5 minutes estimated reading time
Jim Collins, the author of Good To Great has been researching and writing about what makes companies successful since 1988, though there are points made about this and the similarity of the work done by Tom Peters at McKinsey. Peters eventually turned the outputs of that research into the book In Search of Excellence.
From this research Collins has written a series of books:
- Built to Last: Successful Habits of Visionary Companies
- Good to Great: Why Some Companies Make the Leap… and Others Don’t
- Great by Choice
- How the Mighty Fall: And Why Some Companies Never Give In
- Turning the Flywheel
- Beyond Entrepreneurship 2.0
Good to Great was Collins’ sophomore book published in 2001. I was curious to see how it stands up in the 20 years since publication.
What’s the book like?
Collins has written a surprisingly accessible book that at the same time demonstrates an academic rigour to the underlying research. A good chunk of the book is an epilogue, frequently asked questions and referenceable materials at the back.
Each chapter is comes with a summary page and Collins makes good use of visuals to convey his ideas.
Collins bases Good to Great around seven ideas.
- ‘Level 5’ leadership. Collins had a management maturity capability model, the top level on ‘level 5’ was a leader who left their ego at the door with personal humility but professional will. They tend to be work horse rather than race horses. I found this particularly interesting as research that my first agency used to tout showed how a CEO’s visibility or fame had a positive correlation with rising share price, indicating that investors are probably buying on the wrong signals
- Getting the right people on the bus. The right people comes before vision, strategy, tactics, structure. ‘Who’ before ‘what’. Rigor but not ruthlessness drives people decisions. All of this was based around three principles: 1/ If in doubt, don’t hire. Instead keep searching. 2/ Act when a people change is needed. 3/ Put the best people on the best opportunities. The right people thrive in a culture of vigorous debate in search of the best answers and then stand united behind the collective decisions, regardless of political or personal interests. The right people are your most important asset. You need self motivating people rather than having to work to motivate them
- The Stockdale Paradox. Retain faith that you will succeed in the end. Regardless of the difficulties. And at the same time confront the most brutal facts of your current reality. Whatever they might be. An honest determined effort is required to find the truth of a situation. 1/ Leading with questions, not answers. 2/ Engage in a dialogue and debate, not coercion. 3/ Conduct autopsies, not blame. 4/ Build ‘red flag’ mechanisms that turn information into something that cannot be ignored. Dealing with problems head on. Leadership doesn’t begin with vision, it starts with confronting facts head on and dealing with their implications
- The ‘hedgehog concept’. Focus at the interception point between: 1/ What you are deeply passionate about. 2/ What you can be the best in the world at. 3/ What drives your economic engine. It is an iterative process. This becomes the one big thing that you focus on.
- A culture of self-discipline. Great results over the long term depends on a disciplined culture. It requires people who adhere to a consistent system, but also gives freedom and responsibility within the framework of the system. Discipline means focus, ignoring once in a lifetime opportunities that dont fit within the business focus. Stop doing lists are as important than to do lists. This reminds me of why Apple never put an FM radio in an iPod or iPhone.
- Technology as accelerator. Technology isn’t a fad that they follow, but apply carefully selected technologies that meat their focus. A classic example of getting this wrong is the way Micro Focus pivoted to cryptocurrency and ended up being bought by rival Open Text. Instead the attitude to technology is down to thoughtfulness and creativity. Contrary to every marketing campaign I did during my first decade in agency life, technology by itself is never a primary cause of greatness (or decline).
- Good practices are cumulative and compounded in nature. Collins talks about the flywheel effect, the momentum energy required to get it moving requires consistent pressure, but once it gets moving subsequent pressure means that it moves the flywheel at a much faster rate
Where Good To Great didn’t age well
The example of Wells Fargo standing out as an exemplar jarred with me. Wells Fargo is cited as a prime example of a great company, but there are examples of a number of cracks in its culture over years
- Allegations of higher costs charged to African-American and Hispanic borrowers on sub-prime loans which resulted in fines and damages paid totalling 175 million dollars
- Failure to monitor money laundering
- Price gouging on overdraft fees
- National mortgage settlement, the second largest civil settlement in U.S. history
- Race discrimination in hiring practices
Good to Great limitations
Good to Great focuses on American companies, there doesn’t seem to be a consideration of how national culture may have an impact on the firm. Where does China’s wolf culture or Samsung’s punishing culture fit in the kind of model that Collin’s proposes in his book? I don’t know the answer but its a topic worth exploring in a more global business environment. I think that its particularly interesting because Collins’ work has been widely read by Chinese business people, yet their ‘great companies’ look very different to the corporates that Collins cites as good to great in nature.
Collins has created useful management book for departments as well as large corporates, which explains why it has been published in so many languages including Spanish and Chinese. What is less apparent in Chinese corporate culture is how influential the book has really been.