Good to Great: Why Some Companies Make the Leap... and Others Don't

Good to Great: Why Some Companies Make the Leap... and Others Don't

by James C. Collins

Good is the enemy of great. 

Can a good company become a great company? If so, how? Or is the disease of “just being good” incurable?

The book is about timeless principles of good to great. It’s about how you take a good organization and turn it into one that produces sustained great results, using whatever definition of results best applies to your organization.

Summary Notes

Be a Level 5 Leader

“You can accomplish anything in life, provided that you do not mind who gets the credit” - Harry S. Truman

George Cain, Alan Wurtzel, Cork Walgreen, Carl Reichardt - how many of these names ring a bell to you? They are the CEOs of Abbott Laboratories, Circuit City, Walgreens and Wells Fargo respectively.

The reason why you probably haven’t heard of their names is because these leaders never aspired for fame, fortune or power. They only had one goal - to produce extraordinary results. They are what we call Level 5 Leaders.

A Level 5 leader is an individual who has extreme personal humility and at the same time possesses an intense and fierce professional will to do whatever it takes to make the company great.

Actions to take

Get The Right People

“There are going to be times when we can’t wait for somebody. Now you’re either on the bus or off the bus” - Ken Kesey, from The Electric Kool-Aid Acid Test by Tom Wolfe

To turn a company from good to great, we must get the right people on the bus and the wrong people off the bus. When you have the right people, you don’t need to tightly manage them. They are self-motivated and driven in contributing towards the goal you’ve set for your organization.

The question of “who” comes before the “what”, which refers to the vision, strategy, organization structure and tactics. If the “what” comes first, what will happen if your vision or your strategy changes? There is no guarantee that these people will stay. However, when you have the right people on the bus, they will stay with you no matter what direction you take or change you make.

We know when we have the wrong person on our team. Yet we wait, delay and hope that the situation will improve eventually. However, letting the wrong people hang around is unfair to the right people. These strong performers will find themselves filling in the gaps for the inadequacies of the wrong people, and if not addressed, can make them feel frustrated and unmotivated.

People from great companies enjoy their work because they love who they work with.

Actions to take

Confront Brutal Facts

“There is no worse mistake in public leadership than to hold out false hopes soon to be swept away” - Winston S. Churchill, The Hinge of Fate

A leader cannot make a series of good decisions if they do not have the courage to confront the brutal facts of reality. This includes making the wrong decisions, appropriately dealing with poor performance, and so on.

Before you can turn your company from good to great, you must possess this powerful psychological duality - you must confront the brutal facts yet never lose faith that the company will make it in the end. 

To be able to confront the brutal facts, you must create a climate wherein the truth can be heard and faced. Do not be afraid to look back on your mishaps; it is in these “dark” days wherein the best lessons lie.

Actions to take

Discover and Commit to Your Hedgehog Concept

“Know thyself” - Scribes of Delphi via Plato

There are two groups of people - hedgehogs and foxes. Foxes pursue many ends at the same time; while hedgehogs pursue one thing that unifies and guides everything that they do. This is called the Hedgehog Concept.

A Hedgehog Concept flows from a deep understanding on the following: 

  1. What you can be the best in the world at, and what you cannot be the best at

  2. What drives your economic engine, or what helps you measure your business growth

  3. What you are deeply passionate about

Take Philip Morris as an example. Their Hedgehog Concept is that they could become the best in the world at building brand loyalty in cigarettes and later other consumables (what they can be best at) driven and determined on how their brands are known globally (economic driver) because they believe that cigarettes are one of the things that makes life really worth living (passion). 

Discovering a Hedgehog Concept can be difficult and may take time. It is an iterative process, not a single event. To identify your Hedgehog Concept, it requires you to run through as many cycles as possible until you reach an understanding on what you’re meant to do.

Focusing solely on what you can potentially do better than any other organization is the only path to greatness.

Actions to take

Create a Culture of Discipline

“Freedom is only part of the story and half the truth…” - Viktor E. Frankl, Man’s Search for Meaning

Few successful startups become great companies when they respond to growth and success in the wrong way. Entrepreneurial success is fueled by creativity and imagination. When companies start to scale up, they often lose this essence and become a bureaucratic organization. 

To keep the entrepreneurial spirit and a structure to follow, great companies create a culture of discipline. 

A culture of discipline is built around the idea of freedom and responsibility within a framework anchored heavily on the vision the company stands for. Activities unrelated to the vision should be eliminated and opportunities are not blindly pursued, even the big ones. Opportunities are carefully selected and assessed if it adheres to the company’s vision.

The culture of discipline is not led by tyranny or force. It is composed of the right people; self-disciplined people who need not to be managed as they have respect for the structure set. They do not simply settle with just the minimum; they go beyond. They believe that this one extra step can lead them a step closer to being a great organization.

Actions to take

Make Technology Work For You

“Most men would rather die than think. Many do.” - Bertrand Russell

Despite the boom of new technologies, good-to-great companies do not simply ride the bandwagon. They pause and reflect. They ask themselves “How will this technology help us in achieving our goals?”

For good-to-great companies, technology is an accelerator, and not the creator, of momentum. 

Great companies do not implement pioneering technology within their organization unless they have a clear understanding on what technologies are relevant for their goals. Then, technology will act as an accelerator of growth for that organization. 

If a technology is introduced and implemented brashly, it still acts as an accelerator; but towards failure.

Actions to take

Be Consistent

“Revolution means turning the will.” - Igor Stravinsky

A great company is like a flywheel. It takes a number of continuous and consistent pushes for it to work and spin fast. Good-to-great transformations never happen overnight; it is an accumulation of consistent efforts - step by step, action by action, decision by decision - to produce extraordinary results. This is what is known as a breakthrough.

Breakthroughs are not just a luxury of circumstance. Great companies have also experienced dark days and pressure. However, their patience and discipline to push forward made them successful. 

Tremendous power exists in a continuous drive towards improvement and delivery of results.

Actions to take

Strive For Greatness

“It is your work in life that is the ultimate seduction” - Pablo Picasso

Building a great company is not harder than building something good. It doesn’t require more suffering, so why settle for mediocrity? To be great, we just need to focus on the right things - disciplined people, disciplined thought and disciplined action. If we focus on the right things, we get better results, the process is much more fun and the people are motivated and energized.

Another reason to strive for greatness is to be able to do meaningful work. If we do something that we really care about, we will persevere in doing it because we strongly believe in the value it gives.

Actions to take

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