Professional Documents
Culture Documents
Book Review - Good To Great
Book Review - Good To Great
Jim Collins is an alumnus of Stanford University. After he graduated from college, he worked
for Mckinsey for a few years. However, he later realized that his passion was in teaching and
training, so he returned to Stanford to pursue his Ph.D. and went on to become a professor in
the same college. He received a distinguished teaching award. Apart from ‘ Good to Great,’
Jim has written six different books, the most notable one being ‘Built to Last,’ a book that
lists the successful habits of visionary companies. He is currently working from his
The author was always curious to know why only a few companies reach the top and why is
that very few companies do not fare so well in the long run. One of his colleagues mentioned
to him that in his previous book ‘Built to last,’ he only talked about companies that had a
persistent performance. He did not mention the other companies which transitioned from
local brands to ending up in the fortune 500 lists. Hence, he decided to research 11 companies
that we're able to transform from good to great. During his research, he observed that when
most companies achieved certain short term goals they became complacent and decided to
remain in the same position. However there were also certain companies which strived to be
To conduct his research Collins and a team of researchers had a few criteria in shortlisting the
companies. The most important one being that the fifteen-year cumulative stock returns had
to be at the same level or below the general stock market. The team did not choose big names
like Coca-Cola and GE as they were already established brands, and their stock returns were
performing better than the average stock market. The next phase involved setting a
benchmark by comparing these companies with similar ones, which started at the same time
with similar resources. After choosing and comparing the companies, the researches made
some observations of the 11 shortlisted companies. They found out some inner workings of
Most of the CEO’s worked with the same company from the beginning
Strategies were not a key differentiator.
Good to great companies focussed on ‘what not to do’ to get ahead.
Technology-driven changes have nothing to do with transforming a company from
good to great.
Good to great companies were by large from not so great industries.
Level 5 Leadership
While conducting the research, Collins was quite surprised by the type of leaders that that
have converted the organizations from good to great. He found out that such leaders are a
blend of humility and professionalism. He found out that there was a build-up in creating a
good organization.
First and foremost, it was important to find the right people first and then find out the
process.
Every company must maintain unwavering faith even in the most difficult times. Also,
if a company cannot be the best in the world at its core business, then such a core
they may have a hierarchy, most of the employees would do anything to get the job
done regardless of their position in the company. If the employees are self-motivated,
above processes must be implemented step by step. According to him the process of
transformation resembled a flywheel which was being pushed in one direction, building
5 Hierarchy
There is a myth in the corporate world that a good leader is the one that does has no emotions
at all. He/She will get the work done from the employees regardless of the employee's current
circumstances. In other words, someone who rules with an iron fist. However according to
the research conducted by Collins has found out that great leaders have both the qualities of
humility and will. They put their professional needs first and then work on their personal
needs. He gives the example of Abraham Lincoln, a former president of the United States.
While most politicians had a capitalist mindset, he believed in social welfare and as we know
the country did prosper in the future. As mentioned earlier the 11 companies chosen were
compared to other companies in the same industry. It has been found out that the CEO’s of
the companies that did not last had huge egos and would constantly take credit for the success
of the company and blame external circumstances if the company had failed. However Level
5 leaders did the exact opposite and would give most of the credit to the team for the
companies success.
It is empirical to note here that Level five leadership is not just about modesty, but it is also
about a strong resolve and determination to pursue whatever needs to be done. George Cain,
who was the CEO of Abbot Laboratories, had a very shy and reserved personality. However,
he had the determination to set inspired standards for the company. He realized the key cause
for Abbot's mediocre performance in the industry was the nepotism taking place in the
hierarchical structure. He systematically rebuilt both the board and the executive team. He
understood that family ties nor length of tenure in the company would translate to being an
effective leader. Although many companies have want strong leaders who may use
disciplinary measures to get the job done, it is important to note that most of the leaders can
be trained to be Level 5 leaders under the right circumstances. i.e… self-reflection, personal
Building the right team is essential for anyone to achieve success, but what matters more is
building the right team before you know what happens and which path to take towards
success, and hence, it is important to implement the concept of ‘first who..then what.’ It is
important to gather a team of right people before making any changes to the organization and
then decide on what to do, where to go, and how they are going to reach there. It involves a
lot of strategies, vision, and decision making behind it to make the company great. The
reason behind following this approach is that when people join you for making strategies
decision making of the company, then there is no guarantee that they will stick with us or be
equally motivated till the company changes its path. Whereas those who are on the team
because of the motivation of someone else will be there trying to make the company great
regardless of its direction. This approach gives an easier way for the company to change its
direction. It also helps the load of saving lots of time and energy spent by the company on
motivating its employees. To implement this process, the Author gives us three practical
ways:
When you know that you need to make people change, act!
