Book - Good to great by Jim Collins

My take on the book

1. A book that should have been a blog post.
2. It is too long. The author belabours some points to the point of boredom.
3. There are some interesting historical facts about some companies. The anecdotes are interesting and educating.
4. As other people have noted in goodreads, the approach to research that the author takes seems like there could be a lot of room for confirmation bias.
5. Overall, its a decent book. Time spent on it is not entirely wasted.

Chapter 1. Good is the enemy of great

This is one of the key reasons why we have so little that becomes great.

We don’t have great schools, principally because we have good schools. We don’t have great government, principally because we have good government. Few people attain great lives, in large part because it is just so easy to settle for a good life. The vast majority of companies never become great, precisely because the vast majority become quite good - and that is their main problem.

This is not just a business problem. It is a human problem. So, this problem is worth looking into.

Can a good company become a great company? Or is the disease of “just being good” incurable?

It is possible to turn good to great in the most unlikely of situations.

Some of the things that will not necessarily NOT work in turning good companies to great.

1. Larger-than-life, celebrity leaders.
2. Specific forms of executive compensation.
3. Strategy. All companies have strategies. Not all of them turn into great companies.
4. They don’t just focus on what to do to become great. They focus equally on what not to do.
5. Technology and technology driven change. It might accelerate a transformation, but it cannot cause a transformation.
6. Mergers and acquisitions.
7. They don’t pay too much attention to managing change, motivating people or creating alignment. Under the right conditions, these things will take care of themselves.
8. They have no name, tag line, launch event, or program to signify their transformations. The transformations don’t happen by a revolutionary process.
9. They don’t necessarily have to be in great industries. Greatness is noit a function of circumstance. Greatness is largely a matter of conscious choice.

The transformation is a process of buildup followed by breakthrough, broken into three broad stages:

1. disciplined people,
   1. Level 5 leadership
   2. First who.. then what..
2. disciplined thought and
   1. Confront the brutal facts
   2. Hedgehog concept
3. disciplined action.
   1. Culture of discipline
   2. Technology accelerations

Within each of these three stages, there are two key concepts.

Chapter 2. Level 5 leadership

You can accomplish anything in life, provided that you do not mind who gets the credit. - Harry S Truman

Level 1: Highly capable individual: Makes productive contributions through talent, knowledge, skills, and good work habits. Level 2: Contributing team member: Contributes individual capabilities to the achievement of group objectives and works effectively with others in a group setting. Level 3: Competent manager: Organizes people and resources toward the effective and efficient pursuit of predetermined objectives. Level 4: Effective leader: Catalyzes commitment to and vigorous pursuit of a clear and compelling vision, stimulating higher performance standards. Level 5: Level 5 executive: Builds enduring greatness through a paradoxical blend of personal humility and prefessional will.

What is the difference between a good leader and a good soldier? A good leader does not blindly acquiese to authority and is strong, driven, talented that they build their own arenas and turn them into one of the very best in the world. Yet each team member must also have the ability to meld that strength into doing whatever it takes to make the company great.

The “leadership is the answer to everything” perspective is the modern equivalent of the “God is the answer to everything” perspective that held back our scientific understanding of the physical world in the Dark ages. People ascribe everything that they don’t understand to God or to leadership.

Good leaders channel their ego needs away from themselves and into the larger goal of building great things. Its not that they don’t have no ego or self-interest. Indeed, they are incredibly ambitious - but their ambition is first and foremost for the institution, not themselves.

Those who work with or wrote about good leaders continually use words like quiet, humble, modest, reserved, shy, gracious, mild-mannered, self-effacing, understated, did not belive his own clippings, and so forth.

In documentation about companies that make the good-to-great transition, we rarely find details that focus on the good-to-great CEOs.

The exemplify the difference between “the show horse and the plow horse”.

The two sides of good leadership:

Professional will	Personal humility
Creates superb results, a clear catalyst	Demonstrates a compelling modesty, shunning public adulation; never boastful
Demonstrates an unwavering resolve to do whatever must be done to product the best long-term results, no matter now difficult	Acts with quiet, calm determination; relies principally on inspired standards, not inspiring charisma, to motivate
Sets the standard of building an enduring great company, will settle for nothing less	Channels ambition into the company, not the self; sets up successors for even greater success in the next generation
Looks in the mirror, not out the window, to apportion responsibility for poor results, never blaming other people, external factors, or bad luck	Looks out the window, not in the mirror, to apportion credit for the success of the company - to other people, external factors, and good luck.

