﻿ ﻿Notes - Good to Great: Why Some Companies Make the Leap... and Others Don't - Jim Collins

# Good to Great: Why Some Companies Make the Leap... and Others Don't, 1st Edition Hardcover - Jim Collins (2001)

### Notes

The pagination of this electronic edition does not match the edition from which it was created. To locate a specific passage, please use the search feature of your e-book reader.

CHAPTER 1

1. Beryl Markham, West with the Night (San Francisco: North Point Press, 1983), 25.

2. Stock return calculations in this book were determined using data from the University of Chicago Center for Research in Security Prices (CRSP).

Key definitions:

Monthly Total Return: The total return to shareholders in a given month, including dividends reinvested, for an individual security.

Cumulative Stock Return: The compounded value of \$Y invested in an individual security between times t1 and t2, using the formula: \$Y [.dotmath] (1 + Monthly Total Return @ m1) × (1 + Monthly Total Return @ m2) × ... (1 + Monthly Total Return @ t2); where m1 = end of the first month following t1, m2 = end of the second month following t1, and so forth.

General Stock Market (also called the General Market or just the Market): NYSE/AMEX/NASDAQ value-weighted return, which consists of the combined market value of all companies traded on these exchanges (including dividends reinvested) weighted by the capitalization of the company divided by the capitalization of the market.

Cumulative Return Ratio to the Market: At the end of any given time, this ratio is calculated as the cumulative return of \$Y invested in the company divided by the cumulative return of \$Y invested in the general stock market, where the \$Y is invested in both the company and the market on the same date.

Transition Date (for good-to-great companies): The precise transition date for a good-to-great company is the date when the company’s performance—in terms of cumulative stock returns relative to the general stock market—turns upward after a period of market to below-market performance, and never again falls below this point.

3. Using University of Chicago Center for Research in Security Prices data, cumulative returns were calculated from December 31, 1984, to December 31, 1999, for GE and the general market, all dividends reinvested, adjusted for stock splits.

4. The chart on page 2 was created using the following methodology:

1. For each good-to-great company, invest \$1 at the transition date minus 15 years. Also invest \$1 in the general market. Calculate the cumulative stock return of \$1 invested at the transition date minus 15 years through the transition date plus 15 years for the good-to-great company and the general market. In the case of CRSP data not being available (usually because the company was not yet publicly traded, merged, or was acquired), use market returns in lieu of company returns.

2. For each good-to-great company, calculate the ratio of cumulative stock returns to the general market from t — 15 to t + 15 to create a “ratio of cumulative returns” curve.

3. Shift this “ratio of cumulative returns curve” for each good-to-great company such that at the transition date, the ratio of cumulative stock returns to the market equals precisely 1. This shifts the transition dates for all the good-to-great companies to a common reference point—time t. Do this by dividing the ratio of cumulative stock returns to the market at each month (calculated in step 2) from t — 15 to t + 15 by the ratio of the cumulative stock return number calculated at precisely the transition date.

4. Use these shifted returns to calculate the average ratio of cumulative stock returns to the market across all eleven good-to-great companies at each month t — 15 to t + 15. In other words, calculate the average of the calculation in step 3 at t — 15 across all eleven companies, then t — 15 plus 1 month for all eleven companies, plus 2 months, and so forth, for all 360 months. This creates the combined, cumulative returns relative to the market curve for the good-to-great companies.

5. For each direct comparison company, repeat steps 1-3 above, using the same dates for the direct comparison company as for its counterpart good-to-great company.

6. For the direct comparison companies as a set, repeat step 4 above.

7. This chart shows the good-to-great companies versus the direct comparison companies, cumulative returns ratio to the market, t — 15 to t + 15, with t as a common reference point where the ratio to the market is set to 1.0.

The chart on page 4 was created using the following methodology:

1. For each good-to-great company, invest \$1 on December 31, 1964 (the date of the first transition in our study).

2. For each good-to-great company, calculate cumulative stock returns at the market rate of return through the transition-date month, then switch over to using returns from the good-to-great company. For any missing CRSP data (usually because the company was not yet publicly traded, merged, or was acquired), use the market rate of return in lieu of company returns.

3. For each month from December 31, 1964, through December 31, 1999, add the cumulative returns across all eleven companies and divide by 11. This gives the cumulative return of \$1 invested in the entire set.

4. For the general market, invest \$1 on December 31, 1964, and carry through December 31, 1999.

5. For each direct comparison company repeat steps 1-3, holding the company at the market rate until the date of transition for the corresponding good-to-great company. Notes: RJR held at market rate from May 31, 1989, to December 31, 1999, as the company emerged from its LBO in different pieces (RJR and Nabisco).

6. This chart shows the market versus the comparison companies versus the good-to-great companies, the value of \$1 invested from December 31, 1964, to year 2000.

CHAPTER 2

1. David McCullough, Truman (New York: Simon & Schuster, 1992), 564.

2. Robert Spector, based on research and a manuscript by William W. Wicks, Shared Values: A History of Kimberly-Clark (Connecticut: Greenwich Publishing Group, 1997), 101.

3. “Darwin Smith May Have Done Too Good a Job,” Business Week, August 1, 1988, 57; “Rae Takes On the Paper Industry’s Tough Lone Wolf,” Globe and Mail, July 20, 1991; “Former CEO of K-C Dies,” Dallas Morning News, December 27, 1995, 1D.

4. Research Interview #5-E, page 26.

5. Research Interview #5-E, page 26.

6. “Darwin Smith May Have Done Too Good a Job,” Business Week, August 1, 1988, 57.

7. “Darwin Smith May Have Done Too Good a Job,” Business Week, August 1, 1988, 57; “Kimberly-Clark Bets, Wins on Innovation,” Wall Street Journal, November 22, 1991, A5; “Darwin E. Smith, 69, Executive Who Remade a Paper Company,” New York Times, December 28, 1995, B9; Robert Spector, based on research and a manuscript by William W. Wicks, Shared Values: A History of Kimberly-Clark (Connecticut: Greenwich Publishing Group, 1997), 101.

8. Robert Spector, based on research and a manuscript by William W. Wicks, Shared Values: A History of Kimberly-Clark (Connecticut: Greenwich Publishing Group, 1997), 112.

9. International Directory of Company Histories, vol. 3 (Chicago: St. James Press, 1991), 40; “Kimberly-Clark—Aiming for the Consumer,” Financial World, April 1, 1970, 15.

10. Robert Spector, based on research and a manuscript by William W. Wicks, Shared Values: A History of Kimberly-Clark (Connecticut: Greenwich Publishing Group, 1997), 106, 112; “Darwin E. Smith, 69, Executive Who Remade a Paper Company,” New York Times, December 28, 1995, B9; “Former CEO of K-C Dies,” Dallas Morning News, December 27, 1995, 1D; Research Interview #5-E, page 6; “Paper Tiger: How Kimberly-Clark Wraps Its Bottom Line in Disposable Huggies,” Wall Street Journal, July 23, 1987, 1.

11. “The Battle of the Bottoms,” Forbes, March 24, 1997, 98.

12. “The Battle of the Bottoms,” Forbes, March 24, 1997, 98.

13. Robert Spector, based on research and a manuscript by William W. Wicks, Shared Values: A History of Kimberly-Clark (Connecticut: Greenwich Publishing Group, 1997), 10.

14. Shelby Foote, The Civil War: A Narrative: Red River to Appomattox (New York: Random House, 1975), 1040; James M. McPherson, Battle Cry of Freedom: The Civil War Era (New York: Ballantine Books, 1989), 854.

15. Gordon McKibben, Cutting Edge: Gillette’s Journey to Global Leadership (Boston: Harvard Business School Press, 1998), 14.

16. Company “Chronology,” Gillette corporate typescript, 1995; Gordon McKibben, Cutting Edge: Gillette’s Journey to Global Leadership (Boston: Harvard Business School Press, 1998), 198, 199; Rita Ricardo-Campbell, Resisting Hostile Takeovers: The Case of Gillette(Connecticut: Praeger Publishers, 1997), 153.

17. Gordon McKibben, Cutting Edge: Gillette’s Journey to Global Leadership (Boston: Harvard Business School Press, 1998), 159.

18. Rita Ricardo-Campbell, Resisting Hostile Takeovers: The Case of Gillette (Connecticut: Praeger Publishers, 1997).

19. Author conversation with Gillette CEO, summer 2000. “We invested almost \$1.5 billion in Sensor and Mach3. We believed that these projects would have been scrapped had the takeover happened.”

20. Gordon McKibben, Cutting Edge: Gillette’s Journey to Global Leadership (Boston: Harvard Business School Press, 1998), 158. Calculations run using CRSP data.

21. Gordon McKibben, Cutting Edge: Gillette’s Journey to Global Leadership (Boston: Harvard Business School Press, 1998), 254.

22. “Maxwell Relinquishes Rights to \$5.5 Million Final Retirement Payment,” PR Newswire, January 21, 1992; “\$5.5 Million Declined by ExOfficial,” Washington Post, January 22, 1992, F1.

23. “Iacocca’s Last Stand,” Fortune, April 20, 1992, 63.

