michael Beer and Nitin Nohria), through restructuration and layoffs,

the leaders will have to explain why such decisions are made, by clarifying the current

reality faced the company. If leaders do not do this, the indispensable application of theory

E will undermine employees’ alignment. (Beer, Nitin Nohria, 2000).

Third Step: Do not forget to anticipate employees’ reaction

In order to reassure people, leaders have to anticipate any concerns of their

employees in their communication, which will have “the effect of circumventing

objections”(Garvin and Roberto, 2005). Leaders have to explain why past strategies have

failed, and why their current strategies will allow the company to obtain successful results

in the future. In conclusion, changes might induce emotional distress, top management has

to be careful of employees’ emotions.

The top management has to communicate as much as possible about the change

process by getting feedbacks from the employees. They must communicate through every

possible channels, not only annual meeting or conferences. Most of the great leaders speak

about their plan months or years before implementing it, by having discussion during

lunchtime or informal chats. Those informal talks not only serve the persuasion campaigns

well, they allow the leaders to give employees the opportunity a platform to voice out their

opinions.

5. Efficient long-term strategies emphasises steady growth rather than

exceptional results on the short run

“Short-term successes confirm the work of transformation leaders, boost hard-

working staffers, undermine skeptics and stoke everyone’s belief in the change effort”

(Kotter and Cohen, 2012).

Leading changes, developing a vision and implementing it is a lengthy process that

will take months, or even years. In order for leaders to show that the change they have

implemented are working, short terms wins must be created. These wins keep employees

motivated and maintain their understanding this change is good for the company in the


long haul. Usually, the short-term wins are created by the guiding coalition, who aim to

implement new solutions (Kotter, 2007). As the guiding team is usually appointed by the

CEO, the team will have the capacity to experiment plans and strategies, by launching new

products for example, to see how the market will react, revamping the products. They will

use empirical validation in the first year of the change, in order to create short-term win.

This success will usually not be big wins, but sufficient to keep employees hoping for the

biggest win in the long term. “When it becomes clear to people that major change will take

a long time, urgency levels can drop. Commitments to produce short-term wins help keep

the urgency level up and force detailed analytical thinking that can clarify or revise visions.”

(Kotter, 2007, p.10)

a. Exceptional results and innovation might not induce great results over the

long term

The theory of “Big results and big innovation cannot assure great results in the long

term” symbolises the common thinking that companies who succeed in the long term is

due to big innovation, As the study from “Good to Great” stresses, “[n]o matter how

dramatic the end result, the good-to-great transformations never happened in one fell

swoop. There was no single defining action, no grand program, no one killer innovation,

no solitary lucky break, no miracle moment” (Collins, 2001). Innovation can be an

acceleration of momentum, but not a creation. More than 80% of the 84 people in the 11

“great” companies holding key positions did not mention innovation or technology as the

top 5 factors as the implementation of a good change in the long term, during the interview.

According to the same study, more than 64% of the pioneers failed in creating sustainable

good results in the long term, which was further confirmed by the study of “great by

choice”. Based on 290 innovation events, they made a classification of innovation events

between the company who achieved great performance (10X company, due to the fact that

they beated the general market 10 times) and their comparison companies. The results of

the study show that the comparison companies did more major innovation ( + 27%,

considered as revolutionary innovation), when the company who achieved great results on

the long term used much more innovation considered as medium ( + 50%,who offer solid

performance) and incremental (+ 61%,who offered some performance, but didn’t create

major progress) (Annex 22).


b. Not growing too fast

Example of Southwest Airlines

Southwest Airlines, one of the companies being studied, is ranked number 2 “Great

by Choice” companies that has the discipline to not grow too fast, in order to preserve

profitability and its culture (Collins and Hansen, 2011). On the other hand, the companies

who achieved great results over the long term period by performing the general market by

10 times did it because they just hit stepwise performance markers with consistency. The

difficulty to follow the stepwise performance markers is doubled when the conjecture is

good, the company has to step back, and not grow too fast and when it’s difficult time you

still must have to follow your performance marker, which is challenging.

