Book Review: Good to Great

Posted on February 28, 2010. Filed under: Professional | Tags: , , |

Good to Great book coverGood to Great, by Jim Collins has been on the book shelves for a long time. It was originally published in 2001 and updated in 2005. The title was somewhat off-putting for me. I figured there is so much literature these days about “greatness” and so much lip service paid to “excellence” — much of it is meaningless. I expected Good to Great to be more of the same. But, it is not. After reading Collin’s more recent book, How the Mighty Fall, I was impressed with him as a writer and thought I’d give his other books a second glance.

What makes this book different from other popular business books is data. Collins assembled an enormous group of helpers to dig into data about great companies over a multi-year project. His group looked at 30 years of data for hundreds of US-based companies to find 11 that have gone from good to great. The bar was set very high for inclusion, companies have:

  1. operated at a level better than the market for 15 years (good performance);
  2. experienced some kind of breakthrough to become great (better return than 3x the market); and
  3. sustained that level of performance for at least 15 years.

Other companies that had come close were retained for comparison purposes only. The outcome is a very thoughtful and pragmatically meaningful body of work. The essence of the book falls back to discipline — with equal focus on getting the right people on the bus (people), handling business like a hedgehog (thinking) and making a consistent and sustained effort, regardless of who is in charge, to turn the money-making flywheel of the business (action).

Disciplined People

In good to great companies, “who always comes before what.” Collins introduces the concept of Level 5 Leadership to describe the type of leaders his study found leading the way toward greatness. He describes his personal reluctance for including the topic of leadership in the study — and it sounds much like my own reluctance to read his book! But the data was clear, those leaders who have charisma and strong will and lead through the sheer force of their personality (think Lee Iacocca) are level 4 leaders. The difference between the fourth and fifth levels of leadership, Collins finds, is the presence of humility in place of ego. Level 5 leaders routinely give credit to others, keep blame to themselves and foster growth and continuity in the people they choose to lead the company. As a result, the success of great companies extends beyond the leaders that get them there. The culture of discipline inspired by Level 5 leaders lives on after the leaders are gone.

Disciplined Thinking

The hedgehog, as Collins explains, does pretty much one thing only; but it does it very, very well. A hedgehog is not very glamorous, when danger comes along it balls up, sticks out its sharp spines and stays put until the danger goes away. As a result, the hedgehog may not be very elegant, but it always survives. Hedgehog thinking happens at the confluence of three concepts: an economically viable idea, the ability to be the best in the world at something and a passionate drive for the work. Where all three of these things exist, the organization is using hedgehog or disciplined thinking

Collins explores the role of technology in success. He finds technology on its own neither creates success nor failure. Rather, technology acts as an accelerator. He found great companies use technology, but only to augment their hedgehog approach. Conversely, he found companies who failed to adopt technology were doomed to fail despite their technophobic ways. Disciplined thinking with respect to technology requires a crawl, then walk, then run attitude. Apply technology as it is useful and then master it before increasing its presence in your business.

Disciplined Action

When it comes to action, there is power in focus. The core concept of a business is its flywheel. The flywheel is the idea behind the organization that makes its business concept work. Just like the weight of a mechanical flywheel generates momentum as it spins, the spinning of the business’ flywheel has a multiplying effect on success. Collins found strong evidence that good to great companies figure out their core concept and then do everything to keep it turning at a steadily increasing pace. It may take years, but with consistent and dedicated effort at turning the flywheel, eventually enough momentum gathers that a breakthrough takes place.

This build up / break through concept focuses on preserving the core (organization values) and stimulating progress (business model.) The research found something I have LONG believed… when everyone focuses on turning the flywheel there is NO NEED for alignment exercises, motivational speeches and change management because everyone already knows what to do. Convincingly, Collins points to abundant data that show large pay packages — rather than causing improved performance — make no difference and may even be harmful for success of a company. The rock star CEO is a myth and the grossly inflated pay packages that go along with this type of elitism is simply a waste of organizational resources.

Summary

Good to Great gets two thumbs up from me. And, now that I’ve read two of his books, I’m anxious to read Built to Last. Although this was the first book in the series, he recommends reading Good to Great first. Supposedly, there is another book in the works too. I look forward to more of Collins’ data-driven, insightful approach to good business.

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