Good to Great

The team tried to identify companies that had jumped from good to great and had managed to continue their great growth for at least 15 years. They found 11 of these (Abbott, Circuit City, Fannie Mae, Gilette, Kimberly-Clark, Kroger, Nucor, Philip Morris, Pitney Bowes, Walgreens, Wells Fargo). These good-to-great companies (GTG's) outperformed the market by a factor 6.9 in the 15 year period of the analysis! (General Electric outperformed the market 'only' by a factor 2.8 between 1985 and 2000).

The study focused on the question: what did the GTG's have in common that distinguished them from comparable companies in comparable circumstances? The GTG's were compared with two sets of other companies: 1) the direct-comparisons: companies within the same sector and in comparable circumstances, 2) the unsustained comparisons: companies that had had a breakthrough but that had not been able to continue their success. Collins intended to, from the ground up, build a theory which could explain the successful transformation of the GTG's.

As it turned out, all of the GTG's had a period of build up, preparation (often lasting many years) before the breakthrough moment. Three phases could be identified:

PHASE 1: DISCIPLINED PEOPLE
1. LEVEL 5 LEADERSHIP: contrary to the expectation, leaders of the GTG's turned out to be quiet, self effacing and even shy. At the same time, however, they were very determined. Mostly, they were leaders that came from within the company and that have remained unknown to the greater public.

2. FIRST WHO...THEN WHAT: also contrary to what you might expect was that GTG's first got the right people on the bus and the wrong people off and only then focused on strategic direction and vision.

PHASE 2: DISCIPLINED THOUGHT
3. CONFRONT THE BRUTAL FACTS (..BUT NEVER LOSE HOPE). Characteristic was a combination of realism and hope.
4. THE HEDGEHOG CONCEPT (SIMPLICITY IN THREE CIRCLES): just like a hedgehog, the GTG's seemed to have a very simple but effective success formula: all of the activities of the company had to lie within the intersection of the following three circles: 1) what can we become best in the world at? 2) what are we passionate about? 3) what can we make money with?

PHASE 3: DISCIPLINED ACTION
5. CULTURE OF DISCIPLINE: the GTG's turned out to have a culture of discipline that made hierarchy and bureaucracy largely superfluous.
6. TECHNOLOGY ACCELERATORS: none of the GTG's had technology as a cause of the success, but technology did play the role of accelerator of the success.

Collins rather convincingly demonstrates the validity of this model. All of the GTG's showed these practices throughout the 15 year period, while none of the direct comparisons did. The unsustained comparisons showed some of these practises often right until the moment of their decline.

Looking at the share price development of the GTG's, you might expect that there has been a clear marking point of the transformation because their share price stays rather flat at first (for many years) and then just suddenly takes off and keeps on going up. An important finding of the team was, however, that there were no special change programs, and no breakthrough decisions or products. On the contrary, the process evolved very fluently. To eplain, Collins uses the metaphor of the flying wheel. When you start to turn this wheel it goes heavily and moves slowly. But by continuously keeping on turning the wheel, it starts to build momentum and then, just suddenly, a point is reached at which the wheel turns at great speed without you having to turn it any harder than at first. Is this the practice of many companies? Not at all! The reality of many companies is not consistently following a chosen path but rather swinging from one hype to another.

I think this research evokes one principal issue. That the concept 'great' is operationalized in a financial way is easily understood from a practical standpoint. This criterion is clear and rather easily obtained and makes it easy to compare the companies scientifically. But is 'great' the best word to describe spectacular financial success? Does their financial success necessarily make GTG's 'great'? Wouldn't that be like saying that Bill Gates en Silvio Berlusconi are great people while implying Martin Luther King and Mother Theresa are not?

But, having said that, demonstrating how companies achieve and continue spectacular financial success, in itself, is extremely interesting and valuable. This is a terrific book that, I think, has the quality to equal or perhaps even surpass the success of Built to Last. Unlike most management books (which contain creative but highly speculative ideas), the message of this book is based on well-designed research and mindful interpretation of results that is explained and justified terrifically. Despite this thoroughness, the book remains a pleasant read. A pity that the book does not offer some more practical suggestions to help readers get started. I think that would have made it even better.


