Denial: Why Business Leaders Fail to Look Facts in the Face--and What to Do About It

Anyone looking for a "how to" manual may be disappointed -- this is not that kind of business book. On the other hand, anyone interested in learning from history about a problem that's obviously still widespread today -- just look at Toyota! -- will find plenty to chew on here. Tedlow's cautionary tales are instructive. And they are well-written and fun to read, as well -- another nice departure from the typical business book. All in all, a good read, and a valuable one.

A couple of years ago, the worst economic meltdown since The Great Depression created havoc in the housing market, the stock market, and of course, in practically every sector of business. This was a global disaster; there were few safe havens to be found; while some of the biggest names on Wall Street and corporate America were taken down, in brutal fashion. How did this happen? Quite simply, very few of these leaders were able to look reality in the face and deal with the consequences. When the housing bubble burst, even the Federal Government seemed to be in denial; meanwhile, the entire global economy was decimated, as some of the biggest names in business were going broke - GM and Chrysler finally paid the price for making lousy cars - while our government shelled out billions of taxpayers' (and future taxpayers') dollars to bail them out. This is no way to run a business, as Richard S Tedlow observes in this very pragmatic and accurate assessment of how our business leaders SHOULD respond when reality is giving them the bad news. The ability to move swiftly and decisively when crisis strikes is the key to long-term survival; failure to do so usually spells disaster. Those who take the appropriate measures by meeting the challenges head on, often turn the crisis into an opportunity, and in the long run, thrive in the adversity. This is the approach all business leaders should adopt, but so few have. It's time they figured this stuff out, very soon; we're running out of bail-out money.

In this engaging work, Richard Tedlow examines a perverse, persistent syndrome from numerous angles. Sigmund Freud defined denial as "knowing with not knowing;" George Orwell labeled it "protective stupidity." Whatever it's called, it has caused individuals and entire organizations to practice a sort of willful blindness in the face of incontrovertible facts. Sometimes this blindness takes the form of smug complacency, as when the giants of the U.S tire industry were faced with the advent of radial tires, a clearly superior product made by the French (French??!!) company Michelin. Then there's the problem of decisions taken in sealed chambers, where awareness of the outside world - also known as the customer base - rarely penetrates. Think of Coca-Cola's plan, unveiled in 1985, to reformulate its signature beverage. Here was a product that commanded almost fanatical loyalty not just in this country but all over the world and had done so from the time of the company's founding in 1886. The result was a public relations disaster followed by frantic back-pedaling, not to mention gleeful piling-on by Coke's chief competitor, Pepsi-Cola. Tedlow also recounts stories of companies that got it right by fighting off the demon of denial. In the chapter entitled "'Why Shouldn't You and I Walk out the Door...?' A new Perspective at Intel," we get a first hand account of how Andy Grove and Gordon Moore came to the realization that they had to get out of the memory chip business and focus exclusively on making microprocessors. There's also a chapter on Johnson & Johnson's masterful handling of the Tylenol poisonings in the 1980s. It is gratifying to see how this organization, led by visionary CEO James E. Burke, managed to do the right thing by leading with its heart as well as its head. This is a lively account of the stumbling, fumbling, and occasionally inspired action that has characterized some of America's most famous companies over the past one hundred years. Richard Tedlow is well aware that the history of business in America is, in fact, the history of America.

This useful and interesting books tells us that there is really nothing new under the sun. Just as we have been in denial prior to the bubble burst,so have those before us,albeit in different ways:Ford Motor(Ford fired those who questioned his decision to manufacture the Model T and only the Model T); A & P(they saw they were slipping in quality and prime store locations but simply refused to believe what they were seeing);IBM(they survived near death twice, but barely, because their mindset was held hostage to a glorious past). Lots of good stuff, including parts of the polite and professional memo the guy at Ford wrote to Henry about change. He ends on a note of hope from James Baldwin "not everything that is faced can be changed,but nothing can be changed until it is faced."

By now, Richard Tedlow has gained and fully deserves his reputation for writing books and articles that are of the very highest quality. In Giants of Enterprise, he examines the lives and careers of seven entrepreneurial CEOs: U.S. Steel's Andrew Carnegie, Kodak's George Eastman, Ford Motor Company's Henry Ford, IBM's Thomas Watson Sr., Revlon's Charles Revson, Intel's Robert Noyce, and Walmart's Sam Walton. Then he wrote The Watson Dynasty in which he explains the causes and effects of what he characterizes as "the fiery reign and troubled legacy of IBM's founding father and son." More recently, he wrote Andy Grove: The Life and Times of an American. In my opinion, it one of the two most important business biographies published in recent years, with the other being T.J. Stiles's The First Tycoon: The Epic Life of Cornelius Vanderbilt. Denial is his latest book and, in my opinion, his most important and most valuable...thus far. As he explains in the Introduction, "Denial is the unconscious calculus that if an unpleasant reality were true, it would be too terrible, so therefore it cannot be true. It is what Sigmund Freud described as a combination of `knowing with not knowing.' It is, in George Orwell's blunt formulation, `protective stupidity.'" Tedlow acknowledges that there are several short-term benefits of denial (e.g. it is soothing, convenient, allows us to live in a world we have created and thus control..."while it lasts") and that is why it is so seductive. "Denial sometimes actually works," as with entrepreneurs who refuse to be discouraged despite the fact that the overwhelming majority of new businesses fail. Also, "the inevitability of catastrophe does not mean that we personally will suffer the consequences." In most circumstances, denial does work in the short-term. What we have in this extraordinarily informative as well as eloquent book is a comprehensive explanation of what the subtitle correctly indicates: "why business leaders fail to look facts in the face - and what to do about it." Tedlow carefully organizes his material within two Parts. In the first, he examines those who "got it wrong" (i.e. refused to face realities). They include Henry Ford and his denial of what consumers wanted, five major tire manufacturers (i.e. Goodyear, Firestone, Uniroyal, BFGoodrich, and GenCorp) who denied the significance of the "radial revolution" initiated in Europe, and A & P's denial of emerging demographics and consumer preferences. In Part II, Tedlow shifts his attention to several examples of those business leaders who "got it right" at DuPont, Intel, and Johnson & Johnson. Here are a few brief excerpts from Part I: Whereas Alfred P. Sloan at General Motors realized that the desires and expectations of consumers were changing in the 1920s and they wanted more and better choices, Henry Ford observed that "any customer can have a car painted any color that he wants as long as its black...He needed people to buy black cars becaus