good to great
DESCRIPTION
Key concepts in taking an organization to Greatness.TRANSCRIPT
“Why some companies make the leap… and others don’t?”
AGENDA
•The Research
•GTG Framework
•GTG Concepts
•Comparison
•Examples
•Unexpected Findings
•Quiz
•Ice Breakers
THE BOOK
•Written by Jim Collins
•Translated in 35
languages
•Result of 5-year intensive
research
•3 Million Copies Sold
•One of the most
influential business book
before the 21st century
“Our five-year quest yielded many insights,
a number of them surprising and quite
contrary to conventional wisdom, but one
giant conclusion stands above the others: -
We believe that almost any organization
can substantially improve its stature and
performance, perhaps even become great, if
it conscientiously applies the framework of
ideas we’ve uncovered.”
- Jim Collins
1965 - 1995
1995 - 2000
COMPANIES STUDIED GOOD TO GREAT COMPANIES COMPARISON COMPANIES
Abbott (3.98) Upjohn
Circuit City (18.5) Silo
Fannie Mae (7.56) Great Western
Gillette (7.39) Warner-Lambert
Kimberly Clark (3.42) Scott Paper
Kroger (4.17) A&P
Nucor (5.16) Bethlehem Steel
Philip Morris (7.06) RJ Reynolds
Pitney Bowes (7.16) Addressograph
Walgreens (7.34) Eckerd
Wells Fargo (3.99) Bank of America
* 15-year return compared to general stock market
LEVEL 2 – CONTRIBUTING TEAM MEMBER Works effectively with others for the achievement of its objectives.
LEVEL 3 – COMPETENT MANAGER Organizes people and resources towards effective pursuit of pre-determined objectives.
LEVEL 4 – EFFECTIVE LEADER Vigorous pursuit of clear and compelling vision, stimulating higher performance standards.
LEVEL 1 – HIGHLY CAPABLE INDIVIDUAL Knowledge, Skills and Good Work Habits
LEVEL 5 – EXECUTIVE Builds enduring greatness through a blend of PERSONAL HUMILITY and PROFESSIONAL WILL.
PERSONAL HUMILITY And
PROFESSIONAL WILL
• CEO of Kimberly Clark
• Stodgy old paper company
whose stock has fallen 36%
behind the general market over
past 20 years.
• Other management team told
him that he lack qualifications
• Among the 10 Greatest CEO of
all times
•CEO of Fannie Mae
•Company is losing $1M dollar
daily when he joined but earned
$4M every business day 9 years
after.
•Set up his successor for success
•“I want to look out from my porch
someday and look at Fannie Mae
and say “I used to work there”.
• CEO of Chrysler
• Talented yet egocentric
• Chrysler rose to height halfway
of his tenure
• Diverted his attention
• Made himself one of the most
celebrated CEO’s in America’s
history
• His book sold 7 Million copies
• Chrysler fell 31% behind the
market and return to glory
5 years after his retirement
Most remarkable CEO’s of the century:
• George Cain
• Alan Wurtzel
• David Maxwell
• Colman Mockler
• Darwin Smith
• Jim Herring,
• Lyle Everingham.....
....but almost no one ever remarked about them...
THE 11 GTG CEO’S
“Did I have a lot to do with it?” “There are plenty of people in this company who could do my job better than I do.” “I hope I am not sounding like a big shot.”
1. Right people on the bus
2. Wrong people off the bus
3. Proper seats for the right people
•Foresaw that banking industry
would eventually undergo wrenching
change
•Focused on “injecting an endless
stream of talent” directly into the
veins of the company
•He hired the most talented
management team in the industry
instead of mapping strategy for
change
•Wells Fargo outperformed the
market 3 times when banking
industry fell 59% behind
“That is how you
build the future.”
– Dick Cooley
•Followed “Weak Generals, Strong Lieutenants”
model
•Strong lieutenants will stick around if weak
generals are picked.
•Weak generals for Bank of America would wait for
direction instead of seeking solution to problems.
•After losing over $1 Billion in mid 80’s, they
recruited a gang of strong generals (from Wells)
•They refer themselves as “Wells of America”
•BA began to climb upward again
• One genius is the driving force in company’s
success
• Does not need a management team
• Does not give serious thought on
succession planning
• Effective unless genius isn’t
there to make decision
LEVEL 5 + MANAGEMENT
(Good to Great Companies)
LEVEL 5 LEADER
FIRST WHO
Get the right people on the bus. Build a superior executive team.
