March 18, 2021
March 18, 2021
When Charles Butt, now one of the most admired CEOs in the world, began his transformation of H-E-B, the first thing he had to do was transform himself. I started paying attention to H-E-B in 1980, when Kroger, then a client of mine, entered San Antonio with 13 state-of-the-art supermarkets. Then the third largest supermarket retailer in the U.S., Kroger had big plans for San Antonio, as the dominant player didn’t seem to be particularly special or well run. Kroger committed to a $250 million investment in San Antonio, not understanding what and who they were up against. Charles become CEO in 1971 and would take H-E-B from $250 million to over $25 billion. He had already begun to think about doing the impossible and was not about to concede any significant share of his market. Kroger finally waved the white flag in 1993 after posting $150 million in operating losses and another $100 million in capital losses. Today,
H-E-B’s list of accolades would fill a volume and since I’m limited to 1,000 words or so, you’ll have to look them up.
Over 34 years, I’ve seen dozens of examples that prove Charles is an extraordinary leader who does not back down from the impossible. I’ve interviewed two dozen current and former H-E-B C-Suite officers and Unit Directors and am always inspired but never surprised. Doing the impossible is a part of H-E-B’s DNA. Flash back to 1983, which began the onslaught of the Walmart Super Center. By 1987, supermarket retailers worldwide were terrified. Many thought that traditional supermarket retailing as we knew it was over. Charles was not naïve but had a different take. As near as I can determine, the real transformation of H-E-B began during 1987 with Charles’ realization that what got him where he was would not get him where he wanted to go. Tracy Goss, a key consultant to the H-E-B senior executive team at that time, wrote a book entitled The Last Word on Power. Here’s what she said to Charles, and still says to leaders attempting to lead their own organizations through transformation and meaningful change:
The POWER that brought you to your current position of prominence and responsibility as a leader – the power that is the source of our success in the past – is now preventing you from making the impossible happen in your life and in your work. If you are an executive or manager who is charged with leading a re-invention effort, before you can re-invent your organization, institution, community, or country, you must first acquire a new kind of power: the power to consistently make the impossible happen. The absence of this power is what has made an ever-growing number of organizational re-invention efforts fail. The pathway to this new power, is to completely and intentionally “re-invent” yourself: to put at risk the success you’ve become for the power of making the impossible happen.
At the beginning of H-E-B’s transformation, from sleepy, albeit sharply priced regional operator with no particular notoriety, to world class powerhouse, Charles said something like this: “Folks, in order for us to survive and thrive, we’re going to have to match Walmart pricing and provide a superior customer experience at the same time”. Now anyone who has studied the great Harvard strategist, author, and world-renowned professor Michael Porter, knows that combining Cost Leadership (one of Porter’s three possible strategies) with Differentiation (the second of the three), and Niche Operator (being the third) is, by definition, impossible. In the supermarket business, the only retailers who were known for great customer experience also had premium pricing, allowing for much better gross margins to pay for exceptional customer experience. Reasonable people both inside and outside of H-E-B said that pulling this off was an exercise in futility. Fast forward the tape 34 years, he’s pulled it off and then some. H-E-B’s pricing is so close to Walmart even the sharpest consumer can’t differentiate between them, and the customer experience is exceptional.
Successful, highly respected and accomplished leaders who seek true transformation, those who seek to redefine the nature of their industry, make government work more effectively, achieve true diversity and inclusion, right a deeply inbred and prevalent injustice, reshape their workplace, bring a new technology to the world, or just become the very best at what they do, must decide to do battle with the impossible.
Tracy goes on to say: If you’ve ever caught yourself saying something like: I’ve learned exactly how impossible it is to achieve what I really want to accomplish. I know that it can’t be done, or can’t be done by me at this time, but if I could, I would invest myself in attaining it, with all my heart. You are right that you can’t do it – at least not from the power available to you as a leader today. If, however you are serious about acquiring the power to accomplish the impossible, you can accomplish the impossible if you are willing to embark on executive re-invention and transform yourself as a leader, right down to the core of your identity. More on this when we return next week.
The purpose of all these blog posts is to share what we’re learning about building cultures of peak performance. In future posts, we’ll dig further into how rule breakers of every variety are building companies that dominate their sectors. These are organizations that practice the nine principles we’ve observed in organizations that outperform their peers: Unified Leadership, Disciplined Hiring, Leading with Purpose, Stakeholder Engagement, Cost Leadership, Measuring Everything that Matters, Customer Experience, Clarity in Everything, and Staying Ahead of the Curve. If you’d like to talk about how we can help your organization, or if you’d like a thought partner, please give us a call.
Consultants in Retained Search, Interim Executives & Leadership Advisory
With paraphrased content from Tracy Goss and David Allen Last week we determined you must transform yourself before you can transform your organization. Freeing yourself from your old winning strategy, starting with a clean sheet of paper, …Read more
With content from Tracy Goss’s book The Last Word on Power: Executive Re-Invention for Leaders Who Must Make the Impossible Happen In last week’s post, we established that “The POWER that brought you to your current position …Read more
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