Over the President’s Day long weekend, I got down to revisiting an old classic business read, “Good to Great’ by Jim Collins. For those not familiar, this book asks the question – can a Good company become Great and if so How?
To answer this question, the author Jim Collins and his research team first searched for companies that fit the profile i.e. companies that transitioned from Good to Great? In their search, they examined more than 1,000 companies over a 40 year period and identified 11 companies that fit the profile. Each of these companies had cumulative returns below or at the general stock market level over a fifteen year period (in their ”Good’ phase) and then after a transition had cumulative stock returns of at least three times the market over the next fifteen years (in their ‘Great’ phase). Next, the research team did extensive research on each of these 11 companies to decipher common strategies, culture, leadership, technology and other factors contributing to the companies success. Taking 5 years of research, the book outlines the commonalities between these 11 companies and what it takes to transition from Good to Great?
The key timeless principles on what makes companies Great are elegantly shown in this visual below (courtesy – www.expertprogrammanagement.com)
As shown above companies move from left to right in the process of becoming from Good to Great and the process has 3 blocks and within each two parts ; the process starts with (1) Disciplined People – having the right leadership and secondly, getting the right people on board (2) Disciplined Thought – being honest about the facts and focusing on what you can be the Best At and lastly having (3) Disciplined Action – executing what is important to achieve and ignoring what isn’t.
Disciplined People: having the right leadership and selecting the Right People on board
The first block in the transition is Disciplined People which starts with the leader/CEO. The research identified that each one of the 11 companies at some point of their transition from Good to Great had a certain type of leadership which Jim Collins has labelled as a Level 5 leadership. Level 5 refers to a five level hierarchy of executive capabilities as shown below. The key defining feature of the level 5 leaders are a unique blend of personal humility (absence of a larger than life personality) and a disciplined, steel will. Level 5 leaders are fanatically driven to achieve results but combine that determination with a understated personality, personality of modesty and humility; ability to pass the credit to the team and take blame themselves.
The next factor under ‘Disciplined People’ is getting the ‘Right People’ or ‘Right Management Team’; besides the leader the caliber and mindset of all other people is equally important. It is important to get the right people in before deciding the strategy of the company and that is why the factor is labelled ‘First Who…..then What’. This will seem counter-intuitive as the trend is to hire for past successes and skills needed to execute a given strategy but the research in the book shows that getting right people on the bus first is more important than choosing the direction of travel for the bus; if the direction/strategy needs to be changed later it is much easier if you have the right people on board. Second, having the right strategy is of no use if you do not have the right management team. Three practical nuggets of advice are offered to get the right people on board are (i) when in doubt, don’t hire (ii) act quickly when you need to make a change in the team (iii) put best people on biggest opportunities and not biggest problems.
Disciplined Thought – being honest about the facts and focussing on what they can be Best At
The second block is having Disciplined Thought which allows companies to focus on what they can be best at and being realistic about it. In their journey to achieving greatness, the researched companies continuously adjusted their strategy based on reality which was enabled by having an atmosphere where feedback was given without fear and repercussions. Giving precedence to reality and not to the personality of leaders is a key differentiating factor for this block and in order to do this, the right leaders (see above) create a culture where truth is heard and confronted by;
- asking questions and not providing answers
- engaging in debate and dialogue over the strategy
- building red flag mechanisms
- conducting autopsies when failures occur
The second part of Disciplined Thought is being focused on what matters and eliminating what does not; a critical factor in being successful for a company as well as individually. The book illustrates by drawing analogy between the Hedgehog and the Fox and urges companies to adopt a Hedgehog like focus. The Hedgehog focus lies at the intersection of the three questions that companies need to ask;
(1) What can you be best in the world at? – this is the most important of the 3 questions companies need to ask and be brutally honest about it- deciding that what you can do exclusively better than any other company is the path to Greatness. Also, a key distinction is not an asking what ‘you want to be Best at’ but being realistic about ‘what you can be Best at’ (2) What do you feel most passionate about? (3) What drives your economic engine?
Disciplined Action – instilling a culture of discipline and using technology to accelerate
The final block of the transition is having Disciplined Action and this requires instilling a culture of discipline across all levels of the organization by;
- Hiring disciplined people (first block)
- Building a culture of freedom and responsibility but within a defined framework
- Having a culture of discipline but not mindless tyranny and bureaucracy
- Focusing on activities at intersection of the 3 circles of Hedgehog concept and anything that does not fit within that intersection has to be stopped.
Given the obsession with the technology these days, it is interesting to note that technology was used as an accelerator by all the companies who transitioned to Great and was not a creator of the strategy; in essence the researched companies avoided technology fads. To quote from the book ‘ Technology without a clear Hedgehog concept and without discipline cannot make a company great’.
Summary: The book is a great read and has a clear, logical outline and consistent message of Discipline. The key point across all 3 blocks in the transition from Good to Great is Discipline. To go from a good organization to a great one you need disciplined people, disciplined thought, and disciplined action.