24. “Sincere Tyranny,” Forbes, January 28, 1985, 54.

25. “Managing: Leaders of Corporate Change,” Fortune, December 14, 1992, 104.

26. “Chairman Quits Post,” New York Times, November 17, 1992, D5; “Rubbermaid’s Sad Succession Tale,” New York Times, July 5, 1987, C1.

27. “Is Rubbermaid Reacting Too Late?” New York Times, December 22, 1996, A1.

28. Research Interview #7-D, page 17.

29. Chris Jones and Duane Duffy, “Media Hype Analysis” (unpublished), Good to Great research project, summers 1998, 1999.

30. “Did CEO Dunlap Save Scott Paper—or Just Pretty It Up? The Shredder,” Business Week, January 15,1996.

31. “Did CEO Dunlap Save Scott Paper—or Just Pretty It Up? The Shredder,” Business Week, January 15, 1996; “Chain Saw A1 to the Rescue?” Forbes, August 26, 1996; “After the Fall,” Across the Board, April 1996, 28-33; “Only the Paranoid Survive,” Worth Online, October 1996; Albert J. Dunlap with Bob Andelman, Mean Business: How I Save Bad Companies and Make Good Companies Great (New York: Fireside, 1997),20.

32. Albert J. Dunlap with Bob Andelman, Mean Business: How I Save Bad Companies and Make Good Companies Great (New York: Fireside, 1997),132.

33. The cases where a charismatic CEO eventually became a liability for the company were Great Western, Warner-Lambert, Scott Paper, Bethlehem Steel, R. J. Reynolds, Addressograph-Multigraph, Eckerd, Bank of America, Burroughs, Chrysler, Rubbermaid, and Teledyne.

34. “President Iacocca,” Wall Street Journal, July 28, 1982, 1; “Iacocca Hands Over the Keys to Chrysler,” Investor’s Business Daily, January 4, 1993,1.

35. “Iacocca Hands Over the Keys to Chrysler,” Investor’s Business Daily, January 4, 1993,1.

36. “How Chrysler Filled Detroit’s Biggest Shoes,” Wall Street Journal, September 7, 1994, B1.

37. “Why Certain Stocks,” Wall Street Journal, April 13, 1995, A1; “Chrysler’s New Plan: Sell Cars,” Fortune, June 26, 1995,19.

38. “Will Success Spoil Chrysler?” Fortune, January 10, 1994; “Company of the Year: Chrysler Has the Hot Cars. More Important, It Has a Smart, Disciplined Management Team,” Forbes, January 13, 1997, 82; “Daimler-Benz Will Acquire Chrysler in \$36 Billion Deal That Will Reshape Industry,” New York Times, May 7, 1998, A6.

39. Research Interview #1-A, page 3; Research Interview #1-G, page 35; “A Drugmaker’s Return to Health,” Business Week, April 26, 1976, 38; Herman Kogan, The Long White Line: The Story of Abbott Laboratories (New York: Random House, 1963),249.

40. The Upjohn Company, International Directory of Company Histories, 707; “The Medicine Men of Kalamazoo,” Fortune, July 1959,106.

41. Leigh Wilbanks, “CEO Analysis Unit” (unpublished), Good to Great research project, summer1998.

42. University of Chicago Center for Research in Securities Prices data, all dividends reinvested and adjusted for stock splits.

43. Research Interview #10-D, pages 9-10.

44. Herman Kogan and Rick Kogan, Pharmacist to the Nation (Deerfield, Ill.: Walgreens Company, 1989), 236; Research Interview #10-F, page 3.

45. Research Interview #2-G, page10.

46. University of Chicago Center for Research in Securities Prices data, all dividends reinvested and adjusted for stock splits.

47. Research Interview #2-G, page16.

48. Research Interview #7-H, page12.

49. Research Interview #8-A, pages 4-5, 9,10.

50. Joseph F. Cullman 3d, I’m a Lucky Guy (Joseph F. Cullman 3d, 1998),1.

51. “Searching for Profits at Bethlehem,” New York Times, December 25, 1983, C1.

52. “Steel Man Ken Iverson,” Inc., April 1, 1986,40.

53. Jeffrey L. Rodengen, The Legend of the Nucor Corporation (Fort Lauderdale, Fla.: Write Stuff Enterprises, 1997),71.

54. Joseph F. Cullman 3d, I’m a Lucky Guy (Joseph F. Cullman 3d, 1998).

55. Gordon McKibben, Cutting Edge: Gillette’s Journey to Global Leadership (Boston: Harvard Business School Press, 1998), 78-79.

CHAPTER 3

1. Tom Wolfe, The Electric Kool-Aid Acid Test (New York: Bantam, 1999),83.

2. Warren Buffett, The Essays of Warren Buffett: Lessons for Corporate America, selected, arranged, and introduced by Lawrence A. Cunningham (Lawrence A. Cunningham, Benjamin N. Cardozo School of Law, Yeshiva University, 1998),97.

3. Research Interview #11-B, page5.

4. Duane Duffy, “Industry Analysis Unit” (unpublished), Good to Great research project, summer 1998, CRSP financial data analysis.

5. Research Interview #11-H, page 5; “A Banker Even Keynes Might Love,” Forbes, July 2, 1984,40.

6. Research Interview #11-F, pages 1-2,5.

7. Research Interview #11-H, pages 15,20.

8. Gary Hector, Breaking the Bank: The Decline of BankAmerica (Little, Brown & Company, 1988),145.

9. “Big Quarterly Deficit Stuns BankAmerica,” Wall Street Journal, July 18, 1985, A1.

10. Gary Hector, Breaking the Bank: The Decline of BankAmerica (Little, Brown & Company, 1988), 73, 143; “Big Quarterly Deficit Stuns Bank-America,” Wall Street Journal, July 18, 1985, A1; “Autocrat Tom Clausen,” Wall Street Journal, October 17, 1986, 1; further confirmed in conversation between Jim Collins and two former Bank of America executives, July-August2000.

11. “Combat Banking,” Wall Street Journal, October 2, 1989, A1.

12. Research Interview #3-I, page7.

13. Research Interview #3-I, pages 3-14.

14. Research Interview #3-I, page7.

15. Research Interview #3-I, pages 3,15.

16. Research Interview #3-A, page13.

17. Research Interview #3-D, page6.

18. “Eckerd Ad Message: Tailored to Fit,” Chainstore Age Executive, May 1988, 242; “Heard on the Street,” Wall Street Journal, January 21, 1964, B25; “Jack Eckerd Resigns as Chief Executive,” Wall Street Journal, July 24, 1974, 17; “J. C. Penney Gets Eckerd Shares,” Wall Street Journal, December 18, 1996, B10; “J. C. Penney Has Seen the Future,” Kiplinger’s Personal Finance Magazine, February 1, 1997,28.

19. Research Interview #10-E, page16.

20. “Tuning In,” Forbes, April 13, 1981, 96; “Video Follies,” Forbes, November 5, 1984, 43; Research Interview #10-F, page10.

21. “The Forbes Four Hundred,” Forbes, October 17, 1994,200.

22. International Directory of Company Histories, vol. 10 (Chicago: St. James Press, 1995),520.

23. International Directory of Company Histories, vol. 10 (Chicago: St. James Press, 1995); “Making Big Waves with Small Fish,” Business Week, December 30, 1967,36.

24. “The Sphinx Speaks,” Forbes, February 20, 1978,33.

25. “The Singular Henry Singleton,” Forbes, July 9, 1979,45.

26. Scott Jones, “Executive Compensation Analysis Unit” (unpublished), Good to Great research project, summer1999.

27. Jim Collins, “Summary Changes in Compensation Analysis, Summary Notes #5" (unpublished), Good to Great research project, summer1999.

28. “Nucor Gets Loan,” Wall Street Journal, March 3, 1972, 11; “Nucor’s Big-Buck Incentives,” Business Week, September 21, 1981,42.

29. “A New Philosophy,” Winston-Salem Journal, March 21, 1993; “Changing the Rules of the Game,” Planning Review, September/October 1993,9.

30. “How Nucor Crawfordsville Works,” Iron Age New Steel, December 1995, 36-52.

31. “A New Philosophy,” Winston-Salem Journal, March 21,1993.

32. “Nucor Gets Loan,” Wall Street Journal, March 3, 1972, B11.

33. Research Interview #9-F, page29.

34. Joseph F. Cullman 3d, I’m a Lucky Guy (Joseph F. Cullman 3d, 1998),82.

35. “Bold Banker: Wells Fargo Takeover of Crocker Is Yielding Profit but Some Pain,” Wall Street Journal, August 5, 1986, A1.

36. “Bold Banker: Wells Fargo Takeover of Crocker Is Yielding Profit but Some Pain,” Wall Street Journal, August 5, 1986, A1.

37. Research Interview #11-G, page 10; Research Interview #11-A, page 29; Research Interview #11-F, page 11; “Bold Banker: Wells Fargo Takeover of Crocker Is Yielding Profit but Some Pain,” Wall Street Journal, August 5, 1986, A1.

38. “Boot Camp for Bankers,” Forbes, July 23, 1990,273.