In the case of Southwest Airlines, though the fact that the industry is very harmful:

airlines troubles, strike, oil crisis, 11 September 2001 events (when all other companies

had terrible loss), the company hit its target of profitability every year, during 30 years

(Annex 19). And this performance of holding back its growth is even more surprising

when you know that the company was since the beginning publicly traded: despite the

pressure of Wall Street and investors, the CEO of Southwest Airlines had the discipline to

stick to his plan. The companies who succeed on the long term did not implement this

politics of profitability discipline when they were successful, when they could afford to say

“we will not grow to fast”, they were disciplined since the beginning. Southwest Airlines

did not implement itself outside Texas (where it was created), during more than 8 years.

They implement themselves with consistency in other cities, but not too fast, in relation

with their compatibilities. The best example is when in 1996 more than 100 cities canvass

Southwest Airlines to be implement in their airport. In this year, they only moved into 5

cities, which is only accepting 5% of the current opportunities. (Annex 20 / 21 ) This

constraint of the performance marker have to be a constraint self imposed and designed by

the company itself, being appropriate, and achieved with consistency (Collins, 2001).

Example of Intel

Most of the companies have a financial performance marker, but it is not all the


time the case, as for example Intel (one of the company of the great by choice study),

which has an innovation march, based on the Moore’s Law, a law created by the co-

founder of Intel, Gordon Moore: “the number of transistors on a chip will double

approximately every two years” (Intel.com). Intel has used this rules for decades. It uses

this performance marker as a guiding principle in the fast moving technology sector, which

is the microprocessor and chipset industry. This rule allows them also to be more

competitive, by “driving the expansion of functions on a chip at a lower cost per function

and lower power per transistor by introducing and using new materials and transistor

structures” (Intel.com). During the same time, when Gordon Moore was leading Intel and

implementing his march in order to not grow to fast and not loose control, AMD, the

biggest competitor and the comparison company of Intel, did not follow a steady

performance marker, and did not limit is growth during good times. Jerry Sanders, CEO of

AMD in the eighties “proclaimed that AMD would become the first semiconductor

company to generate 60 percent growth two years in a row and that it could grow more in a

single year than it had in its entire 14 year prior history” (Collins and Hansen, 2011). He

also said that his company will become number one in the industry, ahead of Intel, Texas

Instrument, Motorola and all the others. That’s what AMD did, they invested a lot, without

limit and in 1984, after 3 years of growth, the company grew two times more than Intel,

and all the others competitors (Annex 16). But in 1985, an event occurred in the perfect

plan of AMD: the industry of the semiconductor collapsed during an economic recession

(Annex 17 and 18). Both companies faced this event, but Intel resisted with less loss,

because AMD tripled its long-term debt when Intel did not (Collins and Hansen, 2011).

They built confidence with consistency in their results thanks to the performance marker,

and not with irregular results and motivational speeches, with unfounded touch of

optimism when there is a bad result, due to their big results previously. Confidence with

investor and shareholders is only created through consistency in results, through tangible

achievement during good time as bad time, never blaming circumstances, luck or other

events (as we said previously this is one of the innate capabilities of good leaders).

Great companies adopt two important behaviors that avoid them to suffer in bad

times and to still be great through bad events: they are paranoiac and disciplined, which

combined together is represented by the limit of their growth with the performance marker,

when other companies less successful on the long term don’t get prepared for the worst,


use all their resources and grow too fast. Based on the study of 29 events for the company

who achieved great results on the long term, and 23 events for the company who did not, it

appears that the Great companies always apply performance markers and limit their growth,

coming out from bad events with good income fro 100 % of the time, when only 13 % of

the companies who did not limit their growth, emerge from bad events with positive

outcome (Collins and Hansen, 2011).

Part II. Empirical analysis : To what extent do theoretical insights supporting long-term strategies contribute to the understanding and the improvement of the strategies of three selected companies?

A. Companies’ introduction

1. Continental International Moving


Continental International Moving is a company based in Beijing, China, which

offers services such as moving furniture and storage of furniture in and out of China. The

clientele is mainly made up of expatriates wanting to relocate goods.

During my internship, I had the opportunity to assist in the setting up of a new

trading department in the company, which is now named Continental International Trading.

