Good to Great by Jim Collins [Book Summary]
Ever wondered why among thousands of companies only a few dominate the market, and even fewer stay dominant over a period of time? Jim Collins and his research team have not only answered the ‘why?’, but have also given a framework which answers ‘how?’ can good companies become great companies.
During research, the team focused on companies that went from good great and stayed great for at least 15 years to come. What did they discover? Each good to great company had a transition point (chart below), after which it seems there was hardly anything stopping it’s growth!
What exactly happened at that transition point?
Did the board hire a new celebrity CEO?
Did the company lay off workers? or,
Did the company diversify it’s products and services?
No. The good to great companies often did neither of these.
Then how were these companies able to achieve such stupendous growth over and over again?
Jim Collins compares the process of going good to great, to turning a fly-wheel (a really big one!). Turning this fly wheel for the first time will be very difficult! But, you would have built a little momentum. This momentum will make your second turn a little easier. Third turn will get a little more easier and so on. Keep turning it, again and again, until it builds enough momentum where it starts spinning on its own. Now, from here on, with every push you’ll get multiple turns and eventually you’ll build enough momentum for this flywheel to breakthrough to greatness!!
That sounds awesome! But how do I turn a company (head scratch)?
The answer to that is the good to great framework which Jim Collins and his team have come up with (image above).
The frame work is divided into 3 phases and each phase has 2 steps.
The first phase is ‘Disciplined People’ — get the right people on board!
One of the most damaging trends in recent history is the tendency (especially by boards of directors) to select dazzling, celebrity leaders and to de-select potential Level 5 leaders.
- Level 5 Leadership — it all starts with the leader, the first person to turn the flywheel. But not just any leader, a level 5 leader! And you may ask what is that? Jim Collins describes a level 5 leader as “a paradoxical blend of personal humility and professional will.” Level 5 leaders put the company before themselves and have the iron will to overcome any situation! Jim Collins goes as far as comparing level 5 leaders to the likes of Abraham Lincoln and Socrates. Damn! Also, they are totally opposite to the celebrity CEOs who, at times, have literally drowned the company to maintain their own celebrity status.
- First Who… Then What—instead of setting a new vision and strategy, the level 5 leaders preferred to get the right people on board in the right roles (and the wrong people off board). Why you ask? Simple, the right people will figure out where to take the company. As it turns out, the right people were quite often potential level 5 leaders who put the company first and were willing to turn the fly wheel to greatness no matter what.
Good-to-great management teams consist of people who debate vigorously in search of the best answers, yet who unify behind decisions, regardless of parochial interests.
How do I find such level 5 leaders and the right people? Well, usually they are within the company, working silently towards their goals, being the best in what they do.
The second phase is ‘Disciplined Thought’—what to do?
A primary task in taking a company from good to great is to create a culture wherein people have a tremendous opportunity to be heard and, ultimately, for the truth to be heard.
- Confront the Brutal Facts (Yet Never Loose Faith) — face the reality, even if it means causing unrest throughout the company. Brutal facts could range from realizing that your company may not have the potential to be the best at what it does, or, a change in government policies due to which the whole company culture may need to change.
However, “maintain an unwavering faith that you can and will prevail in the end, regardless of the difficulties.”. Have the discipline to confront the brutal facts of your current reality, whatever they might be, and a deep rooted faith (not optimism) that you will overcome these difficulties (Stockdale Paradox). It is through this confrontation that the company will find it’s true path. - The Hedgehog Concept — if you cannot be the best at what you do, then your core business cannot be the basis of a great company. But what can your company be best at? Jim Collins gives another frame work (image below) to precisely answer this question.
As a company (or an individual), answer the following questions :
a. What are you deeply passionate about?
b. What can you be the best in the world at? and,
c. What drives your economic engine?
Once you have answered these questions successfully, you would have gained a deep understanding about yourself with such clarity of thought that the next plan of action will just seem natural and obvious.
But why ‘Hedgehog’? Jim Collins compares this strategy to that of a sly fox who plans to attack a hedgehog in multiple directions (like most companies), where as a hedgehog (like a great company), knows his strength so well, that when attacked, he calmly rolls in to a sphere of sharp spikes pointing in all directions. The fox retreats in defeat only to plan another strategy to attack the hedgehog. Hedgehog’s strategy is simple because he has a deep understanding of himself.
Good-to-great companies set their goals and strategies based on understanding; comparison companies set their goals and strategies based on bravado.
The third phase is ‘Disciplined Action’ — it’s time for growth baby!
“When you combine a culture of discipline with an ethic of entrepreneurship, you get magical alchemy of great performance (image above).”
- A Culture of Discipline — What if there was no need for supervision? What if people worked cause they were motivated to work? Seems too good to be true? This what culture is all about.
Jim Collins gives an analogy of a pilot, who is trained to follow a protocol and take orders from the control room, but at the same time is capable to take independent decisions in times of crisis. Similarly, disciplined people follow the protocol and work along the path set by executives, but at the same time, should be entrepreneurial to tackle unforeseen situations. - Technology Accelerators — Jim Collins and his team have observed that technology by itself is never the root cause of greatness. Rather, it is the way in which companies leverage the use of a specific technology to accelerate growth is what results in great companies. For great companies technology is never the answer to all problems, rather just like any other resource, great companies evaluate whether there is enough upside to adapt a technology. For all you know, great companies may ditch the most ‘popular and hot’ technology altogether.
Good-to-great organizations avoid technology fads and bandwagons, yet they become pioneers in the application of carefully selected technologies.
That’s all cool, but how do you get thousands of employees to turn that flywheel? How do you motivate them?
Jim Collins and his research team found out that level 5 leaders lead by example. After turning the flywheel a couple of times, the leaders presented results in front of the organization in such a way that people saw their accomplishments.
Seeing actual results is what motivated people to voluntarily follow leadership. Eventually the whole organization got aligned to the vision set by the leader and began turning the flywheel. Seeing positive results again and again, everyone realized their own potential; and soon it dawned on everyone that if they just kept turning the flywheel, there was no reason why they couldn’t achieve the goal! It became a matter of ‘when’ and not ‘if’.
Going from good to great is difficult and a long process. The research shows that on an average it took 4 years for the flywheel to pick momentum. Also, as level 5 leaders put the company before themselves, they also set up their successors for success greater than their own hence the success continued for more than 15 years in many cases.
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Also, this blog is not a paid promotion for the book.
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