Ironically, the animus and personal ambition that often drive people to positions of power stand at odds with the humility required of good leaders. When you combine that irony with the expectations of people like boards of directors, media, etc. who think that ego-centric leaders are needed to make an organization great, we understand why good leaders rarely appear at the top of our institutions.

How to become a good leader?

Leading with the other disciplines described in this book.

Chapter 3. First who.. then what

The old adage “People are your most important asset” turns out to be wrong. People are not your most important asset. The right people are.

There are going to be times when we can’t wait for somebody. Now, you’re either on the bus or off the bus. - Ken Kesey, from The Electric Kool-Aid Acid Test, by Tom Wolfe

Setting a new direction, a new vision and strategy for the company, and then getting people committed and aligned behind that new direction - is not the way good to great transformations happen.

Instead this is how it works. “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.”

If people join the bus primarily because of where it is going, what happens if you get ten miles down the road and you need to change direction?

If you have the right people on the bus, the problem of how to motivate and manage people largely goes away. If you have the right executives on the bus, they will do everything within their power to build a great company, not because of what they will “get” for it, but because they simply cannot imagine settling for anything less. Their moral code requires building excellence for its own sake.

If you have the wrong people, it doesn’t matter whether you discover the right direction. Great vision without great people is irrelevant.

The only way to deliver to the people who are achieving is to not burdern them with the people who are not achieving.

How to be rigorous rather than ruthless when it comes to hiring and keeping people:

1. When in doubt, don’t hire - keep looking
   1. The ultimate throttle on growth is not markets, or technology, or competition, or products. It is the ability to get and keep enough of the right people.
   2. Every minute devoted to putting the proper person in the proper slot is worth weeks of time later.
2. When you know you need to make a people change, act.
   1. Letting the wrong people hang around is unfair to all the right people, as they inevitably find themselves compensating for the inadequacies of the wrong people. Worse, it can drive away the best people. Strong performers are intrinsically motivated by performance, and when they see their efforts impeded by carrying extra weight, they eventually become frustrated.
   2. How do you know when you know? Two key questions:
      1. If it were a hiring decision (rather than a “should this person get off the bus?” decision), would you hire the person again?
      2. If the person came to tell you that he or she is leaving to pursue an exciting new opportunity, would you feel terribly disappointed or secretly relieved?
3. Put your best people on your biggest opportunities, not your biggest problems
   1. Managing your problems can only make you good, whereas building your opportunities is the only way to become great.
   2. When you decide to sell off your problems, don’t sell off your best people. If you create a place where the best people always have a seat on the bus, they are more likely to support changes in direction.

Adhrence to the idea of “first who” might be the closest link between a great company and a great life. For no matter what we achieve, if we don’t spend the vast majority of our time with people we love and respect, we cannot possibly have a great life. But if we spend the vast majority of our time with people we love and respect - people we really enjoy being on the bus with and who will never disappoint us - then we will almost certainly have a great life, no matter where the bus goes.

Chapter 4. Confront the brutal facts. Yet never lose faith.

Confront the brutal facts - Yet never lose faith

Chapter 5. The hedgehog concept

1. The Hedgehog and the Fox

In a world overrun by management faddists, brilliant visionaries, ranting futurists, fearmongers, motivational gurus, and all the rest, it is refreshing to see a company succeed brilliantly by taking one simple concept and just doing it with excellence and imagination.

The three circles

Strategy per se did not distinguish the good-to-great companies from the other ones. Both sets of companies had strategic plans. What is different about the strategies of the good-to-great companies is, they were simple, simple, simple ideas. They attained a very simple concept that they used as a frame of reference for all their decisions, and this understanding coincided with breakthrough results.

A Hedgehog concept is a simple, crystalline concept that flows from deep understanding about the intersection of the following three circles.

1. What you can be the best in the world at (and, equally important, what you cannot be the best in the world at). This discerning standard goes far beyond core competence. Just because you possess a core competence does not necessarily mean you can be the best in the world at it. Conversely, what you can be the best at might not even be something in which you are currently engaged.
2. What drives your economic engine. All the good-to-great companies attained piercing insight into how to most effectively generate sustained and robust cash flow and profitability. In particular, they discovered the single denominator - profit per x - that had the greatest impact on their economics.
3. What you are deeply passionate about. The good-to-great companies focused on those activities that ignited their passion. The idea here is not to stimulate passion but to discover what makes you passionate.

To have a fully developed Hedgehog concept, you need all three circles. If you make a lot of money doing things at which you could never be the best, you will only build a successful company, not a great one. If you become the best at something, you will never remain on top if you don’t have intrinsic passion for what you are doing. Finally, you can be passionate all you want, but if you can’t be the best at it or it doesn’t make economic sense, then you might have a lot of fun, but you will not produce great results.

