Good to Great
By Jim Collins
In writing this book, Jim Collins’ intention was to answer the question of why some companies make the leap from being good to being great – and others don’t. His research began with the simple assertion that there are very few companies, schools, or individuals in society that become great, and this is because there are so many that are good. Becoming good is fairly easy, and staying that way is easier still, but what does it take to become great? After a conversation with Bill Meehan, managing director of McKinsey & Company’s San Francisco office, it became clear to Jim that the vast majority of companies would “wake up partway through life and realise that they’re good, but not great,” leading him to question: “Can a good company become a great company and, if so, how? Or is the disease of ‘just being good’ incurable?” These questions inspired him to gather together a team of researchers to find the answers, and his findings are set out for all who aspire to greatness to learn from.
My Top 3 Takes from the Summary
Leaders of great companies always put the company first.
Great companies begin with the “who” rather than the “what.”
Greatness is a cumulative process.
What Makes a Company Great?
The author and his research group spent five years identifying companies that had gone from having good results to having great results. Eleven companies were singled out as those that had managed to sustain great results for at least fifteen years, and they were compared to a group of carefully chosen companies that had failed to sustain great results or to make the leap from good to great at all. The comparison between the two groups gave the team the information they needed to filter out the essential factors distinguishing the great companies from the good ones.
Those factors include:
Level 5 leadership
The right people on the bus
A Hedgehog Concept
And a culture of discipline
Level 5 Leadership
The research team describe the leaders found at the helm of great companies as level 5 leaders, commenting that they appear to be “cut from the same cloth.” These leaders are ambitious, but their egos are directed away from themselves and aimed at the goal of building the company first and foremost. The author uses the terms “modest and wilful, humble and fearless” to describe a level 5 leader, pointing out that those working under such leaders use words such as “quiet, humble, modest, reserved, shy, gracious, mild-mannered, self-effacing, and understated” in describing them, adding to the observation that these leaders are “seemingly ordinary people quietly producing extraordinary results.” They typically come from inside the company, rather than being celebrity CEOs brought in to save the day, and they shy away from the spotlight, choosing to give credit to those who deserve it instead of taking it themselves.
What sets them apart is not only their fierce resolve and unwavering determination to do whatever it takes for the good of the company, it’s also their willingness to surround themselves with potential successors who have what it takes to take up the reins and carry the company into the future without them. The company is the greater cause, and a level 5 leader never lets their ego get in the way of it. They don’t want to be “heroes” or icons, and their values push them to continue on their path, even when it’s extremely difficult. By comparison, the companies that failed to make the leap from good to great always lacked a level 5 leader, and the research team uncovered the fact that nearly two-thirds of those that failed had leaders with big egos that undoubtedly “contributed to the demise or continued mediocrity of the company.”
The Right People on the Bus
The author explains that he had assumed an elementary step in the transition from good to great would be to create a vision, determine a strategy, and then direct all the people in the company towards that end destination. However, he discovered that companies making the transition to great got the right people on board first and then figured out where they were heading. The leaders of companies moving from good to great effectively said, “Look, I don’t really know where we should take this bus. But I know this much: If we get the right people on the bus, the right people in the right seats, and the wrong people off the bus, then we’ll figure out how to take it someplace great.”
Getting the right people on the bus is beginning with the “who” rather than the “what,” and this is part of three truths the author believes all good-to-great leaders understand:
With the right people on board, a company is better placed to adapt in a changing world. If people get on board the bus primarily because of the direction it’s going in, they’re going to jump off quickly if the bus changes direction. If people get on board because of others already on the bus, they’re going to stay on board no matter what direction the bus takes.
Having the right people removes the need to tightly manage or constantly motivate. The right people are self-motivated, and they have the drive to get results and be involved in creating something great.
Great vision without great people is meaningless. If you have the wrong people on the bus, your company will never be great.
A Hedgehog Concept
Another finding detailed by the author is that in great companies the “truth is heard, and brutal facts are confronted.” Hard facts are always faced, and in confronting them and making decisions based upon them, the company comes out stronger and more resilient. He also notes that there’s a sense of exhilaration to be had in taking this approach, with great companies choosing to face harsh realities and then deciding to push through them anyway, rather than give up.
The Hedgehog Concept put forward by the author relates to the Isaiah Berlin essay “The Hedgehog and the Fox.” In this essay, people are divided into two distinct groups: foxes and hedgehogs. Foxes see a complex world, living scattered lives as they pursue several different objectives at the same time. They are cunning creatures, but they can’t outwit the simple defence mechanism of a hedgehog. Hedgehogs live by a basic guiding principle that wins out in the event of a fox attack every time – they roll up into a spikey ball.
