Throwback! It’s time for a book report.
A friend recently asked me what the top three, most influential, business books I have read are. I mentioned one of them being, Good to Great: Why Some Companies Make the Leap…and Others Don’t, by Jim Collins.
He then asked if I got anything from it that I could apply to business, or a technique for the real world, from it?
To which I replied, “I took from it that you should focus on key competencies and not get distracted by the other stuff.”
For those of you who have read the book; you know that my answer could have been tuned up a little, but it got me thinking… why did I recommend a book I haven’t read for four years?
With that, I decided to revisit my notes from Good to Great to compile an overview.
Overview: How companies go from good to great
Good to Great is a book describing the characteristics of companies who made the leap from being good companies to great companies (the title is spot on). Though, Collins asserts that most companies fail to make the transition from good to great.
So, how do you determine a company has made the transition from good to great?
Collins assembled a team of 21 researchers who studied financial analyses of companies. Of those companies, those where growth and success far outpaced the market or industry average, were deemed as having achieved corporate greatness.
Those companies are:
Transforming is a process of buildup… followed by breakthrough
In an overview Collins asks the readers to think of the transformation of good to great as a process of buildup followed by breakthrough.
Within buildup and breakthrough Collins found successes in three broad stages likely to determine a company’s ability to achieve greatness: disciplined people, disciplined thought, and disciplined action.
Further, within each of those three broad stages Collins describes specific characteristics of companies that went from good to great:
- Level 5 Leadership: “…leaders [who] channel their ego needs away from themselves and into the larger goal of building a great company. It’s not that Level 5 leaders have no ego or self-interest. Indeed, they are incredibly ambitious—but their ambition is first and foremost for the institution, not themselves” (21).
- First Who… Then What: Get the right people (leaders/executive team) on the bus, or who should join the company, and then figure out what the best path to greatness is.
- Confront the Brutal Facts: Continuously refine your path to greatness based on the brutal facts of reality.
- Hedgehog Concept: Originating from the story, The Hedgehog and the Fox, the hedgehog sees what is most essential, similar to the “…good-to-great companies [that] were, to one degree or another hedgehogs” (92). This hedgehog nature lead to the Hedgehog Concept, which is made up of three intersecting circles: What you are deeply passionate about, what you can be the best in the world at, and what drives your economic engine
- Culture of Discipline: “A culture of discipline is not just about action. It is about getting disciplined people who engage in disciplined thought and who then take disciplined action” (142).
- Technology Accelerators: Pioneering carefully selected technology is an accelerator of momentum.
- The Flywheel and the Doom Loop: As you persistently push the flywheel and build momentum you will eventually hit a point of breakthrough. In contrast, the doom loop is the lacking of accumulating momentum where a company skips buildup and goes straight to breakthrough, which in turn, fails to maintain a consistent direction.
In the final chapter Collins draws comparisons to his previous book, Built to Last, which studied the factors of whether a new company would survive long-term. Collins continues by saying he now sees substantial evidence that early leaders followed the good-to-great framework. The only difference being, they did so as entrepreneurs in small, early-stage enterprises.
This is an important point to not miss. Though the companies analyzed in Good to Great were enterprise companies; Collins saw these same characteristics in small, early-stage enterprises. Meaning, these characteristics are not limiting to company size. Rather, these specific characteristics, in any size company, are good indicators of achieving long-term success.
Challenging Good to Great
A criticism of Good to Great, is that some of the great companies, featured in the book, are no longer great.
However, Collins viewed and analyzed these companies as looking into the past. Therefore, making no claims as to their future success.
Collins never claimed that these once great companies would always be great. He simply was pointing out a 15 year span where they were great, and the characteristics that lead them to that point.
Why should I care?
So, again, I revisit the question of why would I suggest a book I read four years ago, and why has it stuck with me?
On one level, many business people I respect had recommended Good to Great to to me at some point.
Though, as I reviewed Good to Great, it became apparent that I recommended Collins book because it had an impact on my day-to-day; I was inherently putting many of the characteristics he mentioned into action.
So, if you haven’t read it before hopefully you will consider it (or learn “enough” from my abbreviated summary). Or if you have read it, hopefully you will share some of your key learnings for myself and others to learn from as well.