Jim Collins is a teacher and researcher based in Boulder, Colorado. Five years ago he coauthored an international bestseller called ‘Built To Last: Successful Habits of Visionary Companies’ with Jerry Porras. In it the authors identified 18 visionary companies and set out to determine what is special about them. All the companies were at least 50 years old, very famous and had outstanding track records. Their brand images were the best.
Collins and Porras compared these companies with 18 second rank ones who were successful nevertheless but who never quite became great. Walt Disney Productions for instance was compared to Columbia Motion Pictures. The authors instantly exploded the myth that these great companies all started off with great products and/or charismatic leaders. In fact most of the visionary companies did not fit into that model. The writers’ study led them to an interesting observation. This was an adherence to a core ideology, an active indoctrination of the employees in to an ideological commitment to the company.
Built To Last is no doubt a great book, but as Bill Meehan, the MD of McKinsey’s San Francisco office told Collins, ‘unfortunately it is useless’. Bill’s reasoning was that the companies written about in this book were great anyway and they never had to do an effort to turn themselves into great, from good. This inspired Jim Collins to undertake a research, which eventually took five long years. The result was an astounding bestseller, appropriately named ‘Good To Great: Why Some Companies Make The Leap …And Others Don”t’ which came out in ’01. The book still sells like hot cakes.
The highlight of this work is its insistence on data – tons and tons of data were unearthed on all the 28 companies featured in the book. Collins and his team of researchers sieved through 1435 companies and finally narrowed it down to a list of 11. The companies are Fannie Mae, Walgreens, Wells Fargo, Pitney Bowes, Philip Morris, Kimberly-Clark, Circuit City, Abbot Labs, Gillette, Kroger and Nucor. They have 11 direct comparisons and 6 unsustained comparisons in the book.
There were thousands of pages of interviews with key people that also contributed to the study. All the good-to-great companies, it was found, had a corporate culture that rigorously found and promoted people to think in a disciplined manner. People did not matter so much as ‘right people’. In other words, people are not a company’s greatest assets, the right people are. It also meant that to ensure the company’s health it needed to periodically get the right people on the bus and the wrong people off it. The benchmarks on which the identification was made was not lenient by any yardstick – all 11 of the companies generated cumulative stock returns that beat the general stock market by an average of seven times in fifteen years, better than twice the results delivered by a composite index of the world’s greatest companies, including Coca-Cola, Intel, General Electric, and Merck!
According to Collins, ‘some of the key concepts discerned in the study fly in the face of our modern business culture and will, quite frankly, upset some people.’ That is a fair enough assessment when we consider what the conclusions are. In a concise manner they encompass critical areas of management strategy and practice. In summary,
• Level 5 Leaders: The research team was shocked to discover the type of leadership required to achieve greatness.
• The Hedgehog Concept (Simplicity within the Three Circles): To go from good to great requires transcending the curse of competence.
• A Culture of Discipline: When you combine a culture of discipline with an ethic of entrepreneurship, you get the magical alchemy of great results.
• Technology Accelerators: Good-to-great companies think differently about the role of technology.
• The Flywheel and the Doom Loop: Those who launch radical change programs and wrenching restructurings will almost certainly fail to make the leap.
Good To Great should have been written before Built To Last. In many ways the former is a prequel to the latter. G2G is an eminently enjoyable read for anyone, and certainly so for industry folks.