People who are foxes have scattered, non-unified thoughts, therefore there’s no integration or “unifying vision.” On the other hand, people who are hedgehogs organise their thoughts into a single idea that guides everything. Good-to-great companies have hedgehog leaders that develop a Hedgehog Concept. No matter how complex a challenge or dilemma the company faces, it will always be reduced to a simple idea, because in developing a Hedgehog Concept, they “develop a simple, yet deeply insightful, frame of reference for all decisions.”
The concept flows from a deep understanding of where the three circles intersect. Those circles are the answers to three questions: What can you be best at in the world? What drives your economic engine? What are you deeply passionate about? The author stresses the importance of noting a crucial distinction: a Hedgehog Concept is not “a goal to be the best, a strategy to be the best, an intention to be the best, a plan to be the best. It is an understanding of what you can be the best at.”
A Culture of Discipline
When companies grow, becoming increasingly complex, there’s a danger of them beginning to trip over their own success. There are suddenly “too many new people, too many new customers, too many new orders, too many new products,” and the board will try to bring order to the chaos by bringing in new management. “Processes, procedures, checklists, and all the rest begin to sprout up like weeds,” and where people used to work independently, there’s now a hierarchy in place. A point the author is keen to make is that establishing such bureaucratic rules suggests the wrong people are on the bus, and the more likely it is that the right people will opt to get off the bus. This in turn will lead to an even higher percentage of wrong people on board, creating a need for even more management to compensate for the lack of motivation, competence, and self-discipline. It becomes a downward spiral with no end, but there is an alternative. When a company has a culture of discipline, all bureaucracy and hierarchy can be avoided.
People in good-to-great companies will “take disciplined action within the three circles while being fanatically consistent with the Hedgehog Concept.” In hiring self-disciplined people, a culture of freedom and responsibility is created, meaning there’s no need for close management. The building of a system that allows this culture to grow is all that should be managed, not the people working within that system. A simple mantra followed by all working within a great company is: “Anything that does not fit with our Hedgehog Concept, we will not do.” If it doesn’t fit, great companies don’t do it – ever.
Another finding uncovered by the author’s research team is that there’s no one miracle moment in which a company makes the leap from being good to being great; it’s a cumulative process. The author asks the reader to think of it as a flywheel – a very large metal disc mounted on an axel. Getting the flywheel moving takes a huge effort, but once moving, it becomes easier to keep it moving, and with every push, it moves faster as momentum builds. The flywheel’s momentum begins to do the work for you, so you no longer need to push harder to keep it moving; it “builds upon work done earlier, compounding your investment of effort.”
In a great company, it’s impossible to say which push got the flywheel moving. Every push added to the building of momentum, and the leap from good to great was not the result of one grand push. As the author puts it, every step, every action, and every decision “adds up to sustained and spectacular results.” He also points out that these steps and actions weren’t celebrated with promotions or launch events, they were simply pushes on the flywheel. It was noted in many of the companies that had made the leap, the executives leading the transformation were often only aware of how far they’d come with the benefit of hindsight. There was no one miracle breakthrough moment, “It was a quiet, deliberate process of figuring out what needed to be done to create the best future results and then simply taking those steps, one after the other, turn by turn of the flywheel.”
The findings of the author and his team of researchers are the result of five years of carefully working through highly detailed, empirical evidence. In documenting them in this book, the author not only answers the question of what it takes to make the leap from good to great, but he also uses real-world examples to show the reader how to make the transformation for themselves. Although some of the references to technology are now outdated (first published in 2001) and some of the named companies are no longer as “great” as they once were, the content can readily be applied to modern workplaces and environments, making it an invaluable resource for executives, managers, and rising stars across all areas of business.
The author sets out his findings in a simple, accessible, and easily digestible way, using relatable and relevant analogies that add depth and colour to his points. Comparing a company to a bus, for example, is a great way to illustrate the need to get the right people on the bus and the wrong people off the bus if you want those travelling with you to enjoy the ride – no matter what direction you take on your journey from good to great.
Bio of the Author
Jim Collins teaches at the Stanford University Graduate School of Business, and he is also a multi-million-copy bestselling author, speaker, and business management consultant. In 2017, he was selected by Forbes as one of the 100 Greatest Living Business Minds.