Confronting Reality

“Doing What Matters to get Things Right”

The authors are famous in their own right, but they also co-authored Execution , a best seller you may have already read.

Confronting Reality is an important contribution for running a business in the global economy. Bossidy and Charan show us how to use the business model to develop a robust, reality-based process for thinking about your business in a holistic way. Here is the business model that needs to be customized for your business.

The business model starts with the financial target you want to achieve. We have to distinguish the qualitative elements and have the savvy to determine the relationship of all the components. Our business model needs to be dynamic.

Assessing the external realities is a broad look at the business environment such as: competitors, economics, demographics, technology, regulatory issues, structure and cyclical change.

Assessing the internal activities should only occur after we crystallize the realities of the external environment and choose the set of financial targets. The strategy must not be developed by an isolated few executives, but must have a comprehensive financial expression of the environment that is founded in reality. There can be no wishful thinking. By asking ourselves the tough questions we can get much closer to the right strategy for our business cycle. Simple and clear answers allow us to test the validity of our strategies.

Multiple iterations will reveal if our business model is obsolete or vibrant. The model must be revisited regularly as circumstances change. Iteration is how you put different pieces into the mix until you get solutions that harmonize the model. The process of iteration is where you make trade offs.The company structure is at the root of what typically is not changed until it is too late. Cutting costs and consolidating don’t solve fundamental problems. Detroit highlights the biggest issues around the structure in U. S. business.

In pursuit of reality the business model starts asking questions such as:
- Is there growth in your industry?
- Is the growth profitable?
- Are products being commoditized?
- Is the structure defective?
- How do customers view your products?
- Where is technology going?
- How does your talent compare to competitors?
- Do you have legacy costs that can sabotage you?
- How do you stand, without bias?

We must seek the hard, cold truth to deal with what’s really happening to our business. We must see the fundamentals and address them in an honest manner that leaves us vulnerable. Then, we must work on the fundamentals that will change the business to relate to current market reality and trends.

The authors have many, many examples of business leaders succeeding and failing in their quest to turn around or sustain continued growth. Turning business issues into opportunities frequently takes a very uncomfortable, gutsy and courageous leader to challenge conventional thinking, make unpopular changes and be persistent in doing what’s right. Leaders must get their egos out of the way to look at reality, confront the truth and take actions that are uncomfortable to many people in the company.

We need to look around corners, see the reality of what the future holds and have a strong commitment to “know where the puck is going”. Make the necessary changes based on what we perceive or we risk being overtaken, out-competed and obsolete. We can’t rely on conventional wisdom. This is when we rely on past solutions and listen to like-minded people. Conventional wisdom is one of the greatest challenges to realistic thinking.