Good to Great Summary

By Jim Collins

How does a good, or perhaps even a mediocre or underperforming

company, achieve enduring greatness? This question has played on the
mind of author and business consultant Jim Collins. Collins' previous
book, Built to Last, explores how great companies triumph over time, and
achieve long-term sustainable success. He was inspired to write Good to
Great when a business acquaintance pointed out that his previous book
only examined how great companies stay great, but not how they became
that way in the first place.

Good to Great is lauded as one of the best management books available.

It's the product of a five-year research study identifying public
companies that achieved sustainable success after years of mediocre
performance. The factors that differentiated these companies from
under-performing competitors were pinpointed to gain insight.

We'll briefly unpack the methodology behind Collins' research and

explore what a "great" company looks like. We'll also explain how a bus, a
hedgehog, and a flywheel prove to be useful analogies to clarify how
companies make the leap to greatness. So, If you're tired of business
books that state the obvious, or provide untested "strategies for
success," then Good to Great is the perfect book for you. Collins dives into
rigorous research-backed explanations that can help your business move
from good-to-great, and better still, stay there.

Greatness Defined
Over the course of five years, Collins and his team systematically
analyzed companies that attained greatness. They then compared these
to other carefully selected companies facing almost identical
circumstances, but that failed to achieve excellence over the same time
period.

So what exactly is a good-to-great company? According to Collins, 'A

great organization is one that makes a distinctive impact, and delivers
superior performance over a long period.'

Collins and his team looked at 1,435 good companies, examined their
performance over forty years, and found the eleven companies that
became great, and stayed great. The good-to-great companies generated
cumulative stock returns that beat the general market by an average of
seven times in fifteen years. To put this in perspective, that's better than
twice the results delivered by a composite index of the world's "greatest
companies," such as Coca-Cola, Intel, and General Electric.

So what does it take to develop enduring greatness? Well, as with most

things, it takes discipline.

Good-to-Great Companies Demonstrate

Discipline

Perhaps you think you're one acquisition away from greatness.

Unfortunately, acquisitions don't provide a stimulus for greatness – two
mediocre companies don't make one great company. Or maybe you think
that if you just develop a breakthrough technology, you'll fast-track your
company to join the likes of Microsoft or SpaceX. Technology is
important, but it only comes into play after the right changes have
already been made. So what does it take to drive change for the better?
It takes discipline. Discipline comes in the form of disciplined leaders,
disciplined thought, and disciplined action.

Good-to-great companies are disciplined when it comes to who they hire

to lead their company. They're also disciplined in thought and in action.

Good-to-Great Companies Think: "First Who…

Then What"

Before thinking strategy, good-to-great companies focus on hiring the

right people. They carefully decide and weigh up, 'who gets on the bus,
who gets off the bus, and where people sit on the bus.'

When Collins and his team looked at comparison companies who didn't
go from good-to-great, they called that management structure a 'genius
with a thousand helpers.' Often companies bring people onto the team
who aren't a great fit.

However, the good-to-great companies have a "hire slow, fire fast"

mentality. They spend a great deal of time finding the right people whose
values align with those of the company. These are the type of people
who also demonstrate leadership potential. In other words, they hire
people with an entrepreneurial spirit; people who don't need to be
managed or motivated. Collins gives the example of Dick Cooley. When
he took over the helm as CEO of Wells Fargo, before deciding on a clear
vision, he focused on hiring the best and brightest people. Together they
formulated a vision that transformed the company from good-to-great.
Warren Buffett stated that Wells Fargo's executives were 'the best
management team in the business.'

If you happen to be employed by a good-to-great company, your first

couple of months are crucial. During this time, the managerial team asks
two critical questions: 'Would we hire this person again?' and 'If this
person told us they were leaving to pursue a new opportunity, would we
be disappointed or relieved?' Should you happen to get the stamp of
approval, the company will likely be extremely loyal to you. Six of the
eleven good-to-great companies didn't make a single lay-off in over 30
years, and only four others reported one or two layoffs.

CEO's of good-to-great companies also focus on moving the right people

to the right seats. One CEO reshuffled 38 of his top 50 employees;
another described this process as, 'putting square pegs in square holes
and round pegs in round holes.' Leaders of these companies also aren't
afraid to get the wrong people off the bus. For example, a CEO of a family
pharmaceutical company had the courage to kick his own family
members off the board, because in his mind, this was the necessary
action step to make the company great again.

Speaking of CEOs, it's crucial to have the right leaders in the driver's seat.

Good-to-Great Companies Have Level 5 Leaders

Let's turn to a company employee hierarchy, which we can break into five
levels.

Employees typically start as skilled workers, become reliable teammates,

and then bump up to level three and become a manager. Then, at some
point, they reach level four, where they become a visionary. Visionaries
have a compelling message that people within the company buy into,
which drives high performing teams. This is where most leaders stay.
However, some leaders move to level five, and this is where you want to
be to achieve greatness. Level five leaders are a combination of all these
competencies. The factors that distinguish level five leaders from the
rest, are their traits of extreme humility and resolve.

Despite their success, level five leaders are far from being ego-driven.
They're modest and understated. When Collins interviewed level five
leaders, they would say things like, 'I don't think I can take much credit
for the company's success.' Or, 'There are plenty of people in this
company who can do my job better than I do.'

However it's important to note that humility shouldn't be mistaken for

weakness. Collins reports that 'Every level five has the stoic
determination to do whatever needs to be done, to make the company
great.' Do you remember the previous example of the CEO who kicked his
family members off the board? Well, this is indicative of level 5 leaders
who take the required action steps to make the company great again.
They don't care about popularity. They care about doing what's best for
the company.

