BOOK REVIEW: “Good to Great” by Jim Collins (2001)

Key words

Strategy, Level 5 Leadership, Culture of discipline, The Hedgehog Concept, Corporate Culture, Packard’s Law, The Stockdale Paradox

Summary

This book is considered as one of the most important management books of the 1990s and has been in the best seller list ever since then. Collins says that the study required 10.5 people years of effort. 6,000 articles were read and coded and they generated more than 2,000 pages of interview transcripts. From this study they defined why 11 companies had made the transition from being good to truly great. Of course, time is always cruel with such studies and the business scholars today may have a wry smile when they see Fannie Mae & Circuit City. However, the others have done remarkably well since the study was published.

All Companies have a culture; some companies have a culture of discipline

The study introduces notions such a Level 5 Leaders (Will+Humility), The Hedgehog Concept, (Simplicity within the Three Circles) and The Flywheel and the Doom Loop. According to Collins great companies are NOT about highly charismatic bosses or glitzy media launches. Rather they note that the best companies have quietly and diligently gone about their work, discovering their ‘greatness’ almost by accident.

Interesting quotes from the book:

Level 5 Leadership: We were surprised, shocked really, to discover the type of leadership required for turning a good company into a great one. Self-effacing, quiet, reserved, even shy –these leaders are a paradoxical blend of personal humility and professional will.

Good is the enemy of great.

Start a ‘stop doing’ list

Technology can accelerate a transformation, but technology cannot cause a transformation.

All Companies have a culture; some companies have a culture of discipline. When you have disciplined people, you don’t need hierarchy.

Source:Dividend.com

Darwin Smith stands as a classic example of what we came to call a Level 5 leader- an individual who blends extreme personal humility with intense professional will.

One of the most damaging trends in recent history is the tendency (especially by boards of directors) to select dazzling, celebrating leaders and to de-select potential Level 5 leaders.

Packard’s LawNo company can grow revenues consistently faster than its ability to get enough of the right people to implement that growth and still become a great company.

No company can grow revenues consistently faster than its ability to get enough of the right people to implement that growth and still become a great company

The moment you feel you need to tightly manage someone, you’ve made a hiring mistake. The best people don’t need to be managed. Guided, taught, led –yes. But not tightly managed.

The Stockdale Paradox. “You must never confuse faith that you will prevail in the end – which you can never afford to lose – with the discipline to confront the most brutal facts of your current reality, whatever they might be.”

It takes discipline to say “no thank you” to big opportunities. The fact that something is a “once-in-a-lifetime opportunity” is irrelevant if it doesn’t fit with the three circles. (

When used right, technology becomes an accelerator of momentum, not a creator of it. You cannot make good use of technology until you know which technologies are relevant.

If you ever find yourself thinking that technology alone holds the key to success, then think again of Vietnam.

The good-to-great companies had no name for their transformations. There was no launch event, no tag line, no programmatic feel whatsoever. Some executives said that they weren’t even aware that a major transformation was under way, until they were well into it.

A company need not have passion for its customers (Sony didn’t), or respect for the individual (Disney didn’t), or quality (Wal-Mart didn’t)

Sam Walton himself wrote:

‘Somehow over the years people have gotten the impression that Wal Mart was…just this great idea that turned into an overnight success. But it was an outgrowth of everything we’d been doing since (1945)…And like most overnight successes, it was about twenty years in the making.’

A company need not have passion for its customers (Sony didn’t), or respect for the individual (Disney didn’t), or quality (Wal-Mart didn’t), or social responsibility (Ford didn’t) in order to become enduring and great.

Other information

Good-to-Great Cases:

Company Results from Transition Point to 15 years beyond Transition Point (Ratio of cumulative stock returns relative to the general stock market) T Year to T year +15
Abbott 3.98   times the market 1974 – 1989
Circuit City 18.50 times the market 1982 – 1997
Fannie Mae 7.56   times the market 1984 – 1999
Gillette 7.39   times the market 1980 – 1995
Kimberly-Clark 3.42   times the market 1972 – 1987
Kroger 4.17   times the market 1973 – 1988
Nucor 5.16   times the market 1975 – 1990
Philip Morris 7.06   times the market 1964 – 1979
Pitney Bowes 7.16   times the market 1973 – 1988
Walgreens 7.34   times the market 1975 – 1990
Wels Fargo 3.99   times the market 1983 – 1998

Business School  Grenoble EM  International Affairs   Higher Education   ESC Grenoble   Strategy  Blog  Global Ed   Graduate Business School    Mark Thomas

See also:    

Other Book Reviews

Good to great to gone

The Economist: “In his new book Mr Collins examines 11 of the 60 “great companies” studied in his two earlier books that have since deteriorated to “mediocrity or worse”. Mr Collins says that when he charted the factors that led these firms to greatness, he had never claimed that they were certain to remain great.”

‘Good to Great’ book review

Matt Stocker: “Overall, I think that Good to Great provides a very useful model and framework for developing and creating a great business. Concepts such as the flywheel go some way to challenging the ‘magic bullet’ fascination within the business world.”

Why “Good to Great” Isn’t Very Good

Business Pundit: “Before I go into detail, let me say that I think Jim Collins is a bright guy and I admire what he attempted to do with the book. His major mistake is a very common one – one that rarely gets noticed. I will also say that there is still value in reading the book. There are some good ideas inside (like the “stop doing” list), but I’m sick and tired of people taking it as gospel.”

     

Related Blog Articles

Looking for great results?

Books in Business: “When companies obtain breakthrough results, the outside world might perceive this as a sudden event. Great results however do not depend on one particular genius strategic shift or one brilliant marketing idea. Great companies are disciplined in three ways.”

Realized Vision 

GREAT TO GOOD

“This is not a post on how great organizations  back slide into mere goodness (although that would make a good future topic).  Rather, it is to make the point that  the best business books are often written backwards.  “Good to Great” by Jim Collins is as clear an example as any.  One of the things that make it such a compelling read is that it is based on solid, detailed research.  Collins and his team first sought to define the companies that did indeed go from good to great (at least according to Collins’ relative stock performance criteria) and then trace back to find the common factors on the path they blazed on the journey.”

Greater Leadership

   

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The story of the ups and downs of Starbucks and why Howard Schultz decided to return as CEO. Steve Jobs’ favourite book. Any more questions? Wonderful essay that lays out the benefits of international trade.

 

A fun book that show why humans don’t always behave in a rational manner. An excellent outline of some of the fundamental issues in strategic management. The book is short and generally to the point. Learn about The IKEA Effect, The Baby Jessica Effect and why large bonuses make CEOs less effective.

5 Comments

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5 responses to “BOOK REVIEW: “Good to Great” by Jim Collins (2001)

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