Good to Great: Why Some Companies Make the Leap... and Others Don't
by Jim Collins
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Book Summary Information
Author: Jim CollinsEdition: Hardcover
Audio: English (Unknown); English (Original Language); English (Published)
Published: 2001-10
ISBN: 0066620996
Number of pages: 300
Publisher: HarperBusiness
Product features:
- good to great book, business and investing
Book Reviews of Good to Great: Why Some Companies Make the Leap... and Others Don't
Book Review: Going From Good to Great
Summary: 5 Stars
Review of: "Good to Great - Why Some Companies Make the Leap ... and Others Don't"
By: Jim Collins
The book "Good to Great" is a report on the results of a lengthy business research study. Jim Collins and a team of researchers asked the question: "Why do some companies make the leap from being good companies to being great companies, and why not others?" Over the course of the book this foundational question is asked several different ways.
In chapter eight of "Good to Great" the author says that the fundamental question a CEO should ask is: "What can we do better than any other company in the world, that fits our economic denominator and that we have passion for?" (Page 180)
In chapter nine of "Good to Great" the author introspectively asked what motivated him to undertake the huge project in the first place. His motivation was to understand man's search for meaning, in his own words: "... why greatness ... the search for meaning, or more precisely, the search for meaningful work." (Page 208)
Jim Collins' previous book, "Built to Last" (NS) is a description of sustained greatness in American companies. After publishing "Built to Last" the author asked how companies got to be great in the first place. "Good to Great" answers that question.
Book Summary
Jim Collins and a team of twenty researchers studied the difference between companies that are good and companies that become great. The definition of greatness was made in very practical terms. A great company yields a sustained high return to the owners. For this research a high yield was seven times the general stock market over a fifteen-year period. The study took 10 ½ years of researcher effort and resulted in 2,000 pages of interview transcripts.
The change from "good to great" is guided by, what the author calls, a level five leader. The common characteristics of level five leaders are: modesty, humility, willfulness, courage and company orientation. Level five leaders are unselfish.
Executive compensation plans don't matter between good and great companies. The important thing is that they are reasonable and fair. Executive compensation has to make sense, but will not move a company from "good to great".
Great companies place more emphasis on character than on skills, education, special knowledge or work experience. Skills can be taught.
Great companies are tough places to work. Great companies are rigorous, but not ruthless. Managers and employees are held to high standards. Standards are ferocious and consistent. Great companies seldom have cost cutting layoffs, but underperformers are fired.
Practical disciplines for being rigorous rather than ruthless:
1. When in doubt, don't hire - keep looking. Place tremendous emphasis on finding the right people.
2. When you know you need to make a people change, act instead of delay. If you feel the need to tightly manage someone, you've made a hiring mistake. Do not hire a lot of people and keep the best.
3. Put your best people on the best opportunities and not the biggest problems.
Breakthrough results come about by a series of good decisions, diligently executed and accumulated, one on top of another. Start with an honest and diligent effort to determine the truth of the current situation. The right decisions often become self-evident. You absolutely cannot make good decisions without first confronting the brutal truth.
Four principles of creating an atmosphere where the truth is heard:
1. Lead with questions, not answers.
2. Engage in dialog and debate, not coercion.
3. Conduct autopsies without blame. With the right people it's not necessary to assign blame, but only to search for understanding and learning.
4. Build red flag mechanisms.
Organize the entire world into simple ideas. All the "good to great" companies had simple strategies. The simple strategy guided all their actions.
The simple strategic concepts come from three ideas:
1. Discover what the company can be best in the world at. Focus on this world-class strength.
2. Use insight into what drives your economic engine. Determine what single thing dominates profit and cash flow.
3. Decide what you are deeply passionate about.
Just because you have done something for a long time doesn't mean you can be best in the world.
A culture of discipline
1. Build a culture of freedom and responsibility within a framework.
2. Fill the culture with self disciplined people willing to go to extreme lengths to fulfill their responsibility.
3. Don't confuse discipline with being a tyrannical disciplinarian.
4. Exercise focus.
Freedom and responsibility together allow management to manage the system and not the people. People in great companies go to great extremes to fulfill their responsibilities, bordering on fanaticism. Interview and secondary sources made continual use of words like disciplined, dogged, rigorous, determined, diligent, precise, fastidious, systematic, methodical, workmanlike, demanding, consistent, focused, accountable and responsible.
The fact that something is a once-in-a-lifetime opportunity is irrelevant unless it fits into the corporate focus.
