Good to Great | Jim Collins | Cliff Note Books
“Good to Great: Why Some Companies Make the Leap…And Others Don’t” is a management book by Jim Collins. It presents the findings of a study conducted by Collins and his research team, where they analyzed companies that went from good performance to great performance and sustained it for at least 15 years. The goal was to identify what made these companies different.
The book is divided into several key concepts:
1. Level 5 Leadership: The top-performing companies all had what Collins terms “Level 5” leaders. These leaders blend personal humility with intense professional will. They are ambitious for the company, not for themselves.
2. First Who, Then What: Collins found that great companies focus on getting the right people on the team before deciding the direction to take the company. The right people will do the right things and deliver the best results they’re capable of, regardless of the incentive system.
3. Confront the Brutal Facts: While maintaining an unwavering faith in their ability to prevail in the end, great companies also confront the most brutal facts about their current reality.
4. Hedgehog Concept: Great companies become the best in the world at one single thing that is at the intersection of three key factors: what they are deeply passionate about, what they can be the best in the world at, and what drives their economic engine.
5. Culture of Discipline: Collins emphasizes the importance of disciplined people, disciplined thought, and disciplined action. This isn’t about disciplining employees, but about employees and the company leadership self-disciplining to do what’s needed.
6. Technology Accelerators: Technology can accelerate a company from good to great if it’s used properly, but it should not be seen as the primary cause of transformation. It must be linked to the Hedgehog Concept.
7. The Flywheel and the Doom Loop: Collins uses the analogy of a flywheel to describe how companies transition from good to great. There’s no single defining action or lucky break, but a process of building momentum over time.
“Good to Great” is highly regarded for its evidence-based insights and for providing actionable strategies that leaders can apply to improve their own organizations.
Quotes from Good to Great
“Greatness is not a function of circumstance. Greatness, it turns out, is largely a matter of conscious choice, and discipline.”
“Good is the enemy of great.”
“The good-to-great leaders never wanted to become larger-than-life heroes. They never aspired to be put on a pedestal or become unreachable icons. They were seemingly ordinary people quietly producing extraordinary results.”
“The moment a leader allows himself to become the primary reality people worry about, rather than reality being the primary reality, you have a recipe for mediocrity, or worse.”
“You absolutely cannot make a series of good decisions without first confronting the brutal facts.”
“The Hedgehog Concept is not a goal to be the best, a strategy to be the best, an intention to be the best, a plan to be the best. It is an understanding of what you can be the best at.”
“The right people don’t need to be tightly managed or fired up; they will be self-motivated by the inner drive to produce the best results and to be part of creating something great.”
“A culture of discipline is not a principle of business, it is a principle of greatness.”
Biography of Jim Collins
James C. “Jim” Collins is an American researcher, author, speaker and consultant, primarily focusing on business management and company sustainability and growth. His work has been influential in the world of business strategy and leadership.
Collins was born on January 25, 1958. He completed his undergraduate studies at Stanford University, where he received a degree in Mathematical Sciences in 1980. He later received an MBA from the Stanford Graduate School of Business in 1983, and in 1990, Collins completed his Doctorate in Business Administration at the same institution.
Collins started his career as a consultant with McKinsey & Company, and also worked as a product manager for Hewlett-Packard. But it was at Stanford University’s Graduate School of Business where Collins found his real passion. There, he worked as a lecturer and later as a faculty member, teaching in the areas of leadership and business sustainability.
Collins’ research has always been deeply empirical. He and his research teams would spend years gathering and analyzing data before deriving conclusions about why some companies succeed and others fail. He translated these insights into a number of highly influential books.
In 1995, Collins founded his management research laboratory in Boulder, Colorado. He’s perhaps best known for his books “Built to Last: Successful Habits of Visionary Companies” (1994) and “Good to Great: Why Some Companies Make the Leap…And Others Don’t” (2001), both of which have become key texts in management and strategic planning.
