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Book Summary: “Good To Great” by Jim Collins

Based on a five-year research project, Good to Great answers the question: "Can a good company become a great company and, if so, how?" In this book, Jim Collins teaches that companies can make the leap to outperform the market leaders. And although his Good To Great set of companies (Abbott Labs, Circuit City, Fannie Mae, Gillette, Kimberly Clark, Kroger, Nucor Steel, Phillip Morris, Pitney Bowes, Walgreens, and Wells Fargo) have experienced a myriad of changes and varying results the last decade (witness Circuit City’s demise and Fannie Mae’s role in the mortgage debacle), the principles of what originally helped propel them from average performing companies to market leaders remain valid.

 

Collins writes that "Good is the enemy of great. And that is one key reason why we have so little that become great." Yet the transformation from good to great doesn’t just happen. We must think of transformation as a process of build-up, followed by breakthrough, broken into three broad stages, with a few key components in each.

Stage I. Disciplined People

  • Level 5 Leadership – A surprising style, required for greatness.  These executives build "enduring greatness through a paradoxical blend of personal humility and professional will." They are modest and freely give others credit, act with calm determination, and channel ambition into the company (not to themselves).
  • First Who, Then What – The key distinguishing point here resulting from Collins team’s research was not just about the importance of assembling the right team, but about, first, getting the right people on the bus, the wrong people off the bus, and the right people in the right seat. And then, determining the proper strategic direction that should be followed. Often we think of accomplishing these two steps in the opposite order.

Stage II. Disciplined Thought

  • The Stockdale Paradox – The need to confront the brutal facts and continually refine the path to greatness, yet never losing faith in the ability to prevail. Understanding your current reality, good and bad, can only fully occur when an open culture is fostered where the truth can be discussed and a climate exists where intense dialogue is welcome and handled professionally.
  • The Hedgehog Concept – To transition from good to great, it is necessary to gain a deep understanding of three intersecting circles: 1) what you can be the best in the world at, 2) what economic denominator best drives your economic engine, and 3) what you are deeply passionate about. Next, this understanding must be translated into a concept that can be executed upon.

Stage III. Disciplined Action

  • The Culture of Discipline. The good-to-great companies built a consistent system with clear constraints, but they also gave people freedom and responsibility within the framework of that system.
  • Technology Accelerators – Good-to-great companies think differently about technology. They do not use technology to transform from good to great, but to accelerate their progress, staying focused on their Hedgehog. Collins asserts that technology by itself is never a primary cause of either greatness or decline.
  • The Flywheel and the Doom Loop – Why those who do radical restructuring fail to make the leap to greatness, while those that consistently accumulate momentum (turn upon turn, step by step) can transform themselves. Patience, persistence and discipline are critical to achieving desired results.

Finally, once you’ve gone from good to great, Collins suggests that you make the leap from great to enduring great, by applying the key ideas from his book Built To Last, principally the ideas that you should preserve your core ideology while stimulating change and progress and setting BHAGs (Big, Hairy, Audacious Goals) that are aligned with the middle of your three circles (your Hedgehog).