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. The distinction is absolutely crucial.

What is the difference between a “core business” and a Hedgehog concept? Just because something is your core business - just because you have been doing it for years or perhaps even decades - does not necessarily mean that you can be the best in the world at it. And if you cannot be the best in the world at your core business, then your core business cannot form the basis of your Hedgehog concept.

You can have competence at something but not necessarily have the potential to be the best in the world at it. To use an analogy, consider the young person who gets straight A’s in high school calculus and scores high on the math part of the SAT, demonstrating a core competence at mathematics. Does that mean the person should become a mathematician? Not necessarily. Suppose now that this young person goes off to college, enrolls in math courses, and continue to earn A’s, yet encounters people who are genetically encoded for math. It could take this person three hours to finish the final. Then there were those who finished the same final in thirty minutes and earned an A+. Their brains are just wired differently. This person could be a very competent mathematician, but soon realize he/she could never be one of the best. That young person might still get pressure from parents and friends to continue with math, saying, “But you are so good at it.” Just like our young person, many people have been pulled or have fallen into careers where they can never attain complete mastery and fulfillment. Suffering from the curse of competence but lacking a clear Hedgehog concept, they rarely become great at what they do.

The Hedgehog concept requires a severe standard of excellence. It is not just about building on strength and competence, but about understanding what your organization truly has the potential to be the very best at and sticking to it.

To go from goo to great requires transcending the curse of competence. It requires the discipline to say, “Just because we are good at it - just because we are making money and generating growth - does not necessarily mean we can become the best at it.” The good-to-great companies understood that doing what you are good at will only make you good; focusing solely on what you can potentially do better than any other organization is the only path to greatness.

If you successfully apply these ideas, but then stop doing them, you will slide backward, from great to good, or worse. The only way to remain great is to keep applying the fundamental principles that make you great.

“Growth” is not a hedgehog concept.

Rather, if you have the right hedgehog concept and make decisions relentlessly consistent with it, you will create such momentum that your main problem will not be how to grow, but how not to grow too fast.

The hedgehog concept is a turning point in the journey from good to great. In most cases, the transition date follows within a few years of the Hedgehog concept.

You cannot jump right to it

Despite its vital importance (or, rather, because of its vital importance), it would be a terrible mistake to thoughtlessly attempt to jump right to a hedgehog concept. You cannot just go off-site for two days, pull out a bunch of flip charts, do breakout discussions, and come up with a deep understanding. Well, you can do that, but you probably will not get it right.

1. The difference between knowing and understanding
2. Learn with deliberate practice

Chapter 6. A culture of discipline

All companies have a culture, some companies have discipline, but few companies have a culture of discipline. When you have disciplined people, you don’t need hierarchy. When you have disciplined thought, you don’t need bureaucracy. When you have disciplined action, you don’t need excessive controls. When you combine a culture of discipline with an ethic of entrepreneurship, you get the magical alchemy of great performance.

The purpose of bureaucracy is to compensate for incompetence and lack of discipline - a problem that largely goes away if you have the right people in the first place. Most companies build their bureaucratic rules to manage the small percentage of wrong people on the bus, which in turn drives away the right people on the bus, which then increases the percentage of wrong people on the bus, which increases the need for more bureaucracy to compensate for incompetence and lack of discipline, which then further drives the right people away, and so forth.

Build a culture full of people who take disciplined action within the three circles, fanatically consistent with the hedgehog concept. This means the following.

1. Build a culture around the idea of freedom and responsibility, within a framework.
2. Fill that culture with self-disciplined people who are willing to go to extreme lengths to fulfill their responsibilities. They will “rinse their cottage cheese”.
3. Don’t confuse a culture of discipline with a tyrannical disciplinarian.
4. Adhere with great consistency to the hedgehog concept, exercising an almost religious focus on the intersection of the three circles. Equally important, create a “stop doing list” and systematically unplug anything extraneous.

Freedom and responsibility within the framework of a highly developed system. The good to great companies built a consistent system with clear constraints, but they also gave people freedom and responsibility within the framework of that system. They hired self-disciplined people who didn’t need to be managed, and then managed the system, not the people.

Disciplined action without self-disciplined people is impossible to sustain, and disciplined action without disciplined thought is a recipe for disaster. The transition begins not by trying to discipline the wrong people into the right behaviors, but by getting self-disciplined people on the bus in the first place. Next, there is disciplined thought. Most importantly, we need the discipline to persist in the search for understanding until we get our hedgehog concept. Finally, there is disciplined action. The order is important.