Collins has also written or co-authored other books like “How the Mighty Fall: And Why Some Companies Never Give In” (2009) and “Great by Choice” (2011), further cementing his reputation as a thoughtful and influential voice in business strategy and leadership.
Criticsms of Good To Great
While “Good to Great” has been highly influential in the field of business management and has been praised for its rigorous research methodology, there are also some criticisms:
Selection Bias: Critics have argued that the book suffers from selection bias. The study only looked at companies that had already become great, which may ignore valuable lessons from companies that failed despite seemingly doing everything right.
Hindsight Bias: Some critics point out that the book suffers from hindsight bias. It’s easy to look back at successful companies and identify what they did right, but it’s much more challenging to predict future success.
Changing Business Environment: Some critics argue that the principles Collins identified, while valid in the past, might not apply in the rapidly changing business environment, especially with the rise of digital technology and the shift to remote work.
Short-lived Success: A few of the eleven “great” companies profiled in the book have since experienced significant difficulties or have even gone bankrupt, such as Circuit City and Fannie Mae. This has led some critics to question the sustainability of the principles Collins identifies.
Ambiguity: Some readers find that the principles identified in the book, such as “Level 5 Leadership” and “First Who, Then What,” are somewhat vague and difficult to apply concretely.
Lack of External Factors Consideration: Critics argue that the book doesn’t adequately address the impact of external factors, such as market conditions and competition, on a company’s transition from good to great.
Despite these criticisms, “Good to Great” continues to be widely read and highly influential among business leaders, managers, and entrepreneurs.
Summary of Good to Great
“Good to Great: Why Some Companies Make the Leap…And Others Don’t” by Jim Collins consists of nine chapters, not including the introductory and concluding sections. Here are the chapters:
Good is the Enemy of Great
Level 5 Leadership
First Who…Then What
Confront the Brutal Facts (Yet Never Lose Faith)
The Hedgehog Concept (Simplicity within the Three Circles)
A Culture of Discipline
Technology Accelerators
The Flywheel and the Doom Loop
From Good to Great to Built to Last
Each chapter explores a specific characteristic or strategy identified in companies that made the transition from being good companies to becoming great ones.
Chapter 1: Good is the Enemy of Great, from Jim Collins’ book “Good to Great: Why Some Companies Make the Leap…And Others Don’t”.
The key concept in the opening chapter is reflected in the title itself: “Good is the Enemy of Great”. Collins observes that one of the key reasons why we don’t have more great schools, companies, and institutions is because we have so many good ones. He argues that settling for “good” often prevents us from striving for “great”.
Collins opens by discussing how the book came to be: it was the result of a research project aimed at determining what transforms a good company into a great one. The team employed strict benchmarks for what constituted “great” to ensure the validity of their research. Companies had to have experienced 15 years of cumulative stock returns at or below the general stock market, punctuated by a transition point, then cumulative returns at least three times the market over the next 15 years.
Collins and his team identified 11 companies that met their stringent criteria. They compared these ‘great’ companies to a carefully selected control group of ‘good’ companies. In the ensuing chapters, Collins presents the commonalities that his team found in the ‘great’ companies but were lacking in the ‘good’ ones.
The first chapter of “Good to Great” essentially lays out the foundation for the remainder of the book and introduces readers to the rigorous, data-driven approach that underpins Collins’ insights into what differentiates great companies from merely good ones.
Chapter 2: Level 5 Leadership in Jim Collins’ book “Good to Great: Why Some Companies Make the Leap…And Others Don’t”.
In Chapter 2, Collins introduces the concept of “Level 5 Leadership”. This concept emerged from the research as a key factor that differentiated the ‘great’ companies from the ‘good’ ones.
A Level 5 leader, as defined by Collins, embodies a paradoxical mix of personal humility and professional will. They are ambitious, but their ambition is first and foremost for the cause, for the organization and its purpose, not themselves.