39. Research Interview #11-H, pages 10-11.

40. Chris Jones and Duane Duffy, “Layoffs Analysis” (unpublished), Good to Great research project, summers 1998 and1999.

41. “Wells Buys Crocker in Biggest U.S. Bank Merger,” American Banker, February 10, 1986, 39; “Wells Fargo Takeover of Crocker Is Yielding Profit but Some Pain,” Wall Street Journal, August 5, 1986, A1; “A California Bank That Is Anything but Laid Back,” Business Week, April 2, 1990,95.

42. Chris Jones and Duane Duffy, “Layoffs Analysis” (unpublished), Good to Great research project, summers 1998 and1999.

43. Research Interview #2-A, pages 1,11.

44. “Industry Fragmentation Spells Opportunity for Appliance Retailer,” Investment Dealers’ Digest, October 12, 1971,23.

45. “Circuit City: Paying Close Attention to Its People,” Consumer Electronics, June 1988,36.

46. Research Interview #2-D, pages 1-2.

47. “Dixons Makes \$384 Million U.S. Bid,” Financial Times, February 18, 1987, 1; “UK Electronics Chain Maps US Strategy; Dixons Moving to Acquire Silo,” HFDthe Weekly Home Furnishing Newspaper, March 2, 1987; “Dixons Tightens Grip on Silo,” HFD—the Weekly Home Furnishings Newspaper, February 3, 1992,77.

48. Eric Hagen, “Executive Churn Analysis” (unpublished), Good to Great research project, summer1999.

49. “Gillette: The Patient Honing of Gillette,” Forbes, February 16, 1981, 83-87.

50. “When Marketing Takes Over at R. J. Reynolds,” Business Week, November 13, 1978, 82; “Tar Wars,” Forbes, November 10, 1980, 190; Bryan Burrough and John Helyar, Barbarians at the Gate (New York: Harper-Collins, 1991),51.

51. Research Interview #8-D, page7.

52. “The George Weissman Road Show,” Forbes, November 10, 1980,179.

53. Joseph F. Cullman 3d, I’m a Lucky Guy (Joseph F. Cullman 3d, 1998),120.

54. Research Interview #5-B, page8.

55. Research Interview #5-A, page7.

56. “How Do Tobacco Executives Live with Themselves?” New York Times Magazine, March 20, 1994,40.

57. Research Interview #8-B, page5.

58. Gordon McKibben, Cutting Edge: Gillette’s Journey to Global Leadership (Boston: Harvard Business School Press, 1998),256.

59. Joseph F. Cullman 3d, I’m a Lucky Guy (Joseph F. Cullman 3d, 1998),149.

60. Research Interview #5-A, page 10.

CHAPTER 4

1. Winston S. Churchill, The Hinge of Fate (Boston: Houghton Mifflin, 1950),61.

2. “Hermit Kingdom,” Wall Street Journal, December 12, 1958, A1; William I. Walsh, The Rise and Decline of the Great Atlantic and Pacific Tea Company (New Jersey: Lyle Stuart, Inc., 1986), . Walsh states that A&P had sales of \$3.2 billion in 1950 and was the largest privately owned company and the largest retail organization in the world. Its sales volume exceeded that of U.S. Steel and Standard Oil and was second only to General Motors in total sales volume for corporations of any kind.

3. “Hermit Kingdom,” Wall Street Journal, December 12, 1958, A1.

4. “We Should Have Moved a Lot Sooner,” Forbes, May 15, 1976,99.

5. William I. Walsh, The Rise and Decline of the Great Atlantic and Pacific Tea Company (Lyle Stuart, Inc., 1986), 78-80; Fortune, March 1963,105.

6. “We Should Have Moved a Lot Sooner,” Forbes, May 15, 1976, 99; “A&P’s Ploy: Cutting Prices to Turn a Profit,” Business Week, May 20, 1972, 76; Fortune, March 1963,105.

7. “Ailing A&P,” Wall Street Journal, April 21, 1964, A1.

8. William I. Walsh, The Rise and Decline of the Great Atlantic and Pacific Tea Company (Lyle Stuart, Inc., 1986), 103-105.

9. “A&P’s Ploy: Cutting Prices to Turn a Profit,” Business Week, May 20, 1972, 76; “A&P’s ‘Price War’ Bites Broadly and Deeply,” Business Week, September 30, 1972, 56; “Banking Against A&P,” Time, December 11, 1972, 108; “How A&P Got Creamed,” Fortune, January 1973, 103; “A&P Counts the Cost of Its Pyrrhic Victory,” Business Week, April 28, 1973,117.

10. “Stumbling Giant,” Wall Street Journal, January 10, 1978, A1.

11. “Shifting Gears: A&P’s Price-Cutting Didn’t Create Kroger’s Problems...” Forbes, November 1, 1972, 29; “Superstores May Suit Customers to a T-shirt or a T-bone,” Wall Street Journal, March 13, 1973, A1; “Plain and Fancy: Supermarket Boutiques Spur Kroger’s Gains,” Barron’s, May 25, 1981, 37; “250,000 Unpaid Consultants,” Forbes, September 14, 1981,147.

12. Research Interview #6-C, page6.

13. “Kroger and Fred Meyer Merge to Create No. 1 U.S. Grocery Biz,” Discount Store News, May 3, 1999,1.

14. “Trouble Stalks the Aisles at A&P,” Business Week, September 23, 1991,60.

15. “Pitney Bowes’ Pep,” Financial World, April 11, 1962, 22; “No Middle Ground,” Forbes, January 1, 1961,75.

16. Moody’s Industrial Manual2000.

17. “Roy Ash Is Having Fun at Addressogrief-Multigrief,” Fortune, February 27, 1978, 46; “How Roy Ash Got Burned,” Fortune, April 6, 1981, 71.

18. “Up from the Ashes,” Forbes, April 16, 1979, 104; “AM International: The Cash Bind That Threatens a Turnaround,” Business Week, August 18, 1980, 118; “Ash Forced out of Two AM Posts,” New York Times, February 24, 1981, D1.

19. “Why Ash Was Ousted at AM International,” Business Week, March 9, 1981, 32; “Roy Ash Resigns under Fire,” Fortune, March 23, 1981, 16; “How Roy Ash Got Burned,” Fortune, April 6, 1981, 71; “Up from the Ashes,” Forbes, April 16, 1979, 104; “AM Files Chapter 11,” New York Times, April 15, 1982, D1.

20. “When Technology Was Not Enough,” Business Week, January 25, 1982, 62; “How Roy Ash Got Burned,” Fortune, April 6, 1981, 71; “AM International: The Cash Bind That Threatens a Turnaround,” Business Week, August 18, 1980,118.

21. “When Technology Was Not Enough,” Business Week, January 25, 1982, 62; “AM’s Brightest Years Now Dim Memories,” New York Times, April 15, 1982, D1.

22. “How Roy Ash Got Burned,” Fortune, April 6, 1981, 71; “High-Technology Dream Turns into a Nightmare,” Financial Times, March 2, 1982,17.

23. “AM International: The Cash Bind That Threatens a Turnaround,” Business Week, August 18, 1980, 118; “The Unflappable Roy Ash,” Forbes, December 8, 1980,38.

24. “AM International: The Cash Bind That Threatens a Turnaround,” Business Week, August 18, 1980, 118; “Ash Forced Out of Two AM Posts,” New York Times, February 24, 1981, D1; “When Technology Was Not Enough,” Business Week, January 25, 1982,62.

25. Research Interview #9-G, page12.

26. Research Interview #9-E, page11.

27. Research Interview #9-C, page17.

28. Research Interview #9-G, page12.

29. Research Interview #9-I, page21.

30. Research Interview #9-C, page 20; #9-I, pages 21-22; #9-D, page11.

31. Winston S. Churchill, The Grand Alliance (Boston: Houghton Mifflin, 1950),371.

32. Churchill created this special unit and put a lot of weight on it. According to Martin Gilbert, Churchill frequently consulted his Statistical Office, which was headed by a civilian, Professor Lindemenn, before he made critical decisions. He directly and continuously asked them to “check facts” on such important topics as munitions production, imports and shipping losses, aircraft losses, and aircraft production. Martin Gilbert, The Churchill War Papers, vol. 2 (New York: W. W. Norton, 1995), xvii.

33. Winston S. Churchill, The Gathering Storm (Boston: Houghton Mifflin, 1948),667.

34. Research Interview, #2-C, page 16.

35. “Man of Steel: Correnti Hopes to Take Nucor to No. 1,” Business Journal-Charlotte, September 19, 1994,3.

36. Standard & Poor’s Industry Survey Database, Metals: Industrial, Iron and Steel, January 18, 2001, Leo J. Larkin, metals analyst.

37. Research Interview #7-C, page13.

38. Research Interview #7-E, page 7; Jeffrey L. Rodengen, The Legend of Nucor (Fort Lauderdale, Fla.: Write Stuff, 1997),45.

