One of the most popular management books of all time is Jim C. Collins’s Good to Great, which has sold over four million copies. The sequel to his worldwide best-seller Built to Last, Good to Great, focuses on how both average and good businesses may surpass their unchanging status quo to become outstanding.
After completing his MBA at Stanford, Collins worked as a consultant at McKinsey & Company and then as a product manager at Hewlett-Packard. He got a firsthand look at how successful businesses are operated. Collins established a management research center in Boulder, Colorado, to extend his quest to understand what makes certain firms successful- and others not-after returning to Stanford to teach and do research.
The main lessons from Good to Great are illuminating. Collins and his study group’s investigation of the good-to-great principles span an astonishingly wide range. This Good to Great review will adhere to the book’s format by methodically and sequentially summarizing the crucial ideas from each of the nine chapters.
Author Jim Collins and his team aimed to find businesses that had evolved from good to great. They examined publicly listed firms to identify those that followed the pattern of cumulative stock returns over 15 years that were at least three times the market over the next 15 years, interrupted by a changeover point.
Independent of its industry, each firm was required to display the good-to-great pattern. The firm was eliminated from consideration if the industry showed the same way. In the end, 11 good to great firms were ultimately discovered.
Notably, the researchers discovered two groups of comparable companies. The first set involved “direct comparisons” in the same business as their good-to-great rivals (but did not show a leap). The second was “unsustained comparisons” that temporarily changed from good to great but failed to keep it going.
The crucial question was, “what made the good to the great firm stand out from the comparative companies.”
The fundamental ideas in this book were derived empirically from the facts. It was an iterative process where concepts were developed, tested against the data, and revised; a framework was built, it broke, and it was then rebuilt once more. The following framework was born.
The model includes three steps: disciplined people, disciplined thoughts, and disciplined action. Within each stage are two main themes. The Flywheel, which connects everything, wraps around the entire model.
Theme 1: Level 5 Leadership (Process Stage: Buildup, Phase: Disciplined People)
During the period of transition, Level 5 Leadership was present in every good-to-great company. This style of leadership is a unique fusion of humility and professional will. Such leaders have a tremendous desire for the company’s success, not their wealth or popularity.
The book lists five stages of leadership:
- Highly Competent Individual – contributes effectively using talent, wisdom, know-how, and ethical work practices.
- Contributing Team Member – contributes individual skills to accomplish collective goals and collaborates well.
- Competent Manager – organizes people and resources to effectively and efficiently pursue set goals.
- Effective Leadership – encourages more excellent performance standards by pursuing a clear and compelling vision.
- Level 5 Executive – This person creates enduring brilliance with a paradoxical fusion of individual humility and professional determination.
Level 5 leaders focus their ego needs on creating a great company rather than satisfying their demands. Although they have egos and self-interests, they prioritize the institution over themselves to achieve their goals. They prepare their successors for even more significant outcomes in the following generation.
Level 5 leaders will modestly credit factors other than themselves for their accomplishments. Yet when things go wrong, they would take full responsibility and blame themselves. The CEOs of the comparison companies frequently did the exact reverse, seizing credit for accomplishments and attributing failure to others.
Theme 2: First, Who…then what (Process Stage: Buildup, Phase: Disciplined People)
It is common knowledge that building the right team can help you succeed, but what is even more crucial is doing so before you decide on your course of greatness. This is why the phrase “first who..then what” applies. It is essential to put together a team of outstanding individuals before deciding on the strategy or vision for the business to make it successful. The fundamental reason is that there is no assurance that people who join your firm because they support your strategy or your organization’s direction will remain with you or still be as driven if your company changes its course. Yet, regardless of the team’s direction, people who joined because of another team member will always be working to improve the organization.
The phrase “getting right people on the bus AND getting wrong people off the bus” is used by the author, and “wrong people off the bus” is just as crucial. The only way to help those succeeding is to spare them the weight of those who are failing.
Several businesses use the “genius with a thousand helpers’ model: a genius and visionary CEO establishes the company’s plan and recruits staff to help realize it. According to the author, this technique is probably not sustainable for turning a firm into a great one once the visionary leaves.
It is also essential to be strict in people’s decisions. There are three valid methods:
When in doubt, avoid hiring.
When you know you need to make a people change, act!
Your best employees should be put on the most significant opportunities, not the greatest difficulties.
Theme 3: Confront the Brutal Facts – but Never Lose Faith
Another vital lesson from Good to Great is that good-to-great businesses turned to greatness due to a succession of wise choices skillfully carried out and built upon one another. This was due, in large part, to how these businesses confronted the brutal facts about themselves. Instead of just setting out for greatness, they continually informed the road to greatness with truths about how they were doing, even if it was difficult to accept.
However, how can a team remain inspired by such upsetting truths about the company’s present performance? Collins recommends establishing a society of fact based on the following four tenets:
- Lead with questions, not answers. A greater grasp of the truth can be obtained by asking questions. To ask questions also portrays one is willing to be sensitive enough to demonstrate that they do not have all the answers. It is in this secure setting that reality-based challenge resolution can take place.
- Engage in dialogue and debate, not correction. Allowing a team to discuss the issues to come up with well-informed solutions is preferable to simply staging phony discussions to give the impression that all workers have had their say, even if the leaders have already made their decision.
