good to great summary and review jim collins

Author: Jim Collins
Score:
8/10
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Book Summary

Jim Collins is a master at combining business research with simplified storytelling. In Good to Great, Collins argues that good is the enemy of greatness. But what caused companies to go from good to great, while others lagged behind? Collins and his team sought the answer by studying 28 companies to find what the best shared in common, and what the comparison companies were missing.

Here are the characteristics that the 11 successful companies shared (and outperformed the market 3.4x to 18.5x), that the comparison companies lacked:

  1. Level 5 Leadership – Level 5 leaders are not the larger-than-life celebrities that the media portrays. Instead, these men and women are a paradoxical blend of personal humility and professional will.
  2. First Who, Then What – The right people is a business’s best asset. Most would expect leaders to focus on creating a new vision and strategy. Instead, these good-to-great leaders focused first on bringing the right people on the bus, removing the wrong people off the bus, then deciding where to drive the bus.
  3. Confront the Brutal Facts – Reality can bring some cold, hard truths. The best leaders had the discipline to face these facts and maintained an unwavering confidence that they would prevail no matter what.
  4. The Hedgehog Concept – Great companies need to figure out their core business to know what they will be the best at.
  5. A Culture of Discipline – Some companies has a culture, but few have a culture around discipline. A company shaped by disciplined people, disciplined thought, and disciplined action can get more done by moving past unnecessary hierarchy, bureaucracy, and excessive controls.
  6. Greatness First, Then Technology – Technology never changed a company from good to great. Rather tech was simply like putting the foot on the gas pedal. It’s an accelerant to make you go faster in the direction you are already going.

Overall, it’s an excellent book I find myself coming back to as I gain more experience as an entrepreneur. At times it feels like Collins might have a hindsight bias, or seeing things in a better light looking backward.

But much of these principles you here other successful co-founders and CEOs say too. Here’s the main six topics good to great companies focus on:

  1. Leaders need to remain hungry, but humble.
  2. Great people shape a great company.
  3. Leaders need to face brutal facts and not run from the truth.
  4. It’s better to be a big fish in a small pond than a small fish in a big pond.
  5. When something is important enough, you do it even if the odds are not in your favor.
  6. And finally, automation (read: technology) applied to an efficient system will magnify it’s efficiency, while automation applied to an inefficient system will magnify its inefficiency.

Lessons

  1. 10 of the 11 good-to-great CEOs were hired within the company. The comparison companies tried to hire outside CEOs six times more often.
  2. Good to great companies focus equally on what not to do as well as what to stop doing.
  3. Technology has virtually nothing to do with the transformation from good to great, it is only an acceleration for transformation.
  4. Could you great companies paid little attention to managing change, motivating people, or creating alignment. Under the right conditions, the issues of commitment, alignment, motivation, and change largely melt away.
  5. The good to great companies when not mainly in great industries, some were even in terrible industries. Greatness is not a function of circumstance.

Level 5 Leadership

  1. A level 1 leader is a highly capable individual. They make productive contributions through talent, knowledge, skills, and good work habits.
  2. A level 2 leader is a contributing team member. They contribute to the achievement of group objectives and work effectively with others in a group setting.
  3. Level 3 leaders are competent managers. They can organize people and resources toward an effective and efficient pursuit of set objectives.
  4. A level 4 leader helps catalyze commitment to and provides a vigorous pursuit of a clear and compelling vision, simulating higher performance standards.
  5. A level 5 leader during greatness through a blend of personal humility and professional will.
  6. And over 75% of the comparison companies, executives set their successors up for failure or chose weak successors to succeed them.
  7. Level 5 leaders are driven, infected with an incurable need to produce results.
  8. Level 5 leaders look to give credit to factors outside of themselves when things go well. At the same time, they look in the mirror when things go wrong and take responsibility, never blaming bad luck when things go poorly.

First Who, Then What

  1. The main point is to first figure out who to hire, and who to remove from the team before figuring out where to go.
  2. When David Maxwell became CEO of Fannie Mae and its darkest days, Maxwell first focused on getting the right people on the Fannie Mae management team. He made it clear that the work was going to be very hard and demanding. But he also made it clear that if they did not like it, nobody would hate them for it.
  3. There was no pattern of executive compensation in companies that went from good to great. In fact, these executives receive slightly less total cash compensation 10 years after the transition from good to great than the counterparts in the mediocre comparison companies.
  4. It is better to find people who have the right character, work ethic, intelligence, dedication to fulfilling commitments, and values. It is best to find out who someone is by asking them why they made the decisions they did in their life.
  5. When in doubt, don’t hire, keep looking.
  6. When you know you need to make a people change, act. Plan your efforts right up front to let people know if they will or will not get a role in your company.
  7. At times, someone is the right person, but in the wrong role. How do you know? First, if it were a hiring decision, would you hire the person again? Second, if the person came to tell you that he or she is leaving for an exciting new opportunity, would you feel disappointed or secret really relieved? Uline put your best people on your biggest opportunities, now your biggest problems.
  8. If you create a place where the best people always have a seat on the bus, and more likely to support changes in direction.