39. Jeffrey L. Rodengen, The Legend of Nucor (Fort Lauderdale, Fla.: Write Stuff, 1997),39.

40. Research Interview #7-A, page3.

41. Joseph F. Cullman 3d, I’m a Lucky Guy (Joseph F. Cullman 3d, 1998), 144; Richard Kluger, Ashes to Ashes (New York: Alfred A. Knopf. 1996), 485; “Beverage Management: Risky—but Straight Up 7UP,” Forbes, April 12, 1982, 208; “Coke Peppers 7UP and Pepsi,” Advertising Age, February 24, 1986, 2,86.

42. Joseph F. Cullman 3d, I’m a Lucky Guy (Joseph F. Cullman 3d, 1998),147.

43. John Strohmeyer, Crisis in Bethlehem (Pittsburgh: University of Pittsburgh Press, 1986), 72-73; “The Labors of Trautlein,” Forbes, February 15, 1981, 36; “Bethlehem’s Thin Slab Yawn,” American Metal Market, November 17, 1989, 4; “Bethlehem Museum,” National Public Radio transcript, July 5,1998.

44. “Upjohn: Safety of Upjohn’s Oral Antidiabetic Drug Doubted in Study; Firm Disputes Finding,” Wall Street Journal, May 21, 1970, A6; “Upjohn: A Bitter Pill for Upjohn Shareholders (Drug Company Involved in Antibiotic Controversy),” Financial World, January 23, 1974, 28; “Upjohn: The Upjohn Company: Presentation by R. T. Parfet, Jr., Chairman of the Board and Chief Executive Officer, and L. C. Hoff, Vice President and General Manager, Pharmaceutical Division, to the Security Analysts of San Francisco, September 11, 1975,” Wall Street Transcript, October 13, 1975, 41648-41650; “Upjohn: Hair-Raising Happenings at Upjohn (Testing a Cure for Baldness, the Company Squirms at the Unwelcome Clamor),” Fortune, April 6, 1981, 67-69; “Upjohn: FDA Says Upjohn Exaggerated Claims on Drug’s Value in Treating Baldness,” Wall Street Journal, June 18, 1986, A6; “Upjohn: Riptide: Can Upjohn Manage Its Way out of a Product Gap? If Not, It Could Be Swept into the Industry Merger Wave,” Financial World, September 5, 1989, 26-28; “Upjohn: The Corporation: Strategies: Will This Formula Cure What Ails Upjohn? As the Sharks Circle, It’s Spending Big on R&D and Marketing,” Business Week, September 18, 1989, 65; “Upjohn: Technology and Medicine: Upjohn Sleep Drug Being Investigated for Safety by FDA,” Wall Street Journal, September 20, 1984, B4; “Upjohn: Medicine: Halcion Takes Another Hit: Tainted Data Played a Key Role in FDA Approval,” Newsweek, February 17, 1992, 58; “Upjohn: Medicine: Fueling the Fire over Halcion: Upjohn’s Own Staff Has Raised Safety Concerns,” Newsweek, May 25, 1992, 84; “Upjohn: Top of the News: Successions: At Upjohn, a Grim Changing of the Guard: Ley Smith Inherits the Problem-Plagued Drugmaker at a Critical Juncture,” Business Week, May 3, 1993,36.

45. Research Interview #11-B, page7.

46. “No-Longer-So-Great Scott,” Forbes, August 1, 1972,25.

47. “Scott Paper Back on Its Feet,” Forbes, December 15, 1976, 69-70.

48. “Scott Isn’t Lumbering Anymore,” Fortune, September 30, 1985, 48-55.

49. “Scott Paper: Back on the Attack,” Financial World, August 1, 1979, 22-23; “A Paper Tiger Grows Claws,” Business Week, August 23, 1969, 100-102; “Outlook for 1970—Year-End Statement,” Paper Trade Journal, December 22, 1969, 33; “Profits Peak for Scott Paper,” Financial World, April 22, 1970, 13, 28; “No-Longer-So-Great Scott,” Forbes, August 1, 1972,25.

50. Research Interview #5-F, page2.

51. Research Interview #5-E, page22.

52. Research Interview #6-A, page19.

53. Ann Kaiser Stearns, Coming Back: Rebuilding Lives after Crisis and Loss (New York: Ballantine, 1988), 294. In her work, Stearns describes the findings of these studies, which we believe provide a scientific basis for understanding the effectiveness of the Stockdale Paradox. We were also influenced by the work of Mihaly Csikszentmihalyi. In his comprehensive investigation into the nature of happiness in the book Flow, Mihaly Csikszentmihalyi discusses the transformational potential of apparent tragedy, using as an example the studies of Professor Fausto Massimini of the University of Milan. In these studies, some paraplegics and other severely handicapped people asserted that their personal tragedies had actually resulted in a positive experience that led them to live fuller lives. (Mihaly Csikszentmihalyi, Flow [New York: HarperPerennial, 1990], 192-193.) For another viewpoint on this subject, also see the work of Dr. Al Siebert, who wrote The Survivor Personality—How Life’s Best Survivors Thrive in Difficult Situations and Convert Misfortune into Good Luck.

54. Fannie Mae got 9.3 percent for its mortgage portfolio but had to pay 14.63 percent for the short-term debt it issued. “David Maxwell Takes Over Troubled Fannie Mae,” Washington Post, May 21, 1981; “Fannie Mae Searches for Higher Ground,” Fortune, July 13, 1981,110.

55. “Fannie Mae Searches for Higher Ground,” Fortune, July 13, 1981,110.

56. “Fannie Mae Searches for Higher Ground,” Fortune, July 13, 1981,110.

57. Conversation with David Maxwell, November 14,1997.

58. Tim Brooks and Earle Marsh, The Complete Directory of Primetime Networks and Cable TV Shows (New York: Ballantine, 1999),929.

59. Jim and Sybil Stockdale, In Love and War (Maryland: Naval Institute Press, 1990); Stockdale Triumphs, video presentation—1994 Stanford Alumni Association (Stanford, Calif.).

CHAPTER 5

1. Plato attributed this pithy quote to the Scribes of Delphi in The Protagoras, 343B; Plato: The Protagoras and Meno Translated by W. K. C. Guthrie (New York and London: Penguin Classics, 1956),77.

2. Isaiah Berlin, The Hedgehog and the Fox (Chicago: Elephant Paperbacks, 1993).

3. Conversation with Marvin Bressler, October2000.

4. Research Interview #10-F, page3.

5. Research Interview #10-D, page22.

6. “Convenience with a Difference,” Forbes, June 11,1990.

7. Walgreens Annual Report 1998,16.

8. “Turning In,” Forbes, April 13, 1981,96.

9. “Tandy Agrees to Buy Assets of Eckerd Unit,” Wall Street Journal, July 5, 1985, A4.

10. Moody’s Industrial Subsidiary List (Mergent FIS, 2000).

11. Lawrence A. Cunningham and Warren E. Buffett, The Essays of Warren Buffett: Lessons for Corporate America (Cunningham Group, Benjamin N. Cardozo School of Law, Yeshiva University 1998),98.

12. “Warren Buffett’s Favorite Banker,” Forbes, October 18, 1993,46.

13. “Wells Fargo Targets Southern California,” American Banker, July 10, 1987, 1; “Wells Fargo to Cut Overseas Activities to Boost Its Profit,” Wall Street Journal, May 3, 1985, A32; “Wells Fargo Trims Its Sails,” American Banker, May 3, 1985, 2; “A Banker Even Keynes Might Love,” Forbes, July 2, 1984,42.

14. “BankAmerica Launches Probe,” Wall Street Journal, January 28, 1985, A27; “More Than Mortgages Ails BankAmerica,” Fortune, April 1, 1985, 50; “Big Quarterly Deficit Stuns BankAmerica,” Wall Street Journal, July 18, 1985, A1; “Sam Armacost’s Sea of Troubles,” Banker,September 1, 1985,18.

15. Research Interview #11-H, pages 5,13.

16. Research Interview #11-F, pages 5,11.

17. “Boot Camp for Bankers,” Forbes, July 23, 1990,273.

18. “Hospital Suppliers Strike Back,” New York Times, March 31, 1985, C1; The Abbott Almanac: 100 Years of Commitment to Quality Health Care (Elmsford, N.Y.: Benjamin Company), 1987, 170, 210; “Abbott: Profiting from Products That Cut Costs,” Business Week, June 18, 1984, 56; “In Medical Testing, Abbott Is the Name of the Game,” Business Week, June 1, 1987,90.

19. “Riptide: Can Upjohn Manage Its Way out of a Product Gap?” Financial World, September 5, 1989, 26; “Upjohn: The Corporation: Strategies: Will This Formula Cure What Ails Upjohn? As the Sharks Circle, It’s Spending Big on R&D and Marketing,” Business Week, September 18, 1989, 65.

20. “Riptide: Can Upjohn Manage Its Way out of a Product Gap?” Financial World, September 5, 1989,26.

21. “Upjohn: Mergers: Upjohn Finally Makes It to the Big Leagues: How CEO Zabriskie Engineered the Pharmacia Merger,” Business Week, September 4, 1995,35.

22. 1960 and 1961 Abbott Annual Reports.

23. “Hasbro May Alter Bid to Appease Tonka Holders,” London Financial Times, April 16, 1991, 26; “Tonka Says Yes to Hasbro,” London Financial Times, April 19, 1991,30.

