5 Lessons From Good To Great by Jim Collins
One of the reasons I purchased “Good to Great” by Jim Collins was its popularity within my circle. Good to Great was one of those books I kept seeing on blogs, articles, book recommendation platforms. Well, you can say peer pressure got to me; yes, it doesn’t end in your teenage years. After reading it, I can say it was a good, scrap that, was a great decision.
Before Good to Great, Jim Collins and Jerry Porras co-authored Built To Last. In “Built to Last’’, Jim and his co-author shared their research findings on the characteristics or habits that “great companies” share in common. After being challenged by Bill Meehan, a McKinsey & Co executive, about the seeming relevance of the book, Jim realised that his book Built To Last exclusively focused on companies that were, for the most part, great companies. What about companies that are not great? Can these companies become great companies? If so, how?
To answer the above questions, Jim put together a research team and embarked on a five-year research effort, a journey to explore the inner workings of good to great companies. Good To Great is about companies that became and stayed great for at least fifteen years.
Using market returns as the yardstick, Jim and his team defined the good-to-great companies as companies that attained extraordinary results, averaging cumulative stock returns 6.9 times the general market in the fifteen years following their transition points. Simply put, they were highly profitable than other companies in the same market.
In this blog post, I share a summary of my five top lessons from Jim Collins’ book Good to Great. Jim’s book is not only for entrepreneurs; I found it extremely helpful in my personal life. After all, you are your own brand before any brand, and you deserve to make your life great.
Lesson 1: Level Five Leadership
Contrary to Jim’s initial belief that a company’s success does not rely solely on its leaders, the data from his research showed that we can’t overlook the role of leadership. With the right kind of leadership, Level Five Leadership, a company can become a great company.
Level 5 leaders are executives who create an enduring legacy of greatness through a paradoxical blend of humility and professional determination. Such leaders do not let their ego dictate their decisions. It’s not that such leaders do not have an ego or self-interest, but rather, their ambition is above all for the company’s success, not for themselves.
“You can accomplish anything in life, provided that you do not mind who gets the credit.” ~Harry S. Truman.
On the other hand, comparison companies (companies that did not become great) that turned to larger-than-life celebrity leaders didn’t make the transition to becoming great companies. Such leaders are more driven by their ego and reputation, causing them to fail in setting up the company for success. They may succeed in the short run, but it’s rarely sustained either during their rein or after they leave.
“Because success without a successor is failure”. ~Myles Munroe
Level five leaders are much more likely than the comparison leaders to attribute any success to factors outside themselves and attribute any shortcomings to themselves (when appropriate). The CEOs of the comparison companies, on the other hand, tend to blame any failings on ‘bad luck’ rather than to accept responsibility, preferring to blame anything beyond themselves.
Is it possible to become a level 5 leader? Yes, you can become a level 5 leader. While it might be nature for some, you can nurture it through self-reflection, personal mentors, teachers, coaches, and learning from significant life experiences.
Lesson #2: First Who, Then What
Think of your business/organisation/company as a bus on a journey to drive this point through. Companies that make it to greatness start by getting the right people on the bus before deciding what path to drive on.
While strategy is important for a company’s growth, great companies did not start off by focusing on it; instead, their primary focus was to get the right people on the team (and get rid of underperforming employees).
Focusing on “who” first as opposed to “what” increases your company’s adaptability quotient (AQ) vis-à-vis the fast-changing business landscape where “best practices” are increasingly being rendered less effective by the ever-shifting demands of the real world. The right people don’t need to be micromanaged or encouraged to do a good job; it is ingrained within them. They will have faith in the company because they believe in the value of their teammates and the broader “why” of the organisation.
If a company is already established and a couple of employees do not seem to match the company’s “standards”, the trick is not to be ruthless but instead, be rigorous. Before getting someone off the bus entirely, level 5 leaders will try changing their seats on the bus, and in most cases, such changes achieve better results and fulfilment.
Lesson #3: Always Confront The Brutal Facts
There is a phenomenon in psychology called the “Galatea Effect”, which says that a person’s expectations about themselves determine their performance. In other words, we create self-fulfilling prophecies. The problem is that the Galatea effect only goes so far. Yes, we are more likely to do well in a presentation if we have a positive mindset, but greatness is not achieved just by wishing.
According to Jim’s findings, great companies pivoted into greatness thanks to a series of excellent decisions that were expertly executed, and which accumulated one on top of the other. This was due, in large part, to how these companies faced the brutal facts about themselves head-on. Instead of merely setting out for greatness, they continually informed the path to greatness with truths about how they were performing, even if it was hard to swallow.
