Friday, May 06, 2005

Good to Great

How come I didn't write about this book yet! I read this book a few years ago, and it was by far the best Business book I've read. Good to Great: Why some companies make the leap... and others don't is simply a great book.

Jim Collins, the author of the book assembled a team of 20 researchers that worked for 5 years researching the factors that make some select companies great. The definition of great used in the book is when a company consistently outperforms the market by atleast 4 times for a continuous period of 15 years. Only 11 companies made the cut from a total of 1,435 companies in the initial list. The companies that made the cut to be the subject of the research fit a criteria set by the research team, a good-to-great criteria. The research team have also selected direct comparison companies for each of the good-to-great companies in order to conduct direct comparative analysis to be able to identify the distinguishing variables that account for the transition from good to great.

So what are the distinguishing factors that resulted in the 11 companies making the leap from good to great, in comparison to those companies that remained just good?

1. Level 5 Leadership

We all learn about the importance of good leadership, but what constitutes great leadership that transitions a company from good to great? The great companies had leaders who displayed compelling modesty, were self-effacing and understated. The comparison companies had a very I-centric style, while the good-to-great leaders had compelling modesty and didn't talk about themselves.

It is not just about humility and modesty however, but its equally about ferocious resolve and diligent determination to do whatever needs to be done to make the company great. Level 5 leaders attribute success to factors other than themselves, and when thing go poorly, they look in the mirror and blame themselves, taking full responsibility.

The book notes a great irony, where "the animus and personal ambition that often drives people to positions of power stand at odds with the humility required for Level 5 leadership. When you combine that irony with the fact that boards of directors frequently operate under the false belief that they need to hire a larger-than-life, egocentric leader to make an organization great, you can quickly see why Level 5 leaders rarely appear at the top of our institutions."

2. First Who...Then What

Its not just getting the right people on board, "Its getting the right people on the bus, and the wrong people off the bus before you figure out where to drive it." None of the great companies used the 'genius with a thousand helpers' model.

In determining 'the right people', the good-to-great companies placed great weight on character attributes than on specific educational background, specialized knowledge, or work experience. They viewed these traits as more learnable. They find out who the people they're hiring are by asking them why they made decisions in their life. The best people don't need to be managed. Guided, taught, led --yes. But not tightly managed.

3. Confronting the Brutal Facts

Exerting honest and diligent efforts to determine the truth of your situation, results in having the right decisions self-evident. Giving people the opportunity to be heard, and, ultimately, allowing the truth to be heard is crucial for good decisions. Charisma can be as much a liability as an asset, as the strength of the leadership personality can deter people from bringing that leader the facts.

Every good-to-great company faced significant adversity along the way to greatness, of one sort or another, and in every case, management responded with a powerful psychological duality. They stoically accepted the brutal facts of reality, and at the same time maintained an unwavering faith in the endgame, and a commitment to prevail as a great company despite the brutal facts.

4. The Hedgehog Concept

Simple strategies win. But its not just any random simple idea. A Hedgehog concept is a "simple, crystalline concept that flows from deep understanding" about the intersection of three circles; 1) what you can be the best in the world at, 2) what drives your economic engine (how to most effectively generate sustained and robust cash flow and profitability), and 3) what are you deeply passionate about. Recognizing a Hedgehog conept is an inherently iterative process, not an event.

The key is to understand what an organization can be the best in the world at, as well as what it cannot be the best at --not what it wants to be the best at. The Hedgehog concept is an understanding, not a goal or strategy.

5. A Culture of Discipline

Having the right people reduces the need for bureaucracy, since the purpose of bureaucracy is to compensate for incompetence and lack of discipline. A culture of discipline involves the following:
o Building a culture around the idea of freedom and responsibility.
o Filling that cutlure with self-disciplined people who are willing to go to extreme lengths to fulfill their responsibilites.
o Not confusing a culture of discipline with a tyrannical disciplinarian.
o Creating a "stop doing list" and systematically unplugging anything extraneous.

6. Technology Accelerators

The key to benefiting from technology is using technology as an accelerator of momentum, not a creator of it. Only needed technology that fulfills the need of the Hedgehog concept should be adopted.

