The Window and the Mirror

As part of our research, we interviewed Alan L. Wurtzel, the Level 5 leader responsible for turning Circuit City from a ramshackle company on the edge of bankruptcy into one of America's most successful electronics retailers. In the 15 years after its transition date in 1982, Circuit City outperformed the market 18.5:1.

We asked Wurtzel to list the top five factors in his company's transformation, ranked by importance. His number one factor? Luck. "We were in a great industry, with the wind at our backs." But wait a minute, we retorted, Silo -- your comparison company -- was in the same industry, with the same wind, and bigger sails. The conversation went back and forth, with Wurtzel refusing to take much credit for the transition, preferring to attribute it largely to just being in the right place at the right time. Later, when we asked him to discuss the factors that would sustain a good-to-great transformation, he said, "The first thing that comes to mind is luck. I was lucky to find the right successor."

Luck. What an odd factor to talk about. Yet the Level 5 leaders we identified invoked it frequently. We asked an executive at steel company Nucor why it had such a remarkable track record of making good decisions. His response? "I guess we were just lucky." Joseph F. Cullman III, the Level 5 CEO of Philip Morris, flat out refused to take credit for his company's success, citing his good fortune to have great colleagues, successors, and predecessors. Even the book he wrote about his career -- which he penned at the urging of his colleagues and which he never intended to distribute widely outside the company -- had the unusual title I'm a Lucky Guy.

At first, we were puzzled by the Level 5 leaders' emphasis on good luck. After all, there is no evidence that the companies that had progressed from good to great were blessed with more good luck (or more bad luck, for that matter) than the comparison companies. But then we began to notice an interesting pattern in the executives at the comparison companies: they often blamed their situations on bad luck, bemoaning the difficulties of the environment they faced.

Compare Bethlehem Steel and Nucor, for example. Both steel companies operated with products that are hard to differentiate, and both faced a competitive challenge from cheap imported steel. Both companies paid significantly higher wages than most of their foreign competitors. And yet executives at the two companies held completely different views of the same environment.

Bethlehem Steel's CEO summed up the company's problems in 1983 by blaming the imports: "Our first, second, and third problems are imports." Meanwhile, Ken Iverson and his crew at Nucor saw the imports as a blessing: "Aren't we lucky; steel is heavy, and they have to ship it all the way across the ocean, giving us a huge advantage." Indeed, Iverson saw the first, second, and third problems facing the U.S. steel industry not in imports but in management. He even went so far as to speak out publicly against government protection against imports, telling a gathering of stunned steel executives in 1977 that the real problems facing the industry lay in the fact that management had failedto keep pace with technology.

The emphasis on luck turns out to be part of a broader pattern that we came to call the window and the mirror. Level 5 leaders, inherently humble, look out the window to apportion credit -- even undue credit -- to factors outside themselves. If they can't find a specific person or event to give credit to, they credit good luck. At the same time, they look in the mirror to assign responsibility, never citing bad luck or external factors when things go poorly. Conversely, the comparison executives frequently looked out the window for factors to blame but preened in the mirror to credit themselves when things went well.

The funny thing about the window-and-mirror concept is that it does not reflect reality. According to our research, the Level 5 leaders were responsible for their companies' transformations. But they would never admit that. We can't climb inside their heads and assess whether they deeply believed what they saw in the window and the mirror. But it doesn't really matter, because they acted as if they believed it, and they acted with such consistency that it produced exceptional results.

-- Good to Great, Jim Collins, 2001