Good to Great

By Jim Collins
1. Good is the enemy of great
2. Level 5 leadership
3. First Who….Then What
4. Confront the Brutal Facts (Yet never lose faith)
5. The Hedgehog Concepts (Simplicity within the three circles)
6. A culture of Discipline
7. Technology accelerators
8. The Flywheel and the Doom Loop
 GOOD IS THE ENEMY
OF GREAT
• Emphasis on how the good company can be transform to the great company
• This research is a journey on getting the inner working of good to great

Concept research
• Identifying the company that has make leap from good to great
• Comparison GTG companies with the comparison companies.
• 1453 companies studied over period of 40 years
• Performance of the companies were measured based on their cumulative
returns on stocks
• If 1$ in 1965 in a mutual fund of GTG company would be 471 times in 1/1/2000.
Mkt grew by 56 times.
• From 31/12/1975 to 1/1/2000 – 1USD in Walgreens has beaten $1 invest in
Intel by 2 Times, General Electric by 5 and Coca Cola by 8 times & general
stock market by 15 times.
• Project took 10.5 years to come out with GTG companies.
 Findings
• Based on the study, the research team found that

• Its proved whereby 10 out of 11 good to great‘s leader are

from inside the company. Outside leaders had negative
correlation.
• There is no linking between executive compensation
and the process of going good to great
• Both good to great and comparison companies had their
strategy in place.
• Most of the good to great company focus on what they
should stop instead of what they should start.
• Technology were not the cause of the transformation in
the good to great company. (technology can accelerate
transformation but not cause it)
 Findings
• Mergers and acquisition has no impact on the
movement of good to great company
• The good to great company had very few attention
on managing change, motivation and creating
alignment
• There also unaware of official launch event for the
transformation. No name No tagline…
• It is not necessary the good to great company
should be in great industry, some company were in
the terrible industry.
 Key Concepts Common to GTG
• 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
The framework has got three main components:

1. Process: From setting up yourselves towards greatness (aka Build Up) to

achieving an inflection point that takes you to greatness (aka Breakthrough)

2. Phases: There are three different phases in the ‘Good to Great’ journey.

• Disciplined People: Involves getting the right leader and the right team

• Disciplined Thought: Involves understanding of brutal facts and creating a set of

core values

• Disciplined Action: Creating a robust culture where the right people will work
LEVEL 5 LEADERSHIP
Traits of Level 5 leaders:

1. Are modest and humble. These are the leaders who are shy but show extreme
fierceness in getting the job done
2. Set others up for the successes and the wins, focus on other peoples
successes more than their own. They prefer to share the credit with others as
opposed to other “good” company leaders who are self obsessed
3. Have unwavering resolve Care more about the company than their own profile.
4. These people think about the future of their companies without them and plan
about their succession
5. Their ambition remains within the company and it’s goals, not about their own
personal progression. They first and foremost think about the success of their
organization.
6. Level 5 leaders always apportioned the credit of success to others. In times of
failures they took the responsibility.
7. They come within the company. Greatness comes from hard work.
FIRST WHO… THEN WHAT
 FIRST WHO…THEN WHAT
(Process stage: Buildup; Phase: Disciplined People)
This is about to get right people on the business before you figure out where to
drive. Get Right people In and Wrong people out. Let Right People decide where
you want to go. Company with wrong people never can become Great.

First who, then what

• It is not necessary to set new directions, strategy.
• Getting the right people is more imp than almost
everything.
• Benefits:
– Its easier to change direction
– Team will be self motivating (saving energy of the leader)
– Give organization potential to be great
• Key Principles:
– When in doubt, don’t hire- Keep Looking
– When you know you need to make change in personnel, act right away
– Put your best people on your biggest opportunities, not on biggest
problems.
CONFRONT THE BRUTAL FACT
(YET NEVER LOSE FAITH)
Facts are better than dreams

• If you have Level 5 leadership and right people then

everyone can put company performance ahead of their own
ego.
• Good to great companies did not have a perfect track record.
• But on the whole, they made many more good decisions
than the comparison companies.
Facts are better than dreams