24. “Tobacco: Profit Despite Attacks,” New York Times, January 25, 1979, D1.

25. James C. Collins and Jerry I. Porras, Built to Last (New York: Harper-Collins, 1997),86.

26. Bryan Burrough and John Helyar, Barbarians at the Gate (New York: HarperCollins, 1991).

27. Research Interview #5-A, page13.

28. “An Iconoclast in a Cutthroat World,” Chief Executive, March1996.

29. “Gillette Holds Its Edge by Endlessly Searching for a Better Shave,” Wall Street Journal, December 10, 1992, A1.

30. Research Interview #3-G, page7.

31. The comparison companies that displayed an obsession with growth were Bank of America, Addressograph-Multigraph, Eckerd, Great Western Financial, Silo, Upjohn, Warner-Lambert, Burroughs, Chrysler, Harris, Rubbermaid, and Teledyne.

32. “The Wall Street Transcript: Corporate Critics Confidential: Savings and Loan Industry,” Wall Street Journal, June 12, 1989, 93,903.

33. “How Playing It Safe Worked for Great Western,” Business Week, September 7, 1987,70.

34. “The Wall Street Transcript: Remarks by James F. Montgomery to the Boston Security Analysts Society, October 8, 1985,” Wall Street Transcript, December 23, 1985,80245.

35. In a letter to Carl Seelig, Einstein wrote, “Between the conception of the idea of Special Relativity and the completion of the corresponding publication, there elapsed five or six weeks. But it would be hardly correct to consider this as a birthday, because earlier the arguments and building blocks were being prepared over a period of years .... ” In a letter to R. S. Shankland in 1952, he estimated he “had worked for ten years” on the special theory. Ronald W. Clark, Einstein: The Life and Times (New York and Cleveland: The World Publishing Company, 1971), 74-85, 120.

CHAPTER 6

1. Viktor E. Frankl, Man’s Search for Meaning (New York: Touchstone Books, 1984), 134.

2. Hoover’s Online, www.hoovers.com.

3. Research Interview #1-E, page11.

4. Bernard H. Semler, Putting It All Together (autobiography, draft version, 1998),66.

5. Bernard H. Semler, “Measuring Operating Performance,” 1. Article sent to the research team directly from Mr. Semler.

6. Research Interview #1-E, page3.

7. “How ‘Dr.’ Ledder Cured Abbott Labs: Abbott Labs Was a Sick Company ... ” Forbes, August 1, 1975, 26; “Abbott Shapes Up,” Chemical Week, October 20, 1976, 20; “Abbott Labs: Adding Hospital Supplies to Bolster Drug Operations,” Business Week, July 23, 1979, 177; “Earnings Per Share for First Nine Months of 1980,” PR Newswire, September 17, 1980; “Robert A. Schoellhorn Report on Company at Annual Shareholders Meeting,” Business Wire, April 13, 1984; “Abbott: Profiting from Products That Cut Costs,” Business Week, June 18, 1984,56.

8. Research Interview #1-G, page23.

9. Research Interview #2-E, page1.

10. Research Interview #2-F, page3.

11. “Managing: Carl E. Reichardt, Chairman, Wells Fargo & Co.,” Fortune, February 27, 1989,42.

12. Research Interview #11-H, pages 5,9.

13. “Bold Banker: Wells Fargo Takeover of Crocker Is Yielding Profit but Some Pain,” Wall Street Journal, August 5, 1986, A1.

14. Research Interview #11-H, pages 5, 9,16.

15. Research Interview #11-H, pages 5,9.

16. Research Interview #11-H, page10.

17. “Managing: Carl E. Reichardt, Chairman, Wells Fargo & Co.,” Fortune, February 27, 1989, 42; “A Banker Even Keynes Might Love,” Forbes, July 2, 1984, 40; “Bold Banker: Wells Fargo Takeover of Crocker Is Yielding Profit but Some Pain,” Wall Street Journal, August 5, 1986, A1.

18. Gary Hector, Breaking the Bank: The Decline of BankAmerica (Little, Brown & Company, 1988),72.

19. Author experience in the early 1980s.

20. “Asset or Liability?” Barron’s, October 20, 1986, 13; “BankAmerica Reports a Small Profit,” Wall Street Journal, January 22, 1988, C4.

21. “Another Bout of Anxiety over Bank of America,” Business Week, August 19, 1985,33.

22. “Things Are Adding Up Again at Burroughs,” Business Week, March 11, 1967, 192; “Anatomy of a Turnaround,” Forbes, November 1, 1968, 25; “How Ray MacDonald’s Growth Theory Created IBM’s Toughest Competitor,” Fortune, January 1977,94.

23. “Things Are Adding Up Again at Burroughs,” Business Week, March 11, 1967, 192; “The Burroughs Syndrome,” Business Week, November 12, 1979,82.

24. “The Burroughs Syndrome,” Business Week, November 12, 1979, 82.

25. “Rubbermaid: TWST Names Award Winners Home Products: TWST Names Stanley C. Gault, Chairman and CEO, Rubbermaid Inc., for Gold Award, Home Products,” Wall Street Transcript, April 18, 1988,89116.

26. “Rubbermaid: Features: Marketing: The Billion-Dollar Dustpan,” Industry Week, August 1, 1988, 46; “Quality of Products,” Fortune, January 29, 1990,42.

27. “Rubbermaid: Rubbermaid’s Impact: New Stick Items Plentiful as Vendors ‘Spruce Up’ Household Cleaning Utensils,” Housewares, January 1, 1990,78.

28. “Chrysler’s Next Generation,” Business Week, December 19, 1988,52.

29. Lee Iacocca with William Novak, Iacocca: An Autobiography (New York: Bantam, 1984),161.

30. Lee Iacocca with William Novak, Iacocca: An Autobiography (New York: Bantam, 1984), 162, 163, 170,199.

31. Lee Iacocca with William Novak, Iacocca: An Autobiography (New York: Bantam, 1984),196.

32. “Iacocca Hands Over the Keys to Chrysler,” Investor’s Business Daily, January 4, 1993,1.

33. “Mea Culpa,” Wall Street Journal, September 17, 1990, A1.

34. “Chrysler to Buy Aircraft Maker,” Wall Street Journal, June 20, 1985, A12.

35. “How Chrysler’s \$30,000 Sports Car Got Sideswiped,” Business Week, January 23, 1989,68.

36. “The Game’s Not Over,” Forbes, April 30, 1990,76.

37. “Into a Skid,” The Economist, June 16, 1990, 70; “After the Departure,” Fortune, July 2, 1990, 55; “Can Iacocca Fix Chrysler Again?” Fortune, April 8, 1991,50.

38. Robert A. Lutz, Guts: The Seven Laws of Business That Made Chrysler the World’s Hottest Car Company (New York: John Wiley & Sons, Inc., 1998),27.

39. “The Studied Gamble of Pitney Bowes,” Dun’s Review, February 1967,30.

40. “Tough Choice,” Forbes, May 15, 1965,18.

41. “Tough Choice,” Forbes, May 15, 1965,18.

42. “Tough Choice,” Forbes, May 15, 1965,18.

43. “Fancy Footwork: Manager’s Handbook,” Sales and Marketing Management, July 1994,41.

44. “Pitney Bowes: Jumping Ahead by Going High Tech,” Fortune, October 19, 1992, 113; “Changes in Tax Law and Its Effects on Leasing Equipment,” Advantage, July 1988,28.

45. “Old-Line Selling for New Smokes Wins for Reynolds,” Business Week, February 20, 1960, 74; International Directory of Company Histories (Chicago: St. James Press, 1991),410.

46. “Voyage into the Unknown,” Forbes, December 1, 1971, 30; Bryan Burrough and John Helyar, Barbarians at the Gate (New York: Harper-Collins, 1991), 51.

47. “Voyage into the Unknown,” Forbes, December 1, 1971, 30; Bryan Burrough and John Helyar, Barbarians at the Gate (New York: Harper-Collins, 1991),51.

48. “When Marketing Takes Over at R. J. Reynolds,” Business Week, November 13, 1978, 82; “Voyage into the Unknown,” Forbes, December 1, 1971, 30. RJR purchased McLean Industries in 1969 and Aminoil less than a year later. The article cited above (“When Marketing Takes...”) states that in 1978 RJR committed a further \$580 million on top of the \$1.5 billion they spent in “earlier years.” Thus, over approximately ten years, they poured over \$2 billion into Sea-Land. Net stockholders’ equity in 1978 was \$2,657,900,000 according to the 1979 Moody’s Report.

49. Bryan Burrough and John Helyar, Barbarians at the Gate (New York: HarperCollins, 1991), 62; “Cigarette Conglomerate,” Financial World, February 5, 1969, 4; “New Fields for Reynolds Tobacco,” Financial World, May 6, 1970, 13; “The Two-Tier Market Still Lives...” Forbes,March 1, 1974, 25; “R. J. Reynolds Stops a Slide in Market Share,” Business Week, January 26, 1976,92.

50. “Voyage into the Unknown,” Forbes, December 1, 1971,36.

