Book review: "Good to Great" by Jim Collins

Overview

"Good to Great" is a result of five years' research into how ‘good' company transforms itself to a ‘great' one. Collins describes the qualities of the leaders of these companies, what visions they had and what methods they used.

Collins spends considerable time in explaining the terms ‘good' and ‘great' in a series of detailed appendices. Put simply, to make it into the book's shortlist:

  • the company had to show ‘good' performance (growth of 1.25 times of the stock market) for at least fifteen years prior to a transition point, after which... 
  • the company had to show ‘great' performance (growth of 3 times of the stock market) for at least fifteen more years.

In order to eliminate market-sector upturns, the company also had to demonstrate that it outgrew comparison companies after the transition point.

Eleven make the cut: Collins labels these as ‘good-to-great' companies. A few are well-known (Gillette), but many of them are unlikely to be familiar to UK readers, but this does not detract from the book as the findings apply to any corporation.

Leadership Characteristics

Collins' first finding is that the good-to-great companies have leaders with well-defined, but paradoxical, characteristics of professional will and personal humility. They are intensely ambitious for the company, rather than themselves. The majority of the comparison companies had leaders had ego-driven leaders that took the credit for success and sought to blame others for failure - the very reverse of the good-to-great company leader.

 

Another result is that the good-to-great company leader did not first form a vision and then select the best people for the job; rather they selected the people first and then formulated a vision. Collins raises the interesting point that during a recession, when other companies are shedding staff, the good-to-great company finds a terrific opportunity in hiring top people even though there may be no clearly-defined role for them.

These leaders studied had the willingness to confront unpleasant facts while simultaneously maintaining an absolute belief in that obstacles will be overcome. This dual mindset enabled good-to-great companies to outperform their competitors in conditions of adversity.

Hedgehog Concept

Collins introduces a recurring pattern of all the good-to-great companies - the Hedgehog Concept. This concept is based on the observation that while a fox may have many stratagems to hunt a hedgehog, the latter only has one defence - but one that will win every time.


Collins' Hedgehog Concept is the intersection of these three ideas:

  • What you can be best at.
  • What drives your economics (usually profit). 
  • What are you passionate about.

He found that good-to-great companies spend an average of four years to define their Hedgehog Concept, usually in a gradual, iterative manner. Once the Concept was defined, there needed to be a culture of discipline in order to execute it.

This culture was sustained by having the right people in place - happy to have their work bounded by the Concept framework but also happy to have the freedom and creativity within the framework to achieve their goals. The discipline extended to actively shunning opportunities outside the three ideas - in fact, the more a company stayed within its Hedgehog concept, the more likely it would be to grow as any corporate activity would be correctly aligned.

Appropriate Use of Technology

Collins' research found that the technology paid an important but not dominant influence in good-to-great companies. Fully eighty percent of executives failed to mention technology in the top five reasons for the transformation from good to great. Typically, they used technology as an accelerator of growth, rather than a creator; technology would be used to support the Hedgehog Concept rather than to take a leap of faith outside.

This is not to say that these companies were anti-technology - there was a realisation that they could not lag behind and remain competitive, rather that it was realised that technology could turn unrealised potential into further growth.

Positive Feedback (the "Flywheel")

In focusing on the transformation point, namely the point that the company transformed from good to great, Collins found that there was never one big event that marked the transformation. Rather, the transformation occurred as a result of a large number of small, often unheralded, actions over a period of time, each one acting in the same direction, slowly building up momentum until the transformation became obvious.

Summary

Collins concludes by linking the findings of this book with that of his previous book ‘Built to Last', a study of already-great companies. He finds a great deal of synergy between the two studies and convincingly shows that companies have to go from ‘good-to-great' before they can be ‘built to last'.

Verdict

This is a tremendous book, thoroughly researched with detailed appendices, on what how a good company can be made great. To cap it all, he outlines how the results he found in corporate arena can be transferred to one's own life and aspirations.

Success Stories

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Senior Project Manager, Cogent Defence and Security Networks

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