On the use of technology, the author quotes Bertrand Russell: "Men would rather die than think, many do." Technology, when used correctly, is an accelerator of momentum and not a creator of momentum.
Personal reaction to "Good to Great"
This entire study is just the sort of thing a statistician is trained and inclined to do. It was highly dependent on good experimental design, data collection and statistical technique.
Most readers want to be level five leaders and will see some of the traits in themselves. Most readers will realize that they are not yet there.
Jim Collins found quite a list of differences between his great companies and typical companies. In my opinion the most important difference is in leadership. The one most obvious difference between the two types of companies is the magnanimity of their leaders. Company executives usually rise within an organization by personal ambition. A level five leader makes the company great for the enhancement of the company, not for personal gain.
This book forces the reader to confront realities. Some common uncomfortable realities are:
- Most hiring policies will not get a company from good to great. Most hiring is based too much on skill and not enough on character. The level five leader needs to find people with the passion for the business.
- Focus is crucial and every leader knows it. However, many of us still allow ouryselfs to take on projects for reasons that seem good at the time and bad later. I call these projects one-off projects. They always take on far more energy and resources (especially time) than expected at the start. One-off projects sometimes are good opportunities, but they always take too much time and delay more strategic projects.
If a leader wants his/her company to go from good to great, the process will start with him/her.
References:
Good to Great: Why Some Companies Make the Leap... and Others Don't
Built to Last: Successful Habits of Visionary Companies
Summary of Good to Great: Why Some Companies Make the Leap... and Others Don't
The Challenge:
Built to Last, the defining management study of the nineties, showed how great companies triumph over time and how long-term sustained performance can be engineered into the DNA of an enterprise from the verybeginning.
But what about the company that is not born with great DNA? How can good companies, mediocre companies, even bad companies achieve enduring greatness?
The Study:
For years, this question preyed on the mind of Jim Collins. Are there companies that defy gravity and convert long-term mediocrity or worse into long-term superiority? And if so, what are the universal distinguishing characteristics that cause a company to go from good to great?
The Standards:
Using tough benchmarks, Collins and his research team identified a set of elite companies that made the leap to great results and sustained those results for at least fifteen years. How great? After the leap, the good-to-great companies generated cumulative stock returns that beat the general stock market by an average of seven times in fifteen years, better than twice the results delivered by a composite index of the world's greatest companies, including Coca-Cola, Intel, General Electric, and Merck.
The Comparisons:
The research team contrasted the good-to-great companies with a carefully selected set of comparison companies that failed to make the leap from good to great. What was different? Why did one set of companies become truly great performers while the other set remained only good?
Over five years, the team analyzed the histories of all twenty-eight companies in the study. After sifting through mountains of data and thousands of pages of interviews, Collins and his crew discovered the key determinants of greatness -- why some companies make the leap and others don't.
The Findings:
The findings of the Good to Great study will surprise many readers and shed light on virtually every area of management strategy and practice. The findings include:
- Level 5 Leaders: The research team was shocked to discover the type of leadership required to achieve greatness.
- The Hedgehog Concept: (Simplicity within the Three Circles): To go from good to great requires transcending the curse of competence.
- A Culture of Discipline: When you combine a culture of discipline with an ethic of entrepreneurship, you get the magical alchemy of great results. Technology Accelerators: Good-to-great companies think differently about the role of technology.
- The Flywheel and the Doom Loop: Those who launch radical change programs and wrenching restructurings will almost certainly fail to make the leap.
?Some of the key concepts discerned in the study,? comments Jim Collins, "fly in the face of our modern business culture and will, quite frankly, upset some people.?
Perhaps, but who can afford to ignore these findings?
Five years ago, Jim Collins asked the question, "Can a good company become a great company and if so, how?" In Good to Great Collins, the author of Built to Last, concludes that it is possible, but finds there are no silver bullets. Collins and his team of researchers began their quest by sorting through a list of 1,435 companies, looking for those that made substantial improvements in their performance over time. They finally settled on 11--including Fannie Mae, Gillette, Walgreens, and Wells Fargo--and discovered common traits that challenged many of the conventional notions of corporate success. Making the transition from good to great doesn't require a high-profile CEO, the latest technology, innovative change management, or even a fine-tuned business strategy. At the heart of those rare and truly great companies was a corporate culture that rigorously found and promoted disciplined people to think and act in a disciplined manner. Peppered with dozens of stories and examples from the great and not so great, the book offers a well-reasoned road map to excellence that any organization would do well to consider. Like Built to Last, Good to Great is one of those books that managers and CEOs will be reading and rereading for years to come. --Harry C. Edwards
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