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Good To Great: Why Some Companies Make The Leap...and Other's Don't

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User Rating 4 Star Rating (1 Review)

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Jim Collins new book is titled Good To Great. If you haven't read it yet, buy, beg, or borrow it. It's that important.
Collins calls Good To Great a "prequel" to his hugely successful Built To Last. I call it the most important Business Leadership book I have read in a long time. 1997's Built To Last was a great book. It set a target for all of us. However, it left out critical information, because those companies were already great. What about those of us struggling to move our companies from Good To Great as opposed to those trying to hold on to greatness? The missing piece is clearly identified in Collins' Good To Great.

Collins and his team identified 11 companies that followed a pattern of "fifteen-year cumulative stock returns at or below the general stock market, punctuated by a transition point, then cumulative returns at least three times the market over the next fifteen years." Public companies were selected because of the availability of comparable data.Fifteen-year segments were selected to weed out the one-hit wonders and luck breaks. While these selection criteria exclude "new economy" companies, Collins contends that there is nothing new about the new economy, citing earlier technology innovations of electricity, the telephone, and the transistor.

Having identified the companies that made the leap from Good To Great, Collins and his team set out to examine the transition point. What characteristics did the Good To Great companies have that their industry counterparts did not? What didn't the Good To Great companies have?

Collins maps out three stages, each with two key concepts. These six concepts are the heart of Good To Great and he devotes a chapter to explaining each of them.

  • Level 5 Leadership
  • First Who... Then What
  • Confront the Brutal Facts
  • The Hedgehog Concept
  • A Culture of Discipline
  • Technology Accelerators

Collins characterizes the Level 5 leader as "a paradoxical blend of personal humility and professional will." The Level 5 leader is not the "corporate savior" or "turnaround expert". Most of the CEOs of the Good To Great companies as they made the transition were company insiders. They were more concerned about what they could "build, create and contribute" than what they could "get - fame, fortune, adulation, power, whatever". No Ken Lay of Enron or Al Dunlap of Scott Paper, the larger-than-life CEO, led a Good To Great company.

This kind of executive is "concerned more with their own reputation for personal greatness" than they are with "setting the company up for success in the next generation".

In this book, Jim Collins also challenges the notion that "people are your most important asset" and postulates instead that "the right people are." I don't know that I yet completely agree with his philosophy that it's more important to get the right people on the bus and then see where it goes than it is to figure out where to go and get the right people on the bus who can get you there. However, he makes his point clearly and you can decide if you agree with him.

This nearly 300-page book is packed with leading edge thinking, clear examples, and data to support the conclusions. It is a challenge to all business leaders to exhibit the discipline required to move their companies from Good To Great.

User Reviews

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 4 out of 5
Review of Good to Great by Jim Collins, Member Abhay.Kumar

