Lessons From A Red Folder

Three lessons for fending off threats to your business from Ford v. Ferrari.

My business partner and I? recently watched Ford v Ferrari again. We were struck by the number of lessons in the story that offer insight into the challenges faced by business leaders. One is the allegory of the red folder and the three lessons it evoked.

1. Recognize when it is time to go to war.
2. Give direct authority and accountability to the person most capable of delivering success.
3. Organizational Will is an oxymoron.

If you are unfamiliar with the movie, here is a quick recap.?

Henry Ford II set out to create a legacy for himself that lived up to his legendary father. Ford v. Ferrari focuses on his quest to take the crown of the best automaker in the world from Enzo Ferrari. Ford sets out to create a better, faster race car than Ferrari and prove his superiority in Ferrari’s court, the demanding 24 hours of Le Mans. To accomplish this feat, Ford charged his executives to build a car capable of dethroning Ferrari and provided them a blank check. Legendary executive Lee Iacocca hired Carroll Shelby’s company to “give them the best chance of winning.”?

Following Ford’s first attempt to win at Le Mans, a dozen executives gathered in Henry’s office. The Ford car had what most considered to be an embarrassing showing. Henry and Carroll Shelby sit with Ford’s executives, pacing around them like wolves awaiting a slaughter. Between them, a red folder passes from executive to executive.?

Looking out the window, Ford asks Shelby, “Why shouldn’t I fire you?” and end this charade. Shelby seems to be at a loss for an answer. Instead of pleading his case, he recants how they failed in their first attempt. The list contains nearly two dozen failures in the car's performance, each enough to support his firing. The camera cuts to Ford, looking slightly confused by Shelby’s lack of defense, and then quickly cuts back to Shelby. With intensity, Shelby points out that on one lap on the back straightway, their car, Ford’s car, had gone faster than any car in history, thus snatching one small but meaningful victory from Ferrari.?

Shelby then points to the red folder as it moves about the room and exclaims this is the real problem that will forever doom Ford to finish behind Ferrari. We see that as Shelby was in the executive lobby, he observed that folder move from executive to secretary to another secretary and then to that secretary’s boss, another executive. Shelby shared how each executive made a note or had to approve what was in the red folder as it moved around the lobby and into the office, where the ritual continued. Each executive made their mark, ensuring that the document in the red folder served their agenda. Shelby said, “You see, Mr. Ford, we are at war, and you can’t win a war by committee.”?

Over the past few weeks, my business partner and I have reflected on that scene, each time in the context of a new insight into the challenges many of our clients face.?

Lesson #1 - Recognize When You Need to Go To War (probably yesterday)

While being at War may seem extreme in our softer, more accepting workplaces, virtually every business faces unprecedented disruption. Whether it is your industry, segment, or business, existential threats are charging the gate. As such, the critical strategy for Boards of Directors and CEOs is to determine where you need to go to war if you are to sustain and thrive into the future because if you don’t, the business you have built may not exist much longer. And, if you aren’t willing or interested in going to war, then it is best if you are well into executing an exit strategy.?

Lesson #2: Give direct authority and accountability to the person most capable of delivering success.?

When you go to war, you first identify your top commander and give them the authority and resources to do the job. As part of this empowerment, you must slaughter all the sacred cows that exist. Entrust your commander with the burden of leadership and hold them accountable. One of the commander's primary directives is to build an army that will walk through fire for them and their mission. It is not about the coronation of a dictator or taskmaster. Their second directive is to ensure that this army has the skills, experiences, ingenuity, and resources to succeed. Their final directive is to succeed at all costs.?

In the movie Ford v. Ferrari, Mr. Ford vacillates on this point. At times, he is all in on entrusting everything to Shelby. At other times, he gives in to his number two’s insatiable need for control and inserts the executive as an authority over Shelby. In addition to his insecurities, the executive is a great manager of the traditional Ford business, but he doesn’t share the passion for the mission. Nor does he have the stomach for the risk associated with the single-minded nature of the war effort. The mission to beat Ferrari suffers when the executive asserts his authority over Shelby.?

We strongly discourage CEO’s from trying to be both the commander of the war effort and lead the legacy business. If the CEO is the best person to take command, the legacy business operation must be entrusted to the best manager you can find. This allows the manager to lead the legacy business, enabling the organization to feed the war machine. If parts of the legacy business are to be weapons needed to win the war, move the best and the brightest to the fight. This manager should report to the board just like the CEO to avoid distractions of the red folder.???

Lesson #3 - Organizational Will Is an Oxymoron

In our roles leading organizational change and advising executives, we have encountered the term “organizational will.” Usually, it describes a lack of organizational will. After studying the lessons of the red folder, we concluded that the term is an oxymoron.?

At some point, businesses reach maturity, shifting their mission from an entrepreneur’s quest to an investor's management. As organizations become viewed as investments, a bureaucratic system of executives, managers, technical experts, and administrators is created to maximize returns for the investor or owner. This is understandable and an essential step for most companies.?

By definition, these organizations are purpose-built to reject the kind of radical change required to fend off an existential crisis or reverse one’s mediocrity. Do not believe that will alone is strong enough to avoid extinction or irrelevancy.?

In Conclusion

I’ve faced existential threats several times on our leadership journies and coached others in similar situations. While the wins are sweet, the losses keep me up at night. The wins have come when we went to war and embraced the lessons of the Red Folder.?

In one of the most memorable of these, I was brought in to be the wartime commander. I reported to our CEO, who wrote the blank check and elevated my leadership skills at every turn. In very short order, I had to re-envision the very nature of our value proposition and execute that vision. I had to own the tough decisions that caused beloved teammates and partners to leave, I accelerated the growth of individuals eager to deliver on our new proposition and onboarded new talent and partners. If there was any organizational will, it came from the unwavering commitment of our CEO to enable the group at war and keep the distractions of the legacy business from interfering with accomplishing our mission. In the end, we won the war. As a result, we consolidated business held by other agencies, more than doubled AGI, and built a capability that has delivered value a decade and a half on.

Ultimately, the victories, when they have occurred, are attributable to these great CEOs.?

The losses—well, otherwise great CEOs bear a lot of that responsibility as well. Ironically, the things they were trying to protect with their sacred cows disappeared when they lost. People lost jobs, retirement accounts cratered, and once thriving businesses were shuttered.?

A final thought: Remain diligent in understanding the implications of competitive forces on your business and always, always deliver more value to your customers than what they expect. And, never forget what they needed and expected yesterday is not what they will need and expect tomorrow.

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