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 very beginning.
But what about companies that are not born with great DNA? How can good companies, mediocre companies, even bad companies achieve enduring greatness? Are there those that convert long-term mediocrity or worse into long-term superiority? If so, what are the distinguishing characteristics that cause a company to go from good to great?
Over five years, Jim Collins and his research team have analyzed the histories of 28 companies, discovering why some companies make the leap and others don't. The findings include: Level 5 Leadership: A surprising style, required for greatness. The Hedgehog Concept: Finding your three circles, to transcend the curse of competence. A Culture of Discipline: The alchemy of great results. Technology Accelerators: How good-to-great companies think differently about technology. The Flywheel and the Doom Loop: Why those who do frequent restructuring fail to make the leap.
Publisher:HarperAudio; Unabridged edition (June 14, 2005)
- Language: English
- ISBN-10: 0060794410
- ISBN-13: 978-0060794415
- Product Dimensions: 5.7 x 5.3 x 1.6 inches
- Shipping Weight: 10.4 ounces
Rare Pathways to Exceptionally Increased Prosperity
This study was stimulated by Mr. Bill Meehan’s (head of McKinsey in San Francisco) observation that Built to Last wasn’t very helpful to companies, because the firms studied had always been great. Most companies have been good, and never great. What should these firms do?
Jim Collins and his team have done an enormous amount of interesting work to determine whether a good company can be come a great company, and how. The answer to the former question is “yes,” assuming that the 11 of 1435 Fortune 500 companies did not make it there by accident. The answer to the latter is less clear. The study group identified a number of characteristics that their 11 companies had in common, which were much less frequently present in comparison companies. However, the study inexplicably fails to look at these same characteristics to see how often they succeed in the general population of companies. If these characteristics work 100 percent of the time, you really have something. If they work 5 percent of the time, then not too much is proven.
How were the 11 study companies selected? The criteria take pages to explain in an appendix. Let me simplify by saying that their stock price growth had to be in a range from somewhat lower than to not much higher than the market averages for 15 years. Then, in the next 15 years the stocks had to soar versus the market averages and comparison companies while remaining independent. That’s hard to do. The selected companies are Abbott Laboratories, Circuit City, Fannie Mae, Gillette, Kimberly-Clark, Kroger, Nucor, Philip Morris, Pitney Bowes, Walgreen, and Wells Fargo.
As to the “how,” attention was focused on what happened before and during the transition from average performance to high performance. Interviews, quantitative analyses, and business press reports were studied. Clearly, there’s a tendency to see things a little bit with 20-20 hindsight in such a situation. Since this study started in 1996, it was dealing with facts that were already quite old while they were being examined. Bias is likely.
The key conclusions as to “how” included the following:
(1) a series of CEOs (promoted from within) who combined “personal humility and professional will” focused on making a great company;
(2) an initial focus on eliminating weak people, adding top performing ones, and establishing a culture of top talent putting out extraordinary effort;
(3) then shifting attention to staring at and thinking unceasingly about the hardest facts about the company’s situation;
(4) using facts to develop a simple concept that is iteratively reconsidered to focus action on improving performance;
(5) establishing and maintaining a corporate culture of discipline built around commitments, with freedom about how to meet those promises;
(6) using technology to accelerate progress when it fits the company’s concept of what it wants to become; and
(7) the company builds momentum from consistent efforts behind its concept that are reinforced by success.
Then, a connection is made to how these 7 conditions can provide the foundation for establishing a Built to Last type of company that can outperform the competition over many decades.
One potential criticism of the study is that its conclusions could be dated. Former Stanford professor Collins argues that he has uncovered basic facts about human organizations that will be unchanging.
I compared the conclusions in this book with my own studies of top performing CEOs and companies in the 1988-2001 time period. I noticed two major differences that suggest a shift in “best practice” standards. First, those who outperform now have developed processes that create major improvements in their operating business models every 2-5 years. Second, senior management development is focused around improving a culture for defining and implementing such improvements. I suspect that item (4) above was an embryonic predecessor to these new dimensions, which occur much more frequently now than in this study.
Next, I compared the list of 7 items to what I had observed in companies. The biggest point that hit me is how few CEOs have been interested in creating long-term outperformance that lasts past their own tenure in an industry. You also have to be a CEO for a long time with that focus before you have a chance to make a lasting impact. Founders have a special advantage here. Perpetuating outperformance may help fill a psychological need for immortality that fits with founders especially well.
Finally, I thought about what I knew about the companies studied from personal contacts during the study years. My sense is that their stories are far more complex than is captured here. So, I think the data have probably been “scrunched” to fit together in some cases. In particular, I wonder whether these companies will greatly outperform in the next 15 years. In many cases, they expanded to meet an unfilled need that is now largely fulfilled. Can they develop a new concept for (4) that will carry them forward as successfully in the future? My guess is that most will not. If that turns out to be the case, we must conclude that the items on this list may be necessary . . . but may not be sufficient to go permanently from good to great. Time will tell.
Before closing, let me observe that if the research team had also looked at the rate by which their principles succeeded among companies that employed them, this would have been one of the very finest research studies on best practices that I have seen. A book like this will provoke much discussion and thought for years to come. Perhaps that information can be included in a future edition or printing. Then, we will have something magnificent to consider!
