Big Ideas

Good to great defines a conceptual model which can be applied in any business, from startup to enterprise, in order to ensure consistent success. Immensely valuable for founders or executives looking to bring focus and clarity to their organizations. Fundamentally he's trying to answer the question of "What makes companies great?". One of my favorite things about Collins' work is how clearly he articulates and packages each great concept. While each chapter represents a distinct idea here are some of the core ones:

• Level 5 Leadership - the leaders of great companies blend extreme humility with intense professional will.
• First Who ... Then What - great companies are extremely disciplined about who is involved and who works one what before anything else.
• Confront the Brutal Facts - great companies accept harsh realities, act accordingly and persist with unfaltering commitment.
• The Hedgehog Concept - great companies discover the one thing they can be best at, that drives their economic engine, and that they are passionate about and focus with discipline on doing only that thing.
• A Culture of Discipline - great companies do not need to worry about motivating their people because they have created a culture of discipline.
• The Flywheel and the Doom Loop - great companies stay consistently focused on their hedgehog concept and make incremental improvements over time while ignoring distractions.

Notes

Good is The Enemy of Great

• The methodology looks at 28 companies, 11 good-to-great, 11 direct comparisons and 6 unsustained comparisons
• Good to great companies displayed "fifteen-year 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 fifteen years."
• The direct comparison companies "were in the same industry as the good-to-great companies with the same opportunities and similar resources at the time of the transition, but that showed no leap from good to great."
• The unsustained comparisons made a short term shift from good to great but were unable to sustain their greatness.
• Several things good to great companies were NOT or did NOT HAVE:
• ~"Larger-than-life, celebrity leaders who ride in from the outside are negatively correlated with taking a company from good to great."
• ~"No systemic pattern linking specific forms of executive compensation"
• ~"Strategy per se did not separate" the two groups
• ~"Good-to-great companies did not focus principally on what to do to become great; they focused equally on what not to do and what to stop doing."
• ~"Technology and technology-driven change has virtually nothing to do with" the change
• ~"Merges and acquisitions plat virtual no role" in the change
• ~"The good-to-great companies paid scant attention  to managing change, motivating people, or creating alignment."
• ~"The good-to-great companies had no name, tagline, launch event, or program to signify their transformation."
• ~"The good-to-great companies were not, by and large, in great industries."

Level 5 Leadership

• A level five leader  is an "individual who blends extreme personal humility with intense professional will."
• "They displayed the fierce resolve to do whatever needed to be done to make the company great."
• Level 5  = Humility + Will
• ~"Modest, willful, humble and fearless."
• ~"Comparison leaders, concerned more with their own reputation for personal greatness, often failed to set the company up for success in the next generation."
• ~"Level 5 leadership is not just about humility and modesty. It is equally about ferocious resolve, an almost stoic determination to do whatever needs to be done to make the company great."
• ~"Level 5 leaders are fanatically driven, infected with an incurable need to produce results."
• ~"Contrasting leaders "credited substantial blame to bad luck, frequently bemoaning the difficulties of the environment they faced."
• The window and the mirror
• ~"Level 5 leaders look out the window to apportion credit to factors outside themselves when things go well ... at the same time, they look in the mirror to apportion responsibility, never blaming bad luck when things go poorly."
• ~Comparison leaders did the opposite.

First Who ... Then What

• "The executives who ignited transformations from good to great did not first figure out where to drive the bus and then get people to take it there. No, they first got the right people on the bus (and the wrong people off the bus)."
• Three simple truths
• ~"First, if you begin with the "who" rather than "what" you can more easily adapt to a changing world."
• ~"Second, if you have the right people on the bus, the problem of how to motivate and manage people largely goes away."
• ~"Third, if you have the wrong people, it doesn't matter whether you discover the right direction; you still won't have a great company."
• The "genius with a thousand helpers" approach is not sustainable, as long as the genius leaves the company crumbles
• "It's who you pay, not how you pay them."
• Rigorous, Not Ruthless
• ~"Ruthless means hacking and cutting, especially in difficult times, or wantonly firing people without any thoughtful consideration."
• ~"Rigorous means consistently applying exacting standards at all times and at all levels."
• ~How to Be Rigorous
• ~~When in doubt, don't hire - keep looking.
• ~~When you know you need to make a people change, act.
• ~~"Letting the wrong people hang around is unfair to all the right people, as they inevitable find themselves compensating for the inadequacies of the wrong people."
• ~~Put your best people on your biggest opportunities, not your biggest problems.
• Good-to-great management teams consist of people who debate vigorously in search of the best answers, yet who unify behind decisions, regardless of parochial interests.

