Good to Great is a book by Jim Collins that was worked on for five years with the purpose of describing how good companies make a transition to becoming great companies, while also discussing the reasons why many have failed to do so.
Book Title: Good to Great: Why Some Companies Make the Leap and Others Don’t
Authors: Jim Collins
Date of Reading: March 2022
Table of Contents
What Is Being Said In Detail:
Good to Great is a management book that came to life after the author’s first book called Built to Last. The inspiration for the book came when the author was at a dinner with a group of thought leaders, and one of them claimed that great companies have always been great, but what about companies that realize halfway through life they are just good, not great? Good to Great is an answer to that question, confidently claiming that good companies can also become great.
Throughout the book, the author follows a framework of concepts that lead to breakthroughs, consisting of three stages: disciplined people, disciplined thought, and disciplined action. Each of these stages contains two key concepts that are discussed throughout the book. Accordingly:
- Disciplined People – Level 5 Leadership and First Who…Then What
- Disciplined Thought – Confront the Brutal Facts and the Hedgehog Concept
- Disciplined Action – Culture of Discipline and Technology Accelerators
The book suggests that there is no miracle that will suddenly make a company great, rather than that, it takes years for the company to transition and that process is comprised of multiple stages that the leader and his team need to go through. The author emphasizes the importance of first choosing the right people for the job, and only then coming up with and implementing the business strategy.
Good to Great has 9 chapters, and an epilogue of sorts which contains frequently asked questions. Throughout the book, concepts and frameworks are followed with pictures and diagrams for easier visualization, and at the end of the book, there are research appendices.
Chapter One – Good Is the Enemy of Great
In Chapter 1 the author makes an introduction to the book and the research it was based on. It began by questioning whether a good company can become great. After years of thorough research, the research team determined that good companies truly can become great, when following the steps from further chapters.
Chapter Two – Level 5 Leadership
Chapter 2 explains that every good-to-great company had a Level 5 leader who was in charge of the company during its transition period. Level 5 is a hierarchy of executive capabilities, consisting of 5 levels: highly capable individual, contributing team member, competent manager, effective leader, and level 5 executive at the very top. Level 5 executives showed a lot of humility and modesty, and preferred to live quietly while they were realizing great changes in their companies. The chapter gives multiple examples of such leaders, such as the CEO of Gillette and the CEO of Walgreens.
Chapter Three – First Who…Then What
Chapter 3 talks about prioritizing hiring the right people when running the company, especially in the transition period. Based on the author’s research, good-to-great company leaders – Level 5 leaders would first hire the right people and then come up with a business strategy. A great piece of advice from the book says (in order to be rigorous in people’s decisions) that leaders should put their best people on the company’s biggest opportunities instead of the biggest problems.
Chapter Four – Confront the Brutal Facts (Yet Never Lose Faith)
Chapter 4 proposes that in order to become a great company, it first needs to face brutal facts, without losing faith. An example of this is Admiral Jim Stockdale who became a war prisoner. Stockdale never lost faith that he would be freed, but he also had to face the fact that it was difficult and would probably take years. Listening to and hearing employees is very important, so creating a “climate of truth” can be established by following these steps:
- Lead with questions, not answers,
- Engage in dialogue and debate, not coercion.
- Conduct autopsies, without blame.
- Build red flag mechanisms that turn information into information that cannot be ignored.
Chapter Five – The Hedgehog Concept (Simplicity within the Three Circles)
Chapter 5 explains how everyone in the world can be divided into foxes – who know many things but lack consistency, and hedgehogs – who know one big thing and sticks to it. In order for a company to become great it needs to understand and fulfill the Hedgehog concept consisting of three intersecting parts:
- What are you deeply passionate about
- What drives your economic engine
- What you can be the best in the world at.
Chapter Six – A Culture of Discipline
In Chapter 6 the author reveals through his findings that for a company to be consistently successful and great there needs to be discipline. This culture of discipline consists of disciplined people who are disciplined in thought and who take disciplined actions. The author also says that the most important thing about discipline in a company is keeping to the Hedgehog Concept.
Chapter Seven – Technology Accelerators
Chapter 7 concluded that good-to-great companies use technology to accelerate their success, not to create it. They are not slow with technology, they just carefully select it and sometimes prefer the “crawl, walk, run” approach. A good example of this case can be found in the chapter, where it is described how Walgreens slowly adapted to the Internet boom and created a website that doubled its worth, compared to drugstore.com, a company that was based solely on their website and technology, which in the end perished due to their lack of structure and planning.
