Good to Great: Chapter 6  Summary & Analysis

Collins begins with the story of George Rathmann, cofounder of the biotechnology company Amgen. Even though Amgen grew quickly and achieved fast success, Rathmann avoided creating the bureaucratic hierarchies that often stifle start-ups and focused instead on creating what Collins calls “a culture of discipline.” Rathmann stated in an interview with the research team that he learned this approach working at good-to-great company Abbott Laboratories, where objectives were clearly measured and rigorously worked toward.

Collins goes into more detail about Abbott, describing its system of carefully holding individual employees accountable for “every item of cost, income, and investment.” However, that rigorous system was used to encourage employees to work creatively, by giving them clear markers of success and free rein to decide how to achieve that success. Collins points out that this duality—structure on the one hand, freedom on the other—was apparent in every aspect of Abbott’s operation during its transformation from good to great.

Collins spells out the crucial components of this kind of culture of discipline using four key points. The first is that companies must create a framework that gives employees freedom and responsibility in their work. That is, employees should know what is expected of them and where the boundaries of their systems lie, but they should be able to make important decisions within those systems. Each of the good-to-great companies had such a system, which relied on having the right people onboard to operate successfully. For example, Circuit City achieved success by replicating a clear structure in every store and then giving managers significant discretion within that structure.

Collins emphasizes that the research points consistently to the need to have self-disciplined people within these systems, rather than spending energy trying to impose discipline externally. These people are the second crucial component of a culture of discipline. He notes that people in good-to-great companies “became somewhat extreme in the fulfillment of their responsibilities.” Collins calls this diligence the “rinsing your cottage cheese factor,” after an athlete who washed his cottage cheese to remove every last unnecessary calorie from his diet.

While cultures of discipline were crucial to the good-to-great companies, Collins and his team also found that unsustained comparison companies showed immense discipline. However, discipline in the unsustained comparisons turned out to correlate with the tenures of forceful, abrasive leaders who imposed discipline tyrannically. Once those leaders were gone, the discipline also vanished. Collins uses this information to argue that cultures of discipline should not be confused with tyrants, and that avoiding tyranny is the third crucial component of a true culture of discipline. Chrysler CEO Lee Iacocca is a particularly striking example of a disciplinarian whose company declined after he became distracted by egoistic side pursuits.

Finally, Collins notes that “fanatical adherence to the Hedgehog Concept” is the last of the four crucial components of the culture of discipline. In this case, the discipline applies mostly to the executive team and its ability to let the Hedgehog Concept guide all decisions, without getting distracted by other opportunities. Comparison companies, in contrast, often launched ventures and acquisitions that had little to do with their core concepts. Collins notes that good-to-great companies consistently turned down even “once-in-a-lifetime opportunities” when those opportunities did not match the company’s Hedgehog Concept.

The example of the company Nucor illustrates this idea of adhering to the Hedgehog Concept especially clearly. In Nucor’s case, adherence meant sticking closely to the idea of managing its company without class distinctions and worker oppression. CEO Ken Iverson told Collins and his team that the company’s success relied on its ability to use that concept in every decision it made, from sharing profits with workers to eliminating unnecessary luxuries for executives. In contrast, Nucor’s direct comparison company, Bethlehem, used a management model focused on maintaining and even strengthening class distinctions.

In conclusion, Collins recommends the use of what he calls “stop doing lists” as a method to achieve the four components of a culture of discipline. Many good-to-great CEOs, including Darwin Smith of Kimberly-Clark, paid scrupulous attention to cutting out tasks and activities that were not directly related to their companies’ Hedgehog Concepts. In particular, Collins notes that budgeting under this system means funding some activities fully and others not at all, rather than emphasizing some over others. Discipline, Collins argues, is as much about not doing unhelpful things as it is about doing helpful things.