Good to Great
By Jim Collins
Good to Great
Why some companies Make
the leap…….and other Don't
Good to Great
The Study:
For the years, this question preyed
on the mind of Jim Collins. Are there
companies that defy gravity and convert
long-term mediocrity or worse into long-
term superiority? And if so, what are the
universal distinguishing characteristics
that cause a company to go from good to
great.
Good to Great
The Standards:
Using benchmarks, collins and his research team
identified a set of elite companies that made a
leap to great results and sustained those results
for at least fifteen years. After the leap, the good-
to-great companies generated cumulative stock
returns that beat the general stock market by an
average, of seven times in fifteen years, better
then twice the results delivered by a composite
index of the world's greatest companies, including
Coca-Cola, Intel, General Electric, and Merck.
Good to Great
The Comparisons:
The research team contrasted the eleven good-to-
great companies with a carefully selected set of
comparison companies that failed to make the leap
from good to great. What was different? Why did one
set of companies become truly great performers while
the other set remained only good?
Over five years, the team analyzed the histories of all
twenty-eight companies in study.
The crucial question in study was not, what did the
good-to-great companies share in common? Rather,
the crucial question is, What did the good-to-great
Good to Great
The Comparisons:
companies share in common that distinguished them
from the comparison companies.
Two set of comparison companies were selected. The
first set consisted of eleven “Direct Companies” –
companies that were in the same industry as the
good-to great companies with same opportunities and
similar resources at the time of transition, but that
showed no leap from good to great. The second set
consisted of “un-sustained comparison” – of six
companies that made a short term shift from good-to-
great but failed to maintain.
Good to Great
The Comparisons:
After sifting through mountains of data & thousands
of pages of interviews, collins and his crew discovered
the key determinants of greatness – why some
companies make the leap and others don’t.
Good to Great
The Comparisons: The entire Study Set of 28 Companies
Good-to-Great Companies Direct Comparisons
Abbot Apjohn
Circuit City Silo
Fannie Mae Great Western
Gillette Warner-Lambert
Kimberly-Clark Scoot Paper
Kroger A&P
Nucor Bethlehm Steel
Philip Morris R.J. Reynolds
Pitney Bowes Addressograph
Walgreens Eckerd
Wells Fargo Bank of America
Unsustained Comparison:
Burroughs, Chrysler, Harris, Hasbro, Rubbermaid, Teledyne
Good to Great
Company Result from transition T Year to T
Point to 15years Year + 15
beyond transition point*
Abbott 3.98 times the market 1974-1989
Circuit City 18.5 times the market 1982-1997
Fannie Mae 7.56 times the market 1984-1999
Gillette 7.39 times the market 1980-1995
Kimberly -Clark 3.42 times the market 1972-1987
Kroger 4.17 times the market 1973-1988
Nucor 5.16 times the market 1975-1990
Philip Morris 7.06 times the market 1964-1979
Pitney Bowes 7.16 times the market 1973-1988
Walgreens 7.34 times the market 1975-1990
Wells Fargo 3.99 times the market 1983-1998
* Ratio of cumulative stock returns relative to the general stock market
Good to Great
By Jim Collins
Collins and his team of researchers used strict
benchmarks to identify a group of 11 elite
companies that made the leap from good to
great and sustained that greatness for at least
15 years
They have found distinct patterns of behavior
in those who led each company and the people
who followed them - patterns that concerned
disciplined people, thought and action.
Level 5 Leadership
LEVEL 5 LEADERSHIP
“Greatness is not a function of
circumstance. Greatness, it turns out, is
largely a matter of conscious choice.” p. 11
They never aspired to be put on a pedestal
or become unreachable icons. They were
seemingly ordinary people quietly
producing extra-ordinary results. p. 28
Level 5 Leadership
Combine extreme personal humility with intense professional will
Professional Will Personal Humility
Creates superb results, a clear Demonstrates a compelling
catalyst in the transition from modesty, shunning public
good to great. adulation; never boastful.
Demonstrates an unwavering Acts with quiet, calm
resolve to do whatever must be determination; relies principally
done to produce the best long- on inspired standards, not
term results, no matter how inspiring charisma, to motivate.
difficult. Channels ambition into the
Sets the standard of building an company, not the self; sets up
enduring great company; will successors for even greater
settle for nothing less. success in the next generation.
Looks in the mirror, not out the Looks out the window, not in the
window, to apportion mirror, to apportion credit for the
responsibility for poor results, success of the company—to other
never blaming other people, people, external factors, and
external factors, or bad luck. good luck.
First Who, Then What
good to great
companies start not
with "where" but with
"who."
Start by getting the
right people on the bus
in the right seats., the
wrong people off the
bus, And they stick
with that discipline --
first the people, then
the direction -- no
matter how dire the
circumstances. … p.41
First Who, Then What
“…if you have the
wrong people, it
doesn’t matter
whether you discover
the right direction; you
still won’t have a
great company. Great
vision without great
people is irrelevant.”
P. 42
First Who, Then What
The right people don’t
need to be tightly
managed or fired up.
P.42
First Who, Then What
“…the ‘who’
questions come
before the ‘what’
questions – before
vision, before
strategy, before
tactics, before
organizational
structure, before
technology.” P. 45
First Who, Then What
In a good to great
transformation,
people are not your
most important
asset. The right
people are. P.51
First Who, Then What
“To be rigorous
means consistently
applying exacting
standards at all
times and at all
levels, especially
upper
management. “
P.52
First Who, Then What
The only way to
deliver to the
people who are
achieving is to not
burden them with
the people who are
not achieving.
