Good to GreatTeam 6

Will KerlickBryan Fetterman

Reece MacdonaldMolly Murdock

John Fletcher

Chapter 1: Good is the Enemy of GreatAfter writing the book “Built to Last,” it was brought

to Collins’s attention that the book didn’t tell companies how to become great, so he decided to do some research.

Phase 1: The SearchSearched for companies at or below market returns for

15 years, then after a transition went to three times the average return over the next 15 years. Had to be demonstrated independent of the industry the

company was inYou can find greatness in the most unlikely of situations

Chapter 1 (continued)Phase 2: Compared to What?

First set of comparison companies consisted of “direct comparisons”-companies that were in the same industry with the same opportunities and similar resources at the time of transition, but showed no leap from good to great.

Second set consisted of “unsustained comparisons”- companies that made a short-term shift but failed to maintain trajectory.

Chapter 1 (continued)Phase 3: Inside the Black Box

Celebrity leaders usually failedCompensation was not a driver neither was strategyGood-to-great companies focused on what not to doTechnology, mergers, and acquisitions were irrelevantNo program was used to launch transformation

Phase 4: Chaos to conceptThe study was an iterative process of looping back and

forth, developing ideas and testing them against the data, revising the ideas, building a framework, seeing it break under the weight of evidence, and rebuilding it again.

Chapter 2: Level 5 LeadershipEvery good to great company had Level 5

leadership during the pivotal transition years

“Level 5” refers to a five-level hierarchy of executive capabilities, with Level 5 at the top

Level 5 leaders embody a paradoxical mix of personal humility and professional will

They are ambitious, to be sure, but ambitious first and foremost for the company, not themselves

Chapter 2 (continued)Level 5 leaders display a compelling modesty, are self-

effacing and understated. In contrast, two thirds of the comparison companies had leaders with personal egos that contributed to the demise or continued mediocrity of the company.

Level 5 leaders are driven to produce sustained results

They are resolved to do whatever it takes to make the company great.

Window and the mirror

Chapter 2 (continued)Celebrity leaders are negatively correlated with going from

good to great.

Level 5 leaders attribute success to luck, colleagues, predecessors, or successors, but never attribute it to themselves.

Level 5 leaders set up their successors for even greater success in the next generation

Level 5 leadership exists all around, you just have to know what to look for because some people have the potential to evolve into a level 5 leader.

Level 5 Heirarchy

Chapter 3: First Who…Then WhatFirst figure out who to get on the bus and who to get off the

bus, then you can figure out where to drive itThis concept could solve the 4 hurdles dilemma discussed in

Blue Ocean Strategy. Mainly the cognitive hurdle of convincing employees of the need for a strategic shift could be resolved

The question of who occurs before vision, before strategy, before organization structure, and before tactics.

The model of “genius with a thousand helpers” fails when the genius departs

Good-to-great leaders are rigorous, not ruthless

Chapter 3 (continued)There are three practical disciplines for being rigorous

1. When in doubt, don’t hire-keep looking2. When you know you need to make a people change,

act. First be sure you don’t just have them in the wrong seat.

3. Put your best people on your best opportunities, not your biggest problems.

Management tames should consist of people who debate vigorously in search o the best answers, yet unify behind decisions, regardless of parochial interests.

Chapter 3 (continued)There is no systematic pattern linking executive

compensation to the good to great shift.Compensation is not used in motivation, but in getting the

right people on the bus in the first place and keeping them.

The RIGHT people are your most important asset.

Whether someone is the “right person” has more to do with character traits and innate capabilities than with specific knowledge, background, or skills.This idea is also expressed in Strategy: A View from the Top,

saying that emphasis is being placed on attracting, rewarding, and retaining talent based more on character traits.

Chapter 4:Confront the Brutal FactsThe process of good to great begins with confronting the

brutal facts of the current reality.Blue Ocean Strategy captures these realities using the strategy

canvas.

The right decisions often become self-evident if you start with an effort to determine the truth of your situation.

A culture must be created where people have a tremendous opportunity to be heard and for the truth to be heard.

The leadership personality can deter people from the brutal facts.

Chapter 4 (continued)Creating a truthful climate involves the following

Lead with questions, not answersEngage in dialogue and debate, not coercionConduct autopsies, without blameBuild red flag mechanisms that turn information

into information that cannot be ignored

Good-to-great companies faced just as much adversity as the comparison companies, but responded differently.

Chapter 4 (continued)Vision is not where leadership begins. It begins

with getting people to confront the brutal facts and to act on the implications.

If you have the right people, they will be self-motivated. The key is not to de-motivate them.

Stockdale paradox: Retain absolute faith that you can and will prevail in the end, regardless of the difficulties, and at the same time confront the most brutal facts of your current reality.

Chapter 5: The Hedgehog ConceptTo go from good to great requires a deep understanding of three

intersecting circles translated into a simple, crystalline concept (hedgehog concept)The eliminate-reduce-raise-create grid in Blue Ocean strategy helps

companies to focus on their concept, as does the strategy canvas.

The hedgehog concept is not a goal, strategy, or intention; it is an understanding.

Good-to-great companies set their goals and strategies based on understanding not based on bravado.