In confronting brutal facts, it is vital to create a climate where truth thrives. Here are four ways to create a culture where truth is heard:
- Lead with questions, not answers. Leaping from good to great does not mean coming up with the answers and then motivating everyone to follow your messianic vision. It means having the humility to grasp the fact that you do not yet understand enough to have the answers and then to ask the questions that will lead to the best possible insights.
It doesn’t make sense to hire smart people and then tell them what to do. We hire smart people so they can tell us what to do ~Steve Jobs
2. Engage in dialogue and debate, not coercion. Level 5 leaders create an environment where dialogues and debates are welcome. They didn’t use discussion as a sham process to let people “have their say” so that they could “buy-in” to a predetermined decision. The process was more like a heated scientific debate, with people engaged in a search for the best answers
3. When mistakes happen, conduct autopsies without blame. In doing so, you go a long way toward creating a climate where the truth is heard. If you have the right people on the bus, you will seldom need to blame but only search for understanding and learning.
4. Build “red flag” mechanisms. By red a flag mechanism means creating an environment where employees are entitled to give critical feedback without judgment on any issue concerning them, equipping them with a metaphorical “red flag” that they can raise at any time.
On your journey to greatness, you will certainly face significant adversity along the way. Still, by confronting the brutal facts, this adversity will leave you stronger and more resilient, not weaker and more discouraged. 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.
Lesson #4 Operate Within Your Hedgehog Concept
I found this to be the most insightful lesson from the book and decided to read more on it. Metaphorically, the companies that became great are like hedgehogs, simple, dowdy creatures with “one core strategy” and stuck to it. On the other hand, the comparison companies (those that did not) are like foxes; crafty, cunning creatures that know many things yet lack consistency.
The fox has many tricks. The hedgehog has but one. But that is the best of all. ~ Ralph Waldo Emerson
Transforming from good to great requires you to find your hedgehog concept. Identify an area within your organisation’s market where you can become the best in the world. This single-function will become your selling point, and you will repeat this function over and over. Successful companies can identify an effective hedgehog concept and consistently apply this concept to their organisation.
Identifying and aligning with your startup’s hedgehog concept flows from a thorough and objective understanding of:
- What you can (and cannot) be best in the world at. Not what you would like to be, but what you can be best at.
- What “drives your economic engine”,, i.e. how value is created. Ideally, this should be crystallised into a single financial measure.
- What you are deeply passionate about. Not what you would like to be passionate about, or what you “ought” to be passionate about, but what innate passion you can draw on.
When a company can find a unifying concept that links all three of these factors, that is its Hedgehog Concept. More often than not, good-to-great companies started out as not being the best in the world at anything. However, they all, in turn, began the search for their defining Hedgehog Concept, and even though, on average, it took them four years to find this defining concept, they never wavered from it once they discovered it.
Lesson #5: Implement A Culture Of Discipline
Very few startups become great companies, in large, because they respond to growth and success the wrong way. As they begin to experience some substantial level of success and growth, they begin to trip over their success — too many people, customers and products to manage. Forgetting that their success was initially fuelled by creativity, imagination, bold moves into uncharted waters, and visionary zeal, they (most often under pressure from the board) respond to growth by bringing in a “professional manager.”
Processes, procedures, checklists, and all the rest begin to sprout up like weeds. What was once an egalitarian environment gets replaced with a hierarchy. Chains of command appear for the first time. Reporting relationships become clear, and an executive class with special perks begins to appear. “We” and “they” segmentations appear — just like in a real company. The professional managers finally rein in the mess. They create order out of chaos, but they also kill the entrepreneurial spirit.
So, how does a company manage to maintain an entrepreneurial spirit while also not growing into something entirely unwieldy? By implementing a culture of discipline. Here is a four-step process to encourage a culture of discipline in the workplace:
- Build a culture around the idea of freedom and responsibility within a framework.
“Freedom is only part of the story and half the truth…. That is why I recommend that a Statue of Liberty be supplanted by a Statue of Responsibility”. ~ Viktor E. Frankl”
2. Fill that culture with self-disciplined people who are willing to go to extreme lengths to fulfil 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.
Bonus Lesson: Only Adopt Technology That Aligns With Your Hedgehog
With new technologies sprouting up every day, it is easy to get lost in choosing the right one for your business. According to Jim, Great companies have lived through incredible technological revolutions such as the .com boom and the advent of the personal computer. But instead of being defeated by such radical advances, they have endured. How? Because rather than panicking and choosing to adapt for adaptation’s sake, they have chosen to think differently about technology. They took the time to consider how such technological advances could best serve their Hedgehog Concept.
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?”
- If yes, then the company needs to become a pioneer in the application of this technology.
- If not, then is it worthwhile using this technology at all?
- If yes, then the company need not become the world leader in this piece of technology; parity is what you should aim for.
- If not, then the technology is irrelevant.