P.53
First Who, Then What
Alan Wurtzel of Circuit
City in reply to the
question, “At what
point do I
compromise?”
Without hesitation
said, “You don’t
compromise. We find
another way to get
through until we find
the right person.” P. 55
First Who, Then What
Practical principles:
1. When in doubt don’t
hire, keep looking.
2. When you know you
need to make a people
change, act.
3. Put your best people on
your biggest
opportunities, not on
your biggest problems.
Confront the Brutal Facts
(Yet never lose faith)
“You absolutely
cannot make a
series of good
decisions without
first confronting
the brutal facts.”
P. 70
Confront the Brutal Facts
(Yet never lose faith)
Fred Purdue of Pitney
Bowes said, “When
you turn over rocks
and look at all the
squiggly things
underneath, you can
either put the rock
down, or you can say,
‘My job is to turn over
rocks and look at the
squiggly things,’ even
if what you see can
scare the (stuffens’)
out of you.” P. 72
Confront the Brutal Facts
(Yet never lose faith)
“Yes, leadership is
about vision. But
leadership is equally
about creating a
climate where the
truth is heard and the
brutal facts
confronted. There’s a
huge difference
between the
opportunity to ‘have
your say’ and the
opportunity to be
heard.” P.74
Confront the Brutal Facts
(Yet never lose faith)
Creating a climate
where truth is heard:
1. Lead with
questions, not
answers.
2. Engage in dialogue
and debate, not
coercion.
3. Conduct autopsies,
without blame.
4. Build “red flag”
mechanisms.
Remember The Stockdale
Paradox
Retain faith AND at the
that you will same time
prevail in the confront the
most brutal
end,
facts of your
regardless of current reality,
the whatever they
difficulties. might be.
The Hedgehog Concept
Simplify a complex
world into a single idea
or principle that unifies
and guides everything.
Regardless of the
world’s complexity, the
hedgehog reduces all
challenges and
dilemmas to simple
ideas.
The Hedgehog Concept
“Precisely, the
Hedgehog concept
is a simple,
crystalline concept
that flows from
deep
understanding
about the
intersection of the
three circles.” P.95
What are your three circles?
What are you the
best in the world
at?
What drives your
economic engine?
What are you
deeply passionate
about?
The Hedgehog Concept
A Hedge Hog concept is not a
goal to be the best, a strategy
to be the best, an intention to
be the best, a plan to be the
best. It is an understanding of
what you can be the best at.
P. 98
The Hedgehog Concept
“The only way to remain
great is to keep applying
the fundamental principles
that made you great.”
P.108
The Hedgehog Concept
“We should only do those
things that we can get
passionate about.” P.109
The Hedgehog Concept
The essence of the process is
to get the right people
engaged in vigorous dialogue
and debate, in fused with the
brutal facts and guided by
questions formed by the three
circles. P.114
The Hedgehog Concept
“Know ‘one big thing’ and
stick to it.” P. 119
The Hedgehog Concept
Which is more important:
the goal to be the best at
something, or realistic
understanding of what you
can (and cannot) be the
best at?
A Culture of Discipline
“The purpose of bureaucracy is to
compensate for incompetence and
lack of discipline.” P.121
A Culture of Discipline
“Most companies build their bureaucratic rules
to manage the small percentage of wrong
people on the bus, which in turn drives away
the right people on the bus, which then
increases the percentage of wrong people on
the bus, which increases the need for more
bureaucracy to compensate for incompetence
and lack of discipline, which then further drives
the right people away, and so forth.” P. 121
“Avoid bureaucracy and hierarchy and instead
create a culture of discipline.” P. 121
A Culture of Discipline
“Set your objectives for the year, you
record them in concrete. You can
change your plans through the year,
but you never change what you
measure yourself against.” P.122
A Culture of Discipline
“You focus on what you’ve
accomplished relative to exactly
what you said you were going to
accomplish – no matter how tough the
measure.” P.122
A Culture of Discipline
“The point is to first get self-disciplined
people who engage in very rigorous
thinking, who then take disciplined
action within the framework of a
consistent system designed around
the Hedgehog Concept.” P. 126
A Culture of Discipline
“They displayed a remarkable discipline
to unplug all sorts of extraneous
junk.” P.139
THE FLYWHEEL AND THE
DOOM LOOP
In order to get the flywheel moving,
you must push it. Its progress is slow;
your consistent efforts may only move it a
few inches at first. Over time, however, it
becomes easier to move the flywheel,
and it rotates with increasing ease,
carried along by its momentum.
The breakthrough comes when the
wheel’s own heavy weight does the bulk
of the work for you, with an almost
unstoppable force. P.165
THE FLYWHEEL AND THE
DOOM LOOP
“Tremendous power exists in the fact
of continued improvement and the
delivery of results. Point to tangible
accomplishments … people see and
feel the buildup of momentum, they
will line up with enthusiasm.” P.174
The Flywheel Effect
The Doom Loop
Other companies exhibited
very different patterns. They
pushed the flywheel in one
direction, stopped, changed course
and pushed it in a new direction,
a process they repeated continually.
After years of lurching back and
forth, these companies failed to
build sustained momentum and
fell into what could be termed the
doom loop.