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Good to Great: Why Some Companies Make the Leap.and Others Don't by Jim Collins (Harper Business, 2001).

Background:

If you haven't discovered Jim Collins yet, perhaps you're lucky because you'll be able to read his two best known books in the correct order. The author admits that Good to Great is really the prequel to his widely acclaimed book, Built to Last, written with Jerry Porras and published in 1994.

Built to Last drew on a six-year study at the Stanford University Graduate School of Business, where both men were professors. With over 70 printings and translations into 16 languages, the book has become a business classic.

Throughout Built to Last, the author asked, "What makes the truly exceptional companies different from the comparison companies and what were the common practices these enduringly great companies followed throughout their history?" They concluded that the vision of great companies comes not from great leaders, but rises out of each company's goals, procedures, and people.

1) "Good is the Enemy of Great," the first chapter of Good to Great, shows it is also the result of meticulous research, this time by Jim Collins' own management laboratory in Boulder, Colorado. Over a five year period, he and his team asked the question, "Can a good company become a great company, and if so, how?"

Searching through a list of 1,435 companies that had demonstrated substantial improvement over time, they finally narrowed their focus to 11:  Abbott, Circuit City, Fannie Mae, Gillette, Kimberly-Clark, Kroger, Nucor, Philip Morris, Pitney Bowes, Walgreen's, and Wells Fargo.

The chapter delineates the rigorous research criteria used to isolate the chosen companies. Some of the findings were that in Good to Great companies:

Common to all great companies is one central theme: discipline-in people, thought and action.

Disciplined People

2) "Level 5 Leadership" is Collins' term for the great executives, concerned more for the company than for themselves. They think of "We," not "I." These executives are capable individuals, contributing team members, competent managers, and effective leaders. They act as mirrors, giving credit to the team for successes-at the same time, accepting full responsibility for failures. They're humble people who produce extraordinary results.

Level 5 leaders are a combination of humility, professional will, modesty, resolve, and determination.

Good to great Level 5 leaders have the following characteristics:
     1. Results-oriented;
     2. Intolerant of mediocrity;
     3. Abhor nepotism or seniority;
     4. Come from inside the company;
     5. Are diligent plow horses, not high-spirited show horses;
     6. Choose competent successors to ensure the company's future;
     7. Total determination to get the job done.

Level 5 leaders can be found where there are great results without any one person claiming credit. They are self-reflective, have a good family and significant life experiences, and had a Level 5 boss or mentor. They are the antithesis of celebrity leaders, instead attributing their success to luck and team efforts.

3) "First Who, Then What" focuses on effective team development. Without the proper people in place, it's impossible to steer the company in the right direction. Collins refers to this as "getting the right people on the bus." He cites Wells Fargo as understanding this concept because when they train "the best managers in the banking industry," they know some of them will leave to head up other companies. However, their places will be taken by equally well-trained team players. When everything hinges on "the genius with a thousand helpers" model, and the genius leaves, you are left with chaos.

The three practical disciplines for building great teams are:

Disciplined Thought

4) "Confront the Brutal Facts" illustrates how the great companies create a corporate climate where truth can be both spoken and heard. The example of A&P and Kroger makes the point. One refused to recognize what customers wanted: super stores with ample parking and multiple checkout lines. Kroger listened to its customers, rebuilt its system on a new model, and by 1999 was the leading grocery chain in the United States.

The disciplined thought in the great companies was two-fold:

Collins cites "The Stockdale Paradox." Admiral Jim Stockdale was the top ranked US officer held as a prisoner in Vietnam. He kept alive by accepting the difficulty of his situation and keeping faith he would survive. In the same way, great companies are not judged by their difficulties but by how they handle and overcome them.

5) "The Hedgehog Concept" is named after British philosopher Isaiah Berlin's 1953 essay in which he quotes the Greek poet Archilochus, "The fox knows many things, but the hedgehog knows one big thing." The complex fox is cunning, striving to achieve several goals at once. The hedgehog is totally focused, seeing the essential and blocking everything else. When the fox tries to prey on him, the hedgehog simply rolls into a spiked ball.