Confront the Brutal Facts

• "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."
• "You absolutely cannot make a series of good decisions without first confronting the brutal facts."
• "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. This one of the key reasons why less charismatic leaders often produce better long-term results than their more charismatic counterparts."
• How do you create a climate where truth is heard?
• ~"Lead with questions, not answers."
• ~"Engage in dialogue and debate, not coercion."
• ~"Conduct autopsies, without blame."
• ~"Build 'red flag' mechanisms."
• The Stockdale Paradox - "on the one hand, they stoically accepted the brutal facts of reality. On the other hand, they maintained an unwavering faith in the endgame, and a commitment to prevail as a great company despite the brutal facts."

The Hedgehog Concept

• "A Hedgehog Concept is a simple, crystalline concept that flows from deep understanding about the intersection of the following three circles:"

1. What can you be the best in the world at (and what you cannot be the best in the world at).
2. What drives your economic engine.
3. What are you deeply passionate about.

• "A 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 distinction is absolutely crucial."
• "If you cannot be the best in the world at your core business, then your core business cannot form the basis of your Hedgehog Concept."
• "The good-to-great company eventually gained deep understanding of this principle and pinned their futures on allocating resources to those few arenas where they could potentially be the best."
• Key Economic Denominator
• ~"If you could pick one and only one ratio - profit per X - to systematically increase over time, what x would have the greatest and most sustainable impact on your economic engine?"
• ~Good-to-great companies figured out the best X
• ~What is your X?
• You don't have to be passionate about what you're selling or the what you're doing in the narrowest sense but you do have to be passionate about "what your company stands for".
• "Getting a Hedgehog Concept is an inherently iterative process, no an event."
• "In the majority of cases, the good-to-great companies were not the best in the world at anything and showed no prospects of becoming so. Infused with the Stockdale Paradox ... every good-to-great company, no matter how awful at the start of the process, prevailed in its search for a Hedgehog Concept."
• "It took four years on average for the good-to-great companies to get a Hedgehog concept"

A Culture of Discipline

• "Most companies build their bureaucratic rules to manage the small percentage of wrong people on the bus, which in turn drives away the right people on the bus, which then increase the percentage of wrong people on the bus, which increase the need for more bureaucracy to compensate for incompetence and lack of discipline, which then further drives the right people away ..."
• "Avoid bureaucracy and hierarchy and instead create a culture of discipline."
• "a culture of discipline with an ethic of entrepreneurship" is the way to get superior performance and sustained results
• A Culture of Discipline
• ~"Build a culture around the idea of freedom and responsibility, within a framework."
• ~"Fill that culture with self-disciplined people who are willing to go to extreme lengths to fulfill their responsibilities."
• ~"Don't confuse culture of discipline with a tyrannical disciplinarian."
• ~"Adhere with great consistency to the Hedgehog Concept, exercising an almost religious focus on the intersection of the three circles."
• "The good-to-great companies built a consistent system with clear constraints, but they also gave people freedom and responsibility within the framework of that system. They hired self-disciplined people who didn't need to be managed, and then managed the system, not the people."
• "Everyone would like to be the best, but most organizations lack the discipline to figure out with egoless clarity what they can be the best at and the will to do whatever it takes to turn that potential into reality."
• It must be a culture of discipline, as opposed to a leader who personally disciplined the organization through sheer force
• "It takes discipline to say, 'No, thank you' to big opportunities. The fact that something is a 'once in a lifetime opportunity' is irrelevant if it doesn't fit within the three circles."
• Create a "stop doing" list