Interesting research and a 'How to' guide   January 5, 2003
C. M. Perkins (Stirling, Scotland.)
31 out of 33 found this review helpful

I know I'm enjoying a business book when it provokes a reaction in me along the lines of "I've always sort of known that - and now I've got the evidence to prove it." This book did that for me all the way through.

The evidence is Collins' research, conducted over five years and focusing on eleven companies that met his team's criteria for 'Good to Great' ie: they went from average performance to outperforming the market and sustaining it for 15 years.

The research, and the book, shows a model that these eleven companies adhered to (although they were unaware of it at the time) that should, in theory, be possible to replicate in any other organisation to achieve greatness.

That is the appeal: the possibility that following this model, validated by the research, WILL lead to great performance. It's an extremely attractive prospect and one that my organisation has already taken steps to achieve.

Very rarely does a business book spark such an immediate and enthusiastic reaction throughout the team I am part of, but this book did. So far, much of Collins' language has become part of our vocabulary:

"First Who...Then What": the need to 'get the right people on the bus' before deciding strategy.

"Confront the Brutal Facts": get really clear on the current state of the organisation, being authentic with each other and 'telling it like it is'.

"The Flywheel": recognising that constant, small actions will build momentum for the transformation from Good to Great.

It all sounds achievable, the challenge is maintaining another of Collins' key requirements: Disciplined Action. Can we keep it up? For example, Collins' research showed that it took these eleven organisations an average of four years to *really* discover the uniqueness in their product/service offering and capitalise on it.

That said, they didn't know at the time they were transforming themselves from Good to Great, and didn't have Collins' roadmap to help them on their way - so we're hoping we can discover our uniqueness a little quicker.

This is a fascinating piece of research and a practical tool for improving organisational performance.

If you're concerned about reading this book and discovering what you need to do in your organisation, but then feel unable to implement it, I would recommend 'The Knowing-Doing Gap' by Jeffrey Pfeffer and Robert Sutton. It's got some great ideas for overcoming this problem.

'Good to Great' acted as inspiration for us in discovering how we can achieve breakthrough levels of performance. I hope it does for you too.


A Must For All Managers   October 26, 2004
Mr. Neil Wilson
8 out of 8 found this review helpful

I read an article by Sir Clive Woodward and he recommended this book, along with others, as one managers should read. I'm usually sceptical on recommendations, especially those with an American slant. However, its spot on. If only all managers would take a few leaf's out of this book and apply it in their daily routine/workplace, it would make working life much better.

The book is well structured, easy on the eye, provides excellent examples. Simple and effective concepts that can be easily applied to any size of company.

Any Manager/Executive should make this a number one priority in their reading list to help them improve themselves, their people and their company to be great!


Straight to the fundamentals   October 25, 2001
21 out of 23 found this review helpful

Too many books (and managers) focus on details and techniques, while Jim Collins has instead identified through research the fundamental basics of great companies and why they are different to those who are simply good. Not only does this book appear well researched, but it also fits with the personal experience I have had in successful and less successful companies. A good manager selects and then works with a very capable team to build great results, rather than the often egocentric self-serving behaviour of many managers. The book presents the steps common to all the good companies who become great, it details how those steps were carried out in the different companies, however it does so in a way that is fascinating and not too long winded. I polled friends who have worked at some of these companies and they did indeed agree with the books finding.

This book has an interesting relationship to Jim's previous book "Built to Last" in that it shows how to turn a good company into a great one, while in many respects "Built to Last" is a sequel useful for maintaining that greatness.

Jim explains how the knowledge contained in the book can be applied to other purposes than simply building great companies, why not apply this guidance to your local sports team or other personal interests?

I thoroughly recommend this book and would certainly hope that it is read by all managers who are senior to me!