Good to Great by Jim Collins: Book Summary
The 6 Things That Will Make a Company Great.
1. Level 5 Leadership
If you said, "hey, if Level 5 is the best, then there must be levels 1 through 4" you'd be right. Here they are. If you are a highly capable individual, then you are a Level 1. If you are a contributing team member, you are a Level 2. If you are a competent manager, you are a Level 4. If you are an effective leader, you are a Level 4. And finally, if you build a paradoxical blend of humility and professional will, you are a Level 5 executive.
Still not sure if you are a Level 5 or not? Here are some clues.
If you have ambition for your company rather than yourself, you are a Level 5. If you have a compelling modesty, you are a Level 5. If you have an unwavering resolve to do what must be done, you are a Level 5. If it turns out that you aren't a Level 5 leader, or don't want to be, this book is not for you.
2. First Who, Then What
In the alphabet of Good to Great, who always comes before what. Before you create a vision, strategy, structure and tactics, you must first get the right people in your organization. Collins uses the analogy of the bus. You need to get the right people in the right seats on that bus before you know where you are going to drive it. Just for the record, my vote is to drive that bus straight for the bank - right where the money is.
Level 5 leaders, as it turns out, have a relentless focus for getting the right people on board. One of the reasons they do this is that they know that some day they are going to kick the bucket - like Jack Nicholson and Morgan Freeman from that terrible movie - and then who's going to steer the ship?
Well, the people on the bus, of course. Level 4 leaders who rely on their abilities and sheer genius to get things done are what Collins calls a "genius with a thousand helpers".
Here's how to be rigorous with your people decisions:
- When in doubt, don't hire. Limit growth based on your ability to attract enough of the right people.
- When you need to make a change, act. First make sure that they aren't in the wrong seat though. You'll often find that some of your team members are better suited for other roles you in your company.
- Put your best people on your biggest opportunities. It's very tempting to put your best people on your best problems. Don't do that.
- If you are going to sell off your problems, don't sell off your best people with it.
3. Confront the Brutal Facts.
Having a vision is great, but great organizations continue to combine vision with the brutal facts of reality. Think of Britain in World War II. In the middle of being bombed to oblivion by the Nazis and with most of Europe and North Africa under German control, Churchill had this to say.
We shall fight in France, we shall fight on the seas and oceans, we shall fight with growing confidence and growing strength in the air. We shall defend our island, whatever the cost may be. We shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets. We shall fight in the hills. We shall never surrender.
Churchill knew that if he sugar-coated the situation everybody would know that he was full of BS. It's as if he were saying, "ok, here's the deal. Things are really bad right now. And, they might even get a little bit worse. But here's how we are going to work through this. Here's how we are going to win."
Collins calls this the Stockdale Paradox, a Vietnam veteran and a POW. Here's his paradox. You have to retain faith that you will prevail in the end, and confront the brutal facts of reality, whatever they may be.
Of course, having unwavering faith without the brutal facts, isn't going to do you much good. So here's how you build a culture where the nasty facts that people don't like to talk about, are front and centre:
- Lead with questions, not answers. Ask "why?", "why?", "why?". "Why?" a thousand times.
- Engage in dialogue and debate, not coercion. Don't assume like you know everything. You don't. You'll be amazed at what you can learn by the people around you if you invite them to share and ask for their opinions.
- Conduct autopsies without blame. Every time you make a mistake, look at it. Probe it. Learn everything you can about it. Most importantly, don't place blame. Focus on what you are going to do better the next time, instead.
- Build in red flag mechanisms that turn "information" into "information that can't be ignored".
So, as we are in the middle of one of the largest economic crises that we've ever seen, are you talking about the tough stuff?
4. The Hedgehog Concept
Quick pop quiz: are you a hedgehog or a fox? Here's a hint: the fox knows many things, and the hedgehog knows one big thing. Foxes pursue many things at the same time, and see the world in all its complexity. Hedgehogs, on the other hand, simplify a complex world into a single, organizing idea. A simple principle that unifies and guides everything.
Lest you think that hedgehogs are dumb and a little bit slow, here are a few hedgehog ideas.
Einstein's E=MC2. Adam Smith's pin factory and invisible hand.
The truly great companies - in one way or another - were hedgehogs. Now, I'd argue that we are on the brink of such dramatic change in the business world that everybody should be thinking about this. Even if you've gone through this process 2 years ago, it's probably time to take another look at it.
What is a hedgehog concept? It's a simple, crystalline concept that flows from deep understanding of the following 3 things:
- What you can be best in the world at. This is much different than a core competency, and really forces you to be honest with yourself. You'll probably have to confront some brutal facts with this one. As Collins puts it, a hedgehog concept is not a goal to be the best, a strategy to be the best, an intention to be the best, or a plan to be the best. It's an understanding of what you can be the best at.
- What drives your economic engine. The biggest thing in your engine is the denominator in this equation: Profit per X. It could be profit per store, or profit per visit, or many other things. This is a critical question to be asking yourself as we come out of the recession. Spend some time on this, it's an important point.
- What you are passionate about. Although the hedgehog concept seems to be a hedgehog concept itself, don't fret about figuring it out overnight. It took 4 years, on average, for the Good to Great companies to get to their hedgehog concept.
Collins also talks about setting up a council to help move your organization through, and towards, the hedgehog concept. Rather than a council, you should probably just grab as many smart people as you can (preferably smarter than you) and have a go at it. Just make sure to listen. Listen when somebody tells you the brutal facts.
5. Culture of Discipline.
This is an obvious one, so we won't spend much time on it. Essentially, you need a company of self-disciplined people who take disciplined action, fanatically consistent within the 3 circles.
Disciplined people, thoughts, and action.
Getting this done requires a seemingly contradictory rule. People should work within the confines of a system, but that people should have the freedom and flexibility to do what needs to be done, within the framework of that system.
6. Technology Accelerators
According to Collins, here's what you need to know about technology. When used right, technology becomes an accelerator of momentum, not the creator of it. The Good to Great companies didn't begin their journey with a pioneering technology, for the simple reason that you can't make good technology until you know which technologies are relevant. Which are those?
Those, and only those, that point directly to the 3 intersecting circles of your hedgehog concept. Seeing that we are in the middle of an enormous change in how technology is being used in business, I think that this is very relevant commentary.
Somebody has probably told you that you need to be using Twitter, or that you need to get a video up on YouTube.
Remember, don't be motivated by a fear of being left behind. Take the time to see how you can use these new technologies to achieve business results. But also remember this: there is a huge opportunity to change how you do business with these technologies.