To make good decisions you need to confront the facts. Imp to

have atmosphere to confront these facts. Creating a climate
where truth is heard:
• Lead with questions, not answers. Constantly probe until you have a
clear picture.
• Engage in dialog and debate. It is important to get involved in intense
discussions because they have the capability to evolve into a successful
conclusion rather than just being amicable to maintain relationships
• Conduct autopsies, without blame. The climate of truth prospers when
you analyze the debacles without blaming anyone for it. Consider these
debacles as learnings and move on to build robust systems to avoid
similar debacles in the future.
• Build Red Flag mechanism. Gives ample opportunities to provide
unfiltered information and insight that can act as early warning for
potentially deeper problems.
 THE HEDGEHONG CONCEPT
(SIMPLICITY WITHIN THE THREE
CIRCLES)
A simple crystalline concept that lows from deep
understands about the intersection of the
following circles.
• The Hedgehog concept is not a goal or strategy to be the
best at something, it is an understanding of what you can
be the best at and almost equally important on what you
cannot be the best at.
• To get insight into the drivers of your economic engine,
search for the one dominator (profit per x, for example or
cash flow per x) that has the single greatest impact.
• Decide to do only those things that they could get
passionate about. (passion cannot be manufactured nor can it
be the end result of a motivation effort)
A CULTURE OF DISCIPLINE
The Good to Great Matrix of Creative Discipline

High
Hierarchical Great
Organization Organization

Culture of
Discipline
Bureaucratic Start-up
Organization Organization

Low

Low Ethic of Ownership High

To create a culture of discipline, you must:
• Build a culture around the idea of freedom and
responsibility, within a framework.
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.
• Get right people on board.
• Fill your culture with self-disciplined people who are
willing to go to extreme lengths to fulfill their
responsibilities.
People in good-to-great companies tend to be almost
fanatical in the pursuit of greatness, they possess the
discipline to do whatever it takes to become the best within
carefully selected arenas and then seek continual
improvement from there.
• 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 at their best followed a
simple mantra — “Anything that does not fit with our
Hedgehog Concept, we will not do.” They did not launch
unrelated businesses or joint ventures in an effort to
diversify.
 Technology Accelerators
❑ Good to great organizations also avoid technology fads and bandwagons and
they become pioneers in the application of carefully selected technology.
❑ The good to great companies used technology as an accelerator of momentum,
not a creator of it.
❑ None of the good to great companies began their transformations with pioneering
technology.
❑ They become pioneers in the application of technology once they grasped how it
fit with their three circles and after they hit breakthrough.
The Flywheel Effect

The Doom Loop

 The Flywheel and the Doom Loop
❑ At the first the flywheel seems impossible to turn.
❑ The more momentum you build up easier it gets.
❑ At some point it takes life of its own.
❑ Infact difficult to stop
❑ When this happens you have achieved Good to Great
 The Flywheel and the Doom Loop

❑ No matter how dramatic the end result, the good-to-great

transformation never happened in one swoop. There was no
single defining action, no grand program, no one killer
innovation, no solitary lucky break, no miracle moment.
 The Doom Loop
❑ No Sustained efforts to push the flywheel. Just giving only intermittent
big pushes. These huge efforts are exhausting. Over time, their
intermittent nature leads to poor results. This, in turn, causes the firm to
switch to a new idea because the previous one didn’t work out the way
they’d hoped. Each time they switch idea momentum is lost. These
companies completely stop trying to create momentum. Instead, they
are focused on having one breakthrough. This breakthrough never
comes. The absolute key thing to remember in this flywheel analogy is
that each push on the flywheel builds on all the previous thousands of
pushes and moves you one step closer to going from good to great
 Good to Great Summary

❑ The key takeaway from Good to Great is “Discipline”.

❑ To go from a good organization to a great one you need disciplined
people, disciplined thought, and disciplined action.
❑ The key to going from Good to Great is to get the right people onboard,
engaging in critical thinking, then taking disciplined action aligned with
the Hedgehog Concept.

• Disciplined people: means getting the right people and keeping them
focused on excellence.
• Disciplined thought: means being honest about the facts and avoid
getting sidetracked.
• Disciplined action: means understanding what is important to achieve
and what isn’t
Thank You