Jim Collins, Good to Great: Why Some Companies Make the Leap…and Others Don’t. Harper Business, 2001.
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LifeandLeadership.com Summary
This is an interesting contribution to the literature representing the transformational and empowering leadership philosophies, particularly with its emphasis on the Level 5 Leader.
In this sequel to Collins and Porras’ Built to Last, Collins followed carefully derived criteria to arrive at a list of eleven companies that had underperformed for fifteen years, then had a breakthrough and significantly outperformed their competition for the next fifteen years. They discovered the pattern to renewal begins with a highly motivated executive (Level 5 Leader) who surrounds himself with the right people. This cadre of leaders confronts the brutal facts about the condition of the company. They look at the complex data through three lenses: what that company does best in the world, what they are deeply passionate about, and what drives their economic engine. They discern where these three dimensions intersect into their “hedgehog idea” – the single principle that unifies and guides everything. From this point on, they tenaciously pursue this hedgehog idea, and anything not related to it is pushed aside. The organization develops a culture of highly self-disciplined people who are willing to go to extreme lengths to fulfill their responsibilities and who do not need to be managed.
All of this guards against the bureaucratic slowdown that is so typical of companies who try to guard successes through excessive control. These companies do not get mired in the downtime of technological faddism, but selectively adopt only those new technologies that are relevant to their hedgehog concept, thus using technology to accelerate their momentum. They know what they do, and use technology only to help them do that. As the progress of these companies evolves, they realize it seems slow at times, but they value even the most incremental improvements as long as they are aimed at the goal, like a flywheel that starts slow but is eventually propelled its own momentum. This contrasts to companies on the “doom loop” who try one breakthrough project after another, looking for a splashing success, but usually ending up with only a series of false starts and an increasingly demoralized work force.
From the Publisher
The Challenge
Built to Last, the defining management study of the nineties, showed how great companies triumph over time and how long-term sustained performance can be engineered into the DNA of an enterprise from the very beginning. But what about the company that is not born with great DNA? How can good companies, mediocre companies, even bad companies achieve enduring greatness?
The Study
For years, this question preyed on the mind of Jim Collins. Are there companies that defy gravity and convert long-term mediocrity or worse into long-term superiority? And if so, what are the universal distinguishing characteristics that cause a company to go from good to great?
The Standards
Using tough benchmarks, Collins and his research team identified a set of elite companies that made the leap to great results and sustained those results for at least fifteen years. How great? After the leap, the good-to-great companies generated cumulative stock returns that beat the general stock market by an average of seven times in fifteen years, better than twice the results delivered by a composite index of the world’s greatest companies, including Coca-Cola, Intel, General Electric, and Merck.
The Comparisons
The research team contrasted the good-to-great companies with a carefully selected set of comparison companies that failed to make the leap from good to great. What was different? Why did one set of companies become truly great performers while the other set remained only good?
Over five years, the team analyzed the histories of all twenty-eight companies in the study. After sifting through mountains of data and thousands of pages of interviews, Collins and his crew discovered the key determinants of greatness — why some companies make the leap and others don’t.
The Findings
The findings of the Good to Great study will surprise many readers and shed light on virtually every area of management strategy and practice. The findings include:
- Level 5 Leaders: The research team was shocked to discover the type of leadership required to achieve greatness.
- The Hedgehog Concept (Simplicity within the Three Circles): To go from good to great requires transcending the curse of competence.
- A Culture of Discipline: When you combine a culture of discipline with an ethic of entrepreneurship, you get the magical alchemy of great results. Technology Accelerators: Good-to-great companies think differently about the role of technology.
- The Flywheel and the Doom Loop: Those who launch radical change programs and wrenching restructurings will almost certainly fail to make the leap.
“Some of the key concepts discerned in the study,” comments Jim Collins, “fly in the face of our modern business culture and will, quite frankly, upset some people.”
Perhaps, but who can afford to ignore these findings?
About the Author
Jim Collins is a student and teacher of enduring great companies — how they grow, how they attain superior performance, and how good companies can become great companies.Having invested over a decade of research into the topic, Jim has co-authored three books, including the classic Built to Last, a fixture on the Business Week bestseller list for more than five years, generating over 70 printings and translations into 16 languages.His work has been featured in Fortune, The Economist, Business Week, USA Today, Industry Week, Inc., Harvard Business Review and Fast Company.
Driven by a relentless curiosity, Jim began his research and teaching career on the faculty at Stanford Graduate School of Business, where he received the Distinguished Teaching Award in 1992.In 1995, he founded a management laboratory in Boulder, Colorado, where he now conducts multi-year research projects and works with executives from the private, public, and social sectors.
Jim has served as a teacher to senior executives and CEOs at corporations that include: Starbucks Coffee, Merck, Patagonia, American General, W.L. Gore, and hundreds more.He has also worked with the non-corporate sector such as the Leadership Network of Churches, Johns Hopkins Medical School, the Boys & Girls Clubs of America and The Peter F. Drucker Foundation for Non-Profit Management.
Jim invests a significant portion of his energy in large-scale research projects — often five or more years in duration — to develop fundamental insights and then translate those findings into books, articles and lectures.He uses his management laboratory to work directly with executives and to develop practical tools for applying the concepts that flow from his research.
In addition, Jim is an avid rock climber and has made free ascents of the West Face of El Capitan and the East Face of Washington Column in Yosemite Valley.
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