Good to Great

“Why some companies make the leap and others don’t”

Photo by Dušan Smetana on Unsplash

Good to Great is a study in organizational change. Author Jim Collins sought to answer a question: why do some mediocre companies become great, while others don’t? How can a company with middling, even bad performance, transform itself into one that achieves lasting exceptional performance?

Collins approached this question seriously. He wanted to distill answers out of hard, empirical data. He believed that timeless wisdom is a byproduct of scientific rigor.

Collins assembled a motivated team. Under his direction, they applied a strict methodology to choose the Good to Great companies. These companies were selected based on an objective measure: stock market performance. Each had 15 years of performance at par with the general stock market, followed by 15 years of performance three times better. The team also selected comparison companies with a similar context (industry, opportunities) who did not make the leap.

The team identified factors that all the Good to Great companies had in common. They excluded any factors that were shared by the comparison companies. For example, great strategy may have been a factor present in the Good to Great companies, but if any of the comparison companies also exhibited great strategy, then this factor was excluded.

Collins’ team pored over the data, produced findings, and engaged in vigorous debate. Team meetings were like a crucible. They burned away irrelevancies until left with a true product: the truth.

Good to Great is the result of this meticulous, multi-year study.

The study identified a handful of principles.

1. Level 5 Leadership
2. First who… then what
3. Confront the Brutal Facts
4. The Hedgehog Concept
5. Culture of Discipline
6. Technology Accelerators

Level 5 Leadership

Good to Great describes leadership as a maturity model with 5 levels.

• A Level 1 leader is a productive individual contributor.
• A Level 2 leader is a leader without authority in a team context.
• A Level 3 leader is an efficient manager working towards predetermined goals.
• A Level 4 leader is an effective executive who provides clear direction, and stimulates high performance.
• A Level 5 leader combines a rare mix of humility and ferocious resolve.

A Level 4 leader may be able to turn around a company through his own immense capacity and will. Lee Iaccoca was such a leader. However, the company will typically not sustain its greatness beyond his tenure, as Chrysler didn’t.

A Level 5 leader creates a culture that can outlast him. His combination of humility and resolve inspires loyalty and outstanding results. He instills organizational habits that yield enduring performance.

All the Good to Great companies had Level 5 leaders in key positions at the time of their transition.

First who, then what…

As companies grow, they often introduce process and bureaucracy to control chaos. This has the side effect of slowing the company down and killing its entrepreneurial spirit. The Good to Great companies took a different approach. They got the right people on the bus, and in the right seats.

The right people are disciplined. They do not need to be managed or motivated; they are self-organizing and self-motivated. They do require the visionary leadership of a Level 5 leader who will set a clear, compelling mission, and then trust them to achieve it.

Confront the Brutal Facts

Honesty is an essential component of a turnaround. You can’t improve your reality, until you face it. Good to Great tells the story of Admiral Stockdale who survived 8 years in a POW camp during the Vietnam war. When asked why some didn’t make it past the first year, he replied: “Those were the optimists. They thought we’d be out by Christmas.”

Admiral Stockdale faced the fact that he would be a prisoner of war for years. He developed an elaborate protocol to secretly communicate with his fellow prisoners. He self-mutilated to prevent his captors from being able to claim he was being treated well.

He also retained faith that he would ultimately prevail. And he did.

The Good to Great companies displayed a similar ability to face the most brutal facts of their reality, while retaining faith they would prevail.

The Hedgehog Concept

Good to Great retells the ancient fable of the fox and the hedgehog. The fox is a beautiful, clever creature. The hedgehog is dowdy and simple. The fox knows many things, while the hedgehog knows one big thing. Everyday, the fox will concoct a new scheme to capture the hedgehog. Everyday, the hedgehog will defend itself by rolling into a ball, with its spiky spines protecting it. Everyday, the fox is foiled.

The Good to Great companies were like hedgehogs. They all had a simple concept for their business, and they studiously stayed within it.

A hedgehog concept is the intersection of three circles.
1. What are we deeply passionate about?
2. What can we we be best in the world at?
3. What drives our microeconomics? What is our x in the KPI profit/x?

The Culture of Discipline

All companies have culture, some have discipline, but few have a culture of discipline. A Culture of Discipline means disciplined people who engage in disciplined thought and then take disciplined action. The 6 principles can be overlaid on this template.

http://www.slideshare.net/vantan/good-to-great-concepts

A culture of discipline allows a company to scale without having to choose between chaos or red tape.

When you have disciplined people, you don’t need hierarchy. When you have disciplined thought, you don’t need bureaucracy. When you have disciplined action, you don’t need excessive controls. When you combine a culture of discipline with an ethic of entrepreneurship, you get the magical alchemy of great performance.

Technology as an Accelerator

For the Good to Great companies, technology was never cited as the primary cause of the turnaround. To be sure, these companies mastered technology, but always to serve the hedgehog concept. Technology was used as an accelerator of momentum, not a creator of momentum.

Go for Great

Good to Great de-mystifies greatness by reducing it to a set of principles that any organization can adopt. It asserts that greatness is less about circumstance or talent, and more about discipline, focus and persistence. It’s a motivating message.

Good to Great is a call to action.

Originally published December 2016. Reposted to Medium.