“Good is enemy of great” – and judged from this angle of vision- the book is not good, it is great! The Book is a breakthrough in the contemporary discussion on leadership, excellence and corporate management. Rightly observed by Jim Collin, himself, to say this book is“by Jim Collin” overstates the case. It is, in fact, a research study, representing about 15000 hours of works by a dedicated team of 21 scholars, consuming 10.5 people years of efforts, studying nearly 6000 articles, and generating more than 2000 interview transcripts. The study, starting with the 1435 companies (selected from the Fortune 500 companies, during the years 1965 to 1995).And then 126 companies were finally selected for detailed data pattern analysis. Ultimately 11 companies were found, which turned out really “good to great” set of companies. This great deal of concrete work, with a clearly defined process of theorizing and evaluating, developing ideas, testing ideas against the data, and building a framework, gives it a great deal of authenticity to its finding and inferences. Some of the inferences and theories, can safely be termed as findings, tears apart and dispels many myths about the factors of leadership and corporate excellence. For example, the book finds , celebrity leaders from the outside are negatively correlated with the great companies, strategy or long term strategic planning has little to do with the great companies, the good to great companies did not focus on what to do but focused more on what not to do, the good to great companies paid scant attention on managing change, managing people, or creating alignment. The author has taken the sample of 11 companies which had fifteen year cumulative stock return at or below the general stock market, punctuated by a transition point, and reached a cumulative return at least three times the market average, over the fifteen years. It included companies ranging from Circuit City to Kimberlay clark , achieving the cumulative return being 18.50 times and 3.42 times market average, respectively. The study analyses “what did the “good to great companies” shared in common, that distinguished them from the “comparison companies” and also from “un sustained comparisons” It is an eye opening exercise corroborated by carefully gathered data. The framework considers the transformation as a process of “build up” (comprised of “level 5 leadership”, “first who then what” and “confront the brutal facts”) followed by “breakthrough” (comprised of “hedgehog concept”, “culture of discipline” and “technology accelerators”). It is all mounted on a fly wheel of regular efforts giving it a momentum to accelerate and sustain the process, to turn the company from good to great. “Level 5 leadership” very appropriately dealt with the leadership qualities, in the context of corporate management, starting from first “Highly capable individual”, second “a contributing team member”, third “a competent manager”, four “an effective leader” and finally to a “level 5 executive” who is a paradoxical blend of “humility” and “professional will”. Collins very aptly cited the example “Abraham Lincoln”! “First who than what” concept emphasizes on getting the right people in the bus (and the wrong people off the bus) before figuring out where to drive it. The point has very lucidly explained quoting the David Maxwell (CEO of Fennie Mae) and Dick Cooley (CEO of Wells Fargo), who said “I don’t know where we should take this company, but I do know that if we start with the right people, ask them the right questions and engage them in vigorous debate, we will find the way to make this company great”. “Confront brutal facts” It deals with the need for openness and realization. For a charismatic leadership, the chapter curiously observes, “the charisma can be a liability” because the strength of personality can sow the seeds of problem when the people filter the brutal facts from the leader. Leadership is about vision. But the leadership is equally about creating a climate where the truth is heard and brutal facts confronted. It emphasizes on this paradox of keeping faith in the end and at the same time, bear with the stark reality. (“Stockdale paradox”) “The Hedgehog concept” Cork Walgreen (CEO Walgreens) worked out a clear and concise strategy to have “the best most convenient drugstore with high profit per customer visit” and then every effort and resources was simply vested to one strategy, “a frame of reference for every decision” and it worked, Walgreen achieved a cumulative stock return of $562 per $1 invested as against $309 for a company like Intel and $37 for the stock market in general. Such strategy should be founded on deep understanding of three key dimensions i.e. “what you can be the best in the world at”, “what drives your economic engine” and “what you are passionate about”. A good to great company translate that strategy into a simple crystalline concept that guided all their efforts. “Culture of discipline” is another element of breakthrough. The chapter referred the “concept of responsibility Accounting”( developed by Bernard H. Semler, an Accounts Officer with Abbott) wherein every item of cost, income and investment will be clearly identified with each individual responsible for the item. Every manager in every type of job was responsible for his or her return on investment. Beauty of this Abbott system lay not just in the rigor but in how it used rigor and discipline to enable creativity and entrepreneurship. The concept is comprised of: 1. Build a culture around the idea of freedom and responsibility, within a framework. 2. Fill the culture with self-disciplined people who are willing to go to extreme length. 3. Don’t confuse a culture of discipline with tyrannical disciplinarian. 4. Adhere with great consistency with Hedgehog concept, exercising a religious focus on the intersection of the three circles (“best at”, “economic engine” and “passionate about”). Equally important, create a “stop doing” list and systematically unplug anything extraneous. “Tecnology accelerators” – Walgreen is a case in study, who suffered a loss of market value of $15 billion when ‘drugstore.com, the first Internet Pharmaceutical company floated its share in market. Walgreen played a “crawl, walk and run” style of response. It started with a crawl, experimenting with website cautiously, being careful that it is consistent with their hedgehog concept of “convenience concept”. Next, it walked, began to find ways to tie internet directly to its sophisticated inventory-and-distribution model and ultimately to its “convenience concept”. Finally, it ran in full swing, launching an internet site, as sophisticated and well designed, as most pure dotcoms. Walgreen did not adopt the technology just for the sake of technology or in a fearful reaction of falling behind; it used technology as a tool to accelerate momentum after hitting breakthrough and tied technology directly to its Hedgehog concept of “convenient drugstores increasing profit per customer visit. Primary variable in winning a car race is not the car, but the driver! “The fly wheel”- Try to turn a flywheel of 5000 kgs, push it one inch, then a few inches, then few feet, then one rotation, then few rotations a minute, same effort continued for a longer period and it may lead to a hundred, a thousand rotation per minute. It just a matter of continued effort and time! At times, when it acquires a momentum, it may pull you along, if you don’t push it further! It holds true for the “good to great companies” which continued their exercising “build up” and “transformation”, un relented, gradually and continuously. The flywheel effect has been depicted as a cycle of events- “Step forward” (consistent with hedgehog effect), “accumulation of visible results” , “People line up” (Energized with results), “Flywheel builds momentum” and again a “step forward”, and so on. In sum total, it is marvelous work to build the theory by interpolating data. The book is worth reading for the corporate managers, entrepreneurs and management students as well. It is no less important for the HR people looking for some concrete basis for effectiveness of behavior and an insight into the phenomenon of leadership.

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