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

There appear to be some interesting ideas in this book, but overall, it seems to be a case of the author simply choosing a set of companies that happened to meet some criteria, then looking for similar facts about those companies, and calling them causes that the companies met the criteria.

Maybe I've been reading too many books about biases and fallacies in statistics and behavior lately, but I think this is all luck. See http://www.happen.com/article/good-to-great-or-just-lucky/ for another similar view.

As Steven Levitt (http://www.freakonomics.com/2008/07/28/from-good-to-great-to-below-average/) says, these companies have done worse than the overall market since this book was written. I understand Jim Collins has written a later book show more studying why companies fail, to somewhat try to explain this.

But the simpler explanation is that it's all luck. It was interesting to me to read in Good to Great that when the company CEOs were asked about what they have done to make their companies great, a lot of them said they were lucky. Collins did not take them at face value, but rather, decided that a characteristic of good CEOs is that they are humble and explain their successes as good luck. And similarly, bad CEOs blame their failures on bad luck.

But what if it just is all luck? Isn't that a simpler explanation.

I'm not saying there are factors that make a company successful or not, but this book hasn't convinced me of what any of them are by its use of data, which seems to fail many common tests. show less

Such an excellent book on how a business can become great! Collins and his team researched companies that had transitioned from good performance relative to the general market to a sustained period of great performance. By comparing those companies to others that were similar during the good period but remained merely good, they came away with a set of principles that can move a company from good to great.

The most important lesson, and the theme that's common throughout, is that it's no one thing or moment. All of the good to great principles take a long time to get results (think years, not months). They require sustained effort; stop practicing the principle and a company will lose its greatness.

So what are the principles?

First, show more great companies are ambitious with respect to the company's success but personally humble. They're willing to make big bets and dramatic changes (as well as small bets and incremental changes), and they always keep the company's long term success in mind as they do so. They aren't driven by ego, external pressure, or short term profit. They also tend to be personally humble, seeing failures as opportunities for improvement and successes as outside themselves -- either due to the effort of others or, if there's no obvious cause, due to luck. Compare this to leaders who fail to lead their companies to greatness. These leaders tend to attribute success to their own virtues and failures to bad luck or others.

Great companies focus on making sure that they have the right people in the right positions. They don't compromise on hiring because they need someone now. Having the right people, rather than the people with merely the currently relevant skills, makes a company more able to adapt to change. It also reduces the need for explicit motivation -- the right people in the right positions will be intrinsically motivated to help the company succeed. But who are the right people? The right people are the people whose core values align with your company's core values. There is no single right set of core values, but without alignment to those values, whatever they are, a person won't be the right person, no matter how otherwise qualified. Collins cautions against using this as an excuse to fire people though. If someone isn't a fit, then it's better for the company and for them if the situation is dealt with as promptly as possible, but don't be too quick to confuse the company being a bad fit with the particular role being a bad fit. Also, this rigor has to be applied more strictly the higher up you go in a company hierarchy, not less. The wrong person at a higher level will have a much broader negative influence than the wrong person at the leaves of the org chart.

The third principle for a great company is the delicate balance between confronting reality and keeping faith in the company's ability to succeed. Success comes when a company repeatedly makes good decisions. The way a company makes good decisions is by always being strictly committed to the brutal facts of reality. Looking at the "scary squiggly things" under the rocks, as one executive put it. Most companies spend a lot of time discussing opportunities or what they think they're doing right, but they don't spend a lot of time talking about the scary things, the things they fear will lead to their failure. Focusing on the positive isn't the only way companies avoid reality. Another one, and a particularly toxic one, is when pleasing particular leaders becomes more important than facing external reality. The book goes on to give a number of tips for how to keep those brutal facts coming in the face of people wanting to please those in charge.

This steadfast focus on facts, however, needs to be balanced by faith that the company can prevail. Not that it can necessarily prevail by doing what it's currently doing, but faith that whatever may come, the company can make it through and come out stronger than before. This balance is illustrated with what Collins calls the Stockdale Paradox, after Admiral Jim Stockdale. Stockdale credited getting through an 8 year imprisonment in Vietnam under bad conditions to this balance. As he put it, "This is a very important lesson. 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."

