Good to great, by Jim Collins

Good to Great

Jim Collins (born in 1958) is an American author and consultant focused on business management and company sustainability and growth.

Jim Collins and his team of researchers spent five years looking (1) for companies which successfully transitioned from “good” to “great”, and (2) for the drivers of such transition.

Below are the key lessons from the book:

Level 5 leadership:

1. Every good to great company had level 5 leadership during the transition years.
2. Level 1 – Highly capable individual: makes productive contributions through talent, knowledge, skill and good work habits.
3. Level 2 – Contributing team member: contributes individual capabilities to the achievement of group objectives and works effectively with others in a group setting.
4. Level 3 – Competent manager: organizes people and resources toward the effective and efficient pursuit of predetermined objectives.
5. Level 4 – Effective leader: catalyzes commitment to and vigorous pursuit of a clear and compelling vision, stimulating higher performance standards.
6. Level 5 leader: builds enduring greatness through a blend of personal humility and professional will.
7. Level 5 leaders embody a mix of personal humility and professional will.
8. Professional will:
   1. Creates superb results.
   2. Demonstrates resolve to produce the best long-term results.
   3. Sets the standard of building an enduring great company.
   4. Looks in the mirror to apportion responsibility for poor results.
9. Personal humility:
   1. Compelling modesty.
   2. Acts with quiet, calm determination, relying on standards to motivate.
   3. Channels ambition into the company, sets successor up for success.
   4. Looks out the window to apportion credit for success (other people, external factors, good luck).
10. There is a damaging tendency to select dazzling celebrity leaders instead of level 5 leaders.
11. Larger than life celebrity leaders from outside are negatively correlated with good to great.

First who, then what:

1. First get the right people on the bus (and the wrong people off), then figure out where to drive.
2. “Who” questions come before “what” decisions.
3. The “genius with a thousand helpers” model fails when the genius departs.
4. When in doubt, do not hire, keep looking.
5. When you know you need to make a people change, act (be sure they are not in the wrong seat).
6. Put your best people on your biggest opportunities, not your biggest problems.
7. Debate vigorously in search of the best answers but unify behind decisions.
8. There is no pattern linking executive compensation to “good to great” transition.
9. The purpose of compensation is not to motivate the right behaviors from the wrong people, but to get and keep the right people.
10. People are not your most important asset, the right people are.
11. The right person has more to do with character traits and innate capabilities vs. specific knowledge, background or skills.

Confront the brutal facts, yet never lose faith:

1. The process starts by confronting the brutal facts of the current reality.
2. With an honest and diligent effort to determine the truth of your situation, the right decisions often become self-evident.
3. Create a culture where people have a tremendous opportunity to be heard and the truth is heard
4. Lead with questions, not answers.
5. Engage in dialogue and debate, not coercion.
6. Conduct autopsies, without blame.
7. Build red flag mechanisms that turn information into information that cannot be ignored.
8. When faced with adversity, hit the realities of your situation head-on, and emerge stronger.
9. Retain absolute faith that you will prevail in the end yet confront the most brutal facts.
10. Charisma can deter people from bringing you the brutal facts.
11. Leadership does not begin just with vision, but with getting people to confront the brutal facts and act on the implications.
12. Spending time trying to motivate people is a waste of effort. If you have the right people, they will be self-motivated. The key is not to demotivate them by ignoring the brutal facts of reality.

The hedgehog concept – simplicity within the three circles:

1. The hedgehog concept:
   1. What you can be the best in the world at.
   1. What you are deeply passionate about.
   2. What drives your economic engine.
2. The key is to understand what your organization can be the best in the world at (not what it wants to be the best at), and what it cannot be the best at. If you cannot be the best in the world at your core business, then it cannot be the basis of your hedgehog concept.
3. Having a competence does not mean having the capacity to be truly the best in the world at it.
4. To get insight into the drivers of your economic engine, search for the one denominator (profit per x, cash flow per x) that has the single greatest impact.
5. Set your goals and strategies based on understanding, not bravado.
6. Getting the hedgehog concept is an iterative process (it takes 4 years on average).
7. Good to great companies are like hedgehogs that know “one big thing” and stick to it (vs. foxes that know many things but lack consistency).
8. Good to great companies do not spend more time on strategic planning.
9. You do not need to be in a great industry to produce sustained great results.

A culture of discipline:

1. Sustained great results depend upon building a culture full of self-disciplined people who take disciplined action, fanatically consistent with the three circles.
2. Having the wrong people on the bus leads to incompetence and lack of discipline which leads to a bureaucratic culture to compensate. With the right people on and the wrong people off, no need for bureaucracy.
3. A culture of discipline (i) requires people who adhere to a consistent system, yet (ii) gives people the freedom and responsibility within the framework of this system.
4. A culture of discipline is about getting disciplined people who engage in disciplined thought and then take disciplined action.
5. Good to great companies appear boring from the outside but are full of people who display extreme diligence and a stunning intensity.
6. A culture of discipline should not be confused with a tyrant who disciplines.
7. The most important form of discipline is fanatical adherence to the hedgehog concept and the willingness to shun opportunities that fall outside the three circles.
8. The more an organization stays within its three circles, the more it will have opportunities for growth.
9. The fact that something is a “once in a lifetime opportunity” is irrelevant unless it fits within the three circles.
10. The purpose of budgeting is to decide which arenas best fit with the hedgehog concept and should be fully funded and which should not be funded at all.
11. “Stop doing” lists are more important than “to do” lists.

Technology accelerators:

1. Avoid technology fads but become a pioneer in the application of carefully selected technologies.
2. The key question about any technology is “does the technology fit directly with your hedgehog concept?”. If yes, then you need to become a pioneer in the application of that technology, if no, then settle for parity or ignore it.
3. Use technology as an accelerator of momentum (not a creator of it).
4. Technological change is not the main cause in the decline of once-great companies.
5. “Crawl, walk, run” can be a very effective approach.

The flywheel and the doom loop:

1. “Good to great” transformations look dramatic from the outside, but feel like organic, cumulative processes to people on the inside.
2. Sustainable transformations follow a predictable pattern of buildup and breakthrough. It takes a lot of effort to get the flywheel moving, but with persistent pushing in a consistent direction over a long period of time, the flywheel builds momentum, eventually hitting a point of breakthrough.
3. Comparison companies follow a “doom loop”: they try to skip buildup and jump immediately to breakthrough, then lurch back and forth with disappointing results, and fail to maintain a consistent direction.
4. Comparison companies try to create a breakthrough with large, misguided acquisitions, while good to great companies used large acquisitions after breakthrough, to accelerate momentum.
5. Good to great leaders spend no energy trying to create alignment, motivate the troops or manage change. Under the right conditions, theses problems take care of themselves. Alignment follows from results and momentum, not the other way around.

From “good to great” to “built to last”:

1. “Good to great” provides the core ideas for getting a flywheel turning from buildup to breakthrough.
2. “Built to last” outlines the core ideas for keeping a flywheel accelerating
   1. Clock building, not time telling: build an organization that can endure and adapt through multiple generations of leaders and multiple product life cycles (not a single great leader or a single great idea).
   2. Genius of AND: embrace both extremes on a number of dimensions at the same time.
   3. Core ideology: instill core values and core purpose as principles to guide decisions and inspire people.
   4. Preserve the core / stimulate progress: change practices and strategies while holding core values and purpose fixed. Set and achieve BHAGs consistent with the core ideology.

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Good to Great