- Conduct autopsies without blame. Doing this allows a society where truth can be spoken aloud without fear of repercussions to thrive.
- Build “red flag” mechanisms. This mechanism entitles every employee to an impartial hearing on any matter that may worry them, giving them a symbolic “red flag” they may raise at any moment.
A company must, somewhat strangely, combine its readiness to confront reality at every turn with a firm confidence in the success of its enterprise. This means that the team can rely on this culture of resolve to see the business through these trying times and, as a result, go from good to great, even when things seem dire and the reality appears grim.
Theme 4: The Hedgehog Concept
Simplicity can produce greatness. This idea might appear contradictory at first, so Collins employed the image of a hedgehog. When attacked by predators, hedgehogs have an easy reaction. They merely roll up into a ball. Although it may appear weak protection, it successfully keeps predators away from the prey. Foxes are frequently depicted as symbols of cunning and intelligence. However, they are unable to get past the hedgehog’s simple response. Importantly, this basic protection strategy is as effective after 100 times as the first.
Using this analogy as a springboard, Collins emphasizes the need to identify your hedgehog idea to go from good to great. Choose a market segment for your company where you can dominate and become the greatest in the world. You will repeatedly mention this feature because it will become your main selling point. Collins argues that the best businesses can recognize a sound hedgehog idea and consistently implement this concept throughout their company.
Collins’ three criteria can be used to determine the possible hedgehog idea for your business:
- Determine what you can excel at. Importantly, note the areas in which you fall short of world-class performance.
- Find out what fuels your economic engine.
- Identify your company’s and your own deepest passions.
After running through these criteria, you should better understand what concepts could be your hedgehog.
Theme 5: A Culture of Discipline
A common characteristic across all successful businesses was a corporate culture built upon discipline. Collins emphasizes that this discipline is distinct from management discipline, which involves reprimanding employees. Instead, the best companies were those with a feeling of internal control among all employees. Managers were also affected by this. There is a strong inner desire to see the company thrive.
Collins claims that a culture of discipline comprises employees eager to take on the role of independent business owners. These employees are vested in their job, and the firm’s success, just like business owners do.
A culture of discipline will be beneficial for organizations for several reasons. First off, a culture of control typically encourages individuals and organizations to produce work of a better caliber. Furthermore, a disciplined culture fosters a genuine dedication to the exercises linked to your organization’s hedgehog idea. Again, coercive or dictatorial methods should not be used to promote this dedication. Collins suggests giving your staff members freedom and personal authority as an alternative. Let’s say you provide these essential benefits to your workers. In that situation, they are much more apt to develop strong feelings for the general objectives of the organization. They can connect their passion with a passion for the organization.
Theme 6: Technology Accelerators
It’s crucial to stay up to speed with technical developments. Collins cautions users against relying too heavily on technology to boost the productivity of their business. Similarly, it would help if you didn’t depend on technology to increase your competitive edge and cut costs. Some issues can be resolved with technology, but not all of them.
Collins uses the early 2000s tech bubble collapse as an illustration of the disastrous effects that excessive dependence on technology can have. The market adjustment brought into sharp relief the differences between sustainable uses of the internet to expand established companies and ill-planned, unprofitable online start-ups.
Collins believes that a successful business handles all business choices the same way as new technology. They are receptive to the potential of emerging technology. However, they also take much time to consider whether to incorporate this technology. A great business also uses technology when it does so following its hedgehog principles.
Collins outlines the ideal technology approach cycle for great companies based on all this guidance:
Theme 7: The Flywheel and The Doom Loop
Collins contends that a company’s success or loss develops over several years. It’s a common misunderstanding that wins, and losses can happen instantly. Success or failure doesn’t show up until enough positive or negative energy has built up.
You want your company to establish a profitable business cycle from this point forward. In doing so, you are improving your odds of business success in the future. Collins refers to this as the Flywheel effect. The flywheel effect can be established by making choices and performing actions reinforcing the hedgehog idea. This will result in the buildup of positive outcomes, motivating and winning the staff’s investment and loyalty. Additional staff investment will only continue to build positive momentum. The time it takes to achieve success will be significantly shortened if you can keep up this momentum.
You can also avoid developing what Collins calls a doom loop by avoiding the following:
- Reactive decision-making
- Expansion into many different fields of focus.
- Following short-lived trends.
- Frequent changes in leadership and personnel.
- A decline in confidence.
- Disappointing outcomes.
Theme 8: From Good to Great to Built to Last.
Transitioning from good to great is vital for substantial achievement. However, it would help if you also comprehended how to keep this success. Collins claims that a collection of core values must be established to sustain success. These fundamental beliefs cannot be based on flimsy ideals like material prosperity. Instead, they must advance a greater goal. This could result in the establishment of an industry leader. It must, however, be something that can sustain staff motivation over time.
Book Review Written by an Hexavian
Strategy. Business StartUps and Corporate Restructuring Consulting
Uwaoma Eizu is the lead strategist at Hexavia! He is a graduate of Mathematics with two MBAs and over a decade of experience working with startups and big businesses. His core is in building startups and in corporate restructuring. He is also a certified member of the Nigerian Institute of Management, Institute of Strategic Management of Nigeria and the Project Management Institute, USA. By the side, he writes weekly for the BusinessDay newspaper.