The fourth principle is that great companies have a hedgehog concept, a simple idea that drives everything they do. This clarity keeps the company from going off on tangents but also opens the company to possibilities that may look very different from what they do today, but which align with their core idea. Not just any idea makes a good hedgehog concept. To be successful at driving a company, the concept should be at the intersection of what the company can be the best in the world at given it's capabilities (notably, this may not be something the company is currently doing), be something which drives a successful economic engine, and be something which the people at the company can feel deeply passionate about. When an idea hits all three of these, then it can drive a virtuous circle of hard work, profit, and new ideas which leads to greatness. One of the core points of the chapter is that "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" -- facing the brutal reality emphasized in the previous principle.

Next is a culture of internalized disciple. Discipline doesn't mean bureaucracy, strict leadership, or inflexibility. Rather, Collins sees those as an outgrowth of a lack of internalized discipline. Rather, the important discipline is the internal discipline of people at all levels of the company to always take actions aligned with the Hedgehog Concept and core values of the company. This is the sort of discipline that allows people to say "no" to a good opportunity if it isn't aligned with the company's core mission. This sort of discipline is accomplished by putting disciplined individuals in a system that is manged to align people's incentives with the company's goals. Note, in particular, that it's the system that is manged, not the individuals.

The last principle is really more of an anti-principle. Collins and his team found that technology does not cause greatness. It can accelerate the rise to greatness of a company that's already on its way, but technology is not a magic bullet. It can even be a danger. One ways companies lose their way on the path to greatness or fall from greatness is to get too worried about chasing the latest technological trend before understanding how (or if) it fits into the company's Hedgehog Concept.

Collins then discusses the flywheel, which isn't so much a principle as a common theme underlying all of the principles. Good to great companies are not overnight successes. They don't have an "aha!" moment. Rather, their greatness is built off of consistent small actions, which build momentum over time. This isn't to say their actions don't change over time. Rather, it's that the actions that seem to have propelled a company into greatness are inseparable from what came before. They focused on continued improvement and consistent delivery of results aligned with an overall goal that the people in the company believe in. A corollary of this is that people at a company with the potential for greatness don't need to be explicitly motivated; their goal is motivating in its own right.

I really enjoyed reading this. The challenge is that these principles are challenging to apply in practice. They require consistency and discipline, both of which can be hard to maintain in the face of ever changing pressures. Which is why, as Collins points out, in the end, very few companies are great, less stay great, and few make the transition from merely good to great. show less

As far as business books go, Good to Great sets a high standard for methodology and seldom falls back on the palaver that's so representative of the genre. It's an enjoyable, easy read and Collins and his team pull some fine principles from their research.

That said, it still strikes me that the methodology employed in business research, as evidenced in Good to Great, has a long way to go. The conclusions are based on survivorship bias, very broad induction, and tiny sample sets. There's little attempt, as I remember, at creating falsifiable hypotheses, and then falsifying them. The conclusions are based more on comparisons of a few examples and loose correlations.

Now with *that* said, business may never be broken down to a science, so show more Collins' level of accuracy may be sufficient, as long as readers interpret the conclusions as flexible, guiding principles. The limiting factor there of course is the average business reader, who has far more to improve on in critical reading than good business authors (like Collins) have to improve in the way of critical analysis. show less

I read this one after I did "Great By Choice" by the same author as he used some concepts from this book in that one, particularly the Level-5 Leader and the Hedgehog Concept, and I figured I should read this one to find out just what those titles actually refered to. I now know that and a whole lot more about how to take something that works and make it remarkable. Turns out, the ideas are not that difficult to understand, but not so easy to impliment. I think that this takes what everyone says is "common sense" and points out that it is not only uncommon, but also business myths encourages solutions that seem obvious but don't work. I find myself thinking about it and trying to put it into pratice in the coming year.

This work is the result of a cohort business study. The control group consisted of publicly owned companies that had good performance for 15 years and then great performance (defined as outperforming the market by over three times) for 15 years. There were only 11 good-to-great companies. Eleven other companies in similar lines of work were chosen into the comparison group. Then the research group dissected those companies to figure out what the great companies had in common and how they different from the comparison companies. The result is this book.