51. Ken Iverson, Plain Talk (New York: John Wiley & Sons, 1998), 54-59.

52. “The Nucor Story,” page 5 (document obtained from the Nucor Corporation)—chairman/vice chairman/president, vice president/general manager, department manager, supervisory/professional, hourly employee.

53. Richard Preston, American Steel (New York: Avon, 1991), 4-5.

54. Jeffrey L. Rodengen, The Legend of Nucor Corporation (Fort Lauderdale, Fla.: Write Stuff, 1997), 73-74; “The Nucor Story” (Nucor Web site)/Egalitarian Benefits, August 22,1997.

55. Research Interview #7-G, page4.

56. “Maverick Remakes Old-Line Steel: Nucor’s Ken Iverson...” Industry Week, January 21, 1991,26.

57. Ken Iverson, Plain Talk (New York: John Wiley & Sons, 1998),14.

58. Richard Preston, American Steel (New York: Avon, 1991),5.

59. “Hot Steel and Good Common Sense,” Management Review, August 1992,25.

60. John Strohmeyer, Crisis in Bethlehem (Pittsburgh: University of Pittsburgh Press, 1986),34.

61. John Strohmeyer, Crisis in Bethlehem (Pittsburgh: University of Pittsburgh Press, 1986), 30-35,86.

62. Hoover’s Online.

63. Hoover’s Online.

64. Jeffrey L. Rodengen, The Legend of Nucor Corporation (Fort Lauderdale, Fla.: Write Stuff, 1997),101.

65. “Report of Darwin E. Smith to the Stockholders and the Men and Women of Kimberly-Clark Corporation,” February 28,1972.

66. Research Interview #5-E, page 10.

67. “Rae Takes On Paper Industry’s Tough Lone Wolf,” Globe and Mail, July 20, 1991, B1.

CHAPTER 7

1. “First Inaugural Address, March 4, 1933,” Gorton Carruth and Eugene Ehrlich, The Harper Book of American Quotations (New York: Harper & Row, 1988),230.

2. Drugstore.com 10K report filed February 28, 2000, page 28. “We incurred net losses of \$123.9 million from the period from inception through January 2, 2000. We believe that we will continue to incur operating and net losses for at least the next four years (and possibly longer) and that the rate at which we will incur such losses will increase significantly from current levels. We intend to increase our operating expenses substantially as we: Increase our sales and marketing activities, particularly advertising efforts....”

3. “There’s No Business Like No Business,” Industry Standard, August 7, 2000,43.

4. “The Reluctant Webster,” Forbes, October 18, 1999,80.

5. “The Reluctant Webster,” Forbes, October 18, 1999,78.

6. “Struggling drugstore.com Cuts Staff: Online Retailer Fires 60 Employees—10 Percent of Workforce,” Seattle Post-Intelligencer, October 21,2000.

7. Drug Topics, February 3, 1997, 90; “Fleet-Footed Pharmacy,” Uplink Magazine, a publication of Hughes Communications, Fall1996.

8. “Walgreen—Pharmacy Chain of the Year, 1990,” Drug Topics, April 23, 1990,12.

9. “Walgreen—Pharmacy Chain of the Year, 1990,” Drug Topics, April 23, 1990,12.

10. “Walgreens Special Report: First in Pharmacy,” Drug Store News, October 16, 1995, 27,30.

11. Data taken directly from annual reports and 10K reports, 1971-1999.

12. “Plain and Fancy: Supermarket Boutiques Spur Kroger’s Gains,” Barron’s, May 25, 1981, 37; “There’s a Lot of Life Left in the Kroger Recap,” Business Week, December 5, 1988, 164; “How Borrowing Bought Kroger More Than Time,” Business Week, February 26, 1990,71.

13. “Gillette Knows Shaving—and How to Turn Out Hot New Products,” Fortune, October 14,1996.

14. “Gillette: Gillette Sensor: A Case History,” corporate paper, January 17, 1991, 9; “Gillette: How a \$4 Razor Ends Up Costing \$300 Million,” Business Week, January 29, 1990,62.

15. “Gillette: At Gillette, Disposable Is a Dirty Word,” Business Week, May 29, 1989,58.

16. Research Interview #3-E, page 13.

17. Research Interview #3-E, page13.

18. Research Interview #3-F, page5.

19. Research Interview #3-E, page13.

20. Prominent physicists of the time had already developed similar theories, bolstered by remarkably good experimental evidence, that were mathematically consistent and equivalent to Einstein’s exposition of relativity theory. All they lacked was the clear statement of a fundamental principle to start the chain of thinking that resulted in a clear picture of relativity theory and its consequences. In Understanding Relativity, by Stanley Goldberg (Boston: Birkhauser, 1984), the author points out, “There was not complete satisfaction with the theory that Lorentz and Poincaré produced in 1904, although that theory was formally identical to the theory that Einstein introduced a year later” (page 324). (Emphasis added.)

21. “Who Mattered and Why,” Time, December 31, 1999, 48-58.

22. Richard Preston, American Steel (New York: Avon, 1991),75.

23. Research Interview #7-E, pages 2-3.

24. “Nucor Corporation: Corporate Profile,” Wall Street Corporate Reporter, September 9-15, 1996,19.

25. Clayton M. Christensen, The Innovator’s Dilemma (Boston: Harvard Business School Press, 1997),88.

26. “Daniel S. Bricklin,” CIO, December 15, 1999,140.

27. “As Easy as Lotus 1-2-3,” Computerworld, August 30, 1999,71.

28. “Everyday Necessities, the Building Blocks,” InfoWorld, October 26, 1998, 9; “IBM and Lotus Get Closer,” InformationWeek, July 28, 1997, 73-80.

29. “Bigger Isn’t Better: The Evolution of Portables,” InfoWorld, October 26, 1998, 8-9.

30. Thomas J. Watson Jr. and Peter Petre, Father, Son & Co.: (New York: Bantam, 2001),229.

31. Robert J. Serling, Legend and Legacy (New York: St. Martin’s Press, 1992),126.

32. Centennial Review, Internal Westinghouse Document,1986.

33. “The Rise of Personal Digital Assistants,” Systems, September 1992, 70-72; “Users Mourn Newton,” Computerworld, March 9, 1998, 61-64.

34. Kara Swisher, aol.com (New York: Random House, 1998),64.

35. Research Interview #9-D, page11.

36. Research Interview #5-E, page 5.

CHAPTER 8

1. Quoted by Lorin Maazel, music director, New York Philharmonic, “Maazel Is to Lead Philharmonic,” New York Times, January 30, 2001, A1.

2. “Some People Don’t Like to Haggle,” Forbes, August 27, 1984, 46.

3. Carl M. Brauer, “Circuit City Stores: Customer Satisfaction, Never Self-Satisfaction” (draft, April 1998), 6-1.

4. Total number of articles on good-to-great companies, pretransition decade = 176, posttransition decade = 423. Total number of feature articles on good-to-great companies, pretransition decade = 21, posttransition decade =67.

5. Jeffrey L. Rodengen, The Legend of Nucor (Fort Lauderdale, Fla.: Write Stuff, 1997), 63, 70,82.

6. Research Interview #5-B, page5.

7. Research Interview #5-C, page2.

8. “The Battle of the Bottoms,” Forbes, March 24, 1997,98.

9. Research Interview #1-C, page7.

10. Research Interview #1-E, page9.

11. Conversation between the author and Alan Wurtzel.

12. Research Interview #3-B, page13.

13. Research Interview #4-D, page 3. The interviewee in this case was responding to the question, “Did the company make a conscious decision to initiate a major change or transition at some point during that time frame?”

14. Research Interview #5-A, page7.

15. Research Interview #6-A, page12.

16. Research Interview #7-A, page3.

17. Research Interview #8-C, page6.

18. Research Interview #9-F, page25.

19. Research Interview #10-F, page7.

20. Research Interview #11-G, page6.

21. John Wooden and Jack Tobin, They Call Me Coach (Chicago: Contemporary, 1988),244.

22. Research Interview #3-I, page21.

23. Research Interview #1-G, page 31; Research Interview #1-A, page14.

24. “Upjohn: The Upjohn Company: Remarks by C. H. Ludlow, Vice President and Treasurer, and L. C. Hoff, Vice President, before the Washington Society of Investment Analysts,” February 20, 1974, Wall Street Transcript, March 11, 1974, 36246-36247.

25. Research Interview #6-C, pages 16-17.

26. Research Interview #7-F, page11.

27. Fortune 1000 rankings, from Fortune.com Web site, February 9,2001.

28. “Turning W-L into a Marketing Conglomerate,” Business Week, March 5, 1979, 60; “Warner-Lambert,” Wall Street Transcript, January 7, 1980,56636.

29. “Chasing after Merck,” Forbes, November 10, 1980,36.

30. “Warner-Lambert Company,” Wall Street Transcript, December 21, 1981,64122.

31. “Warner-Lambert,” Financial World, September 5, 1989,24.

32. “On the Mend,” Barron’s, January 2, 1995, 19.