This department was created to help certain customers proceed with their commercial

shipments, which were not possible with the normal moving companies. My job scope

extended to sourcing, market research, networking and business events, website creation

and commercial shipment.

2. ArglyDuckling and Yuan Asociates

My second Asian internship was in Singapore, where I was involved in the merger

of two companies, ArglyDuckling and Yuan Associates. I was employed as a business

development executive to help to create the company ArglyDuckling. Our goal was to

create a company that specialises in the sale of beauty products not available in Singapore.

One of my main tasks was to canvass overseas partners, suppliers and brands; to import

them, create a website and develop marketing strategies. In regards to the marketing aspect,

we worked in collaboration with Yuan Associates, which is a marketing and advertising

firm.

As the company ArglyDuckling had to be created from scratch, our focus was on

marketing. Within three months of planning, we created a website. With several brands in

stock, we kick started the business. Creating a business from scratch is not as easy as

flying a kite. I have learnt so much in the aspects of communication, logistics and

developing sales. Also, I had the chance to work with different clients while working at

Yuan Associates. The clients include HSBC, Subway and Mazda.


B. To what extent do theoretical insights related to the implementation of

long-term strategies contribute to shed light on companies’ action?

1. A comprehensive analysis of the market, and more specifically of the

relevant regulations, has enabled the two companies to achieve successes on

the long-term

At my internships in Asia, I have learnt the importance of having a clear vision if a

business wants to avoid pitfalls. It is essential to analyse the business in different angles in

order to have a good over sight of how a business can develop its strengths, using its

weaknesses to its advantages and transform threats into opportunities.

During the creation of the trading department in Continental International Moving,

Beijing, I had the opportunity to learn the importing process of getting wine from France to

Beijing, because one of the clients of my supervisor wanted to do commercial shipment of

wines for his restaurant in Beijing. However, after a thorough investigation, this

commercial shipment was aborted due to an import wine restriction in China. Only big

companies with a specialisation in wine importing have the authority to import commercial

shipments of wines into china. As mentioned previously, some companies are too eager to

grow quickly but overlook their capacity to handle such a task.

In our case, we were fully aware of our capacity. Hence, we tended to a Sri Lankan

Army project, that wanted to import tissue from China. With the guidance of my internship

supervisor, Miss Lee, who had a large network in the Sri Lankan embassy, we managed to

export tissue to the Sri Lankan Army. We decided on a smaller-scale project because being

a new department with no prior experience, we understood our capability in handling a big

quantity and the risk of failure we were set up for should we launched that wine importing

project without much research and experience.


With my understanding of aligning growth of a company with the capacity of a

company, I applied this theory during my Singaporean internship. As ArglyDuckling’s

brands were mostly imported, we had to ensure we adhered to all regulations through the

Ministry of Health, Singapore, more specifically, the Health Science Authority. Despite the

reliability and effectiveness of the imported products, we made sure the products were

conformed to the regulations of Singapore’s authority. Despite the huge sum of money

spent to verify the safety of each product, we went through with the certifications because

we did not want the beauty products to have hazardous effects on our customers.

2. Within recently created companies characterised by limited financial

resources, employees’ involvement in the company’s strategic decisions

might be a way to foster their motivation.

Working with Yuan Associates allowed me to gain insights about how staff was

managed at the successful boutique agency. The staff in the company was motivated and

happy, working together cohesively. It reminds me of a quote by Dick Appert, one of the

executives at Kimberly-Clark, "I never had anyone in Kimberly-Clark in all my forty-one

years say anything unkind to me. I thank God the day I was hired because I've been

associated with wonderful people. Good, good people who respected and admired one

another”(Collins, 2001, p62).

In the company, I witnessed how employees had their own platforms when it

comes to experimenting new ideas and being responsible for their tasks, excelling in them.

Like working on making a video, creating for the first time storyboard with the copywriters

or by making a photoshoot, with many partners, even if they never did it before, they will

try to find the best co-workers and achieve the project. This is why the commitment was

more important than the money in this company.