Good to great companies are hedgehogs, clear on their reason for existence, consistent and focused. Walgreen's exemplifies this with their strategy, "The best, most convenient drugstores, with high profit per customer visit." They achieved it through proliferation of convenient locations (usually on corner lots allowing for multiple entrances), drive-in pharmacies, and one-hour photo developing.

In great companies, the Hedgehog Concept flows from the intersection of these three circles:
     1. What you do best (and what you don't do well);
     2. What your economic motivator is;
     3. What you are deeply passionate about.

The Hedgehog Concept is a process that takes great companies years to implement effectively. The secret is to build an informal, internal council that allows free and open dialogue, meets regularly, with members drawn from throughout the company, not just the executive ranks.

Disciplined Action

6)  "A Culture of Discipline" is the natural next step after disciplined people and thought. In this corporate culture, self-disciplined people avoid hierarchy and adhere to the hedgehog concept. They use "Stop Doing" lists and eliminate unproductive activities. The culture is one of motivating leadership instead of dictatorial enslavement.

RJ Reynolds and Philip Morris are good examples of the fox and the hedgehog. Both tobacco companies were hit with the surgeon general's warning on every package of cigarettes. RJ Reynolds diversified into oil and shipping, activities not even close to their core capability.

Philip Morris - one of the 11 good to great companies - stuck to its hedgehog concept of providing less than healthy products - chocolate, beer, coffee, and processed cheese.

7)  "Technology Accelerators" refers to the ability of great companies to adapt to change by incorporating new technology into established, successful models. Walgreen's added the convenience of a commercial Internet site, handled internally by trained staff. Gillette accelerated development, design, and manufacturing process with up-to-the-minute technology.

However, great companies treat technology like the hedgehogs they are, moving slowly rather than rushing to be what Geoffrey Moore (Crossing the Chasm) called "early adopters." They avoid fads and pioneer only when technology is a good fit with their mission. (In 84 interviews with good to great executives, only 20 percent ever mentioned technology.)

8) "The Flywheel and the Doom Loop" uses the analogy of a flywheel being pushed on its axle, one rotation per push. Finally, as it moves faster and faster, it achieves a self-propelled, breakthrough momentum. Pointing out that "an overnight success is usually the result of a decade of hard work," Collins shows that great companies are the result of consistent effort, not one identifiable event.

The Doom Loop refers to a company's momentum being stopped by something new - a direction, leader, or acquisition - which begins pushing the flywheel in the opposite direction. The disappointing results cause another reaction, again changing the direction of the flywheel until it goes nowhere.

Great companies use mergers and acquisitions only as accelerators to keep the momentum high. They are wary of mediocrity and understand you cannot buy greatness.

9) "From Good-to-Great to Built to Last" sums up the research conclusions from the previous chapters and identifies the correlation between the two books. Collins shows the importance of identifying core values and purpose, beyond profit motives, so you can stimulate progress while preserving the core.
 

The View from the Lighthouse on Good to Great: Why reading this book is worth your time:

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Click here to buy this book:
http://www.amazon.com/exec/obidos/tg/detail/-/0066620996/qid=1046214255/sr=1-1/ref=sr_1_1/002-2652459-4387222?v=glance&s=books

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RESOURCES:

Contact Info: Jim Collins, P.O. Box 1699, Boulder, CO 80306-1699. Tel: 303-473-9996.  Fax: 303-545-0228
JCC512@aol.com

www.JimCollins.com is Collins' website. There you'll find a fund of information about his books and research. He offers insight into his current thinking, Q & A about his work, a discussion guide, an explanation of his research techniques, as well as some of his most recent articles.

www.pfdf.org/leaderbooks/collins/ This website of the Leader to Leader Organization, (formerly the Drucker Foundation) offers 10 articles by Jim Collins from Inc. Magazine and one from the Drucker Foundation News.

www.qualitydigest.com/may98/html/qual-vu.html is the link to a 1998 interview with Jim Collins that focuses on Built to Last and gives a lucid explanation of many of his seminal concepts.

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