Good to Greate by Jim Collins, summary & review
We’re going to run through a bestseller by Jim Collins “Good to Great: Why Some Companies Make the Leap… and Others Don’t”. The book is based on years of business research. The goal behind it was to expose and highlight key factors for success among companies.
The results of this research cast discredit on fundamental statements embedded in our minds regarding success factors for companies.
'Good to Greate by Jim Collins, summary & review'
Good to Greate by Jim Collins, summary & review
By the end of this reading sprint you’ll find out:
- why a charismatic business leader is more of a complication rather than a benefit;
- why you should seek managers and executives among your employees;
- what great companies have in common with hedgehogs;
- what is the true purpose of bureaucracy;
- when your employees do not need motivation.
What really lies in that gap between a great company and a mediocre one? What differentiates one from another? The vast majority of people stick to a nearly dogmatic image of a successful company: a charismatic leader, having the most advanced technologies at his disposal and a unique product, who makes right strategic choices along the way. Jim C. Collins and the research behind his book “Good to Great: Why Some Companies Make the Leap… and Others Don’t” shift this paradigm proving it wrong. Key factors behind long term success turn out to be less obvious.
It took five years for Collins to analyze activity of thousands of companies and finally come up with a selection of only 11 that could be considered as “great”. So how can a company meet the criteria of greatness? Jim Collins points out: shareholders dividends must be at least three times higher than the average on the market for fifteen years in a row, preceded by a long period of moderate results and even negative return.
Here’s a list of those great elven: Abbott, Circuit City, Fannie Mae, Gillette, Kimberly-Clark, Kroger, Nucor, Philip Morris, Pitney Bowes, Walgreens, Wells Fargo.
The results of the research by Jim Collins cast a long shadow of doubt on commonly accepted understanding of what it takes to reach outstanding business success.
Idea № 1. Companies don’t need super-leaders!
Corporate leaders are known to have rock-solid character, powerful attitude and tend to show up on glossy magazine covers. Imagine what a stunner it was for researchers to find out that leaders who have managed to go from good to great seem like almost from another planet in comparison with the archetype described above. Jim Collins calls it “Level 5 Leadership: leaders who are humble, but driven to do what’s best for the company”. Level 5 leaders represent an unusual combination of modesty and professional determination. It contradicts the widespread statement that companies need powerful “saviors” with recognized authority and high self-esteem for evolution, reorganisation and structural change.
The research also shows that there’s a negative correlation between hiring famous leaders from the outside and outstanding results of companies. It means that to achieve a success a company needs to pick and choose among its own employees.
Statistics show that 10 out of 11 companies to achieve great results have their employees take leading positions. On the other hand, companies to achieve much less hire top managers from the outside up to six times more often.
Interestingly, there was also no correlation between an earnest bonus for CEOs and a transition from good to great. The data revealed: the structure of the executive team and methods of rewards do not signify success.
Idea № 2. Strategy is not first of all
Strategy just by itself is barely what makes a difference on the road to greatness. Both, good and great companies had a strategy. No data shows that great companies spend more time or resources to plan their strategies. It was found out that a Level 5 leader, once in position, starts with firing useless people, then hires right people and makes sure they take right positions. Only when it’s done such leader starts planning and thinking on what path should the company take next.
Mergers and take-overs won’t help a company transition to the top of the food chain according to the research. Two mediocrities combined will never turn into perfection.
Idea № 3. The utmost importance of picking opportunities
It’s good to have a to-do list. However, what’s more important and valuable is to have a not-to-do list. Outstanding great companies do not focus on what to do. Instead they focus on what not to do and on what they need to stop doing immediately.
Idea № 4. Exceptional employees who don’t need motivation
People behind great successful companies understand that growth increase doesn’t come from the market, technologies, competition or exceptional products. The secret is to find and recruit the most useful and talented people, and keep a hold of them. Jim Collins underlines that no company can increase its sales faster than its ability to hire right people.
Put best people to work in areas that hold more promises for your company and not in those with more problems.
It is important to help those with the exceptional productivity and results by isolating them from the burden of mediocrity of their colleagues. The best companies do not pursue a goal of converting lazybones into productivity monsters. They simply let the best improve and prosper while lazy employees either become productive or just leave the company.
