Jim Collins — Good To Great Book Review & Key Takeaways
Today, I’ll review and summarize the key points and my personal takeaways of the classic business book, Good to Great by Jim Collins. Throughout Good to Great, Jim Collins presents the conclusions after studying a certain subset of publicly traded companies to identify key attributes of how companies go from Good to Great.
Good is the enemy of Great.
How can a good company become great? This is how Jim Collins sets off a riveting journey explaining his findings of research in the conquest of how to make good companies great.
Essentially, Good to Great happens very rarely and it is because it is damn difficult.
WarningMost great companies enjoyed years of obscurity before their great results compelled the world to look at them. In fact, they seemed just like any other company until a certain ‘transition point‘ saw them leave the pack behind.
This is one of the best professional development books I’ve read to date. My only regret is that I didn’t read it sooner.
Good to Great encourages us to be better rather than settling for good enough. Throughout the book I found myself identifying with countless examples of companies, organizations, and individuals used as analogies for the status quo: good enough.
Greatness is not a function of circumstance. Greatness, it turns out, is largely a matter of conscious choice.
Without strategic purpose, good enough will be the inertia that keeps us, or our organizations, from greatness. When you’re doing “good enough” people remind you, “it could be worse.” Good becomes the default equivalent of Great.
Good to Great is a must-read for anyone committed to one day leading an organization that truly represents excellence.
What differentiates good companies from great companies? Why do some companies grow over time, while others seem to stay stagnant? This book can help by showing you how to make more good strategic decisions than bad ones. Let’s get to the takeaways.
Level 5 Leadership
Leaders who have brought the ‘Good to Great’ transformation are not the ones who are charismatic or big personalities but are rather quiet, shy, deliberate. Organizations that strive to become great need to have a Level 5 leader.
Jim Collins explains leadership in terms of 5 different levels with Level 5 being the highest level in the hierarchy.
Level 5 leaders embody a paradoxical mix of personal humility and professional will. These leaders are ambitious, to be sure, but ambitious first and foremost for the company, not themselves.
Level 5 leaders look out the window to attribute success to factors other than themselves.
WarningWhen things go poorly, however, they look in the mirror and blame themselves, taking full responsibility. Most CEOs often do just the opposite — they look in the mirror to take credit for success, but out the window to assign blame for disappointing results.
Level 5 leaders channel their ego needs away from themselves and into the larger goal of building a great company. It’s not that Level 5 leaders have no ego or self-interest. Indeed, they are incredibly ambitious — but their ambition is first and foremost for the institution, not themselves.
These Level 5 leaders also share a passion for the products their firm create, however commonplace.
Because they put their firm first, these Level 5 leaders ensure that whoever succeeds them is likely to be just as effective, if not more. They are in it for the future greatness of the company, even well beyond their tenure.
They are fanatically driven, obsessed even, to produce exceptional results on a sustainable basis.
The key word here is sustainable. This isn’t the result of a one-off heroic effort. They are ambitious, but their ambition is for the organization to excel rather than themselves and they tend to be modest about what they personally contribute and are self-effacing.
The Hedgehog Concept
Originating from the story, The Hedgehog and the Fox, the hedgehog sees what is most essential. The Hedgehog Concept is made up of three intersecting circles: What you are deeply passionate about, what you can be the best in the world at, and what drives your economic engine.
If you’re going to be great, you must find what you can be the best in the world at, and then do as much of that and as little of everything else as you possibly can.
WarningThe Hedgehog Concept is not a goal to be the best, a strategy to be the best, an intention to be the best, a plan to be the best. It is an understanding of what you can be the best at. The distinction is absolutely crucial.
What is it exactly that you stand for? Can you sum it up in a few words? If not, your current efforts are likely to be scattered and lacking energy, just like the ‘merely good’ companies.
Great companies have a single idea or a focus which guides everything they do. Such concepts may take many years to refine, but once in place can generate enormous success because they are so differentiated.
What do you feel most passionate about? This is an important question because passion is hugely motivating.
Great companies don’t tell their employees what to be passionate about. They find what their employees are already passionate about and then look for projects aligned to those passions.
A fox is a very clever creature. It sees the world in all its complexity and can pursue many goals at once. A hedgehog is a much more simple creature. It doesn’t get bogged down by all the complexity. It’s really only able to do one thing well. Hedgehogs are not capable of seeing complexity. All they see is a single goal and they execute to achieve that goal.
What can you be best in the world at? This is about more than developing a great core competency.
It’s about deciding on one key area that your business can do better than any other business and about focusing on this area exclusively so nobody else can match you. Note that this is about focusing on what you can be the best at, not what you want to be the best at.
What drives your economic engine? What is the one factor that creates money for your organization?
You think of the economic engine as being like the blood flowing through our bodies. It doesn’t define us and it’s not who we are and what we are about, but without it we simply can’t survive very long.
Discipline Is Freedom
Bureaucratic cultures arise to compensate for incompetence and lack of discipline. Typically, cultures which lack discipline arise from having the wrong people on the bus in the first place.
Having discipline of people eliminates the need for hierarchy. Having discipline of thought keeps everyone on track.
WarningMost companies fail not because of the lack of opportunity but because there is too much opportunity, and they spread themselves too thinly. If you get the right people on the bus, and the wrong people off, you won’t need to worry about bureaucracy.
Build a culture of freedom and responsibility but within a defined framework. You will free up your time if you put in place boundaries but let people decide for themselves how to act within those boundaries.