33. “W-L to Acquire IMED at Cost of \$465 Million,” New York Times, June 8, 1982, D4; “W-L Plan to Buy Imed Corp. Draws Cool Reaction by Analysts Due to Cost, Timing,” Wall Street Journal, June 14, 1982, A41; “W-L to Dump Imed,” San Diego Business Journal, December 2, 1985,1.

34. The Warner-Lambert Web site no longer exists and you are automatically directed to the Pfizer site. Furthermore, the site includes information on how Warner-Lambert stockholders can exchange their shares for Pfizer stock.

35. Peter F. Drucker, Managing for the Future (New York: Truman Talley Books/Dutton, 1992),160.

36. “In the News,” Fortune, July 3, 1978,20.

37. “Harris Is Raising Its Bet on the Office of the Future,” Business Week, July 18, 1983,134.

38. “Harris Corp.’s Bold Strategy,” Forbes, April 25, 1983, 96; “Harris Is Raising Its Bet on the Office of the Future,” Business Week, July 18, 1983,134.

39. “Merits of Harris Tie to Lanier Debated,” New York Times, August 11, 1983, D5, plus annual financial statements drawn from Moody’s reports.

40. “Harris Heads into the Office,” Computerworld, October 12, 1983, 29.

CHAPTER 9

1. Michael Ray and Rochelle Myers, Creativity in Business (New York: Doubleday & Company, 1986),113.

2. Hoover’s Online and Standard & Poor’s Corporation Records, January2001.

3. Sam Walton with John Huey, Sam Walton: Made in America (New York: Doubleday & Company, 1992),35.

4. Sandra S. Vance and Roy V. Scott, WalMart: A History of Sam Walton’s Retail Phenomenon (New York: Twayne, 1994) 169-171; Bob Ortega, In Sam We Trust (New York: Times Books, 1998).

5. Research done for the Built to Last study; original sources courtesy of Hewlett-Packard Company Archives.

6. Research done for the Built to Last study; original sources courtesy of Hewlett-Packard Company Archives.

7. Letter from Bernard M. Oliver to IEEE Awards Board, May 23, 1972, courtesy of Hewlett-Packard Company Archives.

8. “Packard Style,” Palo Alto Daily News, March 27, 1996,10.

9. According to Amy Chamberlain, of the David and Lucile Packard Foundation, the amount was \$5.62 billion as of the date the funds were received.

10. James C. Collins and Jerry I. Porras, Built to Last (New York: Harper-Collins, 1997),1.

11. David Packard, Commencement Speech, Colorado College, June 1, 1964, courtesy of Hewlett-Packard Company Archives.

12. Merck & Company, Management Guide, Corporate Policy Statement, February 3, 1989, courtesy of Merck & Company; George W. Merck, “An Essential Partnership—the Chemical Industry and Medicine,” speech presented to the Division of Medicinal Chemistry, American Chemical Society, April 22, 1935; 1991 Merck & Company Annual Report, inside cover; David Bollier and Kirk O. Hansen, Merck & Co. (A-D), Business Enterprise Trust Case, No. 90-013, case D,3.

13. George W. Merck, Speech at the Medical College of Virginia at Richmond, December 1, 1950, courtesy of Merck & Company Archives.

14. Richard Schickel, The Disney Version (New York: Simon & Schuster, 1968),310.

15. Harold Mansfield, Vision: A Saga of the Sky (New York: Madison Publishing Associates, 1986), 167-201.

16. Robert J. Serling, Legend and Legacy (New York: St. Martin’s Press),79.

17. Robert J. Serling, Legend and Legacy (New York: St. Martin’s Press), 20-22,132.

18. According to “How Boeing Bet the Company and Won,” in Audacity, winter 1993, 52, and Robert J. Serling, the project would cost between \$15 and \$16 million. We verified the \$15 million figure with Boeing’s income statements and balance sheets for the period 1947-1951.

19. Robert J. Serling, Legend and Legacy (New York: St. Martin’s Press), 159, 323, 400-405,409.

20. Standard & Poor’s Industry Surveys: Aerospace and Defense, February 15, 2001, Robert E. Friedman, CPA, Aerospace and Defense Analyst. Also, in 1999, Boeing had twice the revenues of Airbus in this segment of the industry (\$38,409,000,000 versus \$16,817,000,000) according to Hoover’s Online.

APPENDIX 8.A

1. “Hermit Kingdom,” Wall Street Journal, December 12, 1958, A6; “Remodeling the A&P,” Business Week, March 23, 1963, 36; “Ailing A&P,” Wall Street Journal, April 21, 1964, A6; “New Men for A&P’s Top Rungs,” Business Week, June 20, 1964, 32; “A&P Reorganization Is Announced; Move Takes Effect February 24,”, Wall Street Journal, January 15, 1969, A4; “A&P—Awakening the Giant,” Financial World, February 25, 1970, 5; “Great Expectations,” Barron’s, January 19, 1970, 5; “Renewing A&P,” Business Week, February 20, 1971, 68; “How A&P Got Creamed,” Fortune, January 1973, 103; “A&P Goes outside Ranks for First Time, Picks Scott to Assume Eventual Command,” Wall Street Journal, December 11, 1974, A8.

2. “IBM’s New Copier,” Business Week, March 22, 1976, 52; “Addresso-graph Gets Ash and \$2.7 Million,” Business Week, October 4, 1976, 31; “How to Nip Away at the Xerox Market,” Business Week, November 8, 1976, 68; “Roy Ash’s Challenge,” Newsweek, December 13, 1976, 90; “Roy Ash Is Having Fun at Addressogrief-Multigrief,” Fortune, February 27, 1978, 46; “Coup at AM; Roy Ash Resigns Under Fire,” Time, March 23, 1981, 71; “Curious Tale of Mr. Black,” London Financial Times, February 27, 1982, 28; “AM Files Chapter 11 Petition,” New York Times, April 15, 1982, D1.

3. Gary Hector, Breaking the Bank: The Decline of BankAmerica (Little, Brown & Company, 1988); “At BankAmerica a New Regime Strives to Reverse Declines,” Wall Street Journal, May 20, 1982, A1; “The Cost to Armacost,” Economist, February 16, 1985, 76; “Bank of America Rushes into the Information Age,” Business Week, April 15, 1985, 110; “Sam Armacost’s Sea of Troubles,” Banker, September 1, 1985, 1; “Schwab Joins the Ranks of Bank of America Dropouts,” Business Week, August 25, 1986, 37; “Add Security Pacific to Bank of America,” Wall Street Journal, August 13, 1991, A1; “BankAmerica Finds It Got a Lot of Woe,” Wall Street Journal, July 22, 1993, A1.

4. John Strohmeyer, Crisis in Bethlehem (Pittsburgh: University of Pittsburgh Press, 1994); “Bethlehem Steel,” Wall Street Journal, May 13, 1977, A4; “Bethlehem Sets New Pay Reduction,” Wall Street Journal, January 21, 1983, A5; “Bethlehem to Ask Probe,” Wall Street Journal, January 24, 1984, A2; “Making Retirees Share the Pain,” Business Week, April 16, 1984, 50; “Bethlehem Plans Further Cuts,” Wall Street Journal, January 15, 1985, A2; “Is Bethlehem Investing in a Future It Doesn’t Have?” Business Week, July 8 1985, 56; “Bethlehem Exits Freight Car Building,” Journal of Commerce, November 1, 1991, B2; “Faded Glory,” Forbes, March 16, 1992,40.

5. “Tandy Agrees to Buy Assets of Eckerd Unit,” Wall Street Journal, July 5, 1985, A4; “Diversification Appeals,” Chain Store Age Executive, August 1, 1979, 81; “Video Follies,” Forbes, November 5, 1984, 43-45; “Jack Eckerd Holders Will Receive All Cash in a \$1.2 Billion Buyout,” Wall Street Journal, April 21, 1986, A31; “J. C. Penney Gets Eckerd Shares,” Wall Street Journal, December 18, 1996, B10.

6. “Great Western: Great Western Financial Corporation: Remarks by James F. Montgomery, President, to the Security Analysts of San Francisco, March 8, 1977,” Wall Street Transcript, April 25, 1977, 46873-46874; “Great Western: Great Western Financial Corporation: Remarks by James F. Montgomery, Chairman and President, to the Security Analysts of San Francisco, November 9, 1981,” Wall Street Transcript, December 21, 1981, 64131-64132; “Great Western: Great Western Financial Corporation (GWF): Remarks by James F. Montgomery, Chairman and Chief Executive Officer, to the Los Angeles Society of Financial Analysts, September 11, 1984,” Wall Street Transcript, October 22, 1984, 75659-75660; “Great Western: The Corporation: Strategies: How Playing It Safe Worked for Great Western: It Waited until Regulations Eased to Go on a Buying Spree,” Business Week, September 7, 1987, 70; “Great Western: Corporate Focus: Great Western Financial Seeks to Chart a Fresh Course: No. 2 U.S. Thrift Faces Burden of Soured Home Loans, Bloated Overhead,” Wall Street Journal, May 17, 1993, B4.

7. Bryan Burrough and John Helyar, Barbarians at the Gate (New York: HarperCollins, 1991); “Cigarette Conglomerate,” Financial World, February 5, 1969, 4; “Voyage into the Unkown,” Forbes, December 1, 1971, 30; “When Marketing Takes Over at R. J. Reynolds,” Business Week, November 13, 1978,82.

