Good to great is a book written Jim Collins. The following is a summary review of the book. The title comes as a sequel to the author's earlier book called Built to Last which he attributed as greatness and hence the suggestion that many companies that are good don't get to the next stage of being great. Here he focuses on why more companies don't do what worked for others or do it more often. He picked eleven companies Abbott, Fannie Mae, Kimberly Clark, Nucor, Pitney Bowes, Wells Fargo, Circuit City, Gillette, Kroger, Phillip Morris and Walgreens. These companies had to meet the criteria that they had 15 year cumulative stock returns that were at or below the general stock market, punctuated by a transition point, then cumulative returns with three times the market over the next fifteen. These companies were selected over their competitors because they either do not show such a leap or did not sustain it. From these selections, the author describes patterns that emerged from this behavior.
The first topic was about leadership. Contrary to the belief that celebrities may have influenced the performance in the market with their charisma or influence, these companies had leaders who demonstrated Level 5 leadership. The term refers to those who unlike the celebrities had personal humility and intense professional will. Many such leaders often setup successors for success. Their humility came with a steely resolve and intolerance for mediocrity. Abbott Laboratories attacked nepotism in its company to make the leap. The levels from 1 to 5 are graded as follows: level 1 - comprises highly capable individuals who make productive contributions through talent, knowledge, skills and good work habit; level 2 comprises members who contribute at the team level and work with others; level 3 is a competent manager who organizes people and resources towards objectives; level 4 is a leader who draws commitment and pursuit to a clear vision; level 5 is those who establish the vision independent of themselves to make the company move to the next plane.
However, the author argues vision or strategy is not the primary prerequisite to make the leap, instead its the selection of people to get on the bus before deciding where to go. As an example, Wells Fargo continuously hired the best to prepare for changes in its industry. The book claims the following truths:
If we focus on who are with you rather than the mission, the changes is going to be easier.
If we have the right people, we spend less time on managing them.
If we have the wrong people, we cannot make the most of the right direction.
Essentially its about people who practice a culture where they don't worry about their positions.
It also implies not to hire too soon too fast and to put existing people not on the biggest problems but the biggest opportunities.
Another pattern that emerges from this company is the notion of disciplined thoughts. Self-assessment by companies is a pre-requisite to knowing what transition to make. Called brutal facts, these establish the weaknesses that are clear enough. The author highlights that some leaders were open enough to say "I don't know" and that is welcome. It simply argues for evaluations and positive feedback more often to keep refining it till it becomes clear. Clearer facts are easier to execute on, be measured and put in a cycle of improvements. Such facts could also be opened up to the public. To do this the book suggests the following:
- Lead with questions, not answers such that we often discover more and more than what we perceive.
- And engage in a dialogue not a debate, sermon, ridicule or worse coercion.
- Review past work but without blame and with a resolve to do better
- Keep metrics and thresholds so that they can translate to actionable alerts.
The book also introduces hedgehog concept which divides the world into two groups - the hedgehogs who translate the complex world into a single idea or a principle and the foxes who take the complex world for what it is and work on different levels often missing a unified direction. The hedgehogs win in a match with the foxes.
The use of the hedgehog concept is to illustrate that leaders with a simple mission can help drive the company from good to great. To find this mission, the concept talks about identifying the intersection of three dimensions : what we can be best at, what drives the economic engine, and what we are deeply passionate about.
Another pattern mentioned in this book is about disciplined action. These involve building a culture around the idea of freedom and responsibility, within a framework. It also involves getting passionate people who will take their responsibilities forward. The degree of adherence to the discipline should be reasonable and more towards the hedgehog concept than religion.
Lastly, the book mentions a pattern to use technology to accelerate and encourages the use of right technologies as opposed to new technologies. In fact, it cautions against the zeal to use new technologies.
With the patterns mentioned, the book suggests that there is a flywheel effect that can result in good to great transformations. The opposite of the flywheel is the doom loop which can be seen in the cases where the patterns are not followed.
The first topic was about leadership. Contrary to the belief that celebrities may have influenced the performance in the market with their charisma or influence, these companies had leaders who demonstrated Level 5 leadership. The term refers to those who unlike the celebrities had personal humility and intense professional will. Many such leaders often setup successors for success. Their humility came with a steely resolve and intolerance for mediocrity. Abbott Laboratories attacked nepotism in its company to make the leap. The levels from 1 to 5 are graded as follows: level 1 - comprises highly capable individuals who make productive contributions through talent, knowledge, skills and good work habit; level 2 comprises members who contribute at the team level and work with others; level 3 is a competent manager who organizes people and resources towards objectives; level 4 is a leader who draws commitment and pursuit to a clear vision; level 5 is those who establish the vision independent of themselves to make the company move to the next plane.
However, the author argues vision or strategy is not the primary prerequisite to make the leap, instead its the selection of people to get on the bus before deciding where to go. As an example, Wells Fargo continuously hired the best to prepare for changes in its industry. The book claims the following truths:
If we focus on who are with you rather than the mission, the changes is going to be easier.
If we have the right people, we spend less time on managing them.
If we have the wrong people, we cannot make the most of the right direction.
Essentially its about people who practice a culture where they don't worry about their positions.
It also implies not to hire too soon too fast and to put existing people not on the biggest problems but the biggest opportunities.
Another pattern that emerges from this company is the notion of disciplined thoughts. Self-assessment by companies is a pre-requisite to knowing what transition to make. Called brutal facts, these establish the weaknesses that are clear enough. The author highlights that some leaders were open enough to say "I don't know" and that is welcome. It simply argues for evaluations and positive feedback more often to keep refining it till it becomes clear. Clearer facts are easier to execute on, be measured and put in a cycle of improvements. Such facts could also be opened up to the public. To do this the book suggests the following:
- Lead with questions, not answers such that we often discover more and more than what we perceive.
- And engage in a dialogue not a debate, sermon, ridicule or worse coercion.
- Review past work but without blame and with a resolve to do better
- Keep metrics and thresholds so that they can translate to actionable alerts.
The book also introduces hedgehog concept which divides the world into two groups - the hedgehogs who translate the complex world into a single idea or a principle and the foxes who take the complex world for what it is and work on different levels often missing a unified direction. The hedgehogs win in a match with the foxes.
The use of the hedgehog concept is to illustrate that leaders with a simple mission can help drive the company from good to great. To find this mission, the concept talks about identifying the intersection of three dimensions : what we can be best at, what drives the economic engine, and what we are deeply passionate about.
Another pattern mentioned in this book is about disciplined action. These involve building a culture around the idea of freedom and responsibility, within a framework. It also involves getting passionate people who will take their responsibilities forward. The degree of adherence to the discipline should be reasonable and more towards the hedgehog concept than religion.
Lastly, the book mentions a pattern to use technology to accelerate and encourages the use of right technologies as opposed to new technologies. In fact, it cautions against the zeal to use new technologies.
With the patterns mentioned, the book suggests that there is a flywheel effect that can result in good to great transformations. The opposite of the flywheel is the doom loop which can be seen in the cases where the patterns are not followed.
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