Good To Great

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Jim Collins, an established management consultant, identifies and evaluates the factors and variables that allow a company to transition from merely good to truly exceptional in his classic,  Good to Great: Why Some Companies Make the Leap and Others Don’t. “Great”is a very subjective term, but Collins successfully defines it by a number of metrics, including financial performance, the highest the market average sustained by several periods of time. Using this particular criteria, Collins and his research team exhaustively cataloged the business literature and finding a handful of companies that matched their predetermined criteria for greatness.  

Throughout the book, Collins addresses different components that build the bridge that guides the transition from good-to-great. Among these components, we find management, operational practices,  personnel, behaviors and attitudes that are both effective and yet mutually incompatible to the good-to-great transition.

Using the criteria described above, Collines selected the following eleven companies: Abbott, Fannie Mae, Circuit City, Gillette, Kimberly-Clark, Kroger, Nucor, Philip Morris, Pitney Bowes, Walgreens and Wells Fargo.  The most crucial factor in the selection process was a period of growth and sustained success that far outpaced the market or industry average.

Collins  begin the process of identifying and explaining the unique factors and variables that differentiate good and great companies. One of the most significant differences in the quality was the leadership in the firm. Collins goes on to identify the followings five levels of leadership:

  •    The highly capable Individual: Leaders who contribute using their skill, know-how and good habits.
  •    The contributing Team Member: Leaders who are able to use their expertise and knowledge to help their team succeed.
  •    Competent Manager: Leaders who are capable of organizing the team to reach pre-determined objectives efficiently
  •    Effective leaders: Leaders who are able to create the commitment from their team to pursue a clear and compelling vision vigorously. They are also able to build a high-performing team
  •    Lastly, the Great Leaders: leaders with all the abilities of the four levels plus a unique combination of will and humility. It is the combination that makes them a great leader.

An actual level 5 leader often has a long-term personal sense of investment determination and profound humility.

Collins went further to identify the nature of leadership. He specifically states that getting the right people takes precedence over strategy, vision and almost everything. The “who” must be put before the “What.” The most valuable asset of a company is not the people but the right people. It is not just the quality of leadership that is essential to be great but the quality of the people in the team. Collins gave three principles that will help you maximize your most significant asset to become great.

  1.    When in doubt, don’t hire – Keep looking
  2.    When you need to let go of the wrong people, act right away. But do not overlook the possibility that the right person might be in the wrong position.
  3.   Put your best people on your biggest opportunities.

Another defining characteristic of the companies Collins defined as great is simplicity. Collins used the metaphor of the hedgehog to illustrate the principle that simplicity can sometimes lead to greatness.

Equally, Collins shares that the simplist way to transform from Good to Great is often not by doing many things well, but instead, by doing one thing better than anyone else in the world. Usually it takes time to identify that single thing that you can be great at, but those who do successfully identify it are often rewarded with singular success. Collins suggests using the following three criteria to expedite the process to find it: 1) Determine what you can be best in the world at and what you cannot be best in the world at; 2) Determine what drives your economic engine; and 3) Determine what you are deeply passionate about.

Good to Great has become a classic in leadership and business. If you are in a leadership position or planning to do so, grab a copy and be ready to move from Good to Great.

THE BIG THREE – KEYPOINTS

Keypoint #1:   Companies need to create a climate where the truth is heard.

Keypoint #2.    Good to great companies are motivated by inner compulsion of excellence for its own sake.

Keypoint #3.    Always confront uncomfortable truths head-on, but never lose faith that you’ll work it out.

 

One Last Thing:

“Good is the enemy of great. And that is one of the key reasons why we have so little that becomes great. We don’t have great schools, principally because we have good schools. We don’t have great government, principally because we have good government. Few people attain great lives, in large part because it is just so easy to settle for a good life.”

― Jim Collins, Good to Great: Why Some Companies Make the Leap… and Others Don’t

GREAT BY CHOICE: UNCERTAINTY, CHAOS, AND LUCK WHY SOME THRIVE

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Great by choice is a masterpiece of Jim Collins in-depth research. It was written in collaboration with another influential management analyst, Morten. T. Hansen.  Great by Choice aims to solve the problem of “why in spite of ambiguity, chaos, uncertainty, and market volatility, a few companies thrive, and others struggle.” Collins tackles this question by comparing those who outperformed their competitors by a factor of 10 (10Xers) in given time frame and set of variables.

The authors confirm that the great companies are no luckier than good companies, average companies or bad companies. Luck does not make them succeed because even in times of chaos and uncertainty, they go on working as if nothing has happened. These companies succeed because they have acquired an antifragility trait through a process which combines discipline and preparedness. It is not something in the DNA or something you get by luck or sheer courage. It is through a process that can be learned.

The authors successfully illustrate their point with the story of conquering South Antarctica. In 1911, two explorers made dangerous trip to Antarctica in an attempt to become the first people to reach the South Pole. One was led by a Norwegian, Roald Amundsen, while the other was led by a British Navy officer, Robert Falcon Scott.  Looking at both explorers, you would expect the latter to be remembered by history. That was not the case. It was Amundsen’s expedition who won the race to immortality. Why? Simply put:

PREPARATION. Roald Amundsen didn’t know where he was going, but he had a good idea of the conditions that he may be facing and spent as much time as he could researching Eskimo habits and trying all potential food sources.  Scott, on the other hand, wanted to reach the pole faster, so he carried a lot less weight and used the “untested –for-that-terrain” motor sleds. No one remembers if Scott’s team ever made it home. Neither Amundsen nor Scott knew what they would face on Antarctica, but the former did better in preparing for it.

My favorite part of the book is how much research was included. The authors analyzed the companies which beat their industry indexes Y at least ten times in as many years (10X companies) and found out that they were able to overcome stressful situations because they were prepared.

Firstly, they were disciplined. They were not in a hurry to become better than anyone else; they choose consistency over a rapid rise. By setting targets for themselves and hitting them precisely year by year, they became immune to external influences.

Secondly, they were bold. Their leaders weren’t interested in taking unnecessary risks and as a consequence weren’t required to be anymore of visionary than those of merely good companies.

Lastly, they were productively paranoid, just like Amundsen. The polar explorer tried dolphin’s meat to prepare for the worst-case scenario. The 10x companies do this regularly. In the event that something terrible happens, they already have a good strategy.

The 10x companies are neither more innovative nor more bolder than competitive companies; they were merely more attentive. They use bullets until they are entirely sure of their target and then they fire the cannon balls.

In conclusion, be SMaC: Specific, Methodological and Consistent. That is how discipline is implemented within a company. However, it is  only one aspect of what will help you through hard times. The other is being productively paranoid. Prepare for the worst, hope for the best!

THE BIG THREE – KEYPOINTS

Key point #1: Be Attentive. Fire the bullets, then the cannonballs.

Key point #2: Be specific, methodological, consistent and productively paranoid

Key point #3: Greatness is a long-term strategy, strengthened by a consistent discipline in tactics.

One Last Thing

“The great task, rarely achieved, is to blend creative intensity with harsh discipline so as to amplify the creativity rather than destroy it. When you marry operating excellence with innovation, you multiply the value of your creativity.” Jim Collins & Morten Hanson. Great By Choice