good to great, by jim collins

Good to Great is widely considered to be one of the classic reads in management theory. In the book, Collins and his research team take on the task of identifying the factors that allow companies to make the transition from good to great. “Great” is defined according to a number of metrics, such as stock performance exceeding market averages by several orders of magnitude over a sustained period.

His findings are nicely summarized in the book with each chapter presenting its own lesson. Here are those lessons.

Chapter 1: Good is the Enemy of Great

Good is the enemy of great, and that is why we have so little that becomes great. This chapter lays out the process Collins used in selecting the companies that served as the basis of the study. The most important factor was a period of sustained success that far outpaced the market or industry average.

The companies chosen were Abbott, Fannie Mae, Circuit City, Gillette, Kimberly Clark, Kroger, Nucor, Philip Morris, Pitney Bowes, Walgreens and Wells Fargo. Yes, this book is old.

Chapter 2: Level 5 Leadership

Every good to great company had Level 5 (L5) leadership during the pivotal transition years. L5 leaders embody a mix of personal humility and professional will. They are ambitious first and foremost for the company, not themselves. They set up their successors for even greater success in the next generation. L4 leaders often set up their successors for failure.

L5 leaders display a compelling modesty and are understated. They are fanatically driven, infected with an incurable need to produce sustained results. L5 leaders attribute success to factors other than themselves. When things go wrong however, they take full responsibility. Most leaders tend to do the opposite. 10 of 11 good-to-great CEOs came from inside the company.

Chapter 3: First Who...Then What

Good to Great leaders began the transformation by first getting the right people on the bus (and the wrong people off the bus) and then figuring out where to drive it. The key point here is that who questions come before what questions - before vision, before strategy, before organization structure, before tactics. First who, then what  - as a rigorous discipline, consistently applied. 

3 practical decisions for being rigorous in people decisions:

• When in doubt, don’t hire - keep looking (Corollary: A company should limit its growth based on its ability to attract enough of the right people)
• When you know you need to make a people change, act. (Corollary: First be sure you don’t simply have someone in the wrong seat)
• Put your best people on your biggest opportunities, not your biggest problems (Corollary: If you sell off your problems, don’t sell off your best people)

Good to great management teams consist of people who debate vigorously in search of the best answers, yet who unify behind decisions regardless of parochial interests. They also found no systematic pattern linking executive compensation to the shift from good to great.

Chapter 4: Confront the Brutal Facts

All good-to-great companies began the process of finding a path to greatness by confronting the brutal facts of their current reality. When you start with an honest and diligent effort to determine the truth of your situation, the right decisions often become self-evident. A primary task here is creating a culture where people have the opportunity to be heard. Creating a climate where the truth is heard involves:

• Leading with questions, not answers
• Engaging in dialogue and debate, not coercion
• Conducting autopsies, without blame
• Building red flag mechanisms that turn information into information that cannot be ignored

A key psychology for leading from good to great is the Stockdale Paradox: Retain absolute faith that you can and will prevail in the end, regardless of the difficulties AND at the same time confront the most brutal facts of your current reality. 

Chapter 5: The Hedgehog Concept

Going from good-to-great requires an understanding of the hedgehog concept.

The key is to understand what your organization can be the best in the world at, and equally important, what it cannot be the best at. To get insight into the drivers of your economic engine, search for the one metric that has the single greatest impact. 

Chapter 6: A Culture of Discipline

Sustained great results depend upon building a culture full of self-disciplined people who take disciplined action, fanatically consistent with the three circles. A culture of discipline requires duality. It requires people who adhere to a consistent system; yet, on the other hand, it gives people freedom and responsibility within the framework of that system.

The single most important form of discipline for sustained results is fanatical adherence to the Hedgehog Concept and the willingness to shun opportunities that fall outside the three circles.

Chapter 7: Technology Accelerators

Good-to-great organizations think differently about technology and technological change than mediocre ones. They avoid technology fads and bandwagons, yet they become pioneers in the application of carefully selected technologies.

If the technology fits directly with your Hedgehog Concept, then you need to become a pioneer in the application of that technology. If not, then you can settle for parity or ignore it entirely. The good-to-great companies used technology as an accelerator of momentum, not a creator of it.

Chapter 8: The Flywheel and the Doom Loop

Good-to-great transformations often look like dramatic, revolutionary events to those observing from the outside, but they feel like organic, cumulative processes to people on the inside. No matter how dramatic, the good-to-great transformations never happened in one fell swoop. Sustainable transformation follows a predictable pattern of buildup and breakthrough. Like pushing on a giant, heavy flywheel, it takes a lot of effort to get the thing moving at all, but with persistent pushing in a consistent direction over a long period of time, the flywheel builds momentum, eventually hitting a point of breakthrough.

Chapter 9: From Good to Great to Built to Last

The final chapters draws a connection to Collins’ previous work, Built to Last. This book presented the findings of a study into the factors that determined whether a new company would survive in the long-term.

Collins suggests that companies need a set of core values in order to achieve long-term, sustainable success. They need to exist for a higher purpose than simply profit generation. This purpose does not have to be narrowly defined - even if the shared values that compel the company toward success are as open-ended as being the best at what they do and achieving excellence consistently, that may be sufficient as long as the team members are equally dedicated to the same set of values.