So the behaviors of level 5 leadership are quite paradoxical. These

leaders are humble, and at the same time, highly ambitious and driven to
make the organization excel. They tend to be modest about their
personal achievements, but are fanatically determined to produce
exceptional results. This obsession is for sustainable results, and they
tend to be drivers of consistent success. Furthermore, they build
successors by developing and recognizing up-and-coming managers
who may even be more successful than they are. They're quick to share
praise, and even quicker to take the blame when things go wrong. A level
5 leader, as a result, inspires loyalty and commitment from their team
members.

Next, good-to-great companies are disciplined in thought.

Good-to-Great Companies Have a "Hedgehog

Mentality"

The hedgehog concept is a strategic thinking model that reflects an

understanding of three intersecting circles. These circles are, what work
you believe you can be the best in the world at, the things you're deeply
passionate about, and what best drives your economic and resource
engine.

An ancient Greek parable states, 'The fox knows many things, but the
hedgehog knows one big thing.' In the parable, the fox uses many
strategies to try to catch the hedgehog, however the hedgehog notices
the fox immediately, and curls up to display its sharp spikes. The fox tries
many tactics, but the hedgehog relies on one tried and tested strategy.
This strategy is simple, and it almost always proves successful. Collins
explains that from a business standpoint, 'Hedgehogs are the big thinkers
who are more decisive, while the foxes are more accepting of nuance,
more open to using different approaches with different problems.'

Good-to-great companies have the hedgehog mentality. They find their

own simple hedgehog concept by asking themselves three key questions
as represented by three circles. The key questions are, 'What can we be
the best at?' 'What's the fundamental economic indicator we should
concentrate on?' And, 'What are we passionate about?'

When it comes to the first circle, every company would like to be the best
at something. However, very few companies understand what this means
with any sort of piercing insight or clarity. Many companies aren't able to
identify their potential, and what they could be the best at, and, just as
important, what they cannot be the best at. This distinction is crucial. If we
look at Wells Fargo again, they were a bank that outperformed the
market by a multiple of four from 1983 to 1998. They did this by
accepting the truth that they couldn't beat their rivals at CitiGroup. At the
time, CitiGroup was a leading global investment bank and financial
services corporation. So, instead of competing, Wells Fargo shifted their
focus and attention to what they believed they could be the best at.
Through their analysis they figured out that running a bank like a
business, focusing solely on the West of the United States, they could
create something very solid. This single-minded and simple strategy
helped Wells Fargo to become one of the world's leading banks.

The second circle represents a company's economic engine. If we look at

this more specifically, it encompasses how a company can generate
more profit than its competitors. Again, using the example, we can see
how this works. Wells Fargo discovered that they could restructure their
banks to have more ATMs, and fewer employees per branch in order to
generate more profit.

Finally let's look at the third circle. All the good-to-great companies that
were analyzed, weren't driven solely by money; they were deeply
passionate about their business. On the other hand, comparison
companies tended to develop products and services with the sole
purpose of making money. Good-to-great companies invest in products
and services they care about, which fit in with their mission statement.
For example, the difference between the cigarette company Philip Morris,
and other tobacco companies, was that executives at Philip Morris
generally believed, despite the health risks, that life was better with
cigarettes.

Collins and his team found that good-to-great companies spend years
developing a deep understanding of their vision for success. On average,
these good-to-greats spend four years of iteration and reflection on the
intersecting circles. Eventually they discover their own simple hedgehog
mentality, and thereafter every decision in the company falls into this
ethos, resulting in success.

However, as we've all learned, success doesn't happen overnight. A

culture of self-discipline is needed to adhere to the simple hedgehog
concept. Success stems from steady, incremental pushes in the right
direction.

Good-to-Great Companies Adopt the Flywheel

Approach

Collins found that executives of good-to-great companies couldn't

pinpoint a moment in time that exemplified their transition to "greatness."
This may seem strange, but there's no one defining action in building
greatness. There's no one program, no single killer innovation, nor a lucky
break that can be identified as "the magic moment." Instead, the path to
success comes from many tiny pushes in the right direction. Collins likens
it to relentlessly pushing a heavy flywheel, turn upon turn, slowly building
momentum in the right direction.
Comparison companies however, got stuck in what Collins and his team
refer to as the "Doom Loop." Instead of a slow deliberate process of
figuring out what needed to be done, and then executing this plan, the
comparison companies frequently launched a new program. These new
programs were often launched at a significant cost and with lots of
unnecessary fanfare, only to see the plans fail to produce sustained
results. Comparison companies tended to push the flywheel in one
direction, then stop, change course, turn it in a new direction, then stop,
change course and turn it in yet another direction. This lack of
consistency, and the constant moving back and forth, led comparison
companies to fail to build sustained momentum. In short, they got stuck
in the dreaded "Doom Loop."

In Conclusion

There's a lot of mythology around greatness, and there are many

common-sense views about good fortune and good luck. Good to Great
shows that there's a methodology to achieving success, and that
greatness isn't as random as many of us believe. That's not to say that
good fortune and luck aren't factors to success, but rather that there are
numerous tools and strategies we can adopt to go from good to great.

Whether you're an executive, an entrepreneur, or anyone interested in

what makes for great leadership, great corporate culture, and great
strategic planning, then this book is a must-read. Good-to-great
companies have crucial similarities. They get the right people on the bus,
hire "level five" leaders, and adopt a "hedgehog concept" mentality by
sticking to simple and straightforward strategies. Furthermore, by turning
a metaphorical flywheel day in and day out, with unwavering faith, they
take small, progressive steps to bring their vision to life. According to
Collins, 'Few people attain great lives, in large part because it is just so
easy to settle for a good life.'

So, if good isn't good enough for you, how do you plan to transform your
company from good-to-great? Well, Good to Great may just thrust
greatness upon you.