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Good to great: Why some companies make the leap and others don't, by Jim Collins, Random House, 2001
Much like the influential book Living Leadership, a summary of which is also posted on this site, what makes Good to Great stand out from the plethora of management and leadership books that appear each year is that it is grounded in solid and extensive research.
The premise of the book is that when we achieve what is good, in both personal and organisational life, we tend to be complacent and settle for that rather than pushing for the greatness we deserve. In effect, it is a warning against complacency and mediocrity, and a reminder that we deserve better.
The Research
A team of researches applied exacting standards in their search for exemplary great companies. The criteria they used were that such companies should have had 15 years of cumulative stock return below stock market levels, followed by 15 years of cumulative performance at three times the market average. Once that had corrected for uniformly high performing industry sectors, they found only 11 American companies that met their criteria. The subsequent in-depth research into these companies involved reading and coding over 6000 articles, generating over 2000 pages of interview script with CEOs and senior managers, and generating 384 million bytes of raw date to be analysed and synthesised.
The result, as with Living Leadership, was empirical findings on the differences that make a difference with regard to business success. These results were organised around a number of guiding themes related to qualities such as vision, persistence and discipline. At the heart of the book and the practical messages it conveys, however, is the overarching metaphor of the clever fox and the hedgehog.
The Hedgehog Concept
Drawing on Greek mythology and the ideas of Sir Isaiah Berlin, Collins contrast clever fox companies, who pursue many ends in a scattered and diffuse manner, with hedgehog companies who know how to simplify a complex world into a single organising idea and then use this as the basic principle which unifies and guides everything.
In applying the Hedgehog Concept to management and leadership, the team came up with a model of three intersecting circles. The point being that understanding the intersections is at least as important as understanding the circles themselves. At the heart of each circle is a question which great companies have thought long and hard over and then applied these answers rigorously. The questions are:
What can you be the best at? Better than any other organisation. This might be something you are not currently doing.
What drives your economic engine? Focus on a single economic denominator: profit per X. Finding the right “X” is critical.
What are you passionate about? You should do only those things.
Here at Inspire Development and Coaching we often talk about the concept of Me plc, by which we mean thinking about and strategically planning your career in much the same way you would a business if you were its MD. Collins adopts the same approach in saying that these questions can be adapted to the pursuit of personal excellence by rephrasing them as: What do you have a talent for, that you would be well paid for and love doing? Simple really!
Finally, in applying what they learn from a rigorous examination of these three questions, organisations must pursue understanding rather than bluster and bravado. This means repeatedly asking the right questions to get clarity and not avoiding unwelcome answers. The team also advise not obsessively focussing on growth. Rather, this is something that should emerge organically from doing the right things right. In that way, resultant growth is likely to be sustainable.
Who before what
Rather than starting with strategy and vision, Collins and his team paradoxically recommend starting by making sure you have the right people. Get the right people in and the wrong people out. Then, and only then, you should figure out where to go.
Once they have got the right people on board, great companies invest a great deal of time and effort into constantly developing them. They focus on asking their people the right questions and listening intently and without prejudice to the answers. They engage their people in vigorous debate.
These organisations value and cherish their people, but they are not a soft touch. They consistently apply exacting standards. Having taken time to select the best, however, they stand by their people in difficult times and are less likely to resort to lay-offs. Good people are too valuable.
An important common pattern across all these businesses was that they put their best people on their biggest opportunities, rather than handing them the problems to sort out. This is sound common sense of the sort that is too rarely applied. The reward for doing this is greater motivation and more rapid growth for the individual, and greater payback to the organisation.
Living Leaders
Given that, as we have already said, this book and Living Leadership both start from an evidential rather than idealistic or polemic basis, it is interesting that their views on what constitutes effective leadership in the real world are both remarkably similar and both challenge the received wisdom.
