Good to Great

by

Jim Collins

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Good to Great: Chapter 4  Summary & Analysis

Summary
Analysis
Collins opens with an anecdote about two grocery store chains, A&P and Kroger. While A&P was once the more successful company by far, the middle of the twentieth century brought new patterns and consumer pressure to retail businesses, and Kroger adapted much more readily to this new reality. Collins notes that Kroger’s success was due in part to its willingness to confront difficult facts without hesitation, and that its story is an example of a broader trend among the good-to-great companies.
Here, Collins introduces one essential aspect of the good-to-great companies’ dual nature. Kroger’s ability to combine uncomfortable facts with an energetic response exemplifies the way that these companies successfully balance hope and realism throughout the book.
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Kroger’s rise to greatness is “remarkably simple and straightforward”: the company gathered data about what customers wanted—better, more comprehensive stores—and acted on that information by revamping their entire business model. Collins points out that this transformation illustrates the idea that “facts are better than dreams” when it comes to planning strategic changes. In every case, good-to-great companies based their transitions on the facts of their industries’ reality, which were often brutal.
By highlighting how truly dire some of the situations the good-to-great companies found themselves in were, Collins reiterates that bad luck and difficult realities are no barrier to greatness. This point relates back to the theme of the eternal possibility of transformation; even individuals and organizations facing dark futures can still become great.
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Collins gives another example through the case of Pitney Bowes and Addressograph, two office automation companies that were once comparably successful. In the 1970s, the CEO of Addressograph became committed to a single strategic plan and refused to change course even when data showed that his plan wasn’t working. In contrast, the CEO of Pitney Bowes focused hard of facing difficult truths that might get in the way of their success and deciding how to take action accordingly. Though the CEO of Addressograph was charismatic and committed to his vision, Collins suggests that this kind of charisma can actually be a liability because it shields people from facing the brutal facts.
The CEO of Addressograph provides another example of an individual who seemed exceptional but who could not, when it came down to it, achieve greatness. By flipping the usual idea of charisma on its head and calling it a burden rather than an asset, Collins again opens the door to greatness for ordinary individuals. This anecdote also reinforces the crucial need for companies to have the right people in leadership positions.
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The ability to face facts comes from a corporate environment in which everyone is comfortable telling the truth and executives work hard to hear that truth. Turning to strategies for creating that kind of culture, Collins notes that one trend among good-to-great companies is leadership focused on questions rather than answers. For example, CEO Alan Wurtzel of Circuit City was known for admitting that he didn't know the best strategy for his company and relentlessly questioning board members and executives in order to find out how best to proceed. Collins links this kind of questioning and debate to the Socratic style of learning, with understanding (rather than manipulation or intimidation) as its ultimate goal.
Again, Collins redefines something that is usually construed as positive—in this case, having the right answers—as something negative. Just as it’s okay not to be charismatic, it’s okay to be unsure of how to proceed. With this idea, Collins again shows how people can achieve greatness just through the book’s concepts, even without any extraordinary pre-existing knowledge. The idea of a leader who refuses to make decisions alone also introduces a new form of duality to the narrative: a leader who doesn’t exactly lead yet is still crucial to the company.
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Additionally, the good-to-great companies illustrate the importance of relying on debate and dialogue, rather than coercion, to buy into one corporate mindset. Like Alan Wurtzel, CEO Ken Iverson of Nucor was known for fostering heated debate around every important company decision. Finally, Collins notes that good-to-great companies show a trend of conducting thorough autopsies of failed initiatives, without focusing on blame and punishment for those responsible. For these companies, failure is always a learning opportunity. Collins also points out that these companies tend to build in various kinds of “red flag” mechanisms to help employees bring up worrisome facts.
Here, failure is a learning opportunity; again, a seeming obstacle becomes an asset and greatness remains within reach, even for those dealing with difficult circumstances. These examples also provide a new perspective on the idea of the “right people,” showing that rightness can—and often does—come from a willingness to debate rather than from certainty or expertise.
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In addition to facing the brutal facts, the good-to-great companies also showed the ability to keep believing that they would succeed, even when the outlook was bleak. Collins gives the example of Kimberly-Clark and its CEO Darwin Smith, who used the idea of competing against Proctor & Gamble, a powerful rival, as a way to motivate employees toward success. Over and over, the research team’s interviews showed that executives facing hard truths succeeded in part by having faith that their companies would eventually prevail.
In addition to further developing the key duality of hope and realism, this section also gives an example of difficulty as a motivator rather than a deterrent. Again, “bad” things might not always be drawbacks, which means that transformation always remains possible.
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To explain the psychological duality that the management teams of good-to-great companies showed, Collins describes a framework that he calls the Stockdale Paradox. The Paradox refers to Jim Stockdale, a US military officer in a prisoner-of-war camp during the Vietnam War. Stockdale led his fellow prisoners through an eight-year ordeal, doing everything he could to help them stay strong and to thwart the enemies’ attempts to use the prisoners for propaganda. When Collins asked Stockdale how he thrived under these extreme circumstances, Stockdale replied that he “never lost faith in the end of the story.” However, Stockdale also noted that he did not give in to false hope, never telling himself or others that rescue would arrive implausibly soon. From that story, Collins derives the Stockdale Paradox: retain faith in future success but confront the brutal facts of the present.
The Stockdale Paradox is one of the book’s most explicit discussions of good-to-great companies’ duality. The example of Stockdale’s own life is a particularly dramatic one, but its extremity makes it an especially good illustration of Collins’s point: anyone, in any situation, can strive to preserve hope and realism simultaneously. These ideas may oppose each other at times and seem paradoxical, but seeking duality in one’s outlook remains important in spite of—or even because of—these inherent contradictions.
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