Technology Accelerators

• "Technology-induced change is nothing new. The real question is not, What is the role of technology? Rather, the real question is, How do good-to-great organizations think differently about technology?"
• "When used right, technology becomes an accelerator of momentum, not a creator of it. The good-to-great companies never began their transitions with pioneering technology, for the simple reason that you cannot make good use of technology until you know which technologies are relevant. And which are those? Those - and only those - that link directly to the three intersecting circles of the Hedgehog concept."
• "Does technology fit directly with your Hedgehog Concept?"
• ~If yes become a pioneer in the application of that technology
• ~If no then do you need it at all?
• ~~If yes then all you need is parity.
• "Conceptually, [good-to-great companies] relationship to technology is no different from their relationship to any other category of decisions: disciplined people, who engage in disciplined thought, and who then take disciplined action."
• "Technology itself is never a primary cause of either greatness or decline."
• "How a company reacts to technological change is a good indicator of its inner drive for greatness versus mediocrity. Great companies respond with thoughtfulness and creativity, driven by a compulsion to turn unrealized potential into results; mediocre companies react and lurch about, motivated by fear of being left behind."

The Flywheel and The Doom Loop

The Flywheel

• "There was no single defining action, no grand program, no one killer innovation, no solitary lucky break, no wrenching revolution. 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."
• "The good-to-great companies were subject to the same short-term pressures ... yet unlike the comparison companies, they had the patience and discipline to follow the buildup-breakthrough flywheel model despite these pressures."
• "The good-to-great companies understood a simple truth: Tremendous power exists in the fact of continued improvement and the delivery of results."
• "When people begin to feel the magic of momentum - when they begin to see tangible results - that's when the bulk of people line up to throw their shoulders against the wheel and push."

The Doom Loop

• "Instead of quiet, deliberate process of figuring out what needed to be done and then simply doing it, the comparison companies frequently launched new programs - often with great fanfare and hoopla aimed at "motivating the troops" - only to see the programs fail to produce sustained results. They sought the single defining action, the grand program, the one killer innovation, the miracle moment that would allow them to skip the arduous buildup stage and jump right to breakthrough."

Merges and Acquisitions

• "They key to [the good-to-great companies'] success was that that their big acquisitions generally took place after development of the Hedgehog Conceptand after the flywheel had built significant momentum."
• "While you can buy your way to growth, you absolutely cannot buy your way to greatness. Two big mediocrities joined together never make one great company."

Leaders Who Stop the Flywheel

• "The other frequently observed doom loop pattern is that of new leaders who stepped in, stopped an already spinning flywheel, and threw it in an entirely new direction."

From Good to Great to Built to Last

• "Core values are essential for enduring greatness, but it doesn't seem to matter what those core values are. The point is not what core values you have but that you have core values at all, that you know what they are, that you build them explicitly into the organization, and that you preserve them over time."
• "Enduring great companies preserve their core values and purpose while their business strategies and operating practices endlessly adapt to a changing world."
• Preserve
• ~Core values
• ~Core purpose
• Change
• ~Cultural and operating practices
• ~Specific goals and strategies
• Key Ideas from Built to Last
• ~"Clock Building, Not Time Telling. Build an organization that can endure and adapt through multiple generations of leaders and multiple product life cycles."
• ~"Genius of AND. Embrace both extremes on a number of dimensions and at the same time. Instead of choosing A OR B, figure out how to have A AND B - purpose AND profit, continuity AND change, freedom AND responsibility etc.
• ~"Core Ideology. Instill core values (essential and enduring tenets) and core  purpose (fundamental reason for being beyond just making money) as principles to guide decisions and inspire people throughout the organization over a long period of time."
• ~"Preserve the Core/Stimulate Progress. Preserve the core ideology as an anchor point while stimulating change, improvement, innovation and renewal in everything else."
• Big Hair Audacious Goals (BHAGS)
• ~"Bad BHAGs, it turns out, are set with bravado; good BHAGs are set with understanding."
• "The point of this entire book is not that we should "add" these findings to what we are already doing and. make ourselves even more overworked. No, the point is to realize that much of what we're doing is at best a waste of energy. If we organize the majority of our work time around applying these principles, and pretty much ignored or stopped doing everything else, our lives would be simpler and our results vastly improved."