Collins describes the popular image of an effective leader as someone who is charismatic, dynamic, flamboyant, egocentric, hard hitting and authoritarian. Certainly, they found leaders who conformed to this pattern. The ones who really made a difference, however, displayed completely different characteristics. These leaders were modest individuals who described themselves as being in the right place at the right time. They displayed a quiet conviction and resolve to do what needs to be done, avoided apportioning blame and channelled their ego into larger goals instead of personal aggrandisement. That is, they were extremely ambitious, but for the organisation, not themselves. They had an iron professional will, the courage to take risks and the resolve to do what needs to be done. Collins sums this up as humility and will.
In this view of the world, leadership seems to be about vision, persistence and sensemaking. Indeed, charisma may be a liability in that it encourages staff to filter bad news. The leader needs to hold a vision for greatness, but refine the path with the brutal facts they find. What is important is to create a climate where truth is heard, where dialogue and debate are encouraged, and where the leader is constantly seen to be trying to understand. Because it is impossible to completely escape the tough times and setbacks, leaders also need to maintain faith in the face of problems and to maintain an active, resilient persistence.
Three Disciplines
Supporting the leader in these great companies, they found a culture of discipline. The mood in these businesses was dogged, determined, workmanlike, demanding, consistent, focused and responsible. These business had disciplined people. Because they had the right people, less hierarchy and bureaucracy is required. Hierarchy is only needed, argues Collins, to control the wrong people. That is, the people that you should have got rid of (this book was clearly written within the context of liberal American employment laws).
As well as disciplined people, they found disciplined thought. There was a culture of facing up to brutal facts, coupled with a belief that a way through would always be found.
Most concepts in this book seem to come in threes, the third element of the required culture of discipline is that of disciplined action. Great companies take committed action and stay committed to their commitment. There is always a clear, consistent plan of action and it is followed through with application and vigour.
Turning the Flywheel
The final metaphor in the book is that of the flywheel and the doomloop. Collins asks us to imagine a flywheel 30 foot in diameter, 2 foot thick and weighing 5000 pounds. It may take hours of effort to push such a wheel round a single revolution. If we stick at it, however, at some point the wheel starts turning under its own momentum.
He uses this metaphor to tell us that, for the great companies they studied, there was no single defining action that brought success. Rather, it was like spinning the flywheel. All the time these companies were building on work done earlier and through cumulative effort compounding the investment of this effort. What he describes is an organic development process, a process where people and leaders take time to think and focus on continuous improvement and the delivery of results. Although unremarkable in its rather dogged style, such an approach can lead to sustained and spectacular results.
This is contrasted with those companies that get themselves into a doomloop. Here the company keeps changing course, there is no sense of consistent purpose and the business tends to lurch from one grand idea to the next. Typical of such companies is the implementation of big programmes and radical change efforts, rapidly changing CEOs, dramatic revolutions and chronic restructuring. All too many of us will recognise and have lived through these signs and their consequences.
Staying Great
The book ends by relating the findings from this research to the ideas espoused in Collins’ previous book, Built to Last. The point is that having achieved greatness, this state can be sustained by applying the principles from Built to Last. Briefly, these principles are:
Clock building, not time telling – build something that will endure
Belief in “and” rather than “or” – profit and responsibility, continuity and change
Focus on core ideology – core values, core purpose
Preserve the core and stimulate progress – the core ideology remains the anchor whilst the organisation sets what Collins calls “Big Hairy Audacious Goals” (BHAGs)
| Related stories: |
 | Living Leadership: A practical guide for ordinary heroes, by G Binney, G Wilke and C Williams, FT Prentice Hall, 2005 | | Relationship Marketing, by Regis McKenna, Century Hutchinson, 1992 | | Simply Strategy: The shortest route to the best strategy, by R Koch and P Nieuwenhuizen, Prentice Hall, 2006 | | Change, Watzlawick et al, W. W. Norton and Company, 1974 | | The Leadership Pipeline, By R. Charan, S. Drotter and J. Noel, Josey-Bass, 2001 |
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