Case Study-Ch 11
Read excerpt below from Good to Great by Jim Collins which talks about the “Stockdale Paradox” and answer the following questions (use the case analysis template for formatting your submission):
1. Fully explain the “Stockdale Paradox.”
2. In your opinion, which side of the “Stockdale Paradox” do you believe struggling companies have the most trouble accepting: unwavering faith or confronting the brutal reality? Why?
3. Who are “the optimists”? Name a real life business example (can be a specific person or scenario).
4. Apply the “Stockdale Paradox” to each of the following real life business scenarios:
o British Petroleum and the Gulf Oil Spill
o Toyota’s recalls and quality issues
o General Motors and the government bailout
o NFL and the Collective Bargaining Agreement with the NFL Players
o Bank of America Mortgage and the declining housing market
The Stockdale Paradox
The Stockdale Paradox is a concept that encompasses the duality of reality and optimism. The Stockdale paradox takes myriad forms, such as maxims and real-life situations (Jim, 2009). For companies, it is difficult to accept the brutal truth as most managers have preconceived opinions that incremental business issues negatively affect the growth and performance of the business.
An optimist is a person who believes that all things happen for the greater good. For instance, the casino business is a billion-dollar industry due to optimistic people buy costly raffles with a known probability of losing. None the less there wager on without thinking about the possibility of losing their money.
British Petroleum faced the brutal truth of the oil spill, the company way optimistic as it took the responsibility of the accident and sought ways to clean the water. During its quality crisis, Toyota quickly accepted the brutal reality and started fixing the problem to grow the business. The company was less optimistic as it did not waiting for the rough times to pass to make the necessary adjustments. In my opinion, General Motors and government bailout does not apply to the Stockdale paradox as failure to revive the industry would have led to unemployment and freefall in the stock market.
On the other hand, the company was optimistic the government would come to its aid. The optimism of the NFL players led them to strike that started lengthy a process before agreeing. Bank of America Mortgage and the declining market initially held on the hopes but eventually faced reality. The company was adamant about maintaining its reputation and increase sales despite the issues. The company brushed off the existing problems and dwelled on the idea of a better future when all problems were solved.
Jim, C. (2009). The Stockdale Paradox. In C. Jim, Good to Great (pp. 83-85). William Collins.