Good to Great by Jim Collins (Top 100 Business Book Summaries)

If you aspire to be known as a great leader or want to build an enduring, successful company, this book is for you. This is also one of the very few books that I would recommend listening to. Jim Collins is a teacher at heart, and he is able to bring an extra dimension to this book in the audio version.

?My Key Takeaways:

Good To Great: Why Some Companies Make The Leap and Others Don’t came about after a partner at McKinseys told Collins that he loved his earlier book, Built To Last, but it was useless as the companies featured had always been great.

Collins and his team, whom he gives much credit, embarked on a project to identify the companies that went from good to great and sustained it for 15 years or more. These companies were compared to those in similar circumstances that did not become great. The findings are summarised in the 'Flywheel'.

The process begins with a build-up stage, resulting in a breakthrough, that catapults the organisation to above-average results. Then, there are three phases – disciplined people, disciplined thought and disciplined action – all containing key concepts.

Phase 1 – Disciplined People

Key Concept 1 – Level 5 Leadership

These leaders blend extreme personal humility with an intense professional will. They are fanatically driven, infected with an incurable need to produce results. They apportion praise externally and responsibility internally. Being a Level 5 Leader is not about what you get; it's about what you build. Collins observes that it's not that they’re without ego or self-interest, but the ambition is for the company, not themselves.

Conversely, in two-thirds of the comparison, company leaders were described by Collins as “gargantuan personal egos that contributed to the demise or continued mediocrity of the company”.

Key Concept 2 – First Who… And Then What

Level 5 Leaders first get the right people?on?the bus and get the wrong people?off?the bus before deciding where to drive the bus. In comparison companies, they adopted the 'genius with a thousand helpers' model, which tends to fail when the leader departs.

Level 5 Leaders are rigorous, not ruthless. They follow these practical disciplines:

-???????When in doubt, don't hire – keep looking.

-???????When you know you need to make a people change, act.

-???????Put your best people on the biggest opportunities, not on the biggest problems.

A necessary by-product of having the right people is that the best decisions will be made for the company. The team will debate vigorously and yet unify behind the decision for the benefit of the company - 'disagree and commit'.

The study confirmed what is widely accepted – it's someone's traits and capabilities that matter more than technical knowledge and skill. The old adage that people are our most important asset is false. The right people are the most critical asset.

Phase 2 –?Disciplined Thought

Key Concept 3 – Confront The Brutal Facts

A dominant theme from the research was that great companies made good decisions that were diligently executed consistently. They were not lucky. They adopted a deliberate process to make good decisions that compromise two factors:

1. Confronting the brutal facts.

2. Adopting a frame of reference for decision making.

Charisma can be a liability as a leader. An example of this is Winston Churchill, who created the 'statistical office' outside of the standard chain of command to ensure he received the unfiltered, timely, brutal facts. He was aware that his personality was large and intimidating to some and he needed a way to get the brutal facts.

Level 5 Leaders listen and let the truth be told, no matter how uncomfortable.

There are four principles to assist leaders in creating a culture where the truth can be heard:

1.???????????????Lead with questions, not answers. “Can you tell me about that?”; “Can you help me understand?”; “What should we be worried about?”

2.???????????????Engage in dialogue and debate, not coercion. The purpose should be to get the best decision, not attend a lecture.

3.???????????????Conduct autopsies without blame.?The goal is to improve understanding of what happened and to learn.

4.???????????????Build ‘red flag’ mechanisms, which are processes that alert you of failures immediately.

The great companies adopted the 'Stockdale Paradox' – faith that you will prevail in the end, no matter the circumstances while confronting the brutal truth.

A note on motivation: If you have the right person on the bus, they will be motivated enough. You must not de-motivate them by ignoring the brutal facts.

Key Concept 4 – The Hedgehog Concept

The Hedgehog Concept “is a simple, crystalline concept that flows from deep understanding about the intersection of the following three circles”. It is not a goal or a strategy. It is an understanding. Great companies know the answers to these questions:

What can you be the best in the world at?