Thoughtless reliance on technology is a liability, not an asset. When used right, by having it linked to a simple, clear, and coherent concept rooted in deep understanding --technology is an essential driver in accelerating forward momentum. However, when used wrong and grasped as an easy solution, technology simply accelerates your own self-created demise.

Why Greatness

Collins then concludes his book by answering the question of why go for greatness and not just settle with good? Collins provides two answers, the second one is more interesting to me, and that is, "the search for meaning, or more precisely, the search for meaningful work". "If you're doing something you care that much about, and you believe in its purpose deeply enough, then it is impossible to imagine not trying to make it great. It is impossible to have a great life unless it is a meaningful life. Indeed, you might even gain the deepest of all satisfaction knowing that your short time here on this earth has been well spent, and that it mattered."

The question that follows I guess is what makes a life meaningful?

10 comments:

Hellme said...

Sorry to say this Mo - most of this stuff is recycled hogwash. 'Hedgehog' concept? WTF is that all about? 'Technology Accelerators' that promote 'momentum'? The hell? It's a goddamned business, not a physics equation.

The amount of money know-nothing authors make from profiteering books like this makes me sick in the stomach.

Don't get me wrong, I don't necessarily disagree with anything the authors say. I'm just fed up with all this hyperbolic business bullshit that seems to have taken over the world, trying to turn simple little truths into deep, grandiose 'scientific' sounding revelations that are the soul domain of the authors simply because they chose to christian them with names like the 'hedgehog' concept.

Mohamed said...

I'll have to disagree with you ofcourse Hellme. The book talks about very simple concepts, that's very true, and that's what's great about it. Simple concepts that everyone misses. Forget about the names he gives to those concepts for a while. But whoever thinks that a great leader is a humble and modest one?! Isn't this one of our major problems in Egypt for example. All our leaders are so full of themselves they can't make any real achievements. Whoever thinks that the real value in an organization is in its people --only successful organizations think so? Whoever thinks that its not about using leading-edge technology, its about using the right technologies to serve your desired needs in order to push you forward faster? Whoever thinks that its not just strategies, its passion, and having meaning in what you do that makes it so great?

Other than the concepts they talk about in the book are very right in my view, the approach they've taken in reaching those conclusions give me alot of confidence in what the book says. This is not one of those 'make money quick' books, its a very well researched book.

I've actually tried to read his earlier book Built to Last, and it wasn't as good as this one in my view, although it is the one that gave the author (and his other co-author) such a bang.

Hellme said...

You don't really disagree with me, do you? I did say I don't have anything against the practicies the book tries to teach - humility, people-driven, goal oriented corporations. It isn't really 'new' business practice to me, but evenso, I don't disagree with it, and I do think that that is the key to running a successful business.

What I was whinging about is the terminology. It might have worked for you, but it would immediately smell like buckaneering to me. Not that I'd ever read it anyway.

I wasn't suggesting that it was a 'get rich quick' book, although I suspect the authors got rich really quick. I was only lamenting the fact that today's business language is shitpiled with so much gumph and crap when the original concepts are - as you contend - simple. I mean, it wouldn't be a 'great' book if he said that managers should be simple, that companies should focus on what they can achieve rather than what they want to achieve and that people are the most important part of the organisation. Nope, he had to go off and call it the bloody hedgehog concept.

I call this the 'too much koromb leads to zorat' principle.

Anyway, thanks for the heads up on the book. I'll try to find it somewhere and see what they have to say.

Mohamed said...

Aah, I see what you mean now. You're right I guess. He has to give those concepts big names to sort of trademark them, as well as sell. But I don't really care about the terminology. Well, I'm sure the author and his team got rich, but I doubt it was quick. It took 5 years to write this book. So we agree that these are the 'obvious' (to us) reasons for a successful organization. But if so, why is no one using them?!

Also, the book doesn't claim that those are 'new' business practices. They've identified those existing practices in companies that made the leap from good-to-great for a period of 15 years. They even excluded most of the new high tech companies, because they did not fit their criteria regarding the 15 period of outperforming the market.

I think you'll find lots of good reviews about this book elsewhere. If nothing else, its fun to read with many interesting cases/examples.

Hellme said...

Point taken :)

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