Put your best people on the biggest opportunities, not on the biggest problems.
One of the important things that are required to become a great company is to make a series
of good decisions, and they cannot be just made unless you confront the brutal facts first. If
you have the level 5 leadership and right people, then everyone can put company
performance ahead of their ego, and that enables you to confront the brutal facts without
losing phase, and ultimately, the company will become successful. There is always a thin line
between ‘having your say’ and ‘being heard of.’ It is later that enables companies to confront
the brutal facts from their people and then make the right decisions. To avoid distorting facts,
companies always need to create an atmosphere where the truth is welcomed. The author
Leaders of great companies always ask questions based on reality and its implications. They
constantly probe until they have a clear picture of the answer they get.
Leaders of great companies have a heated debate even if they agree or disagree, but they
never coerce.
Consider these obstacles as learnings and move on to build a mechanism to avoid these
Whenever you see wrong happening in your company, always raise a red flag to counter it.
Hedgehog concept
The author explains the hedgehog concept to help good companies strategize to become great
companies. The key dimensions that help the companies to realize about themselves are
The author strongly emphasizes that you need to be the best in your core business. Hence
only the things in which you can truly be best make it into the hedgehog concept.
This is one of the important factors that determines the potential of the company. It helps the
When the organization does the things in which they are deeply passionate about, then they
From the above figure, according to the author, the application of the hedgehog concept
becomes successful when all the above questions are better implemented.
Culture of Discipline
The author introduces the sixth concept, which is the culture of discipline. There is a great
emphasis on the discipline of the organization as a whole and the related employees. This
concept tells that if there is discipline, on the whole, there would be no need for hierarchy or
bureaucracy in the organization, which is the main reason for many inefficiencies that any
organization faces. The author says that for any organization to mature and to have good cash
flows over a long period, discipline is the key factor in it. Sustained good results depend on
building a culture full of self-disciplined people. Culture is a way of planting the values and
work culture in an employee’s mind by which the respective individual will automatically
inherit the passion and values of the organization. This leads to the right action, focused
approach in alignment with the Hedgehog concept. The author also says to inculcate a culture
discipline and entrepreneurship. A low ethic of entrepreneurship and low culture of discipline
discipline leads to a start-up organization. A low ethic of entrepreneurship and high culture of
discipline leads to a hierarchical organization which is usually low on innovation and can be
considered as a good company. A high ethic of entrepreneurship and high culture of discipline
leads to a great company where employee has total accountability to their work assigned and
is responsible for innovative thinking. This leads to greater efficiency in the organization.
Abbott displayed high levels of entrepreneurship and culture of discipline. It has financial
discipline as well a culture of innovative thinking. This led them to reduce their
administrative costs to the lowest in the industry and at the same time innovate machines like
For a great company, there shouldn’t be too many opportunities as it diversifies the focus of
the employees. There should be fewer opportunities, and one should excel at the same.
Any great company should start to create ‘Stop doing’ lists. The author encourages
organizations to retrospect their experiences and not to repeat any of those mistakes in the
future. The author also encourages the organization to give freedom to innovate and inculcate
a culture where no one is afraid of failure. But freedom should come with a definite
boundary. This is illustrated by an example of a pilot who is guided by Air Traffic Control in
a definite direction, but internally the pilot is given complete freedom to maneuver the flight
Technology as an Accelerator
The final concept explained by the author is ‘Technology as an accelerator.’ It says that a
company should not invest in technologies just because the industry competitors are doing it.
They should only invest if it gets them a good return on investment and aligns well with their
hedgehog concept. Companies are bound to fail if they invest in technology, which does not
align with their hedgehog concept. Great companies are always calm and calculated and only
use technology as an accelerator of momentum but not as a creator of it. A company should
first identify their hedgehog concept and then use technology concerning it. This is illustrated
States, had direct competition with drugstore.com during the internet revolution. As
drugstore.com put their products on the internet, Walgreens had a hit on their revenues.
Instead of launching their website and putting on impulse, they identified their Hedgehog
concept and launched their internet services a year later. This resulted in their stock prices
doubling within a year. Great companies also tend to become pioneers in the use of
low-cost, reliable razors, and hence they invested in manufacturing machines, which could
The author also tells about the Flywheel concept, which every organization must go through
to become a great company. Firstly, for any company, it may seem to be intimidating, but as
they start building momentum, it gets easier with time helping the company achieve
Breakthrough to become a great company. But the media doesn’t cover any company until the
flywheel is already turning. Ex. Circuit city, overnight success story where the company sold
It was in the media after its success. It skews the public perception of the reality that Rome
Conclusion
Finally, any great company should hire the right people, take the right actions aligning with