Good to Great

by

Jim Collins

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Good to Great: Chapter 1  Summary & Analysis

Summary
Analysis
Author Jim Collins begins by stating that good is the enemy of great. His previous book, Built to Last, highlighted how great companies stay great over time, but colleagues pointed out to him that most great companies had always been that way. With this new book, Collins decided to explore how companies that are merely good can become ones that are truly great.
From the start, Collins indicates that transformation is the book’s key idea. His confidence in undertaking this study is the first indication that Collins believes transformation is comprehensible and attainable.
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Collins goes on to describe how he and his research team selected the good-to-great companies that they studied for this book. To be in included, the companies had to go from showing good results to great results and continuing showing great results for at least fifteen years. The study also included other companies that either did not make the leap from good to great or could not sustain their great results over time. In many cases, the good-to-great companies had not been particularly remarkable before their sudden improvement. Collins emphasizes that though the book describes specific companies and their results, it is really about the transition to greatness rather than these individual companies.
Here, Collins emphasizes that the specific companies and even the business world as a whole are not really the book’s focus. Rather, the good-to-great companies serve as proxies for the concept of transformation more generally. Collins’s description of the rigorous research process also foreshadows the idea of focused, consistent effort that will become important later.
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After assembling a research team, Collins looked for companies that showed fifteen years of average or below-average performance in the stock market, followed by a clear transition and then sustained above-average performance for at least fifteen years. For their purposes, they defined “above-average” as showing stock returns at least three times the market. Collins and his team chose fifteen years in order to rule out both short-term lucky breaks and the influence of exceptional CEOs.
Collins’s note about trying to de-emphasize the influence of CEOs shows that the need to have the right people in a company (discussed later on) really does come from the empirical evidence, in that Collins did not search for this conclusion and yet found it anyway.
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The researchers eventually settled on eleven good-to-great example companies. Each company selected had shown the good-to-great trend without being in an overall great industry. Additionally, Collins and his team decided to use only the stock market results pattern as their standard for inclusion, since they could not determine any other legitimate objective standard of success.
Describing the use of stock market results as shorthand for success, Collins makes it clear that other forms of greatness are just as important as financial success. The team only uses financial data for practical reasons, not because they don’t value other forms of greatness.
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Then, the team selected a group of comparison companies. One group, the “direct comparison companies,” includes companies that were in the same industry as the good-to-great companies but did not transition into great results. The second group, the “unsustained comparison companies,” did make the jump from good to great but did not maintain their improved results over time.
The presence of the direct comparison companies, which had resources and opportunities similar to the good-to-great companies, underscores the idea that greatness comes from active choices rather than lucky circumstances.
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Finally, team carried out their research through a deep analysis of all twenty-eight companies. Through interviews, data analyses, reviews of relevant media, and other forms of data, they sought to find out what was inside the “black box” of the good-to-great transition. The full details of the researchers’ analyses are included in the book’s appendices.
Again, the methods of Collins and his team serve as a core example of consistent, focused effort as a way to accomplish an enormous task.
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In analyzing their data, Collins and his team developed the concepts detailed in the book directly from the data. They also found that several factors they had expected to be influential were actually not significant. Some of the factors that did not, surprisingly, affect good-to-great transitions include charismatic leaders, executive compensation, advanced technology, and long-term strategic planning. Additionally, none of the good-to-great companies had major launches or tag lines to announce the transformations that eventually led them to greatness.
Here again we see that many of the factors that are commonly associated with greatness, such as charisma and dramatic events, did not turn out to be important in good-to-great transformations. This reiterates the point that greatness is available to everyone, not just those who have certain innate gifts.
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Collins then introduces a framework of concepts that he and his research team developed in order to express their complex findings. At the broad level, they conceptualize the process of transitioning from good to great as “buildup followed by breakthrough,” all of which depends on the key features of disciplined people, disciplined thought, and disciplined action. The more detailed principles behind this process are outlined in the coming chapters. Collins urges readers to view the concepts as universal and applicable to any company, regardless of economic or social change. He notes that the good-to-great principles may apply just as much to other organizations or even individuals as they do to corporations, and challenges his readers to evaluate and consider each principle carefully.
Again, transformation as Collins describes it is fact-based and accessible to anyone. Here more than anywhere else, he explicitly states that even though the book is about companies, its principles can apply to any kind of organization or even an individual. This section sets up the egalitarian, optimistic framework on which the book rests.
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