Chapter Eight – The Flywheel and the Doom Loop
Chapter 8 deals with the misconception that the breakthrough and transition of good-to-great companies happens dramatically and quickly, whereas it happens organically, over a long period of time. This is partly due to the media picking up on these companies only after their breakthrough has happened, so it seems sudden, but in reality, there is no “miracle moment” for these organizations.
Chapter Nine – From Good to Great to Built to Last
In Chapter 9 the author explains how after writing this book he realized that Good to Great is actually a prequel to his previous book Built to Last. They are connected because one is aimed toward preserving core values and purpose, while the other is aimed toward changing cultural and operating practices, as well as specific goals and practices. The chapter also notes the importance of BHAG (Big Hairy Audacious Goal), which is an intersection of three things:
- What are you deeply passionate about
- What you can be the best in the world at
- What drives your economic engine
Epilogue – Frequently Asked Questions
Epilogue answers some questions that the author was faced with, such as why were there only eleven companies that made the cut, why were only US companies considered, can young technology companies have Level 5 leaders, or where and how to begin.
Most Important Keywords, Sentences, Quotes:
“Some new idea or innovation comes along, and it is obvious to all that it will upend our world. The internet. Social media. In previous generations, it was the telephone and the automobile. There’s an expectation that because of this new invention, things will get better, more efficient, safer, richer, faster. Which they do, in some respects. But then things also, invariably, go sideways.”
“The Bomber Mafia is a case study in how dreams go awry. And how, when some new, shiny idea drops down from the heavens, it does not land, softly, in our laps. It lands hard, on the ground, and shatters.”
“The story I’m about to tell is not really a war story. Although it mostly takes place in wartime. It is the story of a Dutch genius and his homemade computer. A band of brothers in central Alabama. A British psychopath. Pyromaniacal chemists in basement labs at Harvard. It’s a story about the messiness of our intentions, because we always forget the mess when we look back.”
CHAPTER ONE: Good Is the Enemy of Great
“Few people attain great lives, in large part because it is just so easy to settle for a good life.”
“Who would have thought that Fannie Mae would beat companies like GE and Coca-Cola? Or that Walgreens could beat Intel?”
“The core of our method was a systematic process of contrasting the good-to-great examples to the comparisons, always asking, ‘What’s different?’”
“Ten of eleven good-to-great CEOs came from inside the company, whereas the comparison companies tried outside CEOs six times more often.”
“Technology can accelerate a transformation, but technology cannot cause a transformation.”
“Mergers and acquisitions play virtually no role in igniting a transformation from good to great; two big mediocrities joined together never make one great company.”
“Greatness is not a function of circumstance. Greatness, it turns out, is largely a matter of conscious choice.”
“People are not your most important asset. The right people are.”
“Yes, the world is changing, and will continue to do so. But that does not mean we should stop the search for timeless principles.”
CHAPTER TWO: Level 5 Leadership
“In retirement, Smith reflected on his exceptional performance, saying simply, ‘I never stopped trying to become qualified for the job.’”
“To use an analogy, the ‘Leadership is the answer to everything’ perspective is the modern equivalent of the ‘God is the answer to everything’ perspective that held back our scientific understanding of the physical world in the Dark Ages.”
“It didn’t matter when the transition took place or how big the company. All the good-to-great companies had Level 5 leadership at the time of transition.”
“Level 5 leaders are fanatically driven, infected with an incurable need to produce results. They will sell the mills or fire their brother, if that’s what it takes to make the company great.”
“Of 1,435 companies that appeared on the Fortune 500 in our initial candidate list, only eleven made the very tough cut into our study.”
CHAPTER THREE: First Who…Then What
“First, if you begin with ‘who,’ rather than ‘what,’ you can more easily adapt to a changing world.”
“They hired outstanding people whenever and wherever they found them, often without any specific job in mind. ‘That’s how you build the future,’ he said. ‘If I’m not smart enough to see the changes that are coming, they will. And they’ll be flexible enough to deal with them.’”
“Singleton achieved his childhood dream of becoming a great businessman, but he failed utterly at the task of building a great company.”
“If you have the right executives on the bus, they will do everything within their power to build a great company, not because of what they will “get” for it, but because they simply cannot imagine settling for anything less.”
“The Nucor system did not aim to turn lazy people into hard workers, but to create an environment where hardworking people would thrive and lazy workers would either jump or get thrown right off the bus.”
“The only way to deliver to the people who are achieving is to not burden them with the people who are not achieving.”
“The moment you feel the need to tightly manage someone, you’ve made a hiring mistake.”
“Every minute devoted to putting the proper person in the proper slot is worth weeks of time later.”
