Take Your Company From Good To Great

Good to Great: Why Some Companies Make the Leap... and Others Don't became a worldwide success when it was published in 2001 and remains one of the best-known business books published. In the book, Collins explains how companies of that era transitioned from being average to becoming great companies. He gives real-world examples from companies like Wells Fargo, Pitney Bowes, and nine others to illustrate his points. Here are some of the key points we think still ring true for companies today:

Disciplined People

Collins warns against bringing in “celebrity CEOs” to stimulate change. Instead, it’s better to find someone who is personally invested in the success of the company. A celebrity CEO is looking to get out as soon as possible and move on to their next conquest; a good CEO recognizes that while much depends on them, at the end of the day, it’s not about them. To facilitate a transition from good to great, bring in a Level 5 Leader, or an executive who possesses both genuine personal humility and intense professional will.

Once you have the right leadership in place, you need to secure high-quality, high-talent personnel.  It may seem counterintuitive, but you want to figure out first who, then what. To use Collins’ metaphor, you want to get the right people on the bus before you decide where to drive it. As Collins points out, you want to make sure that if your bus has to suddenly change course, its driver and passengers will want to remain on board.

With the right people in the right positions, many common management problems will take care of themselves.  For example, instead of using valuable time and resources to motivate employees, Collins argues that you should hire people who are already motivated to do great work. Collins also emphasizes the importance of shrewdness in making personnel decisions - it’s more important to find an absolutely suitable candidate than to speed up the hiring process, and employees and managers who are starting to fail should be moved to new positions. Those who are not actively contributing to the success of the company should be removed.

Disciplined Thought

One common pitfall among companies who never make it to great is trying to do too many things at once. Great companies do one thing, and they do that thing well. In order to figure out what your company’s “one thing” is, you need to confront what Collins calls “the brutal facts.” Ask yourself: 1) What you can do better than anyone else in the world (and what you will never be the best at); 2) What will make you money; and 3) What you are deeply passionate about. While you may not like the answers to these questions, it’s important to answer them truthfully - whatever lies in the overlap of these circles is the concept you should pursue, or your “hedgehog concept,” so named after an ancient parable which compares the hedgehog, who knows a lot about one thing, to the fox, who knows a little about lots of things. Collins asserts that great leaders - and great companies - are hedgehogs.

Collins gives Wells Fargo as an example - they had to come to terms with the fact that they would never be great at global banking, despite trying to operate as a global bank for decades. Instead, they realized they could be pioneers in electronic banking, and decided to pursue that route instead, making the leap from good to great.

Keep in mind that you can always change and improve to face these brutal truths, so never give up hope. Collins calls this the Stockdale paradox, named after Admiral James Stockdale who was held as a prisoner of war for eight years during the Vietnam War. While Stockdale had unbelievable faith that things would work out, he said that it was always the most optimistic of his fellow POW’s who failed to make it out alive - because they refused to confront the reality of their situation. The lesson here is to never give up hope, but to make sure you don’t lose touch with reality, either.

Disciplined Action

After asking the hard-hitting questions, it’s time to put a plan into motion. Though instead of focusing on your to-do list, Collins suggests making a stop-doing list. Think about everything your company is doing that doesn’t fit in with your concept, and pull the plug. Avoid reactive decision-making, following short-lived trends, frequent changes in leadership and personnel, and loss of morale. Collins associates these phenomena with disappointing results and calls this “the doom loop.” You must consistently make decisions and take actions that reinforce your company’s mission to initiate positive momentum. Keep up with industry trends and use technology to accelerate growth - but don’t rely on technology alone to lead you to success.

Collins describes the level of commitment Dave Scott, the first six-time Ironman Triathalon World Champion, applies to his training. Even though he burned 5,000 calories a day, he would still rinse his cottage cheese to get as much fat off it as possible. Like Dave Scott, people who find every small way to be better than the competition - and don’t see this level of discipline as a hassle - will be the most successful. 

Your management and employees must be on board with rinsing the cottage cheese as well. Every person in the company should be personally invested in its success. In order to foster this level of engagement, it’s necessary to empower your employees with the appropriate authority to make decisions and act on them. Even the most highly engaged employees will become frustrated if they don’t have the ability to channel their energy into actionable goals.

 Image courtesy of asaecenter.org

Image courtesy of asaecenter.org

Final Thoughts

Collins describes the feeling of being part of a company that’s making the leap from good to great as the flywheel effect. The flywheel, a massive metal disk that weighs about 25 tons, is your company. Your job is to get the flywheel moving. At the beginning, you’ll need to make a tremendous effort to get it moving, but eventually the momentum of the heavy wheel will kick in your favour. You won’t need to push any harder, and the flywheel will keep accelerating. Taking the steps outlined by Collins’ book will have an additive effect; these small steps will act on each other like compound interest. While it may not seem like one step is particularly important, know that it’s part of a much larger effort to create momentum for your company.