What drives your economic engine?

What you are deeply passionate about?

Equally important, great companies also know the inverse of these questions. Companies that aren’t great are typically more like a fox – scattered, diffused and inconsistent. They formed their strategies more from bravado than from understanding. The strategic difference between the good-to-great companies and the comparison company was:

1. The great companies had a deep understanding of the three Hedgehog questions.

2. They translated this understanding into a simple, concise concept.

Best in the world

You need to find out what you can be the best in the world at. This is different to your 'core competency'. Just because you can do something does not mean that you can be the best in the world at it. ?

Economic engine

Seek and find the one denominator that has the single most significant impact. Then, understand the economics of the industry and the business.

Passionate

Find out what you are deeply and genuinely passionate about.

In the study, it took companies, on average, four years to develop their Hedgehog. Collins suggests forming a “council” to iterate the process. The point is emphasised that a Hedgehog Concept is not a goal or a strategy – it is an understanding. The good-to-great companies knew that doing what you are good at only makes you good. Focusing solely on what you can potentially do better than any other organisation is the only path to greatness.

Phase 3 – Disciplined Action

Key Concept 5 – Culture of Discipline

Level 5 Leaders built an enduring culture of discipline where self-disciplined people take disciplined action, whereas the Level 4 Leaders personally disciplined the organisation through sheer force. The good-to-great companies built consistent systems with clear constraints but gave people freedom and responsibility within the system.

Discipline is as much about doing things as it is about not doing things. If it did not fit into their Hedgehog, the great companies did not do it. Collins suggests starting a 'Stop Doing List'.

Key Concept 6 - Technology Accelerators?

The good-to-great companies think differently about technology. They embrace carefully selected technologies that complement their Hedgehog Concept. Technology becomes an accelerator of technology, not a creator of it. Mediocre companies react to new technology motivated by fear of missing out.

The Flywheel & The Doom Loop

Sustainable transformation occurs in the 'Flywheel' cycle of build-up and breakthrough. The early days are hard and require consistency and discipline. It is hard to move initially, but momentum builds and is rewarded by a breakthrough. The combination of disciplined people, disciplined thought and disciplined action negates the need to adopt formal programs to manage change or create alignment. The flywheel creates the proper structure and process for success.

The opposite is the 'Doom Loop' where companies attempt to skip the build-up phase and instead hunt for quick wins. Good-to-great comes as a result of a cumulative process. The most famous flywheel is the Amazon flywheel (see pic below).

Conclusion

Good To Great proves through rigorous research, that companies need to ensure they have disciplined people, thought, and action to build momentum that turns the flywheel of growth and sustainability.

Favourite Quotes

?"You can accomplish anything in life, provided that you do not mind who gets the credit."

Harry S. Truman

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“Humility + Will = Level 5.”

Jim Collins

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"Facts are better than dreams."

Winston Churchill

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"Most men would rather die, than think. Many do."

Bertrand Russell

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"When you set your objectives, you set them in concrete. You can change your plans, but you never change what you measure yourself against. You don't get a chance to editorialise. You don't get a chance to adjust and finagle, and decide that you really didn't intend to do that anyway, and re-adjust your objectives to make yourself look better.”

George Rathmann

Glossary

?Flywheel????????????1. Sustainable transformation that occurs in the 'Flywheel' cycle of build-up and breakthrough. The early days are hard and require consistency and discipline. It's hard to move initially, but momentum builds and is rewarded by breakthrough.

Gestalt ???????????????1. An organised whole that is perceived as more than the sum of its parts.

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Hedgehog Concept ??1. A simple, crystalline concept that flows from a deep understanding of the intersection of the following three questions:

1. What can you be the best in the world at?
2. What drives your economic engine?
3. What you are deeply passionate about?