Confront the Brutal Facts (Yet Never Lose Faith)

  1. Facts are better than dreams. Good to great companies create an entire process to face the brutal facts of reality.
  2. There’s nothing wrong with pursuing a vision for greatness. But you must constantly find the path to greatness with the brutal facts of reality.
  3. Pitney Bowes created a long-standing tradition of forms were people could stand up until senior executives what the company was doing wrong.
  4. There’s a huge difference between giving the opportunity for people to have their say, and the opportunity to be heard.
  5. Great leaders lead with questions, not answers. They do not come up with answers, then motivating everyone to follow the vision.
  6. It means having the humility to grasp the fact that you do not yet understand enough to have the answers and then to ask questions that will lead to the best possible insights.
  7. Engage in dialogue and debate, not coercion. The process was more like a heated scientific debate, with people engaged in a search for the best answers.
  8. Conduct autopsies without blame. The goal is to create a climate where the truth is hurt. With the right people, should almost never need to assign blame only need to search for understanding and learning.
  9. Good to great leaders take responsibility for their bad decisions. But they desire all to take responsibility for extracting the maximum learning from bad decisions made.
  10. Build red flag mechanisms. The key lies not in better information, but in turning information into information that cannot be ignored. You can get a lot of information from customer surveys, there are always ways of explaining the way the data.
  11. The Stockdale Paradox focuses on retaining faith that you will prevail in the end, regardless of the difficulties. At the same time, you must confront the most brutal facts of your current reality, whatever they might be.

The Hedgehog Concept

  1. The Hedgehog Concept is a goal to simplify a complex world into a single organizing idea, a basic principle or concept that unifies and guides everything.
  2. Anything that does not somehow relate to the Hedgehog Concept holds no relevance.
  3. The Hedgehog Concept focuses on a deep understanding of the following three circles.
    1. What you can be the best in the world at and, equally important, what you cannot be the best in the world at. These companies stick with what they understand and let their abilities, not their egos, determine what the attempt. Keep in mind that just because you are good at something, making money, and generating growth, doesn’t necessarily mean you can become the best at it.
    2. What drives your economic engine. If you could pick one and only one ratio, profit per X, to systematically increase over time, what X would have the greatest and most sustainable impact on your economic engine? Someone examples include profit per employee, profit per geographic region, profit per mortgage risk level, profit per customer, profit per consumer brand, profit per local population, profit per ton of finished material, profit per global brand category, and profit per customer visit.
    3. What you are deeply passionate about. Strive to move more from understanding than bravado.
  4. It took 4 years on average for the good to great companies to get a Hedgehog Concept.
  5. You do not need to be in a great industry produce sustained great results.

A Culture of Discipline

  1. The purpose of bureaucracy is to compensate for incompetence and a lack of discipline.
  2. Abbott created a system where every manager and every type of job was responsible for his or her return on investment.
  3. It’s helpful to recognize that planning is priceless, but plans are useless.
  4. Build a culture around the idea of freedom and responsibility, within a framework.
  5. Fill that culture with self-disciplined people who are willing to go to extreme lengths to fulfill their responsibilities.
  6. Do not confuse a culture of discipline with a tyrannical disciplinarian.
  7. It here with great consistency to the Hedgehog Concept, exercising an almost religious focus on the intersection of the three circles.
  8. The culture of discipline means finding discipline people, with discipline thought, who take disciplined action.
  9. The fact that something is a once-in-a-lifetime opportunity is irrelevant if it does not fit within the core of your business.
  10. Budgeting is a discipline to decide which area should be fully funded and which one should not be funded at all.

Technology Accelerators

  1. Make sure that your core business drives your use of technology, not the other way around.
  2. Technology is an accelerator of momentum, not a creator of it.
  3. 80% of the good-to-great executives did not even mention Technologies one of the top five factors in their transition. When they did mention technology, it had a median rank of 4th, the only two executives of 84 ranking it number one.
  4. Good to great executive never talked and reactionary terms and never defined a strategies principal in response to what others were doing. They talked in terms of what they were trying to create and how they were trying to improve relative to an absolute standard of excellence.

 

 

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