What Separates Great Leaders from Good Leaders?

The 82 year old company, once synonymous with “Blue Chip," was in deep trouble.

The new CEO—brought in to replace a fired predecessor-- later said, “…few people even understand how perilously close the company was to running out of cash.” With an enormous workforce of 400,000, an emphasis on selling low margin commodity products, and a slow, bureaucratic culture, the company was fast going out of business.

Remarking that “the last thing [this company] needs is a vision,” the new leader put the company back on the road to solvency through massive layoffs and cost reductions. Then he shifted the emphasis of the enterprise from selling low margin commodities to much more profitable “turnkey” integration services.

By the time the CEO retired from the company 9 years later, its market capitalization had risen from $29 Billion to $168 Billion.

The company was IBM and The CEO was Lou Gerstner, author of the bestseller Who says elephants can’t dance.

In the book, Gerstner asserted that one of his proudest achievements was turning the company around by changing its culture and driving the recovery with existing employees, rather than doing it with outsiders.

Summing up Gerstner’s accomplishments, he

• Quickly floated a sinking ship
• Aimed the ship in a massively profitable new direction
• Changed the “inbred, ingrown” culture of an 80 year old “crew” from the inside

Any one of these successes would have been remarkable, but Gerstner achieved them all.

By any measure, this stunning track record, and Gerstner’s previous stellar performances at American Express and RJ Reynolds, put him squarely in the category of “Great leader.”

Or do they?

Let’s consider another CEO.

An entrepreneur born into a family of farmers struggling to make a living, this other leader founded a company in 1962, which he lead until his death in 1992. The company started at one location, growing to 24 venues by 1967, with sales of $12.6 million. Not as impressive as Gerstner’s success, but wait.

Over the next 25 years, until his death, the company’s founder increased the number of operating locations to 1720, and revenues to $44 billion. Today, the company has 11,000 locations worldwide and revenue over $415 billion, making it number 1 on the Fortune 500.

The CEO was Sam Walton, his company Walmart.

These breathtaking numbers ought to put Sam Walton in the pantheon of “great leaders,” but in my view, by themselves, the numbers do not.

Walton does belong on the short list of truly great leaders, but not because of the staggering ffinancial results he racked up. Rather, Walton resides on my list of greatest all-time leaders because of the way he racked up the numbers and set Walmart on a path to becoming the largest company in the world.

During every single day of Walmart’s rapid rise, Sam walked around his spartan headquarters or one of his stores carrying a yellow legal pad and jotting down ideas about new things that would increase sales and profitability. Walton’s ideas were incredibly diverse, from marketing, to supply chain management, to merchandising to entering entirely new businesses such as groceries and prescription drugs. In addition to developing his own ideas, Sam strongly encouraged all employees, from executives all the way down to sales clerks, to do the same.

Under Sam, Walmart developed a culture, from top to bottom, that Walmart CIO Kevin Turner described as one of “divine discontent.”

In other words, it didn’t matter how well things were going for Walmart, Sam and the rest of the company were never satisfied with the status quo, and constantly strove to find new opportunities and new ways of doing business. This constant passion for innovation and change drove Walmart inexorably to the top.

As it grew Walmart didn’t need to change to survive, but change it did…..constantly.

Taking a step back and comparing the impressive accomplishments of Gerstner and Walton, one striking difference emerges between the two leaders:

Gerstner changed IBM, with spectacular results, after it was clear that the company needed to change to survive.

Walton, changed Walmart before change was thrust upon him. And he continued this change all during his company’s meteoric rise to the top.

Bottom line:

Gerstner was a very good leader because he skillfully changed IBM when it was clear that the company had to change.

But Walton was a truly great leader because he continually changed Walmart before it had to change.

Why did changing before he had to change move Sam from the “good” category to “great?”

Because Walton had to overcome what Evolutionary Psychologist’s call “Darwinian scripts,” wired deep into all of our brains in an era when day-to-day survival was a struggle. Faced with the urgency of near term survival, our brains, which are identical to those of our distant human ancestors, naturally focus on obvious, here-and-now threats, and not on less obvious problems that lie the distant future. Jean Monet, father of the European Union, eloquently described our “temporal myopia” this way

“People only change out of necessity and only recognize necessity in crisis.”

Except for Sam Walton.

So how can you become the next Walton and defy your short-sighted Darwinian scripts?

Follow two simple steps:

Step 1. Practice a technique that Clinical Psychologists call “letting the phone ring.” In this exercise, you literally refrain from answering the phone the next time it rings, and subsequently only answer it every third or fourth time. Soon, you will learn that the world doesn’t end when you ignore the here-and-now urgency of the phone, and are on your way to generalizing that principle to realize that many pressing demands on your time are not as urgent as they seem. This realization frees up time for you think about step number two

Step 2. Dream up, then carry out many small, quick experiments in changing your organization. Marvin Minsky, legendary father of Artificial Intelligence, said: “When you don’t know what to do, do lots of things.” This process of rapid trial and error on a small scale—embraced by Walmart from its beginning—is what changing before you need to change is all about. Because each of your experiments is small, it will not detract from the urgency of your “day job.”

After many such experiments, a few big wins will emerge, laying new paths for you, your employees and your company.

This technique of exploring many quick and dirty new ways of doing things may not seem to constitute visionary leadership, but it really, really……..really does.

Effective visionaries are rarely clairvoyant. Rather they get to the future faster than their contemporaries through Walton’s rapid trial and error process, and, along the way stumble upon big wins.

The great French mathematician, Henri Poincare, described the technique of creating many opportunities, then looking amongst them for the big innovations this way:

“To invent is to discern, to decide.”

Big wins that change organizations for the better rarely pop out of our brains through proactive thought. Rather, after implementing many new ideas, our brains observe then react to the best of the concepts and turn them into big wins.

Of course leaders like Walton who do this are later labeled “visionaries”, but the truth is, for most such leaders, their only real vision is to borrow a page from evolution’s playbook and “pre-adapt” to an uncertain future by mutating before the need for mutation is obvious.

References

Who Says Elephants Can't Dance?: Leading a Great Enterprise through Dramatic Change, Lou Gerstner, (Harper Business, 2002

Sam Walton: Made in America (Bantam books, 1993)

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