One more interesting conclusion researchers came to is that the best employees need no motivation. Those businesses to transition from good to great pay little attention to control, motivation and discipline when it came to the subject of employees.
Once you have hired the right team and established a strong company you won’t have any unresolved issues, while responsibility and motivation are going to be present by default. You also won’t have any problems with flexibility and adaptivity even in case of a major change within the company.
Idea № 5. The flywheel principle
The best leaders take non-revolutionary steps to achieve revolutionary changes. They also never start with setting colossal goals. You don’t switch to gear four after gear one. They just start rotating that flywheel and step by step they gain both understanding and speed. Those who start revolutionary transformational processes on a big scale right away won’t succeed. Regardless of what your end goal is, you can never make it from start to finish in one leap. Like a flywheel you have to gain momentum, work your way to that sweet spot of success. You work to raise your potential and experience and over time it will kick back, pay off and start moving you to the top of the food chain.
Idea № 6. Growth and decline: technology is not a cause but an accelerator
Do you think that technological progress is the main cause of great corporations decline? Jim Collins and his research proved this hypothesis wrong. No correlation. The root of evil was not bad tech, but bad management.
And similarly, good tech gives no guarantees for great achievements and prosperity.
Technologies can accelerate transitional period but cannot be a cause for transition itself. The great leader never perceives technologies as the main factor in the process of corporate evolution. You will be unable to truly put technology to use until you understand what tech your company needs.
Immense success doesn’t come by chance, quite the opposite — it is a conscious choice. Some great companies conducted businesses in bad sectors of economy and the majority of them didn’t represent prosperous branches.
The research by Jim Collins reveals: great companies didn’t have better or more information than others.
All companies had the same level of access to the same amount of information. The difference is how you use it. It’s all about the ability to turn input data into facts on the output and make use of it.
Idea № 7. “The hedgehog concept”
This concept comes from an ancient greek parable. A fox attacks a hedgehog again and again, failing each and every attempt. Everytime the hedgehog nonchalantly responds by rolling himself into a ball and sticking his spiky needles out.
The hedgehog follows the most simple and natural concept of behaviour and keeps ignoring the rest of options.
According to Jim Collins great companies act similarly.
The hedgehog concept can be visualized as three intersecting circles which answer these three questions:
- What can you be the best at?
- How does your economic model work?
- What is it that you specifically love to do?
Every company wants to become the best company. And that’s where it’s vital to come to understanding of what you can do best and what you cannot.
Great companies never say: “Ok, people, now let’s get very passionate about what we do!”. On the contrary, they propel quite a different idea: “We only need to do what we are truly passionate about”. Great companies seem bleak, unremarkable and even boring when observed from the outside. But once you take a peek on the inside, you’ll see hard-working people full of energy, determination and enthusiasm.
Idea № 8. The purpose of bureaucracy
During the research Jim Collins found no evidence that great companies need complicated bureaucratic procedures. In fact they had none of those. In mediocre companies bureaucracy aims to compensate for lack of discipline and competence. If you gather the right team to work you will never need to compensate for those important aspects.
When companies create bureaucratic instances and develop them to keep “wrong” people in check it only forces good employees to eventually leave. It leads to a major increase of unproductive and incompetent people on the team and begs for more compensatory measures of bureaucracy. It’s a downward spiral and you need to avoid it.
Idea № 9. How to avoid bureaucracy?
You don’t need hierarchy, when your employees are disciplined. You don’t need bureaucracy, when your mind is disciplined. Disciplined actions need no excessive control. The culture of discipline and entrepreneurial ethics combined give you a wonderful mix. It will help you achieve phenomenal results.
Idea № 10. Culture of discipline vs tyranny
Tyranny forces discipline and never succeeds in the long run. All companies listed by Jim Collins were defined by inner discipline. This is a culture of discipline — a combination of subordination and freedom plus responsibility given to employees.
+ Book Pros
Unorthodox take on what makes some companies really great and successful.
− Book Cons
Verbiage and repetition of ideas throughout the book.