The good-to-great companies at their best followed a simple mantra: “Anything that does not fit with our hedgehog concept, we will not do. We will not launch unrelated businesses. We will not make unrelated acquisitions. We will not do unrelated joint ventures. If it doesn’t fit, we don’t do it. Period.”

A great company is much more likely to die of indigestion from too much opportunity than starvation from too little. The challenge becomes not opportunity creation, but opportunity selection. It takes discipline to say “No, thank you” to big opportunities. The fact that something is a “once-in-a-lifetime” opportunity is irrelevant if it doesn’t fit within the three circles.

The idea of aligning worker interests with management and shareholder interests through an egalitarian meritocracy largely devoid of class distinctions was central to Nucor’s success. Ken Iverson writes about his in his 1998 book “Plain Talk”:

Inequality still runs rampant in most business corporations. I’m referring now to hierarchical inequality which legitimizes and institutionalizes the principle of “We” vs “They”… The people at the top of the corporate hierarchy grant themselves privilege after privilege, flaunt those privileges before the men and women who do the real work, then wonder why employees are unmoved by management’s invocations to cut costs and boost profitability… When I think of the millions of dollars spent by people at the top of the management hierarchy on efforts to motivate people who are continually put down by that hierarchy, I can only shake my head in wonder.

Stop doing list

In a good-to-great transformation, budgeting is a discipline to decide which arenas should be fully funded and which should not be funded at all. In other words, the budget process is not about figuring out how much each activity gets, but about determining which activities best support the hedgehog concept and should be fully strengthened and which should be eliminated entirely.

The most effective investment strategy is a highly undiversified portfolio when you are right.

Chapter 7. Technology accelerations

When used right, technology becomes an accelerator of momentum, not a creator of it. The good-to-great companies never began their transitions with pioneering technology, for the simple reason that you cannot make good use of technology until you know which technologies are relevant. And which are those? Those - and only those - that link directly to the three intersecting circles of the hedgehog concept.

Technology becomes of prime importance to companies, but after they discover their hedgehog concept and after they reach breakthrough. Technology is usually of what they call “the second wind” of the transformation and technology acts as an accelerating factor. The pioneering application of technology usually comes late in the transition and never at the start.

People don’t know what they don’t know. And they are always afraid that some new technology is going to sneak up on them from behind and knock them on the head. They don’t understand technology, and many fear it. All they know for sure is that technology is an important force of change, and that they’d better pay attention to it.

Fully 80% of the good-to-great executives we interviewed didn’t even mention technology as one of the top five factors in the transition. Furthermore, in the cases where they did mention technology, it had a median ranking of fourth, with only two executives of 84 interviewed ranking it number one.

The prime factors were the consistency of the company, and their ability to project its philosophies throughout the whole organization, enabled by their lack of layers and bureaucracy.

Studies support the idea that technological change does not play the principal role in the decline of once-great companies (or the perpetual mediocrity of others). Certainly, technology is important - you can’t remain a laggard and hope to be great. But technology itself is never a primary cause of either greatness or decline.

Throughout business history, early technology pioneers rarely prevail in the end. VisiCalc, for example, was the first major personal computer spreadsheet. Where is VisiCalc today? Do you know anyone who uses it? And what of the company that pioneered it? Gone; it doesn’t even exist. VisiCalc eventually lost out to Lotus 1-2-3, which itself lost out to Excel. Lotus then went into a tailspin, saved only by selling out to IBM. Similarly, the first portable computers came from now-dead companies, such as Osborne computers. Today, we primarily use portables from companies such as Dell and Sony.

This pattern of the second (or third or fourth) follower prevailing the early trailblazers shows up through the entire history of technological and economic change. IBM did not have the early lead in computers. It lagged so far behind Remington Rand (which had the UNIVAC, the first commercially successful large-scale computer) that people called its first computer “IBM’s UNIVAC”. Boeing did not pioneer the commercial jet. De Havilland did with the Comet, but lost ground when one of its early jets exploded in midair, not exactly a brand-building moment. Boeing, slower to market, invested in making the safest, most reliable jets and dominated the airways for over three decades. GE did not pioneer the AC electrical system; Westinghouse did. Palm Computing did not pioneer the personal digital assistant; Apple did, with its high-profile Newton. AOL did not pioneer the consumer Internet community; CompuServe and Prodigy did.

We could make a long list of companies that were technology leaders but that failed to prevail in the end as great companies. It would be a fascinating list in itself, but all the examples would underscore a basic truth: Technology cannot turn a good enterprise into a great one, nor by itself prevent disaster.

