Chapter 1“Good is the Enemy of the

Great”Team II

Josh Pavlik, Jennifer Rogas, Logan Reynolds, Corbin Ray, Marlee Armstrong, Amy Drake

Good to Great◦ Prequel to “Built to Last”

Good is the Enemy of Great

4 Phases Level 5 Leadership Timeless Physics

Brief Overview

Good-to-great pattern:◦ 15-year returns at or below market◦ Transition point◦ 15-year returns at least three times market

Other criteria:◦ Pattern independent of company’s industry

Should additional criteria be used with stock returns?

Phase I: The Search

Cut 1- 1,435 companies◦ Fortune 500, 1965-1995

Cut 2- 126 companies◦ Used data from University of Chicago Center for Research

in Security Prices ◦ Selected companies that had above-average returns

preceded by average or below-average returns

Cut 3- 19 companies◦ Eliminated companies that did not follow exact good-to-

great pattern

Selection Process

Cut 4- 11 companies◦ Eliminated companies that did not show transition

relative to industry

AbbottCircuit CityFannie MaeGilletteKimberly-ClarkKroger

NucorPhilip MorrisPitney BowlesWalgreensWells Fargo

11 Good-to-Great Companies

Good-to-Great VS Comparison Companies◦ Distinguishing Factors

Direct Comparison Companies◦ Same Industry/Opportunities◦ Similar Resources at Transition◦ No Leap from Good to Great

Unsustained Comparison Companies◦ Short Term shift Good-to-Great◦ Failed to Sustain

Phase II: Compared to What?

Good-To-Great Companies Direct Comparison CompaniesAbbott

Circuit CityFannie Mae

GilletteKimberly-Clark

KrogerNucor

Philip MorrisPitney Bowes

WalgreensWells Fargo

UpjohnSilo

Great WesternWarner-Lambert

Scott PaperA&P

Bethlehem SteelR.J. Reynolds

AddressographEckerd

Bank of America

Entire Study Set

Unsustained Comparison CompaniesBurroughsChryslerHarrisHasbro

RubbermaidTeledyne

The research compared good companies to great companies

Research was gathered through evidence of key data

Material was coded into categories Research included interviews of executives during

transformation Extensive analysis

Phase III Inside The Black Box

The research included extensive analysis of◦ Acquisitions and mergers◦ Executive compensation◦ Business strategy◦ Corporate culture◦ Layoffs◦ Leadership and management styles◦ Financial ratios

Phase III Extensive Analysis

10 to 11 great companies, CEO’s came from within the company

Executive compensation is a key component of transformation

Long range strategic planning has no direct correlation

Focus on what not to do and what to stop doing

Phase III Key Findings

Technology advances transformation, it does not create it

Two mediocre companies cannot equal one great one

Commitment, leadership, and motivation flourish under the right circumstances

Most great transformations are made unaware Greatness is a matter of choice, not circumstance

Phase III Key Findings Cont’d

Interactive Process of looping back and forth

◦ Developing Ideas◦ Testing them against the data◦ Revising the ideas◦ Building framework◦ Watching it break under the weight of evidence◦ Rebuilding it yet again

Phase IV: Chaos to Concept

Process is repeated continually

Reach coherent framework of concepts

Every primary concept showed up as a change variable in 100% of the good to great companies.

Transformation Process: Disciplined People, Disciplined Thoughts, Disciplined Action

Phase IV: Chaos to Concept

Transformation Process Stages:

◦ Disciplined People Leadership, First Who…Then What

◦ Disciplined Thoughts Confront Brutal Facts, Hedgehog Concept

◦ Disciplined Action Culture of Discipline, Technology Accelerators

Phase IV: Chaos to Concept

What type of leaders take a good company to great?

Do not share the characteristics of high profile leaders

They are self-effacing, quiet, reserved, and even shy

A blend of personal humility and professional will

Level 5 Leadership

How do good-to-great leaders begin the process to greatness?

Got the right people on the bus Took the wrong people off the bus Got the right people in the right seats Then figured out where to drive the bus

First Who… Then What

Good-to-great companies embrace the Stockdale Paradox◦ 1. Maintain faith you will prevail◦ 2. Confront the brutal facts of reality

Stockdale Paradox

Good-to-great companies rise above the curse of competence

Because something is your core business, does not mean you can be the best at it

If you can’t be the best at it, then it cannot be the basis of a great company

The Hedgehog Concept

Good-to-great companies create a culture of discipline

If you have disciplined people, hierarchy is not needed

If you have disciplined thought, bureaucracy is not needed

If you have disciplined action, excessive controls are not needed

Culture of Discipline

Good-to-great companies think differently about the role of technology

Use technology to ignite transformation Technology is not used as a primary cause

of greatness Pioneers in “carefully selected

technologies”

Technology Accelerators

Jim Collins states that we should continually search for timeless principles that will remain true and relevant no matter how the world changes around us

Example: Wells Fargo

Timeless “Physics”

It does not matter what kind of economy we are in to apply these timeless principles

Example: Apple and Steve Jobs

Economy

Good being the enemy great is a human problem

Any type of organization can be transformed using timeless principles

Conclusion