This confirmed the fact the observation made by Michael Beer and Nitin Nohria in

“Cracking the Code of Change”: Asia and Europe company are more likely using the

theory O, taking care about the commitment of his employee, when the theory E, which


stand for taking first shareholders value into consideration and motivate their employee

through financial incentives, is more use in the American Culture (Beer and Nohria, 2000).

I also assisted in numerous interviews, as the company did a lot of recruitment

during the period I was doing my internship. The company hired people based on their

character traits, which have to fit to the organisation’s vision and culture. The company has

a good hierarchy and a good management team. Despite the diversities of job scopes, the

staff compromises to work towards achieving a common goal.

I was very interested in working in such a company because it allowed me to see

how the theory O can be implemented first hand. In my opinion, absence of leaders which

leads to delegating responsibilities can have a bad impact on the company, and the people

who do not share similar work ethics of these leaders. Hence, hiring the right persons for

the job is critical to sustaining a company. Certain people who left the company

complained that my supervisor was not present all the time. They saw her as a

businesswoman who was present at the office during times of trouble or when papers had

to be signed. This picture is the opposite of how I would expect a supervisor to be.

Employees have to understand an organisation’s culture and dynamics. As I have

mentioned it earlier, the salary bracket sits in the average, and sometimes the employees

have to work overtime for deadlines. If the idea of overworking and being underpaid do

not sit well with an employee, and there is an absence of passion in the work he does, this

results in unhappiness and eventually, the company will lose that employee. This is why

leaders have to embrace both theories O and E. As described by Michael Beer and Nitin

Nohria, it is respecting the reward system, by which the company should use incentives to

reinforce commitments, not to drive it, but if incentives are too low, or the commitments is

destroy by a too high workload, the company will have to react (Beer and Nohria, 2000)

3. Communicating the company’s vision to partners and consumers is crucial

for any new company to build up its uniqueness and, enhance partners’ and

consumers’ adhesion to the company.


During the creation of the company ArglyDuckling, we decided to implement a

very specific communication plan, even before the launch of the website. As we were

working with the advices and network of a partner who used to work as a brand manager in

L’Oreal, this allowed us to convey our communication plan to many influential people in

the beauty industry. Furthermore, we collaborated with three beauty bloggers in Singapore,

who are also influent bloggers. One of them is a beauty products journalist. They gave us

beauty advices on our Social Media platforms, write articles or produce make up videos on

the company’s blogs, in relation to the products. The blog is a way for us to pave our way

into the beauty industry under the name of ArglyDuckling.

Our partner, who was an ex-employee at L’Oreal, was in charge of communication

with L’Oreal on behalf of our company. We held an event where we talked about our

products and their benefits, and invited everyone involved so they had the chance to

interact and meet each other. The event was an opportunity for the company to

communicate to the public about its vision and why it was created.

We did not pay the beauty bloggers, even so they were all very much in demand,

notably as biggest companies and newspapers were willing to pay them for their services.

Nevertheless, beauty bloggers agreed to work with us because they knew one of our

partners, the Brand manager of L’oreal, but also because they were very interested by the

vision of our company. We took care of clearly communicate our vision to them, stressing

that we aimed to bring beauty products from overseas that were not available in Singapore,

within the different stores but also on the Internet. All the products were of very good

quality, very reliable, made only with organics or natural ingredients, and prized by a huge

community of stars or famous beauty bloggers from overseas. The vision was not so

complicated and the way our partners communicated about it was very simple. Beauty

bloggers felt that the project was convincing, clear, and that they could be fully part of this.

Moreover, the idea of bringing outstanding products from overseas could be a great thing

for Singaporeans passionate about beauty products. They would not be ordering from the

United States anymore, waiting their products for weeks, with high shipping rate and many

time stuck within the customs duties. As beauty bloggers found the vision unusual, and as

they know that we were a start-up without many funds, they agreed to work with us

without financial incentives: we only furnished them with many products samples.


4. The success of long-term strategies relies on short-term wins to create a

momentum that enables the company to achieve its long-term goals.

After that event, every channel was used to communicate the company’s vision.

Before putting the products on the market, we communicated our vision and invited the

Singaporean beauty bloggers to come forth for a “sampling” of those beauty products. We

launched into a discussion of the benefits of the products and why those specific goods

were being selected.