Level 5 leaders are not the typical stereotype of a high-profile, charismatic leader. Instead, they often shun public adulation and are modest, shy, and fearless. They attribute success to factors outside themselves, but when things go poorly, they look in the mirror and blame themselves.
Collins argues that Level 5 leadership is not only key but also quite common in companies that transition from good to great. He proposes that while individuals can develop the capabilities of each leadership level, reaching Level 5 requires a particular blend of personal humility and indomitable will that seems to be innate.
The chapter provides examples of Level 5 leaders from the selected ‘great’ companies, contrasting them with their counterparts in the comparison companies who did not show the same level of leadership. Some examples of Level 5 leaders mentioned in the book include Darwin Smith from Kimberly-Clark and Colman Mockler of Gillette.
The essence of this chapter is the shift in understanding of what effective leadership looks like: it is not always about charisma and personality; in many cases, humility coupled with professional resolve drives enduring companies.
Chapter 3 of “Good to Great: Why Some Companies Make the Leap…And Others Don’t” by Jim Collins is titled “First Who…Then What”.
In this chapter, Collins introduces the concept of “First Who…Then What”. He found that all of the ‘great’ companies he studied started their transformations by getting the right people on the team before they figured out where to drive that bus.
Collins suggests that leaders of successful companies focus first on assembling a superior team, because who is on the team matters more than what direction the team is headed. Once the right team is gathered, they can collectively decide on the best path forward and execute the plan successfully.
On the other hand, if leaders start by setting a direction without having the right team, they might find themselves needing to change course if the team is not capable of executing that particular vision. They might also struggle to motivate and align people around the vision.
A key aspect of the “First Who…Then What” idea is also dealing with the wrong people – the need to let go of people who aren’t a good fit for the team. Good-to-great companies were found to be rigorous, not ruthless, in dealing with people – they didn’t use layoffs as a primary strategy, and they treated people with fairness and dignity, but they also acted swiftly and surely when it became clear that someone was not the right fit.
Collins reinforces that getting the right people on the bus, the wrong people off the bus, and the right people in the right seats is the first step to take a company from good to great.
Chapter 4 of “Good to Great: Why Some Companies Make the Leap…And Others Don’t” by Jim Collins is titled “Confront the Brutal Facts (Yet Never Lose Faith)”.
In this chapter, Collins presents the idea that all good-to-great companies start their transformations by confronting the brutal facts about their reality, yet they maintain an unwavering faith that they can and will prevail in the end.
The chapter outlines the importance of creating a culture where people have the opportunity to be heard and, where, the truth is heard. This process involves a number of practices and principles:
Lead with Questions, Not Answers: Collins suggests that effective leaders don’t start by telling people what to do; they start by asking questions.
Engage in Dialogue and Debate, Not Coercion: Allowing for healthy debate can lead to the best decisions, as everyone gets the chance to share their perspectives.
Conduct Autopsies, Without Blame: When something goes wrong, it’s important to investigate and learn from the mistakes without assigning blame to individuals.
Build Red Flag Mechanisms: The organization needs to create mechanisms to bring the brutal facts of reality to the surface.
At the same time, while taking into account and addressing the brutal facts, good-to-great companies are described as having “an unwavering faith that they can and will prevail in the end, regardless of the difficulties,” and they “retain the faith that they will prevail in the end, regardless of the difficulties”. Collins refers to this as the Stockdale Paradox, named after Admiral Jim Stockdale, a United States military officer held captive for eight years during the Vietnam War.
So, the principle of this chapter is to confront the most brutal facts of the current reality, whatever they might be, while maintaining unwavering faith that the company will overcome its obstacles and succeed in the end.
Chapter 5 of “Good to Great: Why Some Companies Make the Leap…And Others Don’t” by Jim Collins is titled “The Hedgehog Concept (Simplicity within the Three Circles)”.
In this chapter, Collins introduces the concept of the Hedgehog Concept, which he identifies as a key characteristic of the ‘great’ companies. The Hedgehog Concept is centered around finding the intersection of three key circles: passion, expertise, and economic drivers.
