Good to Great
By Jim Collins
(Summarised by Paul Arnold – Trainer & Facilitator – email@example.com)
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IN A NUTSHELL
Good is the enemy of Great.
Great companies become great by staying focused: focused on their products, their customers and their businesses.
They aspire to higher levels of excellence, are never content to become complacent and are passionate about their products.
They have leadership that is not ego-driven, and have organizational cultures that embrace constant change.
There are 6 key principles derived from carefully studying companies who have consistently outperformed the market for 15+ years:
1. Level 5 leadership
– It’s above principled leadership, not charisma. Great leaders mix personal humility with intense professional will – where the company comes first. Ego-driven leaders can lose sight of the real goal (cf. Iacocca).
– Great organizations have leaders that take responsibility and have the courage to do what MUST be done.
– They do not budge from high standards.
2. First who…then what
– Great organizations get the wrong people off the bus, the right people on the bus – then get the right people sitting in the right seats – and only then decide where you want to go.
– Talent is the ultimate key driver of growth – cf Packard’s law = No company can grow faster than its ability to get enough of the right people.
– They never compromise on the quality of you staff.
– People are often brilliant at one thing but not everything – so they put people into their own personal ‘seats’ of excellence.
– They put their best people onto their biggest opportunities not their biggest problems.
3. Confront the brutal facts (yet never lose faith)
– The Stockdale effect – Admiral Jim Stockdale – highest-ranking military officer in the ‘Hanoi Hilton’. He was imprisoned with no trial for 8 years. He was tortured 20 times and never knew from day to day if he would live or die (and had no release date). He faced the tough truth of his situation but never gave up hope.
– Great organizations encourage real debate where ‘the elephant in the room’ can be openly discussed. This requires a ‘no blame’ culture.
– By facing the brutal truths these organizations adapt quickly to changing market conditions.
4. The Hedgehog concept
– Three interlinking circles:
1) What are you deeply passionate about?
2) What can you be the best in the world at?
3) What drives your economic engine?
– Great companies are very focused – they just do ONE thing really well – consistently and brilliantly.
– They run their own race, not that of their competitors.
– Finding an organization’s passion is critical. Passion drives a company to become an expert in that one area. The issue is then how to moneterise that area of excellence.
5. A culture of discipline
– Great organizations set – and rigorously hold onto – high standards
– They do not flinch from doing what has to be done.
– They are disciplined to not get distracted by other opportunities (it is as important to stop doing the wrong things as it is to start doing the right things).
6. Technology accelerator
– Great organizations do not lose sight of their key focus. They use technology as a vehicle to help them reach their goals faster.
– “No technology can make you a level 5 leader. No technology can instil the discipline to confront brutal facts of reality. No technology can create a culture of discipline.”
– Since technology is speeding up the rate of change, great organizations
are structured to be able to adapt quickly.
The flywheel (and the doom loop)
– Consistency to all these principles eventually leads good companies becoming a great company.
– It takes time. Like a flywheel, there is initial slow growth, but as the organisation grows, its ‘gravitational’ force increases). It’s when companies abandon some of these principles that the ‘doom loop’ starts to kick in.
Why ‘Good to Great’ might not be so great:
– Simplistic – life is always more complex (over-simplification is often a management curse).
– The study was based on only 11 companies. We should not therefore assume that there is only one model for success across the full range of businesses in the world.
– The book was first published 10 years ago – so has the environment changed since 2001? For example, it probably under-estimates the role of technology as a key driver/enabler.
– It’s ambiguous/open to interpretation (e.g. how do you know who are the right people?)
– Not tested the null hypothesis (i.e. companies that exhibit these 6 qualities but are not great).