Before putting the products on the market, we invited the Singaporean beauty bloggers for

a private event to sample the products. We used this opportunity to communicate the

benefits of the products and why our company decided to bring in this specific brand of

goods, as to how the products are closely linked to our vision. We created a “Public

Relation Kit” that contained products samples, an informative brochure and the company’s

mission. With the help of Yuan Association, the brochure and catalogue were produced.

After the launch of the website, the company continued to communicate with the

public and stakeholders through traditional and modern use of media. We also sent out

monthly newsletters to all the customers, thriving to keep build rapport and constantly

collect feedbacks.

5. The success of long-term strategies relies upon short-term wins to the

extent that they might impulse a momentum enabling the company to achieve

its long-term goals.

As previously discussed, the companies that want to be sustainable in the long term

have to create success in the short-term through employees’ motivation. I experienced

during both experience in China and Singapore, how important it was to create short-term

success.


My first experience was when I was in China. The creation of the trading

department involved numerous steps: sourcing clients who already know the kind of

products they want to import from China, or find the products, and then find the clients

willing to buy it. In all the case, we had to experiment how to do a commercial shipment,

so we decided to begin with a small contract. As we knew how to do a commercial

shipment we were more prepare to do bigger contracts. When my supervisor told me he

planed to work with his contact on much bigger shipment, I told him it might be more

secure to begin with a smaller success, but as soon as possible, in order to have the time to

learn how to do it. Then we learned how to follow the rules in term of commercial

shipments, we were more familiarised with the incoterms, and all the other administrative

part. I also noticed that it cheered up my colleagues, and keep it us to work harder, in order

to create even more commercial shipment, and why not bigger one.

During my work in Singapore I also experimented the implementation of a short-

term success. When we launched the website on the internet, two months and an half from

scratch, almost all the contents were ready, but some changes had to be made in order to

launch a perfect website. So the website was on the Internet (host by a server), but it was

not available, when people googled it or tried to see the website it was not possible to see it.

We should have waited that the website was perfectly made, because if a customer visited

it and saw the website change a few days after, even if it was a minor change, it might have

created a nefast effect, adding to the fact that the website was only good and not “perfect”.

Despite all these facts my supervisor decided to launch the website. We had too many

people outside the company involved in this project: shareholders, bloggers, journalists.

Report again the launch of the website, even if it was not perfect would have been

demotivating for those people who wait that this project became reality. We had one week

of advance in our planning, and launched first the website, and we worked hard in

collaboration with the Yuan Associates company in order to fix the remaining problems,

and finalised the website. One week after we launched the final version.

In my view, I would have waited one week more in order to avoid the risk to

disappoint the new customers by changing the website only one week after his launch, but

I have to agree that the first launch was judicious in fine. Add to the fact that it allowed us

to experiment the effectiveness of the website, allowing us to see the bugs and problems

before the specify day of launch, it also created a huge momentum with our partners:


bloggers and shareholders were all very enthusiastic. This momentum was also useful for

employees in the company, they were even more motivated in order to work hard during

one week for the launch of the final version of the website.

FURTHER DEVELOPMENTS:

From mine point of view, one of the main challenges of this paper was to link the

theories with my practical experiences within the three companies. As an intern,

sometimes, I was surprised by the fact that crucial decisions were executed quickly as I

expected decisions to be implemented more coherently and strategically.

The aim of my paper has been to investigate to what extent are theoretical insights

useful in building a consistent and comprehensive framework supporting the long-term

strategy of the company. Nevertheless, findings of such work could be pushed further in

investigating a larger sample of companies, which unfortunately, I could not undertake due

to certain constraints in the paper’s format. I also really wanted to interview the leader of

the Yuan Associates’ company. We agreed on an interview before the end of my internship,

but it was not possible due to unforeseen circumstances. If I had the chance to interview

her, I am sure it would provide an interesting insight and be an opportunity to further my

findings.

+


CONCLUSION

This dissertation has argued that, unlike the conventional wisdom, companies that

implement long-term strategies are more likely to be successful.