THEN WHAT
Once you have the right people in place, figure out the best path for
greatness.
A “GENIUS WITH THOUSAND HELPERS”
(Comparison Companies)
LEVEL 4 LEADER
FIRST WHAT Set a vision for where to drive the
bus. Develop a road map.
THEN WHO
Enlist a crew of highly capable “helpers” to make the vision
happen.
WALGREENS (Cork Walgreen)
ECKERD CORPORATION (Jack Eckerd)
Picked the right people to hire
Picked the right stores to buy
Which people should go in what seats
Which stores should in what location
Best executive team in the industry
Had no executive team
Selection of a great successor
With bunch of capable helpers
• Made every decision
• From small enterprise to #295 in the Fortune 500 in just 6 years
• Completed 10 acquisitions in 10 years
• No serious thought given to succession
• Failed 66% behind the market when he left the company
1. Set up steel factories in provinces with farmers who go to bed early, rise at dawn and get right to work without fanfare
2. Idea of “You can teach farmers how to make a steel but you can’t teach work ethic to people who don’t have it in the first place”
3. Pays more than any other steel company in the world, with bonus tied directly with productivity
Three (3) Practical Disciplines on how to be rigorous in
people decision.
When in doubt, don’t hire – keep looking.
No company can grow revenues consistently faster that its ability to get enough of the right people to implement that growth and still become a great company.
If your growth rate in revenues consistently outspaces growth rate in people, you simply will not – indeed cannot – build a great company.
CIRCUIT CITY (Alan Wurtzel)
SILO (Sidney Cooper)
Goal - Build the best, most professional management team in the industry
Goal – To grow as fast as possible
Spent the bulk of his time hiring the right people
Focused his time on the right stores to buy
Took off like a rocket and beat the general stock market at 18.5:1
Could not even perform basics - Deliveries
“Always Looking for Great People”
Bought by a foreign company
When you know you need to make a people change,
ACT!!
We have wrong person on the bus and we know it. Yet we
wait, we delay, we try other alternatives, we give a 3rd and 4th
chance hoping that situation will improve, we invest time in
trying to properly manage this person but we fail. We go
home and we find our energy diverted by thinking (or talking
to your spouse) about that person.
Worse is, all the time and energy we spend on that one
person takes the energy away from developing and working
with all the right people.
We continue to stumble along until this person leaves on his
own or we finally act after waiting for so long. Meanwhile,
our best people will wonder and ask “WHAT TOOK YOU SO
LONG?”.
•Letting the wrong people hang around is unfair to all the right people •Waiting too long before acting is equally unfair to the people who need to get off the bus •Two key questions – Would you hire that person again? Would you feel terribly disappointed if that person leaves?
Put your best people
on your biggest opportunities,
not your biggest problems.
Joe
Cullman
Identified international markets as the
best opportunity for growth even with
less than 1% of total co. Revenue
Came up with brilliant answer to “Who”
and not “What”
Assign his number one executive,
George Weissman who was running 99%
of the company that time
Few years later, Marlboro became the
best selling cigarette in the world, 3 years
before it became number one in US
UNEXPECTED FINDINGS:
1. There is no link between executive compensation and the shift from good to great. The purpose of compensation is not to motivate the right behavior from the wrong people, but to get and keep the right people.
2. The old adage “People are your most important asset” is wrong. The right people are.
3. “Right Person” has more to do with character, traits and inner capabilities than with specific knowledge, background and skills.
