Good to Great

by

Jim Collins

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Jim Collins states that while his previous book, Built to Last, explained how great companies stay great, it did not delve in the ways that good companies become great ones. That process of transformation is the subject of Good to Great.

Collins and his research team selected eleven corporations that went from showing average or below average performance on the stock market to showing extraordinarily good returns and sustaining those returns for at least fifteen years. Additionally, the team selected eleven direct comparison companies to study from the same industries as the good-to-great companies, as well as six unsustained comparison companies. The direct comparison companies did not show a change from good to great, while the unsustained comparisons did show that change but could not continue their gains over time.

Collins and his team set a goal of figuring out what went into these companies’ remarkable transformations, in order to outline a set of universal good-to-great principles that any organization or even individual might use. They eventually uncovered the seven principles that make up the book’s core concepts.

The first of the seven principles is the concept of the Level 5 Leader. Over the course of their research, Collins and his team found that every good-to-great company was led at the time of its transformation by a very particular kind of CEO, which they term Level 5 Leaders. In contrast to the stereotype of a brilliant, charismatic leader, Level 5 Leaders are universally humble and devoted to serving the company’s success over their own. However, these leaders are not meek or unassertive; on the contrary, they fight forcefully for their companies’ well-being while maintaining their personal modesty. The balance between these two characteristics, which may seem initially contradictory, forms the essential trait of Level 5 Leaders. Collins gives several examples of the kinds of behavior, both humble and assertive, that led the research team to characterize the good-to-great CEOs as Level 5 Leaders.

Next, Collins turns his attention to the hiring and employment strategies of good-to-great companies. Contrary to popular wisdom that emphasizes strategic planning above all else, the good-to-great companies almost always focused their attention on hiring the right people before deciding what direction the company should take. Collins uses the metaphor of a bus for this process and gives examples of the ways that good-to-great companies prioritized getting the right people on the bus, even when dire circumstances prompted them to take action. With the right people in place, the companies’ CEOs did not need to lead through tyranny; rather, they were able to delegate and share responsibility.

Having the right people on the bus also helped these companies make savvy strategic decisions, since they had a variety of intelligent perspectives to draw from in setting a direction. Throughout this chapter, Collins emphasizes that a person is “the right person” when their motivations align with the company’s, and that “right” does not refer to any objective definition of what talents or background employees should have.

Collins next explores the idea that good-to-great companies must confront the brutal facts of their situations without losing hope that they will eventually prevail. Collins calls this form of duality the Stockdale Paradox, after a U.S. Admiral in the Vietnam War who told Collins that his key to surviving a prisoner of war camp was maintaining a balance of hope for the future with realism about the present. While the comparison companies were often in denial about their challenges, the good-to-great companies confronted challenges head-on and made plans based on real facts rather than wishful thinking. At the same time, they remained steadfast in their belief that they could succeed.

The other concept based on good-to-great companies’ strategic planning is one of the book’s motivating symbols: the Hedgehog Concept. Collins demonstrates how each of the good-to-great companies used one simple, precise concept to drive all of its planning and action. These concepts are termed Hedgehog Concepts after a story about a simple hedgehog who defeats a clever fox by using one focused strategy consistently, while the fox exhausts itself with intricate maneuvers that ultimately fail. Collins lists each of the good-to-great companies’ Hedgehog Concepts and shows how the comparison companies did not have similarly focused strategies. Additionally, Collins notes that the research suggests that good-to-great companies engaged in careful, long-term consideration of three specific areas: identifying what the company can do better than anyone else in the world; finding out what exactly drives the company’s economic engine; and clarifying what the company and its leadership are deeply passionate about. For those looking to develop their own Hedgehog Concepts, Collins recommends robust debate around those three areas of understanding, which he terms “the three circles.”

The next section of the book focuses on disciplined action and how it builds on the resources of disciplined people and disciplined thought discussed in previous chapters. The first key concept based on disciplined action is the idea of an overall culture of discipline, which Collins notes existed in some way at every good-to-great company. These cultures were not ruthless—that is, they did not rely on tyrannical leadership or baseless punishment of employees. Rather, they were formed through the duality of combining rigorous structures with freedom for individuals. Within such cultures, expectations are clear and standards are high, but employees decide how they personally can best meet those standards. Additionally, cultures of discipline as defined here are focused on fanatical adherence to the company’s Hedgehog Concept, which must drive everything the company does.

Finally, Collins identifies the savvy use of technology as a particularly important case of disciplined action. Though new technology can be exciting and tempting, Collins’s research shows that good-to-great companies pursued technological advances only when doing so made sense as a way to advance their Hedgehog Concepts. Many of them became technological leaders, but they did not do so for the sake of technology in and of itself. In contrast, the comparison companies often pursued technological progress without applying it wisely to the unique circumstances of their companies. Collins notes that while technology can be a powerful accelerator of a company’s existing momentum, it cannot create greatness on its own. Many of the executives of good-to-great companies deemphasized technology in describing their own success, demonstrating that technology is truly a tool rather than a strategy.

Collins moves on to the seventh and final good-to-great concept, which unifies the previous six and shows how they can work together to create remarkable transformation. Collins use the symbol of an enormous, heavy flywheel as a symbol for this idea. The flywheel turns slowly and only gains momentum by moving steadily in the same direction for a long time. Moving it requires simple motions repeated over and over again, but once it starts to gain momentum, its own weight becomes an asset, powering it forward until the entire thing reaches a point of breakthrough and starts spinning on its own. Collins uses the image of the flywheel to show how all of the components of the good-to-great companies worked together to build energy toward transformative breakthrough. Crucially, none of the components can work on their own; they only function as part of the flywheel process. In contrast, Collins notes that comparison companies often seemed to be caught in a “doom loop,” in which irrational decisions compound over time to prevent success.

In the final chapter, Collins connects the good-to-great concepts to those discussed in his previous book, Built to Last. In that earlier work, Collins conducted different research to show how great companies sustain their greatness over time, and he states that he now views Good to Great as a kind of prequel to Built to Last. The earlier book shows some of the same good-to-great patterns, and the new book also clarifies some of the first one’s mysteries. Collins states that in order for a company to transition to greatness and maintain it over time, it must apply all of the concepts from both books, consistently and without exception.

Collins ends by noting how the good-to-great concepts show up even in organizations with little in common with corporations, using the example of a champion track team. Collins tells his readers that working toward greatness in any arena can be a key to leading a meaningful life and encourages them to find at least one area in which they might try our the good-to-great concepts themselves.