“The good-to-great companies made a habit of putting their best people on their best opportunities, not their biggest problems.”
“For no matter what we achieve, if we don’t spend the vast majority of our time with people we love and respect, we cannot possibly have a great life.”
CHAPTER FOUR: Confront the Brutal Facts (Yet Never Lose Faith)
“We also learned that you had to be number one or number two in each market, or you had to exit.”
“One of the dominant themes from our research is that breakthrough results come about by a series of good decisions, diligently executed and accumulated one on top of another.”
“Even more important, on the really big choices, such as Kroger’s decision to throw all its resources into the task of converting its entire system to the superstore concept, they were remarkably on target.”
“You absolutely cannot make a series of good decisions without first confronting the brutal facts.”
“One of the dominant themes that runs throughout this book is that if you successfully implement its findings, you will not need to spend time and energy ‘motivating’ people.”
“When Alan Wurtzel started the long traverse from near bankruptcy to these stellar results, he began with a remarkable answer to the question of where to take the company: I don’t know.”
“It didn’t matter how bleak the situation or how stultifying their mediocrity was, they all maintained unwavering faith that they would not just survive, but prevail as a great company.”
CHAPTER FIVE: The Hedgehog Concept (Simplicity within the Three Circles)
“Foxes pursue many ends, at the same time and see world in all its complexity.”
“Hedgehogs, on the other hand, simplify a complex world into a single organizing idea, a basic principle – or concept that unifies and guides everything.”
“While Walgreens executives understood that profitable growth would come by pruning away all that did not fit with the Hedgehog Concept, Eckerd executives lurched after growth for growth’s sake.”
“You can’t manufacture passion or ‘motivate’ people to feel passionate. You can only discover what ignites your passion and the passions of those around you.”
CHAPTER SIX: A Culture of Discipline
“Few successful start-ups become great companies, in large part because they respond to growth and success in the wrong way.”
“The main points of this chapter, however, boil down to one central idea: Build a culture full of people who take disciplined action within the three circles, fanatically consistent with the Hedgehog Concept.”
“You’ve got to have management and people who believe in the system and who do whatever is necessary to make the system work.”
“In a sense, much of this book is about creating a culture of discipline. It all starts with disciplined people.”
“It is absolutely clear that the unsustained comparison CEOs brought tremendous discipline to their companies, and that is why they got such great initial results.”
“Yes, discipline is essential for great results, but disciplined action without disciplined understanding of the three circles cannot produce sustained great results.”
“In contrast, we found a lack of discipline to stay within the three circles as a key factor in the demise of nearly all the comparison companies. Every comparison either (1) lacked the discipline to understand its three circles or (2) lacked the discipline to stay within the three circles.”
“If you look back on the good-to-great companies, they displayed remarkable courage to channel their resources into only one or a few areas.”
“‘Being right’ means getting the Hedgehog Concept; ‘highly undiversified’ means investing fully in those things that fit squarely within the three circles and getting rid of everything else.”
“If you have Level 5 leaders who get the right people on the bus, if you confront the brutal facts of reality, if you create a climate where the truth is heard, if you have a Council and work within the three circles, if you frame all decisions in the context of a crystalline Hedgehog Concept, if you act from understanding, not bravado-if you do all these things, then you are likely to be right on the big decisions.”
CHAPTER SEVEN: Technology Accelerators
“Some entrepreneurs didn’t even bother to suggest that they would build a real company at all, much less a great one. One even filed to go public in March of 2000 with an enterprise that consisted solely of an informational Web site and a business plan, nothing more.”
“Precisely one year after the Forbes article, Walgreens had figured out how to harness the Internet to accelerate momentum, making it just that much more unstoppable.”
“It will only become a great company if it figures out how to apply technology to a coherent concept that reflects understanding of the three circles.”
“Indeed, most of the truly great companies of the last hundred years – from Wal-Mart to Walgreens, from Procter & Gamble to Kimberly-Clark, from Merck to Abbott-trace their roots back through multiple generations of technology change, be it electricity, the television, or the Internet. They’ve adapted before and emerged great. The best ones will adapt again.”
“The same pattern holds for Kroger, Gillette, Walgreens, and all the good-to-great companies-the pioneering application of technology usually came late in the transition and never at the start.”
“Does the technology fit directly with your Hedgehog Concept? If yes, then you need to become a pioneer in the application of that technology.”
“If a technology doesn’t fit squarely within their three circles, they ignore all the hype and fear and just go about their business with a remarkable degree of equanimity.”
“But when used wrong-when grasped as an easy solution, without deep understanding of how it links to a clear and coherent concept-technology simply accelerates your own self-created demise.”