Passion: The first circle represents what the company is deeply passionate about. It’s about finding what the company loves to do and is deeply committed to.
Expertise: The second circle represents what the company can be the best in the world at. It involves identifying the areas where the company has a unique set of core competencies, skills, and capabilities.
Economic Drivers: The third circle represents what drives the company’s economic engine. It’s about understanding the activities that generate the most revenue and profitability for the company.
The sweet spot lies at the intersection of these three circles. The Hedgehog Concept is about finding the overlap where all three aspects align and focusing on activities and initiatives within that space. Companies that identify and embrace their Hedgehog Concept are more likely to achieve greatness.
Collins provides examples of companies that have successfully applied the Hedgehog Concept, such as Walgreens, which focused on being the best at convenient drugstore retailing, and Kimberly-Clark, which shifted from being a paper manufacturer to focusing on consumer paper products like Kleenex and Huggies.
The chapter emphasizes the importance of simplicity and discipline in focusing on the Hedgehog Concept. By honing in on the core areas where the company can excel and generate economic success while aligning with passion, companies can drive their path from good to great.
Chapter 6 of “Good to Great: Why Some Companies Make the Leap…And Others Don’t” by Jim Collins is titled “A Culture of Discipline”.
In this chapter, Collins explores the concept of a “Culture of Discipline” as a distinguishing factor of ‘great’ companies. He argues that discipline is an essential ingredient in the sustained success of these companies.
Collins emphasizes that discipline does not mean a culture of strict rules or a stifling environment. Instead, he defines discipline as consistency of action, guided by clear values and performance standards. He describes it as a combination of disciplined people, disciplined thought, and disciplined action.
Disciplined People: Great companies have the right people on their team who possess self-discipline and a strong work ethic. These individuals are motivated by the desire to excel and contribute to the success of the organization.
Disciplined Thought: A culture of discipline involves rigorous decision-making processes. The decision-making is based on gathering and analyzing relevant data, seeking diverse perspectives, and applying critical thinking to make informed choices.
Disciplined Action: Great companies follow through on their commitments and execute with precision. They align their actions with their long-term goals and consistently deliver high-quality performance.
Collins also highlights the importance of focusing on what is essential and saying no to distractions. By establishing a culture of discipline, companies can avoid complacency and stay on track towards their goals.
He provides examples of companies like Abbott Laboratories, Kroger, and Wells Fargo, which have exhibited a strong culture of discipline and achieved exceptional results over the long term.
The chapter underscores that building a culture of discipline requires time and effort. It involves aligning the organization’s values, hiring and developing disciplined individuals, establishing clear performance expectations, and maintaining consistency in execution.
Overall, the chapter emphasizes that a culture of discipline is a key factor in sustaining greatness and achieving long-term success for companies.
Chapter 7 of “Good to Great: Why Some Companies Make the Leap…And Others Don’t” by Jim Collins is titled “Technology Accelerators”.
In this chapter, Collins explores the role of technology as an accelerator of progress in the journey from good to great. He emphasizes that technology in itself is not the primary driver of greatness, but when used strategically and aligned with the company’s Hedgehog Concept, it can significantly accelerate its momentum.
Collins identifies three key points regarding technology accelerators:
Technology is Not a Root Cause of Greatness: Collins highlights that technology is an enabler, not a creator of greatness. Great companies focus first on their core values, purpose, and strategic direction before considering how technology can support and enhance their goals.
Technology Must Fit with the Hedgehog Concept: The companies that transition from good to great effectively use technology as an accelerator because they have a clear understanding of their Hedgehog Concept. They strategically select and adopt technologies that align with and amplify their core competencies and economic drivers.
Technology is a Means, Not an End: Collins emphasizes that technology should serve as a tool to enable the company to excel in its chosen areas. It should be applied in a way that reinforces the company’s competitive advantages and propels its progress, rather than pursuing technology for its own sake.