Do you want to be the best permanently? Why? Or, why not? Mr. Collins points out that it probably takes no more effort, but a lot more discipline and focus.
A book for the ages! Excellent for managers and start-ups
Jim Collins, co-author of Built To Last, has done it again! This time he spent 5 years trying to find out what differentiates good companies from great companies. This study can be applied to entrepreneurial ventures and to current corporate America. After reading this book you may see your company from a much different perspective than in the past and it may have you thinking about the effectiveness of senior managers within your company. I believe it is a book that business executives will read and keep handy for reference.
This book is a study of companies that exceed their industry, the overall stock market and produce PHENOMENAL returns over a 15-year period (15 of them are very “normal” years and the next 15 years are full of explosive growth). Some key points you will take away from this book include:
1) Growth in most companies came after years and years of trying to adapt / mold a concept into something the company truly believed in. Once this happened the growth engine got going.
2) Great managers worry more about getting the right people on board and the wrong people off board BEFORE they establish a corporate stategy.
3) Most great CEOs came from within their own ranks and weren’t recruited from the outside.
4) Executive compensation didn’t appear to be a key driver of corporate performance
5) The respective great companies exceeded the overall stock market in creating shareholder value by at least 3x during their 15 year run measured (some for many more years). While some may say this is not much think about the steel industry and how many are filing for bankruptcy. Nucor Steel still managed to beat the S&P by more than 3x.
6) The great companies in this book blew away their comparable peer group. Wells Fargo vs. Bank of America, Kroger vs. other grocery chains, Walgreens vs. Eckerd, etc.
7) Collins describes a Level 5 leader. After reading this section I was amazed at how many CEOs I recognized as not being Level 5 leaders. This may, in the near future, shake up executive compensation plans, CEO searches and potentially affect corporate governance.
8) Technology accelerated a transformation but was regarded as a tool. It didn’t define the company.
9) M&A activity played virtually no role in going from good to great.
That is all I will write about the book. I could write on and on about how good this book is. Read it. It will change the way you think about business. Other very good books on the principles of business and entrepreneurship are Leading at the Speed of Growth by Catlin and Mathews and The 22 Immutable Laws of Marketing by Jack Trout and Al Ries.
Good to Great + consistent Optimal Thinking = Best
This book is a fascinating read! A study taken over five years began with twenty-eight corporations and revealed eleven that had made the leap from Good to Great. From this study, I gained an instant understanding of the role of humility in leadership. The primary ambition of great leaders is focused on the success of their company, not on themselves.
Collins advocates the Hedgehog Concept – a combination of discovering what you can be best in the world at (Optimal Thinking), what you are passionate about, and what drives your economic engine. Collins states that sustained disciplined action is primarily achieved by “fanatical adherence to the Hedgehog Concept and the willingness to shun opportunities that fall outside the three circles.” So my question is: How do you identify the best? I recommend Optimal Thinking: How To Be Your Best Self by Dr. Rosalene Glickman as an adjunct to this powerful book to provide the mental resource to identify the best, optimize emotional and financial intelligence and create a corporate culture of optimization. From Good to Greatest to Best!”
Unwavering resolve to do what must be done
Unwavering resolve to do what must be done! Ah — a characteristic of the Level 5 (Good to Great) leader, described in this well researched book that shows the reader what it takes to take a good company to greatness. Personal humility fortified with professional will gives Good to Great leaders the edge on their ego-driven counterparts. Collins makes many marvellous points, the first being that the RIGHT people are your most important asset. By rising above unrealistic optimism, confronting brutal facts and asking questions that lead to the greatest insights (optimal thinking), the leader moves his company to greatness. Good to Great leaders focus on the few things that have the greatest impact (optimal thinking). Collins won me when he said “One of the primary ways to de-motivate people is to ignore the brutal facts of reality.” Good to Great leaders create a culture where the truth is heard, and where negative thinking is not degraded or scorned (optimal thinking). This book is a must read!
Good to Great and Optimization
This book is a refreshing change from the leadership books which expound various flashy leadership skills as the determinant for corporate greatness. Clearly disciplined execution and focusing on the key profitability ratio produce a shift from mediocrity to greatness. This book is a definite read for the business leader. To move beyond greatness and achieve optimization, read Optimal Thinking: How To Be Your Best Self, then infuse Optimal Thinking into every facet of your corporation.
Well written and entertaining too
Good to Great is a comphrehensive research project, well written
and entertaining to read, Good to Great is a worthy successor to, and in the tradition of, Built to Last.
Level 5 leadership – from Good to Great
It has always been my contention that makes a company great is not their products, not even their salespeople…but leadership at level 5!People won’t buy products no matter how great they are without leaders moving them.Salespeople will not sell, no matter how great their products or compensation plan is…without leadership.Leadership…Level 5 leadership take you from good to great.
Good to great is a fantastic book!
If you own a business or are planning on owning one, read this excellent book by Jim Collins and find out what makes great companies great.
Hint: It’s not hype, a fancy widget or a charismatic guru.
What is it? Read the book and find out. It’s worth the read and you’ll thank me later.
Good to great is a great book
I really do not understand the sub five star let alone the 1 star reviews. This is a great book. A lot of time and research was done to find what separates the good from the great companies. I can only assume that sub 5 star reviewers own businesses that are doing doing that great or are not in business at all…anymore.
Great book for those who want to learn how to take your business to that next level. The level of greatness.