1950’s - Largest
retailing corporation in
US
1960’s – Began to falter
Lagged behind the
market
1950’s – Unspectacular
grocery chain, half the
size of A&P
1960’s – Began to lay the
foundations to become
great company
25 years later, generated
cumulative returns 10x
the market and 8x better
than A&P
•Old company facing
new reality (111 years)
•All assets invested in
traditional grocery
stores
•Brutal fact – this model
was going to become
extinct
•Never dealt with the
facts
•Failed to adapt
•Old company facing new
reality (82 years)
•All assets invested in
traditional grocery stores
•Brutal fact – this model
was going to become
extinct
•Confronted the brutal
fact heads on and change
its whole system
•Became very successful
1973-1998
25 years later, generated cumulative returns 10x the market like a
rocket and 8x better than A&P, while A&P lagged behind the market
•Postage meters
•Year 1973 – similar revenue and
headcount
•Imminent reality of losing their
monopoly
•Management meetings – 15
minutes discussion about
accomplishments and 2 hours
about “scary squiggly things”
that might impede future results
•Year 2000 – with 30,000
employees and revenue of $4
Billion
•Address-duplicating machines
•Year 1973 – similar revenue and
headcount
•Imminent reality of losing their
monopoly
•Charismatic leader – Roy Ash
•Set a vision to dominate IBM,
Xerox and Kodak
•Refused to confront that his plan
has a little chance of success and
was doomed to fail
•Year 2000 – only 670 employees
and revenue of &100 million
•Company closed
•Ash thrown out of the office
Pitney Bowes outperformed Addressography by 3,581 to 1. (3,581 times better)
Pitney Bowes
“There is nothing wrong with pursuing a vision for greatness. After all, the good-to-great companies also set out to create greatness.
But, unlike the comparison companies, the good-to-great companies continually refined the path to greatness with the brutal facts of
reality.”
How to Create a Climate Where the Truth is Heard
Lead with questions, not answers
Engage in dialogue and debate, not coercion
Conduct autopsies, without blame
Build “Red Flag” mechanism
Each MBA student will have a bright red sheet of paper, with
the following instructions:
“This is your red flag for the quarter. If you raise your hand
with your red flag, the classroom will stop for you. There are
no restrictions on when and how to use your red flag; the
decision rests entirely in your hands. You can use it to voice
an observation, share a personal experience, present an
analysis, disagree with the professor, challenge a CEO guest,
respond to a fellow student, ask a questions, make a
suggestion, or whatever. There will be no penalty whatsoever
for any use of a red flag. Your red flag can be used only once
during the quarter. Your red flag is nontransferable; you
cannot give or sell it to another student.”
Key psychology for leading companies from good to great...
• Named after Jim Stockdale • Highest ranking US military officer
during Vietnam war • Tortured over 28 times during his 8-year imprisonment • No prisoner’s rights, no set release
date, and no certainty he would even survive to see his family again.
• Never lost faith during his ordeal: “I never doubted not only that I would get out,
but also that I would prevail in the end and turn the experience into the defining event of my life, which, in retrospect, I would not trade.”
He noted that it was always the most
optimistic of his prison mates who failed
to make it out of there alive.
“They were the ones who said, „We‟re
going to be out by Christmas.‟ And
Christmas would come, and Christmas
would go. Then they‟d say, „We‟re going
to be out by Easter.‟ And Easter would
come, and Easter would go. And then
Thanksgiving, and then it would be
Christmas again. And they died of a
broken heart.”
Retain absolute
faith that you can
and will prevail at
the end...
And at the same
time...confront the
brutal facts of
reality whatever
they might be.
Life is unfair – sometimes to our advantage and
sometimes to our disadvantage. We will all
experience disappointments and crushing events
somewhere along the way.
What separates people is not the presence or
absence of difficulty but how we deal with them.
What are
you
deeply
Passionate
about?
What you
can be the
best in the
World at?
What
drives your
Economic
engine?
You cannot manufacture passion or motivate people to feel
passionate. You can only discover what ignites
your passion and the passions around you.
CIRCUIT CITY
Best at implementing 4S Model (Service, Selection, Savings and Satisfaction
FANNIE MAE
Best capital market player in anything that pertains to mortgagest
GILETTE
Best at building premier global brands of daily necessities of sophisticated
technology
KIMBERLY CLARK
Best in the world at paper-based consumer product
NUCOR
Best in technology to produce low cost steel
PHILIP MORRIS
Best at “sinful” products like tobacco, beer, coffee and chocolate (Marlboro,
Miller, Maxwell House and Toblerone)
WELLS FARGO
Best at running a bank like a business.
ABBOTT LABORATORIES
Best at creating portfolio that lowers cost of health care
COMPANY ECONOMIC DENOMINATOR
ABBOTT Profit per employee
CIRCUIT CITY Profit per economic region
GILETTE Profit per customer
KIMBERLY CLARK Profit per customer brand
KROGER Profit per local population
NUCOR Profit per ton of finished steel
PHILIP MORRIS Profit per global brand category
WALGREENS Profit per customer visit
WELLS FARGO Profit per employee
•Breakthrough Strategy -
Best, most convenient
drugstores with high profit
per customer visit
•Became the best in the
world at convenient
drugstores
•Exceeded the market
over 15 times beating
great companies like
Coke, Intel and GE.
