Good to Great by Jim Collins is another business classic. It is a book that I read about 4 years ago as a ‘required reading’ for when I started my current job. I read it at the time, but going back through it the second time knowing what I know today was definitely worthwhile. Over the years I have become a much more active reader, making notes, adding bookmarks, underlining things I want to quote, etc. So the second time through was worth the time I had considered skipping it in my curriculum.
Anyways, on to the book. The premise of the book is that Good is the enemy of Great, this is the first sentence of the book. This book is looking at what it takes to become a great organization, whether that is a business, nonprofit, or high school sports team. What are the key ingredients that make an organization make the leap from mediocrity to greatness. “We believe almost any organization can substantially improve its stature and performance, perhaps even become great, if it conscientiously apply the framework of ideas we’ve uncovered”. To understand how to get from good to great they were looking for catalysts. The author and his team had certain preconceived assumptions about what they ‘thought’ they would find that may come as a surprise. The things they did not find were:
- Larger than life, celebrity leaders from outside the company
- Links between success and executive compensation
- Good to great companies focused equally on what to do as much as what not to do and what to stop doing (80/20 TF rule)
- Technology was not a driver. It accelerated, but never caused the transformation.
- M&A did not have a large role
- Didn’t focus on motivating people or creating alignment
- No big tag line, or launch event to signify transformations, they happened evolutionary.
- Good to great companies were not (for the most part) in great industries.
- Greatness it turns out is a conscious choice
There is a diagram the book uses to drive the concepts home (see below) the summary is that there are three broad stages: disciplined people, disciplined thought, and disciplined action. Each of these are then broken into two concepts. All of this is going on and building up until the breakthrough. Then they utilize the momentum from all of the concepts to continue driving the right things and keep the ‘flywheel’ spinning.
- Level 5 Leadership– Leaders in good to great companies had more in common with Lincoln and Socrates than Patton or Caesar.
- Character traits of level 5 leaders:
- Unwavering resolve
- Un-curable need to produce results
- They talk in terms of the success of the company
- Most often, the level 5 leaders were brought up from within the company
- Showed up in big decisions AS WELL as workmanlike diligence.
- Often say they were lucky about their successes, but never blamed bad luck on their misfortunes
- Further explanation and comparison between professional will and personal humility on page 36.
- Many of them had significant life experiences that sparked or fathered their maturation: WWI experience, strong religious beliefs, near-death experiences, etc.
- They are results-driven, take full responsibility, set up their successors for even greater success.
- Character traits of level 5 leaders:
- First Who, Then What – “Get the right people on the bus, wrong people off the bus, and the right people in the right seats- and then they figure out where to drive it”
- The key point is that the ‘who’ decision comes before the ‘what’ decisions – before vision, strategy, org. structure, tactics, etc.
- Leaders were rigorous, not ruthless in people decisions
- How to be rigorous in people decisions:
- When in doubt, do not hire (keep looking) – this is similar to the TF podcast that said ‘if it is not a HELL YES! it’s a no.’
- When you know you need to make a people change, act
- Put your best people on your biggest opportunities
- Compensation is not to motivate, it should be used to get and keep the right people in the first place
- The right person has more to do with character traits and innate capabilities than it does with specific knowledge, skills’ tc.
- Confront the Brutal Facts – Stockdale Paradox: you must maintain unwavering faith in that you can and will prevail in the end, regardless of the difficulties. while at the same time confront the brutal facts of reality. A very stoic philosophy.
- You need to confront the basic facts of the current reality, when you do this the ‘right’ decisions become self-evident. But you need to first confront the brutal facts.
- Create a culture where people have an opportunity to be heard and for the truth to be heard. You can create this culture by:
- leading w/ questions, not answers
- Engage in dialogue + debate (5 dysfunctions) but not coercion
- Conduct autopsies of issues, without blame
- Build red flag mechanisms that turn information into info that cannot be ignored.
- Good to great companies had just as much adversity, but responded differently. “They hit the realities of their situations head-on”
- Do not try to motivate people. Try not to de-motivate them. one primary way to de-motivate people is to ignore the brutal facts of reality.
- The Hedgehog Concept (simplicity within the three circles) – If you cannot be the best in the world at your core business, then your core business absolutely cannot form the basis of a great company. Look for the center of the three circles (sweet spot) where passion, economic viability, and ability to become the best in the world.
