The Book that I loved reading recently

Curiosity led Jim Collins the author of the book BUILD TO LAST to embark on his next journey to find out why majority of companies never become great. It is because they are satisfied with good results. This seems to be true in general in other areas as well. His general observation led to him to say GOOD IS THE ENEMY OF GREAT. As people settle at being good, they don’t attain level of great. This seems to be true not only at personal level but also at business level.

So, in this book Good to Great Jim Collins is aiming to find out how a good company can become a great company? Are there organisations that have transitioned from being good to great? If so, what did they do differently?

He and his team analysed publicly-traded companies looking for those that matched the following pattern:

1.????Fifteen-year cumulative stock returns at or below the general stock market, punctuated by a transition point, then cumulative returns at least 3x the market over the next fifteen years.

2.????Each company had to demonstrate the good-to-great pattern independent of its industry.

3.????If the whole industry showed the same pattern, the company was dropped from consideration. In the end, from the initial list of 1435, eleven good-to-great companies were found.

Critically, the team also found two sets of comparison companies. The first set was “direct comparisons” in the same industry as their good-to-great counterparts (but did not show a leap). The second was “unsustained comparisons” that made a short-term shift from good-to-great but failed to maintain the trajectory.

The critical question was, “What did the good-to-great companies share in common that distinguished them from the comparison companies?”

The core concepts of this book were developed by making empirical deductions from the data. It was an iterative process of developing ideas and testing them against the data, revising the ideas, building a framework, seeing it break, and rebuilding it yet again. In the end, the following framework was discovered.

Jim Collins describes this entire process as trying to find what is inside the blackbox by switching on the lights to see what is happening within these organisation that drove the change and started the flywheel to move and eventually start accelerating.

If we have to describe the key concept of the book in a single word, that word would be discipline.

To go from a good company to a great company you need disciplined people, disciplined thought, and disciplined action.

·?????Disciplined people: means getting the right people and keeping them focused on excellence.

·?????Disciplined thought: means being honest about the facts and avoid getting sidetracked.

·?????Disciplined action: means understanding what is important to achieve and what isn’t.

Personal Action: Start looking at what changes to bring in our individual lives to in terms of living a disciplined life, led by disciplined thoughts and disciplined actions.

Concept 1: Level 5 Leadership

The first concept of the book is Level 5 Leadership. Discipline starts with the leadership. Every great company Jim studied had the same type of leader – Level 5 Leaders.

If you think about an organisational hierarchy, the lowest level of leadership is the Highly Capable Individual. These are people who contribute using their skills, know-how and good work habits.

Moving a step up the hierarchy, the next level is a Contributing Team Member. These are people who are able to use their skills and knowledge to help their team succeed.

The next level is Competent Manager. These managers are capable of organising their team to efficiently reach pre-determined objectives.

Level 4 is Effective Leaders. This is where the majority of leaders can be found. They are able to create the commitment from their team to vigorously pursue a clear and compelling vision. They’re also able to create a high-performing team.

Finally, we reach Level 5 Leadership. These are the great leaders. They have the abilities of the other four levels plus a unique combination of will and humility. And it is this combination that makes them great.

The behaviours of Level 5 Leaders that set them apart include:

• They are ambitious, but their ambition is for the organisation to excel rather than themselves. At the same time, they tend to be modest about what they personally contribute and are self-effacing.
• They are fanatically driven, obsessed even, to produce exceptional results on a sustainable basis. The key word here is sustainable. This isn’t the result of a one-off heroic effort.
• They build successors to be even more successful. This is in contrast to level 4 leaders who will sometimes set up their successors for failure to make themselves look good.
• They share the praise amongst the team when things go well. (Look out of the Window)
• They are happy to take the blame when things go wrong. (Look into the mirror)
• By sharing the praise and taking the blame they make their team extremely loyal and committed to them.
• They never have larger than life personalities or celebrities.
• In 10 out of the 11 companies they come from within the organisation. This is because their greatness comes from quiet hard-work, rather than heroic acts.

Personal Action: Individuals can start looking at qualities/traits to develop/enhance to become a Level 5 leader.

Concept 2: First Who … Then What

Forming the right team with the right people is important.

What does first who, then what mean? It means that you don’t decide what you want to do and then get the people you need to do it. Instead, you start by getting the right people into the organisation and let them plan on where to go and what to do.?Also it means that to get the wrong people out. According to Jim, onboard the right people on the bus and off-board the wrong people.

Getting the right people takes precedence over vision, strategy or anything else. First, get the right people. Then you let them work out where you’re going to go, what you’re going to do, and how you’re going to do it. Recruit people primarily for their character and work ethics rather than for education, skills, or knowledge that can be acquired on the job.

The benefits of putting “who” before “what” include:

• It’s easier to change direction because people are present because of who they get to work with rather than what they are working on.
• You won’t have to waste time and energy motivating and managing the team. They’ll be fired up, self-motivating, manage themselves and capable of generating results.

