Last Updated Mar 30, 2010 1:21 PM EDT
They don't see the iceberg off the bow that is apparent to everyone else.
In Denial: Why Business Leaders Fail to Look Facts in the Face -- and What to Do About It, Harvard Business School historian Richard S. Tedlow outlines classic gaffes made by generations of CEOs, from Henry Ford to Coca-Cola's Roberto Goizueta.
All took their companies on journeys that either ruined or deeply damaged them. But Tedlow's point is that those decisions were made with ample knowledge available to prove they were the wrong ones to make. Instead, the execs stuck their heads in the sand and denied what became even more obvious with time: black Model Ts should have come with color options, and there was no reason to replace classic Coke with New Coke.
How to overcome denial?
One way is to bring in an outsider, Tedlow notes. Moving over from RJR Nabisco, Lou Gerstner was able to come into IBM and challenge accepted strategies, helping show the company that it really wasn't in the business of selling technology as much as it was selling services.
Outsiders aren't a requirement for clear thinking, however. Tedlow recounts when Intel founders Gordon Moore and Andy Grove were considering a new direction for their long established chip company. Tedlow writes:
"In the midst of their aimless wandering, Grove asked Moore, 'If the board kicked us out and brought in new management, what do you think they would do?' Suddenly the answer to Intel's dilemma became clear to both men. Grove's deceptively simple question stripped the blinders of denial from their eyes. It allowed them to see the situation afresh, face it squarely, and make what had instantly become the obvious choice."So next time your CEO makes a wrong move, don't think him stupid. Just tell him to pull his head out and gain a new perspective.
Here's a recent interview with Tedlow about his book.