First of all, this dissertation has comprised of a literature review highlighting that

companies that developed long-term policies are more likely to be successful, thus,

enabled them to expand their market share. Next, five elements are being pin-pointed for

the contribution to the success of long-term policies. First, leaders capable of achieving

greatness share definite characteristics. Second, leaders have to analyse the company’s

situation with humility and consistency, avoiding being trapped in inefficient policies.

Third, the role of management is crucial in promoting cohesion between co-workers and to

avoid pitfalls arising from the restructuration of organizational systems. Fourth, it was

argued that communicating a company’s vision was key in building a strong backbone for

a company. Finally, leaders must prevent the company from growing too fast from the

pressure of the competitors.

In its second part, the paper discussed how such theoretical insights might

contribute to the strategies of three companies. More importantly, it emphasised how the

theoretical points supporting the elaboration of long-term policies might help to assess

decisions made by the management of three companies i.e. to predict the success or on the

contrary the failures of such policies. Recommendations have been proposed as to how

theoretical insights can achieve better results.

For instance, my case-study has emphasised how companies can enhance

employees’ involvement in resorting to both financial and non-financial incentives. More

precisely, companies might resort to theories E and O. This case-study has also stressed, in

accordance with the theoretical part, that companies might need to achieve short-term wins

in order to succeed over the long-term.


SOURCES

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Beckhard R. & Harris R. (1987), Organizational Transitions: Managing Complex Change.

Addison-Wesley

Collins J. (2001), Good to Great: Why Some Companies Make the Leap... and Others

Don't. HarperBusiness

Collins J. & Hansen M. (2011), Great by Choice: Uncertainty, Chaos, and Luck-Why

Some Thrive Despite Them All. HarperBusiness

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Goffee R. & Jones G. (2006), Why Should Anyone Be Led by You? What It Takes To Be An

Authentic Leader. Harvard Business Review Press

Golman (1995), Emotional Intelligence. Bantam

Kotter J. & Cohen D. (2012), The Heart of Change: Real-Life Stories of How People

Change Their Organizations. Harvard Business Review Press

Nietzsche F. (1889), Twilight of the Idols.

Senge P. (2006), The Fifth Discipline: The art and practice of the learning organization

Wurtzel A. (2012), Good to Great to Gone: The 60 Year Rise and Fall of Circuit City.

Diversion Publishing


ARTICLES:

Beer M. & Nohria N. (2000), Cracking the Code of Change

Beer M. & Eisenstat R. & Spector B. (1990), Why Change Programs. Don't Produce

Change

Garvin D. & Roberto M. (2005), Change Through Persuasion.

George & Sims P. & McLean A. & Mayer D. (2007), Discovering Your Authentic

Leadership. Harvard Business Review Press

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Review Press

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implementation. Transitus Inc.

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Rate Observer


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INTERVIEWS:

Blackhurst C. (2007) Exclusive MT interview: Archie Norman. Management Today

Swisher K. & Mossberg W. (2007), All Things Digital Conference D5 highlights, with

Steve Jobs and Bill Gates

Swisher K. & Mossberg W. (2010) Apple CEO Steve Jobs at D8: The Full, Uncut

Interview

INTERNET:

Forbes.com (November 2011) Tim Cook Profile

Western librairies.com (2012) Biography - Peter Senge

Intel.com : Moore’s Law Inspires Intel Innovation


ANNEXS

ANNEX 1 ............................................................................................................................ 50 11 companies selected VS Comparison Companies VS General Market ANNEX 2 ............................................................................................................................ 51 Walgreens VS Famous Companies VS General Market ANNEX 3 ............................................................................................................................ 52 Circuit City results after Alan Wurtzel became CEO ANNEX 4 ............................................................................................................................ 52 6 Habits of Mind. Wurtzel ANNEX 5 ............................................................................................................................ 53 Great companies (10X companies) VS Comparison Companies ANNEX 6 ............................................................................................................................ 54 Final set of company who beat 10 times the market ANNEX 7 ............................................................................................................................ 55 Good luck events ANNEX 8 ............................................................................................................................ 56 Bad luck events ANNEX 9 ............................................................................................................................ 57 Teledyne and the genius Singleton ANNEX 10 .......................................................................................................................... 58 Successful Acquisitions: Great companies VS Comparison Companies ANNEX 11 .......................................................................................................................... 59 Archie Norman maiden speech quote