•Acquire lumps of stores
– 46 here 36 there – with
no unifying theme
•Lurched after growth
•Purchased American
Home Video Corp.
•Produced &31 million in
losses
•Eckerd ceased to exist
as an independent
company
Author of the book Good to Great (1)
What are the 3 broad stages of transformation from being
good to great company (2-4)
Two distinguishing characters of Level 5 leader (5-6)
Three steps to implement the “First Who then What”
concept (7-9)
What do you call this psychology that states “ Retain absolute faith that you can and will prevail at the end... And at
the same time...confront the brutal facts of reality whatever
they might be. (10)
Three dimensions of the Hedgehog Concept (11-13)
What does the title “Culture of Discipline”
bring to your mind?
AIRLINE PILOT
AN AIRLINE PILOT •Heads $84 Million piece of machinery
•Sits in a cockpit surrounded by dozes of
complicated gauges switches
•Begins with pre flight checklist,
systematically moves through methodical step
by step procedure
•Cleared for departure, he begins working with
air traffic control
•Once aloft, communicates continually with
flight-control centers
•Hits a ferocious thunder and hail storm, wings
tilt to the left and right*
•Did some maneauvers until it safely lands
•Dave Scott
•Won Hawaii Triathlon 6 times
•Would ride his bike 75 miles,
swim 20,000 meters and run 17
miles
•No weight problem
•Believed that low-fat diet
would give him extra edge
•Literally rinse his cottage
cheese to get the extra fat off
•Froze executive salaries for 2
years
•Shut the executive dining
room and replaced with food
service caterer
•Closed the executive elevator
•Sold the corporate jets
•Banned green plants from
Executive Suite
•Threw fancy-binded reports
•“Would you spend your own
money this way?”
•Preserved their posh
executive kingdom
•CEO’s office has large
attached conference room,
oriental rugs, floor-to-ceiling
windows, with a sweeping
panorama view of
Golden Gate
•“Why rinse the cheese when
life is so good?”
• Good to Great companies had Level 5 leaders who built an enduring culture of discipline
• Comparison companies had Level 4 leaders who personally disciplined the organization through sheer force
EXAMPLES:
1. Stanley Gault of Rubbermaid – imposed strict disciplines,
arrives work at 6:30 am and worked 80 hours a week and
expects his managers to do the same. Rose dramatically
but also declined when he departed.
2. Lee Iacocca of Chrysler – imposed his towering personality
to discipline the organization, overhauled the management
structure, instituted strict financial controls, improved
quality measures, conduct mass lay off, etc.
3. Ray MacDonald of Burroughs – controlled the
conversations, told all jokes and criticized those not as
smart as he. Company succeeded but no culture of
discipline to endure beyond him, failed 93% below the
market after he left
MANTRA :
“Anything that does not fit with our Hedgehog Concept, we will not do.”
DARWIN SMITH
Kimberly Clark
•Stopped the Annual Forecast
Game with Wall Street
•Unplugged titles of executives
•Unplugged layers in the
organization
•Unplugged Kimberly from all
paper industry trade
associations
Good to Great companies institutionalized the discipline of
“Stop Doing” through the use of unique budget mechanism.
“Budgeting is a discipline to decide which
arenas should be fully funded and which
should not be funded at all....determining
which activities best support the
Hedgehog concept and should be fully
strengthened and which should be
eliminated entirely.”
Stop
Doing List
To Do List
Is more
important than
The key question is :
Does the technology fit directly with
your Hedgehog Concept?
If yes, then you need to become a pioneer
in the application of that technology.
If no, then you can settle for parity or
ignore it entirely.
No Technology can: • Make you a level 5 leader! • Turn wrong people into right people! • Instill discipline to confront the brutal facts! • Create a culture of discipline!
“If you ever find yourself thinking that technology alone holds the key to success, then think of the US-Vietnam war.
The Americans lost to the
Vietnamese despite superior technology.”
•Technology by itself, is never a primary root cause of
either greatness or decline
•Across 48 interviews with GTG executives, 80% did
not even mention technology as one of the top five
factors in the transformation.