“No technology, no matter how amazing-not computers, not telecommunications, not robotics, not the Internet-can by itself ignite a shift from good to great.”
CHAPTER EIGHT: The Flywheel and the Doom Loop
“Some pushes may have been bigger than others, but any single heave-no matter how large-reflects a small fraction of the entire cumulative effect upon the flywheel.”
“Good to great comes about by a cumulative process – step by step, action by action, decision by decision, turn by turn of the flywheel-that adds up to sustained and spectacular results.”
“But the good-to-great executives simply could not pinpoint a single key event or moment in time that exemplified the transition.”
“There was no miracle moment. Although it may have looked like a single-stroke breakthrough to those peering in from the outside, it was anything but that to people experiencing the transformation from within.”
“Like Fannie Mae and Abbott, all the good-to-great companies effectively managed Wall Street during their buildup-breakthrough years, and they saw no contradiction between the two. They simply focused on accumulating results, often practicing the time-honored discipline of underpromising and overdelivering.”
“The good-to-great companies tended not to publicly proclaim big goals at the outset. Rather, they began to spin the flywheel-understanding to action, step after step, turn after turn.”
“When people begin to feel the magic of momentum – when they begin to see tangible results, when they can feel the flywheel beginning to build speed – that’s when the bulk of people line up to throw their shoulders against the wheel and push.”
“In a sense, everything in this book is an exploration and description of the pieces of the buildup-to-breakthrough flywheel pattern.”
CHAPTER NINE: From Good to Great to Built to Last
“When I consider the enduring great companies from Built to Last, I now see substantial evidence that their early leaders followed the good-to-great framework.”
“In an ironic twist, I now see Good to Great not as a sequel to Built to Last, but as a prequel.”
“Looking back on the Built to Last study, it appears that the enduring great companies did in fact go through a process of buildup to breakthrough, following the good-to-great framework during their formative years.”
“‘As I look back on my life’s work,’ he said, ‘I’m probably most proud of having helped create a company that by virtue of its values, practices, and success has had a tremendous impact on the way companies are managed around the world.’”
“Walt Disney provides a classic case of preserve the core and stimulate progress, holding a core ideology fixed while changing strategies and practices over time, and its adherence to this principle is the fundamental reason why it has endured as a great company.”
“First, I believe that it is no harder to build something great than to build something good. It might be statistically more rare to reach greatness, but it does not require more suffering than perpetuating mediocrity.”
“Perhaps your quest to be part of building something great will not fall in your business life. But find it somewhere. If not in corporate life, then perhaps in making your church great. If not there, then perhaps a nonprofit, or a community organization, or a class you teach.”
EPILOGUE: Frequently Asked Questions
“First, we used a very tough standard (three times the market over fifteen years) as our metric of great results. Second, the fifteen-year sustainability requirement is difficult to meet.”
“Also, I believe that much of what we found – Level 5 leadership and the flywheel, for instance – will be harder to swallow for Americans than for people from other cultures.”
“Most technology companies were eliminated from consideration because they are not old enough to show the good-to-great pattern.”
“Remember, no single finding by itself makes a great organization; you need to have them all working together as an integrated set.”
Book Review (Personal Opinion):
This book was useful from start to finish. It offered multiple perspectives from the author himself, as well as from leaders of successful companies such Walgreens, Wal-Mart, Disney, and Gilette, to name a few. It is very useful not only for managers but also for the general public who want to become great through various frameworks, such as the Hedgehog Concept. It made me realize how a lot of companies and their leaders had to work hard and make difficult decisions at times in order to come this far, which can be applied not only to business but also to one’s personal life.
While this book is aimed at people in management, some financial and business concepts might take more time to understand for people from other backgrounds.
This Book Is For:
- Aspiring business and management students
- Managers who want to improve their performance and build a productive and lasting team
- Businessmen who want to make the next big step for their company
If You Want To Learn More
Jim Collins discusses Good to Great and the ideas from the book on the Moonshots Podcast.
How I’ve Implemented The Ideas From The Book
Since this is a relatively specific book aimed toward leaders of the company, it is hard to implement everything from the book unless you are one, however, all of us can develop leadership and go from good to great. Therefore I decided to try implementing the Hedgehog concept on myself – finding something I am passionate about and best at and growing it.
One Small Actionable Step You Can Do
Since this book is filled with diagrams and examples of good companies and their road to greatness, I suggest reading parts such as company representatives’ quotes in Chapter 8 where they explain the company’s growth and hard work and how there was no “miracle moment”, as it is inspiring for both those only starting their journey as well as for already established leaders.