Three recommendations from Jim on hiring people:

1.????When in doubt, don’t hire – keep looking. However, when you find the right person hire them immediately. Get them on the bus.

2.????When you know you need to make a change in personnel, act right away. Let go off the wrong people. Get them off the bus. It isn’t fair on them and it’s not fair on the organisation to keep them around. Also, the right person might just be in the wrong position. Take actions to move them to the right place in the bus. However, if people don’t have a place in the bus don’t hesitate to take them off the bus.

3.????Put your best people on your biggest opportunities. Managing problems well can make your organisation good, but only exploiting opportunities can make you great. So put your best people precisely where they can generate the biggest opportunities. Where you make them sit on the bus is important.

Having right people doesn’t mean they will always agree with each other. It’s best if they fiercely debate ideas in pursuit of the best answers to organisational questions. And then, when all is said and done, unify fully behind final decisions, regardless of personal interests.

In many cases these right people have eventually grown to become Level 5 leaders and have become successors and also have led other organisations to success.

For contrast, comparison companies often took the “genius with a thousand helpers” approach. A bold leader would set the vision and then coordinate with “helpers” to turn it into reality. Unfortunately, this approach falls apart whenever the leader leaves the organisation.

Personal Action: If you are in leadership position, take a look at your team and see what actions that you can take from Jim’s recommendation.

Concept 3: Confront The Brutal Facts (Yet Never Lose Faith)

The next step towards transition from good to great is to know and understand what is the status of things in the organisation? What is the reality of the situation? To do this assessment the environment should be open, transparent, honest, and truthful to discuss and accept the brutal facts. Companies cannot make great decisions without first confronting reality.

Jim talks of four practices that will help to create an atmosphere for open discussions where truth can be heard:

1. Lead with questions, not answers.

·?????The leaders of Good to Great companies start by assuming they don’t know what is required. They ask questions until a picture of reality and its implications emerges.

·?????This is the opposite of superstar leaders who assume they have all the answers and just need to make their team execute. These leaders are likely to make bad decisions because they don’t have a true understanding of the facts.

1. Engage in dialogue and debate, not coercion.
2. When mistakes happen, conduct autopsies without blame.
3. Build “red flag” mechanisms to gather critical feedback.

Every Good to Great company faced significant adversity along the way to greatness.?But they responded to these adversities differently. In confronting the brutal facts head on, they emerged stronger and more resilient from these adversities.

It’s essential to strike a balance between confronting the most brutal facts of your current reality and retaining absolute faith that you can and will prevail. This is referred to as the Stockdale Paradox, and it’s vital for leading a company from good to great. That is to retain absolute faith that you can and will prevail in the end regardless of the difficulties.

Concept 4: The Hedgehog Concept

“The fox knows many things, but the hedgehog knows one big thing.”

The Good to Great companies were like hedgehogs: simple, dowdy creatures that had “one core strategy” and stuck to it. The comparison companies were more like foxes: crafty, cunning creatures that know many things yet lack consistency.

A fox is a very clever creature. It sees the world in all its complexity and can pursue many goals at once. A hedgehog is a much more simple creature. Hedgehogs are not capable of seeing complexity and even if does, it doesn’t get bogged down by all the complexity. It is really able to do only one thing well – curl up into a ball to protect itself. All they see is a single goal and they execute to achieve that goal.

Good to Great companies behave in a similar way to a hedgehog. They stick to doing what they are best at and avoid getting distracted. It’s incredibly easy to get distracted, with even great companies having to fight to stop this from happening.

So, how does your organisation become more like a hedgehog and less like a fox? You can find your inner hedgehog at the intersection of these three questions:

• What do you feel most passionate about?
• What can you be best in the world at?
• What drives your economic engine?

Circle 1: What Are You Deeply Passionate About?

Good to Great companies focused on the activities that ignite their passion. The idea here is not to stimulate passion but to discover what makes you passionate. You can’t manufacture passion or “motivate” people to feel passionate. You can only?discover?what you and your team are already passionate about.

Circle 2: What Can You be The Best At?

Every company would like to be the best at something. This is about more than developing a great?core competency. It’s about deciding on one key area that your business can do better than any other business. It’s then about focusing on this area exclusively so nobody else can match you. But few understand with total clarity what they have and what is their potential to be best at. It’s not about coming up with a goal to be the best, a strategy to be the best, or an intention to be the best. It’s about identifying what you can truly be the best at. The distinction is critical. This is about focusing on what you?can?be the best at, not what you?want?to be the best at.

Circle 3: What Drives Your Economic Engine?

Every organization must understand how to generate sustained cash flow. To gain insight into the drivers of your economic engine, search for the one denominator that has the single most significant impact. Some examples that may be relevant include:

• Profit per customer.
• Profit per employee.
• Profit per retail location.
• Profit per square foot.
• Profit per geographic region.
• Profit per product.