ANNEX 12 .......................................................................................................................... 59 Visions VS Strategies VS Plans VS Actions ANNEX 13 .......................................................................................................................... 60 Visionary Companies VS Comparison Companies ANNEX 14 .......................................................................................................................... 61 Communication on the vision: Great Companies VS Comparison Companies ANNEX 15 .......................................................................................................................... 62 Economic Boom ANNEX 16 .......................................................................................................................... 62 Economic Recession ANNEX 17 .......................................................................................................................... 63 End of Recession ANNEX 18 .......................................................................................................................... 63 Southwest Airlines Stepwise Performance ANNEX 19 .......................................................................................................................... 64 Southwest Airlines Opportunities


ANNEX 20 .......................................................................................................................... 64 Southwest Airlines Stock Returns ANNEX 21 .......................................................................................................................... 65 Innovation level: 10X companies VS Comparison Companies


ANNEX 1 11 companies selected VS Comparison Companies VS General Market

(Good to Great Study)

ANNEX 2 Walgreens VS Famous Companies VS General Market



ANNEX 3

Circuit City results after Alan Wurtzel became CEO (Good to Great Study)

ANNEX 4 6 Habits of Mind. Wurtzel (Good to Great to Gone)


ANNEX 5

Great companies (10X companies) VS Comparison Companies (Great by Choice Study)


ANNEX 6 Final set of company who beat 10 times the market

(Great by Choice Study)

Final Set of Company Era of Study

Value of $10.000

Invested*

Performance Relative to

Market

Performance Relative to

Industry

Amgen 1980-2002 $4.5 million 24.0X the

market 77.2X its industry

Biomet 1977-2002 $3.4 million 18.1X the market

11.2X its industry

Intel 1968-2002 $3.9 million 20.7X the market

46.3X its industry

Microsoft 1975-2002 $10.6 million 56.0X the market

118.8X its industry

Progressive Assurance 1965-2002 $2.7 million 14.6X the

market 11.3X its industry

Southwest Airlines

1967-2002 $12.0 million 63.4X the market

550.4X its industry

Stryker 1977-2002 $5.3 million 28.0X the market

10.9X its industry

Cumulative stock returns, dividends reinvested. Invest $10.000 in each company on December 31, 1972, and hold until December 31, 2002; if the company was not public on December 31, 1972, grow investment at general stock market rate of return until first month of CRSP data available for that company. Source for all stock-return calculations in this work: ©200601CRSP®, Center for Research in Security prices. Booth School of Business, The University of Chicago. Used with permission. All rights reserved. http://www.crsp.chicagobooth.edu.


ANNEX 7 Good luck events


Companies Number of Years Coded*

Number of Good Luck Events

Number of Good Luck Events per

Decade

10X Had More Good

Luck Events?

10X COMP 10X COMP 10X COMP Amgen VS Genentech 23 27 10 18 4.3 6.7 Fewer

Biomet VS Kirschner

26 9 4 4 1.5 4.4 Fewer

Intel VS AMD

35 34 7 8 2 2.4 Similar

Microsoft VS Apple 28 27 15 14 5.4 5.2 Similar

Progressive VS Safeco 32 32 3 1 0.9 0.3 More

Southwest Airlines VS

PSA 36 43 8 6 2.2 1.4 More

Stryker VS USSC 26 31 2 5 0.8 1.6 Fewer

Average 29.4 29 7 8 2.4 3.1 Similar / Fewer

Total 206 203 49 56

N=105 good luck events 10X = Companies who beat 10 times the General Market COMP = Comparison Companies *From company founding to 2002


ANNEX 8 Bad luck events


Companies Number of Years Coded*

Number of Good Luck Events

Number of Good Luck Events per

Decade

10X Had More Good

Luck Events?