History teaches this lesson repeatedly. Consider the United States debacle in Vietnam. The United States had the most technologically advanced fighting force the world has ever known. Super jet fighters. Helicopter gunships. Advanced weapons. Computers. Sophisticated communications. Miles of high-tech border sensors. Indeed, the reliance on technology created a false sense of invulnerability. The Americans lacked not technology, but a simple and coherent concept for the war, on which to attach that technology. It lurched back and forth across a variety of ineffective strategies, never getting the upper hand.

Meanwhile, the technologically inferior North Vietnamese forces adhered to a simple, coherent concept: a guerrilla war of attrition, aimed at methodically wearing down public support for the war at home. What little technology the North Vietnamese did employ, such as the AK 47 rifle (much more reliable and easier to maintain in the field than the complicated M-16), linked directly to that simple concept. And in the end, as you know, the United States-despite all its technological sophistication-did not succeed in Vietnam. If you ever find yourself thinking that technology alone holds the key to success, then think again of Vietnam.

Indeed, thoughtless reliance on technology is a liability, not an asset. Yes, when used right - when linked to a simple, clear, and coherent concept rooted in deep understanding - technology is an essential driver in accelerating forward momentum. But when used wrong-when grasped as an easy solution, without deep understanding of how it links to a clear and coherent concept-technology simply accelerates your own self-created demise.

Technology and the fear of being left behind

If you had the opportunity to sit down and read all 2,000+ pages of transcripts from the good-to-great interviews, you’d be struck by the utter absence of talk about “competitive strategy.” Yes, they did talk about strategy, and they did talk about performance, and they did talk about becom ing the best, and they even talked about winning. But they never talked in reactionary terms and never defined their strategies principally in response to what others were doing. They talked in terms of what the were trying to create and how they were trying to improve relative to a absolute standard of excellence.

They are just never satisfied. They can be delighted, but never satisfied.

Those who built the good-to-great companies weren’t motivated by fear. They weren’t driven by fear of what they didn’t understand. They weren’t driven by fear of looking like a chump. They weren’t driven by fear of watching others hit it big while they didn’t. They weren’t driven by the fear of being hammered by the competition.

No, those who turn good into great are motivated by a deep creative urge and an inner compulsion for sheer unadulterated excellence for its own sake. Those who build and perpetuate mediocrity, in contrast, are motivated more by the fear of being left behind.

Chapter 8. The flywheel and the doom loop

There is no single defining action, no grand program, no one killer innovation, no solitary lucky break, no miracle moment. Rather, the process (of turning great) resembles relentlessly pushing a giant heavy flywheel in one direction, turn upon turn, building momentum until a point of breakthrough, and beyond.

Revolution means turning the wheel. - Igor Stravinsky

No matter how dramatic the end result, the good-to-great transformations never happen in one fell swoop. There was no single defining action, no grand program, no one killer innovation, no solitary lucky breat, no wrenching revolution. Good to great comes about by a cumulative process - step by step, action by action, decision by decision, turn by turn of the flywheel - that adds up to sustained and spectacular results.

You can’t disset this thing into a series of nice little boxes and factors, or identify the moment of ‘Aha!’ or the ‘one big thing’. It was a whole bunch of interlocking pieces that built one upon another.

Lasting transformations from good to great follow a general pattern of buildup followed by breakthrough. In some cases, the buildup-to-breakthrough stage takes a long time, in other cases, a shorter time.

How do they overcome resistance to change and get people lined up? “Creating alignment” would be one of the top challenges faced by executives working to turn good into great. “How do we get the boat turned?” “How do we get people committed to the new vision?” “How do we motivate people to line up?” “How do we get people to embrace change?”

However, the question of alignment is not a key challenge faced by the good-to-great leaders. They got incredible commitment and alignment - they artfully manage change - but they never really spend much time thinking about it. It was utterly transparent to them. Under the right conditions, the problems of commitment, alignment, motivation, and change just melt away. They largely take care of themselves.

Credit for the terms buildup and breakthrough go to David S. Landes and his book “The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor”. Landes writes: “The question is really twofold. First, why and how did any country break through the crust of habit and conventional knowledge to this new mode of production? Turning to the fist, I would stress buildup - the accumulation of knowledge and know-how; and breakthrough - reaching and passing thresholds.”

There are some highly prevalent patterns for stopping flywheels or get doom loops started:

1. the misguided use of acquisitions
2. the selection of leaders who undid the work of previous generations. Sometimes, new leaders step in, stop an already spinning flywheel, and throw it in an entirely new direction.

Chapter 9. From good to great to built to last

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