•“Crawl, walk, run” can be a very effective approach,
even during times of rapid and radical technological
change.
A massive metal disk 30 feet diameter 2 feet thick 5,000 pounds in weight It’s your job to turn this wheel and get it going as fast and long as possible Turning this wheel is like moving a company so it will begin to produce results
Good to Great transformations do not happen overnight or in one big leap. Rather, it starts one movement at a time, gradually building up momentum till there is breakthrough.
•Egg sitting there
•No one pays attention
•Egg cracks open
•Out jumps a chick
•Media
•“The Transformation”
•“The Remarkable Evolution”
•“Stunning Turnaround”
•GTG companies had no name for their
transformation, no launch event, no tag
line, there were no miracle moment!
ABBOTT
“It wasn’t a binding flash or sudden revelation from
above”. Our change was a major change, and yet in
many respects simply a series of incremental
changes...”
FANNIE MAE
“There was no one magical event, no one turning
point, It was a combination of things. More of an
evolution, though the end results were dramatic.”
WELLS FARGO
“It wasn’t a single switch that was thrown at one
time. Little by little, the themes became more
apparent and stronger....”
Is your organization on a FLYWHEEL or on a DOOMLOOP?
You are in a Flywheel, if you: •Follow a pattern of build up, leading to breakthrough •Confront the brutal facts to see what steps must be taken to build momentum •Attain consistency with a clear “Hedgehog Concept”, staying within the 3 circles •Follow the pattern of disciplined people, thought and action •Harness appropriate technologies to your Hedgehog concept •Spend little energy trying to motivate or align people; the effect of Flywheel is infectious •Maintain consistency over time.
Is your organization on a FLYWHEEL or on a DOOMLOOP?
You are in a Doomloop, if you: •Skip build up and jump right into breakthrough •Implement big programs, radical change efforts, dramatic revolutions and chronic restructuring •Embrace fads and engage in management hoopla, rather than confront the brutal facts •Demonstrate chronic inconsistency, lurching back and forth, and straying outside the 3 circles •Jump right into action, without disciplined thought, or first getting the right people on the bus •Spend a lot of energy trying to align and motivate people, rallying them around new visions •Sell the future to compensate for lack of results in the present
Please fill up the EVALUATION FORM
It is about having disciplined people engaged in disciplined
thought and who then take disciplined action (14)
A very effective approach in considering technology in our
business (15)
Concept of going from build up to breakthrough (16)
Two popular doomloops to avoid (17-18)
What are the 7 concepts of being good to great company?
(19-25)
Author of the book Good to Great (1) JIM COLLINS
What are the 3 broad stages of transformation from being good to great
company (2-4) DISCIPLINED PEOPLE, DISCIPLINED THOUGHT AND DISCIPLINED
ACTION
Two distinguishing characters of Level 5 leader (5-6) PERSONAL HUMILITY OR
MODESTY AND POLITICAL WILL
Three steps to implement the “First Who then What” concept (7-9) RIGHT
PEOPLE ON THE BUS, WRONG PEOPLE OFF THE BUS, RIGHT SEAT FOR THE
RIGHT PEOPLE.
What do you call this psychology that states “ Retain absolute faith that you can
and will prevail at the end... And at the same time...confront the brutal facts of
reality whatever they might be. (10) STOCKDALE PARADOX
Three dimensions of the Hedgehog Concept (11-13) WHAT YOU CAN BE THE
BEST AT, WHAT ARE YOU PASSIONATE ABOUT, WHAT DRIVES YOUR ECONOMIC
ENGINE
It is about having disciplined people engaged in disciplined thought and who
then take disciplined action (14) – CULTURE OF DISCIPLINE
A very effective approach in considering technology in our business (15)
CRAWL, WALK, RUN
Concept of going from build up to breakthrough (16) FLYWHEEL
Two popular doomloops to avoid (17-18) MISGUIDED ACQUISITIONS AND
LEADERS WHO STOPS THE FLYWHEEL
What are the 7 concepts of being good to great company? (19-25) LEVEL 5
LEADER, FIRST WHO THEN WHAT, HEDGEHOG CONCEPT, CULTURE OF
DISCIPLINE, TECHNOLOGY ACCELERATORS, FLYWHEEL
THANK YOU!!!!!