10X COMP 10X COMP 10X COMP Amgen VS Genentech 23 27 9 9 3.9 3.3 Fewer

Biomet VS Kirschner

26 9 7 4 2.7 4.4 More

Intel VS AMD

35 34 14 11 4.0 3.2 Fewer

Microsoft VS Apple 28 27 9 7 3.2 2.6 Fewer

Progressive VS Safeco 32 32 8 10 2.5 3.1 More

Southwest Airlines VS

PSA 36 43 13 13 3.6 3.0 Fewer

Stryker VS USSC 26 31 5 6 1.9 1.9 Same

Average 29.4 29 9.3 8.6 3.2 3.1 Similar

Total 206 203 65 60

N=125 good luck events 10X = Companies who beat 10 times the General Market COMP = Comparison Companies *From company founding to 2002.


ANNEX 9 Teledyne and the genius Singleton



ANNEX 10 Successful Acquisitions:

Great companies VS Comparison Companies (Good to Great Study)

Companies Total Number of

Acquisitions during Era Studied

Total Number of Divestitures during

Era Studied

Overall Success Rate of Acquisitions

Strategy

VS Abbott 21 5 +2 Upjohn 25 7 NA

VS Circuit City 1 0 +3

Silo 4 0 -1

VS Fannie Mae 0 0 +3

Great Western 21 3 -1

VS Gillette 39 20 +3

Warner-Lambert 32 12 -1

VS Kimberly-Clark 22 18 +2

Scott Paper 18 24 -2

VS Kroger 11 9 +2 A&P 14 4 -3

VS Nucor 2 3 +3

Bethlehem Steel 10 23 -3

VS Philip Morris 55 19 +1 R.J.Reynolds 36 29 -3

VS Pitney Bowes 17 8 +1

Addressograph 19 9 -3

VS Walgreens 11 8 +3

Eckerd 22 9 -1

VS Wells Fargo 17 6 +3

Bank of Americo 22 13 -1


ANNEX 11 Archie Norman maiden speech quote

ANNEX 12 Visions VS Strategies VS Plans VS Actions


ANNEX 13 Visionary Companies VS Comparison Companies

(Built to Last)


ANNEX 14 Communication on the vision: Great Companies VS Comparison Companies

(Built to Last)

High communication (H = score 3): Significant evidence that the company stated an ideology (core values and/or purpose as per our definitions) with the intent to use the ideology as a source of guidance. Evidence that key members of the company spoke and/or wrote about the ideology more than a few times and that the ideology was communicated widely to people throughout the organization. Medium communication (M = score 2): Some evidence that the company stated an ideology (core values and/or purpose as per our definitions) with the intent to use the ideology as a source of guidance. Some evidence that key members of the company spoke and/or wrote about the ideology, but perhaps only once or a few times, and some evidence that the ideology was communicated to people in the organization, but less than those that received an “H” on this dimension. Low communication (L= score 1): Little or no evidence that the company made any serious attempt to clarify and declare an ideology (core values and/or purpose as per our definitions).

Great Companies Index Score

Difference Index Score

Comparison Companies

3M 3 +1 2 Norton American Express 2 0 2 Wells Fargo

Boeing 3 +1 2 McDonell Douglas Citicorp 2 0 2 Chase Manhattan

Ford 3 +1 2 GM General Electric 3 +1 2 Westing-house Hewlett-Packard 3 +1 2 Texas instruments

IBM 3 +2 1 Burroughs Johnson & Johnson 3 +1 2 Bristol-Myers Squibb

Marriott 3 +1 2 Howard Johnson Merck 3 +1 2 Pfizer

Motorola 3 +1 2 Zenith Nord-Storm 3 +1 2 Melville

Philip Morris 2 0 2 RJR Nabisco Procter & Gamble 3 0 3 Colgate

Sony 3 +1 2 Kenwood Wal-Mart 2 +1 1 Ames

Walt Disney 3 +2 1 Columbia Total 60 16 34


ANNEX 15 Economic Boom (Great by Choice)

ANNEX 16

Economic Recession (Great by Choice)


ANNEX 17 End of Recession (Great by Choice)

ANNEX 18 Southwest Airlines Stepwise Performance (Great by Choice)


ANNEX 19 Southwest Airlines Opportunities (Great by Choice)

ANNEX 20

Southwest Airlines Stock Returns (Great by Choice)

Thesis Colin de Rivas

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