Collins and his research team undertook interviews, performed research on publicly available information, and tried to details as much as possible. As such, Good to Great not only covers show more abstract principles which animate these companies, but also, it shares the stories of excellent success along with the not-as-excellent narratives of the comparison group.

On occasion, this book’s writing seems to lapse into marketing and hype, but I guess that is to be expected among the business genre. Although the book is not as hard of a science as something like physics, Collins’ team seems to aspire to genuinely making their study as scientific as possible. It’s clear that they looked for fundamental insights instead of just covering the surface. For that, they deserve to be praised. Also, because of the stringent inclusion requirements (which require 30+ years of historical data), tech companies are not considered in this work. The qualities that make tech companies great – especially in the face of constant changing environments – is of particular interest to me, and I would like to see further exploration on that topic.

Their overall findings suggest a category of leader that they term a “Level-Five Leader.” This type of leader consistently puts the organization above her or his personal needs. They serve as the mortar which connect the bricks of a group into a strong wall. Through reading this book, you can explore more of this quality of leader.

Unfortunately, time has shown that several of these companies have engaged in ethically questionable policies. That blunts this book’s impact significantly. It goes to show that in the field of business research, it is difficult to adequately control all the factors, such as hidden cheating. It was a good attempt, and still brings forth historical insights into an era. Nonetheless, enthusiasm needs to be dampened with reality. show less

Besides the two most important reminders that this book brought along, the concept of 'level 5 leadership' and the importance of selecting the right people for the job and despite half of the book describing the methodology of their study, the books has a higher ration of trite, if common sense, ideas than strong arguments that can predict success.

The first thing to remember is that excellent leadership is not only about being a servant leader—it's also mandatory that you are a rigorous, ambitious person that relentlessly follows a vision of excellence. Even so, this seems to me easier to do than being a truly humble leader as you accumulate success and power. And here the book is thin on explanations. I wish it had touched more on show more how humility is neither about being weak, meek, or indecisive, nor even about shunning publicity. Humility is about a true lack of narcissism—knowing what you don't know (the overwhelming amount of dark matter out there), not underestimating your competition, listening to weird ideas, being passionately curious, and valuing substance to fluff.

Secondly, it is paramount to have the right people on the bus even before knowing the direction. This sounds very common sense, again, but in a world obsessed with fast growth it might also be the first thing to cut on. I'm a strong believer in the hiring principles of continuing to look when in doubt (but making sure you've looked thoroughly) and in being swift in making people changes when a certain formation goes against the vision and the strategy you've all agreed to pursue. Lastly, James Collins makes an interesting point about giving best people the best opportunities rather than the best problems to solve. I've seen many very talented people being crushed because they were given the responsibility of steering a sinking boat.

Overall, James Collins is not the first one to explain that grit, passion, huge amounts of work and discipline, focus, and putting understanding in front of bravado are what builds great performers, both in the individual and in the corporate spheres. In particular, the Hedgehog Concept, for which the book is usually referenced, is argued incredibly weakly but it should give managers the guideline that it's not really worth giving your best performers mandates they aren't passionate about, and this is me turning the concept onto its head towards individual performance, for the book looks at it in a corporate, macro sense.

I also share the sentiment that it is mostly backwards looking (after all, most of the "great" companies are not great companies anymore) and therefore it doesn't really make predictions and it is more about correlation than causation.

As well, while researching the criticism about this book, I've stumbled upon a nice piece in HBR which was proposing that some of these great companies should look at becoming good after all—that is to say coming back from great, which solely means exceptionally profitable, like Pepsi, who are not in the book, or Philips Morris, who are in the book, to working for the greater good. show less

I’ve resisted reading this book for a decade or so. As a pastor I’ve long associated it with an uncritical business thinking takeover of Christian leadership. As I read it, I’m certainly critical of parts, from methodology to interpretation, but slowly it overwhelmed me with helpfulness. It’s just too helpful of a book to not read and apply. Yes, of course, it’s not the only book to read, and it doesn’t have all the answers (whatever that means), but it’s one of the few books I read this year that I’ll reread in the next three years.