- This is a gem of the book. What we call the sweet spot at the company I work for. It is the intersection of your passions, skills, and what can be an economic engine. The “hedgehog concept” takes it one step further saying that you should ignore the things that do not fit into the intersection of these circles. It is not aligned with your purpose.
- You need to understand what you can be world class at, and just as importantly you need to be completely honest and put the ego aside to say what you cannot be world class at. It is not a goal, strategy, or intention, it is an understanding
- “best in the world” is not the same thing as a core competence.
- “To get insight into the drivers of your economic engine, search for the one denominator (profit per x or, in the social sector, cash flow per x) that has the greater single impact.” VA/person, VA/hour, etc….
- The council (page 114) can be useful to reiterate the hedgehog concept. it is an iterative process that took the good to great companies in the study an average of 4 years to get down.
- Culture of Discipline – When you combine a culture of discipline with an ethic of entrepreneurship, you get the magical alchemy of great performance.
- Sustained great results depend on a culture full of self disciplined people who take action, fanatically consistent with the three circles
- Bureaucracy comes from having the wrong people on the bus
- “A culture of discipline is not just about action. It is about getting disciplined people who engage in disciplined thought and who then take disciplined action”
- Do not confuse a culture of discipline with a tyrant who disciplines.
- You need to have the willingness to shun opportunities that fall outside the three circles. A “once in a lifetime” opportunity is irrelevant if it is outside the hedgehog concept. a great company will have many “once in a lifetime opportunities”
- “stop doing” lists are more important than “to do” lists
- Technology Accelerators – Good to great companies use technology differently than others. They are typically the pioneers in the application of carefully selected technologies. The technology in itself is never the primary root cause of greatness OR decline.
- Avoid the tech fads and bandwagons, yet they become the pioneers in the application of carefully selected technologies- pick and choose the ones that are aligned with their hedgehog and can be used as an accelerator of momentum
- How a company reacts to technological change is a good indicator of its inner drive for greatness versus mediocrity.
- Most of the good to great execs. didn’t even mention technology as a major factor in the interviews.
Flywheel Concept and Doom Loop – No single defining action, program, innovation or lucky break can be attributed to going from good to great. It takes relentless pushing on the heavy flywheel to build the momentum through a point of breakthrough.
- This is basically a Plan Do Check Act (PDCA) of the entire good to great practice this book outlines.
- Sustainable transformations follow a predictable pattern of buildup and breakthrough likened in the book to pushing a giant flywheel until it gains enough momentum to break through.
- Good to great companies only really used large acquisitions AFTER breakthrough, in order to accelerate the already fast spinning flywheel.
- “The good to great leaders spent essentially no energy trying to ‘create alignment’, ‘motivate the troops’ or ‘manage change.’ Under the right conditions, the problems of commitment, alignment and change largely take care of themselves. Alignment principally follows from results and momentum, not the other way around”
Good to Great -> Built to Last
- Since Jim Collins also was the author of “built to last” the last chapter is about how to make the transition from a “good to great” company to one that will last many generations. The basic idea is that you want to preserve the basic Core values and purpose of the organization while being open to changing cultural and operating practices as well as specific goals and strategies. In summary: keep the underlying foundational principles the company was built on, but allow change to occur in everything else. There is an interesting graphic about how Disney did this on page 197.
- The four key ideas of Built to Last are as follows:
- Clock building, not time telling: Build an organization that can endure and adapt through generations of leaders and multiple product life cycles. vs. one leader and one idea
- The Genius of “AND” – Get rid of the mentality that it is an EITHER OR decision. Figure out how you can have AND: “Purpose AND profit, continuity AND change, freedom AND responsibility, etc.”
- Core ideology – Instill the core values and purpose as principles to guide the decisions for long term.
- Preserve the core/Stimulate Progress- Preserve the core ideology as an anchor WHILE stimulating change, improvement, innovation, and renewal in everything else. Keep the ideology at the forefront!
- BHAG’s (Big Hairy Audacious Goals)
- Good BHAGs are set with understanding. There should be a connection between BHAGs and the three circles of the Hedgehog Concept. This is where the magic happens
Collins ends the book with a thoughtful statement: “For, in the end, it is impossible to have a great life unless it is a meaningful life. And it is very difficult to have a meaningful life without meaningful work. Perhaps, then, you might gain that rare tranquility that comes from knowing that you’ve had a hand in creating something of intrinsic excellence that makes a contribution. Indeed, you might even gain that deepest of all satisfactions: knowing that your short time here on this earth has been well spent, and that it mattered.”