Getting the hedgehog concept is an iterative process, and the council can be a useful device for finding it.

Chapter 5 (continued)The key is to understand what your company can be the

best in the world at, and what it cannot be best at.

If you cannot be the vest in the world at your core business, then your core business cannot form the basis of your hedgehog concept.

Having a competence is not the same as having the capacity to be the best in the world.

To get insight into the drivers of your economic engine, search for one denominator that has the single greatest impact.

Chapter 5 (continued)Good-to-great companies are like hedgehogs; they

find “one big thing” and stick to it.

Strategy did not separate the good-to great companies from the comparison companies.

The industry of the company does not have to be great for the company to produce superior economic returns.Strategy: A View from the Top argues that the

attractiveness of an industry are an important determinant of profit potential.

Three Circles of the Hedgehog Concept

What you Are Deeply

Passionate About

What you Can Be the Best In The

World At

What Drives Your

Economic Engine

Chapter 6: A Culture of DisciplineYou need a culture full of self-disciplined people who take

disciplined action, fanatically consistent with the three circles.If you get the right people on the bus, and the wrong people off,

you don’t need bureaucracy.In Strategy: A View from the Top, it says that building a company

culture can differentiate a company from its competitors.

A culture of discipline required people who adhere to a consistent system, yet it give people freedom and responsibility within a framework of that system.

It is about getting disciplined people who engage in disciplined thought and who then take disciplined action.

Chapter 6 (continued)Good-to-great companies are filled with people who

display extreme diligence and a stunning intensity. (they rinse their cottage cheese)

CEOs who personally discipline through sheer force of personality usually fail to produce sustained results.

Must have fanatical adherence to the Hedgehog concept and the willingness to shun opportunities that fall outside the three circles.The more it is willing to do this, the more it will have

opportunities for growth.

Chapter 6 (continued)A great company will have many once in a lifetime

opportunities, so ignore the ones that don’t adhere to the three circles.

The purpose of budgeting in a good-to-great company is not to decide how much each activity gets, but to decide which arenas best fit with the Hedgehog concept and should be fully funded and which should not be funded at all.

“Stop doing” lists are more important than “to do lists.

Chapter 7: Technology AcceleratorsGood-to great companies avoid technology fads and

bandwagons.

They become pioneers in the application of the selected technology.

If the technology fits directly with the hedgehog concept, then the company needs to become a pioneer in its application. If not, then the company needs to ignore it.

None of the good-to-great companies began their transformation with pioneering technology. They used it as an accelerator, not a creator.

Chapter 7 (continued)How a company reacts to technological change is

a good indicator of its inner drive for greatness versus mediocrity.

Great companies are driven by a compulsion to turn unrealized potential into results.Mediocre companies react and lurch about,

motivated by a fear of being left behind.

An effective approach to technology would be pause, think, crawl, walk, run

Chapter 8: The Flywheel and the Doom LoopFrom the inside, good-to-great transformations are

organic, cumulative processes.The good-to-great transformations never happened in

one fell swoopThere was no single defining action, no grand program,

no one killer innovation or miracle moment

The transformation was like pushing a giant, heavy flywheel, it takes a lot of effort to get the thing moving at all, but with consistent pushing in the same direction, the flywheel builds momentum, eventually hitting the point of breakthrough.

Chapter 8 (continued)With the doom loop, comparison companies

attempted to skip buildup and jump immediately to breakthrough.Then they would lurch back and forth, failing to

maintain a consistent direction.

Comparison companies tried to create breakthrough with large, misguided acquisitions. Good-to-great companies used large acquisitions

AFTER breakthrough to accelerate momentum in an already fast spinning flywheel

Chapter 8 (continued)Good-to-great companies spent essentially no

energy trying to create alignment or motivate its people.Under the right conditions, the problems of

commitment, alignment, and motivation largely take care of themselves.

The short-term pressure of Wall Street were not inconsistent with this model. The flywheel effect is not in conflict with these pressures, but it is a key to manage them.

The Flywheel

BUILD UP

BREAKTHROUGH

FLYWHEEL

Level 5 First Who Confront the HedgeHog Culture of TechnologyLeadership Then What Brutal Facts Concept Discipline AccelerationsDisciplined People

Disciplined Thought

Disciplined Action

Chapter 9: From Good to Great to Built to LastGood-to-great companies have a deeply held set of

core values and core purpose beyond profit and cash flow.

The business strategies and operating practices of good-to-great companies endlessly adapt, but core values and purpose are preserved

The core values, purpose, and principles guide decisions and inspire people throughout the organization over a long period of time.

Chapter 9 (continued)Bad BHAGs (Big Hairy Audacious Goals) are set with

bravado, good BHAGs are set with understanding.

Build a company that can endure and adapt through many generations.

You should strive for greatness because it is no more difficult to build something great than it is to trudge along in mediocrity.If you are passionate about what you are doing, then

why not make it great?

ConclusionThe combination of these frameworks and

concepts captures the process of going from good to great.

When all of these pieces come together, not only does your work move toward greatness, but so does your life. For, in the end it is impossible to have a great life unless it is a meaningful life. And it is very difficult to have a meaningful life without meaningful work.