The best way to explain this is by using the example of an airline pilot. The pilot is guided by air-traffic control. But the pilot has ultimate responsibility within that system for the safety of the craft, its passengers, and its crew.
Other thing that involved within culture of discipline is saying NO to all the opportunities that do not fit the hedgehog concept. There needs to be a fanatical adherence to hedgehog concept that requires companies to only focus on things that they have determined they can be best at.
Build a strong culture, not a dictatorship. It’s not about driving your team relentlessly.
WarningIt’s more about creating a culture where the team wants to achieve. Obviously, the Hedgehog Concept will help here as it keeps everyone focused.
Good to great companies exist within a culture that combines discipline and an entrepreneurial ethic.
For this to be possible, the company must have solid structures, then give its employees freedom to act and make decisions within those structures. It flows from disciplined people, to disciplined thought, then disciplined action.
Discipline on its own is pointless. There are many examples from history where people have marched with discipline into disaster.
The key to going from Good to Great is to: get the right people, engaging in critical thinking, then taking disciplined action aligned with the Hedgehog Concept.
Confront The Brutal Facts
We are living in an era where it’s very easy to be deceived by the world’s perception of you and your company. It’s easy to buy the hype. Nevertheless, facts are better than dreams.
Great companies aren’t shy to confront the facts, especially when the facts aren’t so pleasing.
They’re most careful when everyone is praising them. They’re also not quick to assign the blame, but will look to thoroughly and honestly analyze the issue before acting.
All good-to-great companies began the process of finding a path to greatness by confronting the brutal facts of their current reality.
When you start with an honest and diligent effort to determine the truth of your situation, the right decisions often become self-evident. It is impossible to make good decisions without infusing the entire process with an honest confrontation of the brutal facts.
Jim Collins found that charismatic leaders can often get in the way of a company’s greatness, because the staff start to refer only to “what the CEO will think” instead of data being the basis for decisions. The best companies want the truth to be heard, whoever speaks it. They have a culture of questioning and openness uncorrupted by obsequiousness to rank.
Companies need to create a climate where the truth is heard.
WarningThere is a difference between ‘having your say’ and ‘being heard of’. It is the ‘being heard of’ culture that enables companies to confront the brutal facts from their own people and then take appropriate right decisions.
Lead with questions, not answers. Constantly probe until you have a clear picture. Engage in dialog and debate, not coercion.
It is important to get involved in intense discussions because they have the capability to evolve into a successful conclusion rather than just being amicable to maintain relationships.
Good to Great organizations think differently about technological change when compared to mediocre ones. How a company reacts to technological change is a good indicator of its inner drive for greatness versus mediocrity.
Great companies respond with thoughtfulness and creativity, driven to turn unrealized potential into results.
WarningOn the other hand, mediocre companies react and jump around, motivated by fear of being left behind. Good to Great organizations avoid technology fads and bandwagons, yet they become pioneers in the application of carefully selected technologies.
A company can’t ignore new technologies and hope to be great, but technology by itself is never a primary root cause of either greatness or decline.
The idea that technological change is the principal cause in the decline of once-great companies (or the perpetual mediocrity of others) is not supported by the results from the study of Jim Collins.
Pioneering carefully selected technology is an accelerator of momentum. Good-to-great companies never use technology as an excuse for their problems nor do they depend on it to propel them forward. Rather, they are thoughtful in their approach and choice in technologies, using it as an accelerator of momentum.
Good to Great companies think about technology in a different way.
WarningTechnology is certainly important in the growth of future businesses but what is more important is not to blindly follow the new technologies but rather being diligent of knowing what technology can accelerate the existing momentum. The great companies do not start with what technology to use but start what technology fits best to our defined hedgehog concept.
The transformation from good to great does not happen with a pioneering technology but by realizing the right technology and becoming a pioneer in the application of that technology.
Good to great companies are motivated by inner compulsion of excellence for its own sake. They are not motivated by the fear of being left behind due to the technological changes because they know that after mindful thought and adherence to their core concepts will lead them to eventual success in technological transformation.
I unexpectedly found Good to Great to be an engaging read, despite being a business book, because of its storytelling style. With this storytelling style also came a level of transparency that you wouldn’t expect from this type of book.
Ultimately, Good to Great is a must-read as it provides unprecedented insight into the dimensions of leading an organization that consistently delivers, demonstrates excellence and can one day be considered great.
Not only do we hear the way in which many of the conclusions are made, we also learn of findings that Jim Collins’ research team unexpectedly discovered along the way, each of which were added to the end of relevant chapters.
If you are looking for factors within a business that can be proven beyond doubt to create success then you might as well stop reading business books!
If however, you are looking for interesting ideas that help develop your business, not as a magic formula but rather as concepts to play against and spark off, then Jim Collins’ Good to Great does just that.
There is no one killer innovation, no solitary lucky break, no wrenching revolution. Good to great comes by cumulative process-step by step, action by action, decision by decision.
WarningGreat companies did not emerge due to a dramatic or a revolutionary event but rather years or decades of adhering to their core tenets, building up in the process, gaining momentum slowly as turn-by-turn of the flywheel and ultimately reaching an inflection point of breakthrough.
Good to Great may not hold the secrets to success but it will certainly provide you with food for thought!
So, if you haven’t read it before hopefully you will consider it (or learn “enough” from my abbreviated book review). Or if you have read it, hopefully you will share some of your key learnings for myself and others to learn from as well.