All of the Good to Great companies understood that the essence of profound insight is simplicity. They identified their Hedgehog Concept and used it as a frame of reference for future decisions.?While it sometimes took years for the concept to come together, the eventual discovery coincided with breakthrough results.

Concept 5: A Culture Of Discipline

This is not about controlling people or tyrant approach to discipline people. This is about building a culture full of self-disciplined people who take disciplined action, fanatically consistent and manically focused on the hedgehog principle.

Having disciplined people eliminates the need for hierarchy and bureaucracy. Having discipline of thought keeps everyone on track. It eliminates the need for bureaucracy. This means that there is no need to excessively control the actions of people.

Most companies fail not because of the lack of opportunity but because there is too much opportunity, and they spread themselves too thinly and will often get distracted. This requires willingness to shun opportunities that fall outside the hedgehog principle of three circles.

Stop Doing lists are more important than To Do list. This will help to have the discipline to drop/stop doing things that are not aligned to the three circles.

The more an organisation has the discipline to stay within its three circles, with almost religious consistency, the more it will have opportunities for growth.

Culture of discipline involves of duality. On the one hand, it requires people who adhere to a consistent system. Yet, on the other hand, it gives people freedom and responsibility within the framework of that system.

Concept 6: Technology Accelerator

When used correctly, technology becomes an accelerator of momentum, not a creator of it.

The Good-to-Great companies never began their path to greatness by pioneering technology just for the sake of innovation. Instead, they understood that you cannot make good use of technology until you know which technologies are relevant.

The critical question is,?“Does this technology fit directly with the Hedgehog Concept?”

Good-to-Great organizations avoided technology fads and bandwagons, yet they become pioneers in the application of carefully selected technologies. The thoughtless pursuit of technology is a liability, not an asset. Innovation alone cannot turn a good enterprise into a great one. Nor by itself can it prevent disaster.

The Flywheel and Doom Loop

Let’s revisit the flywheel we mentioned at the beginning of this review.

Imagine a very large flywheel. Thousands of kilograms or pounds in weight. To get it to spin you need to start pushing it. As you begin to push you might make one single step of progress. Then another step. Then another step.

A single push has no impact on the wheel. Even a singular massive push has no impact on the wheel.

As you first start to push it seems almost impossible to turn. But you keep at it. Pushing it, and pushing it, and pushing it. The more momentum you build up the easier it gets but you still need to keep pushing hard.

Then at some point, as you run behind this giant flywheel, it takes on a life of its own and its spinning really fast and doesn’t need as much effort to spin.

In fact, now it is really difficult to stop! We have achieved a Good to Great Flywheel Effect. We are taking consistent action in alignment with our Hedgehog Concept. We are then achieving some visible results. This, in turn, energizes people and momentum is easy to sustain without much effort.

The media is obsessed with moments of breakthrough and inspiration. But, if someone came to you and enquired as to what was the one big push that made your flywheel spin so fast what would you say? You wouldn’t be able to answer! Because there was no singular thing you did that made the difference. It’s about consistency over a long period of time.

While good-to-great transformations often look dramatic from the outside, they feel like organic, cumulative processes to the people on the inside. It’s very comparable to the time and effort required to get a heavy flywheel spinning.

A key concept here is to realize that no single push makes a difference. No matter how herculean the effort. So you have to be thinking about cumulative effects, not looking for the dramatic singular win.

The Doom Loop

The doom loop is the opposite and it is how bad companies do things.

They start with a great idea or a flash of brilliance. But then they work on it intermittently, giving only intermittent big pushes. These huge efforts are exhausting. Over time, their intermittent nature leads to poor results.

This, in turn, causes the firm to switch to a new idea because the previous one didn’t work out the way they’d hoped. Each time they switch idea momentum is lost.

These companies completely stop trying to create momentum. Instead, they are focused on having one breakthrough. This breakthrough never comes.

The absolute key thing to remember in this flywheel analogy is that each push on the flywheel builds on all the previous thousands of pushes and moves you one step closer to going from good to great.

Summary:

The key takeaway 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.

• Disciplined people: means getting the right people and keeping them focused on excellence.
• Disciplined thought:?means being honest about the facts and avoid getting side-tracked.
• Disciplined action: means understanding what is important to achieve and what isn’t.

The key to going from Good to Great is to get the right people onboard, engaging in critical thinking, then taking disciplined action aligned with the Hedgehog Concept.

Good to Great is an absolute classic business book and one that I recommend you read . I have tried to summarise the concepts here in this review. In the book there are many examples that will help bring these concepts that we have discussed here to life.

While reading keep comparing to your current environment and think about where you can apply these learnings even if it in a small way within your area of control. Also may be you can start advocating about these great principles and share your learnings within your circle of influence. (Trying to suggest my learnings from Steven Covey’s principles here)