Good to Great: Why Some Companies Make the Leap…and Others Don’t

Good to Great: Why Some Companies Make the Leap…and Others Don’t

 

In his renowned book, Good to Great: Why Some Companies Make the Leap…and Other Don’t, influential management consultant Jim Collins undertakes the difficult task of identifying the specific factors that separate merely good companies from the truly great ones. Collins’s opening chapter begins by outlining the metrics by which the subjective term “great” is operationally defined. Next, he identifies several companies that fit the criteria to help explain the transition factors that enable the leap from “good to great” in compelling detail. With no shortage of content to choose from, we have selected the following five points from the book to be the most important.

  • The Hedgehog Concept – Collins spends a chapter outlining this seemingly paradoxical principle that oftentimes is a simple yet overlooked approach that leads businesses to greatness. He elaborates by pointing to an ancient Greek metaphor of a fox and a hedgehog. The fox is a cunning, clever hunter who possesses a dynamic skill set, yet despite his impressive traits, is unable to catch the hedgehog, whose sole means of defense is his very simple, yet incredibly effective skill of rolling up into a ball.  Collins contends that the businesses that intrinsically do one thing better than anyone else, as opposed to doing many things well but nothing exceptional, are the ones able to make the leap from Good to Great.
  • Level 5 Leadership–Great leadership is a precursor of great success. While this seems blindingly obvious, Collins spends a chapter looking into the common characteristics of top-level management at the companies he has deemed “great.” He found that all of these leaders are at the top of a five level hierarchy that ranges from merely supervision to strategic executive decision-making. He also noted several commonalities among the Level 5 personality type; such as they are often intensely determined, yet profoundly humble. They are not driven as much by personal ego or individual financial gain as they are by long term stability and growth of the company. Collins also points out that the popular trend of bringing in a “celebrity CEO” to turn around a failing or stagnating company actually has a detrimental long term affect on the company.
  • First Who, Then What–Collins begins the third chapter of his book by explaining his hypothesis on “great” company strategy. He assumed when he began his research that companies would set a new goal and vision and thusly aligned personnel behind that new strategy. What he found was quite the opposite. Collins uses a bus analogy to convey this point- he says you must have the right people on the bus (and the wrong ones off it) before you figure out where to drive it. By focusing first on who, rather than what, companies leave themselves in a much better position to adapt to changing environments. If people get on the bus because of where is it going, what happens miles down the road if the bus needs to change course? If people board the bus because of who else is on it instead of its destination, changing directions will be much easier. Collins also argues that if you have the right people on the bus from the beginning, the problem of motivation dissipates. He concludes his analogy by saying that even if a bus with the wrong passengers does end up in the right direction, it still won’t be a great company: “great vision without great people is irrelevant.”  We need to go from good to great.
  • Confront the Brutal Facts–One of the key factors in making the leap from good to great is a company’s ability to identify and properly analyze information from within the company and the greater industry. The proficiency with which a company can keep up with changing market conditions and consumer preferences is directly correlated to its growth and success. Collins uses the extended example of A&P and Kroger in the American retail grocery industry to show how these are make-or-break factors for a company. Kroger recognized the changing consumer demands for a more modern grocery experience in the post WWII era, and took steps to meet these demands even though it meant a total overhaul of the company’s business model. A&P meanwhile, remained stagnant and became obsolete. Collins created a four step practice to ensure the recognition of emerging trends and consumer preferences, 1) Lead with questions, not answers 2) Engage in dialogue and debate, not coercion 3) Conduct autopsies, without blame 4) Build red flag mechanisms that turn information into information that cannot be ignored.
  • Technology Accelerators–Technology plays a crucial role in many other areas of contemporary business. The final important point made by Jim Collins in Good to Great is to not rely too heavily upon technology to solve core business problems. Collins contends that the use of technology is by no means a “cure all” for modern business, but rather a peripheral tool that, when used properly, can help facilitate key business functions. Collins goes on to refer to technology as an “enabler” of change, not the cause of it. Lastly, he advocates that businesses should only invest substantial resources into enhancing technological capacity if they are fundamentally necessary to their “hedgehog concepts.”