Collins provides examples of companies like Walgreens and Circuit City that successfully leveraged technology to support their strategic goals. He also highlights the importance of disciplined thought and action when implementing technology, ensuring that it is purposefully integrated into the company’s operations and processes.
The chapter emphasizes that great companies are not technology-driven but are disciplined in their use of technology to accelerate progress in line with their strategic focus and unique capabilities.
Overall, Chapter 7 underscores the importance of strategic alignment and disciplined implementation when utilizing technology as an accelerator of success in the journey from good to great.
Chapter 8 of “Good to Great: Why Some Companies Make the Leap…And Others Don’t” by Jim Collins is titled “The Flywheel and the Doom Loop”.
In this chapter, Collins introduces the concept of the flywheel, which represents the cumulative effect of consistent, small actions that build momentum and propel a company from good to great. He contrasts this with the concept of the doom loop, which represents the opposite—a cycle of reactive decision-making that hinders progress.
Collins emphasizes that the transformation from good to great is not achieved through a single dramatic event or one major breakthrough. Instead, it is the result of a sustained effort and a consistent build-up of positive actions over time.
The flywheel effect begins with a single push, where a company makes a series of small, deliberate moves in alignment with its Hedgehog Concept. These actions build momentum, leading to breakthroughs and positive outcomes. The key is to identify and focus on the specific activities that contribute most to the flywheel’s rotation.
On the other hand, the doom loop represents a negative cycle that prevents companies from achieving greatness. It occurs when companies repeatedly make reactive decisions, chase after the latest trends, or fail to confront the brutal facts of their reality. This leads to a lack of focus, fragmented efforts, and ultimately, stagnation.
Collins provides examples of companies that experienced the flywheel effect, such as Walgreens and Nucor, as well as companies that fell into the doom loop, such as Circuit City and the comparison companies in the study.
The chapter emphasizes the importance of consistency, alignment, and the cumulative effect of small actions in building momentum. By understanding the flywheel concept and avoiding the doom loop, companies can sustain their progress and achieve long-term greatness.
Overall, Chapter 8 highlights the power of the flywheel effect and the detrimental consequences of the doom loop, underscoring the need for deliberate and consistent actions to propel a company towards sustained success.
Chapter 9 of “Good to Great: Why Some Companies Make the Leap…And Others Don’t” by Jim Collins is titled “From Good to Great to Built to Last.”
In this final chapter, Collins explores the transition from being a great company to one that is built to last. While the book primarily focuses on the transformation from good to great, Collins acknowledges that the ultimate goal is not just short-term greatness but enduring excellence.
Collins emphasizes that building a company that is built to last requires a different set of principles and strategies compared to the transition from good to great. He identifies several key ideas:
Clock Building, Not Time Telling: Built-to-last companies focus on building a strong organizational foundation and enduring principles rather than relying solely on individual leaders. They emphasize the importance of developing a lasting legacy rather than being dependent on charismatic leaders.
Genius of the “AND”: Instead of choosing between opposing strategies, built-to-last companies embrace a “genius of the AND” mindset. They strive for both short-term performance and long-term sustainability, innovation and stability, and individual freedom and disciplined processes.
Cult-like Cultures: Built-to-last companies develop strong cultures based on core values and a shared purpose. These cultures attract and retain employees who align with the company’s mission and contribute to long-term success.
Preserve the Core, Stimulate Progress: While built-to-last companies preserve their core values and purpose, they remain adaptable and open to change in their strategies and practices. They balance the need for stability with the need for continuous improvement and innovation.
Collins presents case studies of companies like Procter & Gamble and Nordstrom, highlighting their enduring success and the principles they employ to build companies that last.
The chapter concludes by emphasizing that the journey from good to great is not the final destination. It is a stepping stone toward the greater challenge of building a company that can sustain its excellence over the long term.
Overall, Chapter 9 highlights the importance of enduring principles, strong cultures, and a focus on preserving the core while stimulating progress in creating companies that are built to last.