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

Published: 2001-10-16
Hardcover : 400 pages
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The Challenge:
Built to Last, the defining management study of the nineties, showed how great companies triumph over time and how long-term sustained performance can be engineered into the DNA of an enterprise from the verybeginning.

But what about the company that is not born with great ...

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The Challenge:
Built to Last, the defining management study of the nineties, showed how great companies triumph over time and how long-term sustained performance can be engineered into the DNA of an enterprise from the verybeginning.

But what about the company that is not born with great DNA? How can good companies, mediocre companies, even bad companies achieve enduring greatness?

The Study:
For years, this question preyed on the mind of Jim Collins. Are there companies that defy gravity and convert long-term mediocrity or worse into long-term superiority? And if so, what are the universal distinguishing characteristics that cause a company to go from good to great?

The Standards:
Using tough benchmarks, Collins and his research team identified a set of elite companies that made the leap to great results and sustained those results for at least fifteen years. How great? After the leap, the good-to-great companies generated cumulative stock returns that beat the general stock market by an average of seven times in fifteen years, better than twice the results delivered by a composite index of the world's greatest companies, including Coca-Cola, Intel, General Electric, and Merck.

The Comparisons:
The research team contrasted the good-to-great companies with a carefully selected set of comparison companies that failed to make the leap from good to great. What was different? Why did one set of companies become truly great performers while the other set remained only good?

Over five years, the team analyzed the histories of all twenty-eight companies in the study. After sifting through mountains of data and thousands of pages of interviews, Collins and his crew discovered the key determinants of greatness -- why some companies make the leap and others don't.

The Findings:
The findings of the Good to Great study will surprise many readers and shed light on virtually every area of management strategy and practice. The findings include:

  • Level 5 Leaders: The research team was shocked to discover the type of leadership required to achieve greatness.
  • The Hedgehog Concept: (Simplicity within the Three Circles): To go from good to great requires transcending the curse of competence.
  • A Culture of Discipline: When you combine a culture of discipline with an ethic of entrepreneurship, you get the magical alchemy of great results. Technology Accelerators: Good-to-great companies think differently about the role of technology.
  • The Flywheel and the Doom Loop: Those who launch radical change programs and wrenching restructurings will almost certainly fail to make the leap.

“Some of the key concepts discerned in the study,” comments Jim Collins, "fly in the face of our modern business culture and will, quite frankly, upset some people.”

Perhaps, but who can afford to ignore these findings?

Editorial Review

Five years ago, Jim Collins asked the question, "Can a good company become a great company and if so, how?" In Good to Great Collins, the author of Built to Last, concludes that it is possible, but finds there are no silver bullets. Collins and his team of researchers began their quest by sorting through a list of 1,435 companies, looking for those that made substantial improvements in their performance over time. They finally settled on 11--including Fannie Mae, Gillette, Walgreens, and Wells Fargo--and discovered common traits that challenged many of the conventional notions of corporate success. Making the transition from good to great doesn't require a high-profile CEO, the latest technology, innovative change management, or even a fine-tuned business strategy. At the heart of those rare and truly great companies was a corporate culture that rigorously found and promoted disciplined people to think and act in a disciplined manner. Peppered with dozens of stories and examples from the great and not so great, the book offers a well-reasoned road map to excellence that any organization would do well to consider. Like Built to Last, Good to Great is one of those books that managers and CEOs will be reading and rereading for years to come. --Harry C. Edwards


Chapter One

Good is the Enemy of Great

That's what makes death so hard -- unsatisfied curiosity.
--Beryl Markham, West with the Night

Good is the enemy of great.

And that is one of the key reasons why we have so little that becomes great.

We don't have great schools, principally because we have good schools. We don't have great government, principally because we have good government. Few people attain great lives, in large part because it is just so easy to settle for a good life. The vast majority of companies never become great, precisely because the vast majority become quite good -- and that is their main problem. ... view entire excerpt...

Discussion Questions

From the Author:

Level 5 Leadership
• Which is harder to cultivate within yourself: humility or will?
• If Level 5 is about ambition first and foremost about the cause, the company, the work—not yourself—combined with the will to make good on that ambition, then how can each of us as individuals learn to take actions consistent with being Level 5?
• Think of a Level 5 you have known. How did he or she become Level 5? What can we learn from that person?
• Why do so few Level 5s get chosen for top spots in our organizations? What can be done to change this?

First Who
• How might you tell if someone is the right person on the bus?
• How might you tell if someone is simply in the wrong seat as distinct from being the wrong person on the bus entirely?
• Think of a case where you had doubts, but your organization hired anyway. What was the outcome? Why did the organization hire anyway, and what do you learn from the situation?
• If compensation is not the primary driver for the right people on the bus, then what are the primary elements in getting and keeping the right people on the bus? What role does compensation play?

Confront the Brutal Facts
• Which side of the Stockdale Paradox is harder for you: unwavering faith or confront the brutal facts? Why?
• Think of two environments that you have been in. The first being an environment that did not confront the brutal facts and where people (and the truth) were not heard. The second being an environment that did confront the brutal facts and where people had a tremendous opportunity to be heard. What accounts for the difference between the two environments? What does the contrast teach about how to construct an environment where the truth is heard?
• Do you have any red flag mechanisms in your life or organization? What ideas do you have for new ones?
• In leading a team, what is your questions to statements ratio?

Hedgehog Concept (the Three Circles)
• How long, on average, did it take the good-to-great companies to clarify their hedgehog concepts? What implications does this have about finding your own hedgehog concept?
• Are you engaged in work that fits your own three circles: what you are passionate about, what you are genetically encoded for, what you can get paid for? Do you need to change? Which circle is hardest to get right? Why?
• Which is more important for an organization: the goal to be the best at something, or realistic understanding of what you can (and cannot) be the best at?
• Can each sub-unit and each person have a hedgehog concept?
• How is the hedgehog concept different for a nonprofit organization?

Culture of Discipline
• If "rinsing your cottage cheese" is important, how do you tell *which* cottage cheese is worth rinsing? In other words, if diligent attention to detail is essential, how do we decide which details are important, and which are trivial?
• Think of two people: One being someone who only sees his or her job as a "job" and the other who understands that he or she has a responsibility. How does this difference play itself out in their work? What should we look for in locating such people?
• If class distinctions are deeply divisive, then why do organizations persist in creating an executive class that separates itself from those who do the real work? If you ran the whole show, what would you remove to reduce these class distinctions?
• Do you have a stop doing list? What do you put on your stop doing list?

Technology Accelerators
• If technology cannot make or break a company's level of greatness, but only serves as an accelerator of greatness or demise already in progress, then why did everyone fall in love with technology for technology's sake during the 1990s?
• Why is there so much hype and fear about new technologies, and what can you do to view new technologies with objective equanimity?

• Think of two organizations you've observed: one that followed the flywheel principle, and the other that fell into the Doom Loop. What caused the difference between the two? What does your contrast teach about why do so many organizations fall into the Doom Loop, rather than building momentum over the long term in the flywheel?
• How do you know when it is time to change the direction of the flywheel?
• If big change programs with lots of hoopla, tag lines, launch events, motivational meetings—and so forth—do not lead to greatness, then why are such programs so common? What should be done instead of these programs?
• How can the flywheel concept apply to your own life and career?

Preserve the Core / Stimulate Progress
• What are your core values?
• What is your core purpose, beyond just making money?
• What is your BHAG—big hairy audacious goal?
• What is your first five year base camp, on the way to achieving the BHAG?
• What practices and strategies does your organization have that are dysfunctional and should be open for change?

Notes From the Author to the Bookclub

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