Though all of these points are relevant attributes of high performing companies, the overarching problem with this book is whether or not these factors can actually transform a business. The reader can’t help but get the impression that Jim Collins in his attempts to be analytical oftentimes is trying to fit a square peg in a round hole. What we disagree with most about Good to Great are the oversimplification of Collin’s assessments and the conservative picture that he paints of long-standing unilateral large corporations as the sole model for business culture.

If anyone were to pick up this book as a “how to” approach to better their company, they’d be sorely disappointed. The prototype that Collins considers for the “great” company is so contrived with obvious practices, that if you don’t already have great people, great leaders, a clear competitive advantage or a flawless mission statement then the “great” status is out of reach. But even when treating this book objectively, as a crude analysis of successful companies over the last 35 years, the ambiguous language that defines the key corporate personality traits is reminiscent of reading a horoscope where broad sweeping assertions can apply to anyone. A “Level-5” leader is determined but humble; the right people are rightly talented and should thusly be placed in the right positions. The hedgehog is passionate and steady, the flywheel, sturdy and progressive. Not only is this book wrought with platitudes, it also is plagued by confusing paradoxes. In chapter 4, Confronting the Brutal Facts means debating without coercion, troubleshooting without blame, and questions without answers. Chapter 6, A Culture of Discipline is no better, where individuals are entrepreneurial within their group, or personally empowered without ego. Collins consistently throws around terms to give impact to statements that have no one interpretation and even more so, little to no direction on tangible means for improvement.

The other complaint we had with this book is that it was written in a vacuum and has little relevance to a new generation where companies can transition from good to great overnight. Jim Collins seriously contributes to his lack of current affairs with a management technique that’s stuck in the 1980’s. In this author’s mind, corporations even without the right people or right management could still be at least “good” – an antiquated notion in 2011, even though this book was written in 2001. The 21st century “living company” has to constantly adapt to changing market demands where extended periods of growth and sustainability just don’t fit into the business model. The fact that two of the chosen companies for this book’s analysis, Fannie Mae and Circuit City don’t exist anymore proves, to borrow one of Collin’s ridiculous analogies, that eventually the fox finds a way to eat hedgehog.

For a business professional, specifically a marketer, Good to Great does contain a couple important take-away messages implicit in developing a long lasting brand. It should come as little surprise that present-day consumers can be transient in their immediate purchasing tendencies and respond heavily to trends. However, it would appear as though great companies develop long-standing relationships with their customers and create loyalty regardless of fads. In fabricating this relationship, businesses recognize that customers are not usually drawn to an item that doesn’t resonate with their lifestyle and therefore they will undergo a tireless process to understand and develop the customer’s needs. It’s this type of long-term engagement that’s talked about in Collin’s previous book, Built to Last (and chapter 9), which makes it seem impossible for a corporation to become marketing geniuses overnight. Establishing brand loyalty with customers requires a lot of initial research and assessment that might also include some failures and back-to-the-drawing board moments.

In order to establish this forward momentum flywheel, Collins is keen to suggest that business requires the right strategy of putting the pieces into to play before starting the game. Too often in business the requisite time and effort is not invested in the first place, when simply the notion of a good idea is suppose to guide the team. As business leaders of the future, I think Collins is urging us to surround ourselves with good company; after all, nobody wants to take a long bus ride sitting next to somebody they can’t stand, no matter how competent they may be. The totality of why some people are good leaders and why some companies surpass others is still largely a mystery to business researchers. In fact, if one were to diligently watch the news, it would appear as if we are actually relatively bad at business and still learning. Collins is speaking in generalities because he has to – the management world is obtuse at times and difficult to fully understand. In the end, the main contributions of this book are friendly reminders that everyone can appreciate; be good at what you’re good at, stay focused, work hard, and try to remain in good spirits. Work isn’t a life sentence; if you find that you don’t like it anymore, just hop off the bus.