8. “A Paper Tiger Grows Claws,” Business Week, August 23, 1969, 100-102; “No-Longer-So-Great Scott,” Forbes, August 1, 1972, 25; “Now an Outsider Will Run Scott Paper,” Business Week, April 23, 1979, 39, 42; “Scott a Paper Tiger,” Advertising Age, November 3, 1980, 96; “Scott Paper’s New Chief,” Business Week, November 30, 1981, 62; “Scott Isn’t Lumbering Anymore,” Fortune, September 30, 1985, 48-55; “Bermuda Triangle,” Forbes, January 6, 1992, 284; “Al Dunlap: An Insider’s View,” Navigator, December 1997; “Did CEO Dunlap Save Scott Paper—or Just Pretty It Up? The Shredder,” Business Week, January 15,1996.

9. “Silo, Discount Appliance Chain, Enjoys Payoff from Hard Sell,” Barron’s, March 29, 1971, 35; “An Appliance Dealer with Real Clout,” Business Week, November 6, 1971, 76; “Cyclops Acquires Silo,” Wall Street Journal, October 16, 1979, A5; “Dixons Makes \$384 Million U.S. Bid,” London Financial Times, February 18, 1987, 1; “Silo-Dixons Power: How Far Can It Reach?” Consumer Electronics, November 1988, 14; “Dixons Strategic Move into Los Angeles Area,” London Financial Times, November 12, 1989, 10; “Shake-up at Silo,” Discount Store News, March 4, 1991, 1; “Dixons Tightens Grip on Silo,” HFD—the Weekly Home Furnishings Newspaper, February 3, 1992,77.

10. “Upjohn: Two Upjohn Antibiotics Barred from Sale; FDA-Drug Company Confrontation Is Seen,” Wall Street Journal, May 15, 1969, A38; “Upjohn: Tweedle Dee: Upjohn Can’t Ever Seem to Do Quite as Well in Ethical Drugs as Tweedle Dum, Its Corporate Lookalike, Eli Lilly, Which Is No Great Shakes Either,” Forbes, March 1, 1970, 65-66; “Upjohn: Two Upjohn Drugs Linked to Thirty-two Deaths Needn’t Be Banned, FDA Aide Testifies,” Wall Street Journal, January 30, 1975, A14; “Upjohn: Hair-Raising Happenings at Upjohn (Testing a Cure for Baldness, the Company Squirms at the Unwelcome Clamor),” Fortune, April 6, 1981, 67-69; “Upjohn: R&D Scoreboard: Drugs,” Business Week, June 22, 1987, 145; “Upjohn: Upjohn’s Stock Falls on Study’s Claim Its Anti-Baldness Drug Has Side Effects,” Wall Street Journal, February 9, 1988, A2; “Upjohn: Law: Upjohn Settles Liability Suit over Halcion Sleeping Pill,” Wall Street Journal, August 12, 1991, B2.

11. “Gillette President S. K. Hensley Resigns to Accept Presidency of Warner-Lambert,” Wall Street Journal, June 21, 1967, A32; “Say Little, Do Much,” Forbes, December 1, 1974, 52; “After the Diversification That Failed,” Business Week, February 28, 1977, 58; “Turning W-L into a Marketing Conglomerate,” Business Week, March 5, 1979, 60; “Hagan Outlines Strategic Plan,” PR Newswire, October 29, 1980; “Beating the Japanese in Japan,” Forbes, April 27, 1981, 44; “W-L: Reversing Direction to Correct Neglect,” Business Week, June 15, 1981, 65; “Hagan Outlines Strategic Actions,” PR Newswire, December 2, 1981; “Hagan Announces IMED Purchase,” PR Newswire, June 7, 1982; “Hagan Defends IMED Purchase,” PR Newswire, July 12, 1982; “Did W-L Make a \$468 Million Mistake?” Business Week, November 21, 1983, 123; “The Succession at Warner-Lambert,” Business Week, September 17, 1984,52.

12. “Things Are Adding Up Again at Burroughs,” Business Week, March 11, 1967, 192; “How Ray MacDonald’s Growth Theory Created IBM’s Toughest Competitor,” Fortune, January 1977, 94; “A Tough ‘Street Kid’ Steps in at Burroughs,” Business Week, October 29, 1979, 50; “Will a Shake-up Revive Burroughs?” Business Week, May 4, 1981, 53; “Can Burroughs Catch Up Again?” Forbes, March 28, 1983,78.

13. Robert A. Lutz, Guts: The Seven Laws of Business That Made Chrysler the World’s Hottest Car Company (New York: John Wiley & Sons, 1998), 27; “President Iacocca,” Wall Street Journal, June 28, 1982, A1; “Is There Life after Iacocca?” Forbes, April 8, 1985, 75; “Lee Iacocca’s Time of Trouble,” Fortune, March 14, 1988, 79; “Can Iacocca Fix Chrysler Again?” Fortune, April 8, 1991, 50; “After Lee,” The Economist, March 21, 1992, 70; “How Chrysler Filled Detroit’s Biggest Shoes,” Wall Street Journal, September 7, 1994, B1; “Daimler-Benz Will Acquire Chrysler in \$36 Billion Deal That Will Reshape Industry,” New York Times, May 7, 1998, A6.

14. “Harris-Intertype, Radiation Inc. Directors Approve Merger Pact Valued at \$39 Million,” Wall Street Journal, April 3, 1967, 30; “Critical Mass?” Forbes, April 15, 1976, 86; “Technology Transfer’s Master,” Business Week, October 10, 1977, 120; “Harris Corp.’s Remarkable Metamorphosis,” Forbes, May 26, 1980, 45; “Harris Corp.’s Bold Strategy,” Forbes, April 25, 1983, 96; “Harris Is Raising Its Bet on the Office of the Future,” Business Week, July 18, 1983, 134; “Harris Corp. Elects Hartley to Added Post of Chief,” Wall Street Journal, April 1, 1986, A45; “New Harris President Prefers Growth to Downsizing,” UPI, April 23,1993.

15. “Hasbro: On a Roll: Toymaker Hasbro Continues String of 25% Yearly Growth,” Barron’s, July 19, 1982, 40; “Hasbro: Hasbro Toys Find Profits in Tradition,” Wall Street Journal, December 12, 1983, A29; “Hasbro: News: Hasbro Gets Its Guns: Stephen Hassenfeld’s Loading Up for Battle,” Industry Week, April 30, 1984, 17-18; “Hasbro: Silver: A Play on Toys: Hasbro Bradley’s Hassenfeld,” Financial World, April 16, 1985, 29; “Hasbro: Merry Christmas: It Has Already Come for Hasbro, Biggest U.S. Toymaker,” Barron’s, December 23, 1985, 34; “Hasbro: The Corporation: Strategies: How Hasbro Became King of the Toymakers: With \$1.2 Billion in Sales and \$99 Million in Profits, It Is Now No. 1 Worldwide,” Business Week, September 22, 1986, 90-92; “Hasbro: Marketing: Toys: It’s Kid Brother’s Turn to Keep Hasbro Hot: Alan Hassenfeld Must Fill Big Shoes at the Toymaker,” Business Week, June 26, 1989, 152-153.

16. “Rubbermaid: Sincere Tyranny (Why Has Stanley Gault Spent the Last Four Years Moving and Shaking at Rubbermaid? It Was a Case of Serious Problems Masked by Cheery Numbers),” Forbes, January 28, 1985, 54-55; “Rubbermaid: Rubbermaid Emerges a ‘Clear’ Winner; Food Storage Containers,” Chain Store Age—General Merchandise Trends, October 1986, 67; “Why the Bounce at Rubbermaid? The Company Sells Humdrum Goods in a Mature Market, and Most of Its Competitors Undercut Its Prices. But It Has Doubled Sales and Tripled Earnings in the Past Six Years,” Fortune, April 13, 1987, 77-78; “Rubbermaid: America’s Most Admired Company,” Fortune, Feburary 7, 1994, 50-54; “Rubbermaid: From the Most Admired to Just Acquired: How Rubbermaid Managed to Fail,” Fortune, November 23, 1998, 32-33.

17. “Henry Singleton’s Singular Conglomerate,” Forbes, May 1, 1976, 38; “Two Ph.D.’s Turn Teledyne into a Cash Machine,” Business Week, November 22, 1976, 133; “The Sphinx Speaks,” Forbes, February 20, 1978, 33; “Teledyne’s Winning Roster,” Forbes, August 17, 1981, 35; “Parting with Henry Singleton: Such Sweet Sorrow for Teledyne?” Business Week, April 9, 1990, 81; “Teledyne to Pay \$17.5 Million to Settle U.S. Criminal Charges,” Washington Post, October 6, 1992, D6; “Teledyne Struggles to Recapture Magic of Yesterday,” Wall Street Journal, November 22, 1993, B4; “Richard Simmons to Share Spotlight at Allegheny Teledyne, Sees ‘Good’ Fit,” Wall Street Journal, April 3, 1996, B8.

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