Chapter One: Good is the

Enemy of GreatKaty Lovett, Matt

Snowden, and CJ Baker

How do companies go from go to great?

What methods were used in research?

What concepts exemplified good-to-great companies?

Chapter Overview

Phase 1: The Search Find companies that showed the good-to-

great pattern

Companies that had cumulative returns over 15 years

Companies whose growth was independent of the industry

Good to Great CasesCompany Results from

Transition Point to 15 Years later

Transitional Period

Abbot 3.98 times the market

1974-1989

Circuit City 18.5 times the market

1982-1997

Fannie Mae 7.56 times the market

1984-1999

Gillette 7.39 times the market

1980-1995

Kimberly-Clark 3.42 times the market

1972-1987

Kroger 4.17 times the market

1973-1988

Nucor 5.16 times the market

1975-1990

Philip Morris 7.06 times the market

1964-1979

Pitney Bowes 7.16 times the market

1973-1988

Walgreens 7.34 times the market

1975-1990

Wells Fargo 3.99 times the market

1983-1998

Phase 2: Compared to What? Contrasted the good-to-great companies to

a selected set of “comparison companies”

Distinguishing factor

“Direct comparisons” and “unsustained comparisons”

Comparison Companies Good-to-Great Companies

Direct Companies Unsustained Comparisons

Abbot Upjohn Burroughs

Circuit City Silo Chrysler

Fannie Mae Great Western Harris

Gillette Warner-Lambert Hasbro

Kimberly-Clark Scott Paper Rubbermaid

Kroger A&P Teledyne

Nucor Bethlehem Steel

Philip Morris R.J. Reynolds

Pitney Bowes Addressograph

Walgreens Eckerd

Wells Fargo Bank of America

Researchers stepped into a “black-box” to shed light on inner workings

Debated results to come to conclusions

Phase 3: Inside the Black Box

Surprising results: CEO Ego-maniacs Executive compensation Strategy Focusing on what to do Technology Mergers/Starting Events Managing people Industry

Phase 3: Inside the Black Box

“Iterative process of looping back and forth…”

Concepts are based on fact, not opinion

Phase 4: Chaos to Concept

Great Traits Level 5 Leadership First Who…. Then What Confront the Brutal Facts, Yet Never Lose

Faith The Hedgehog Concept A Culture of Discipline Technology Accelerators The Flywheel and the Doom Loop.

Level 5 Leadership Level 5 Leaders are not we expect to see! Level 5 Leaders are often shy and reserved,

unlike their charismatic counterparts. Level 5 Leaders almost always are

promoted from within the company. Level 5 Leaders care more about building

something great, than being someone great.

First Who…. Then What Your team is more important than your plan. The right people must be selected before a

great strategy can be devised. This may seem obvious but note the

nuance.

Confront the Brutal Facts Pretending that obstacles are not there WILL

NOT make them go away. Believing that you can overcome obstacles

WILL help you to succeed.

The Hedgehog Concept Simplicity within the three circles.

◦ What are you passionate about?◦ What can you be the BEST at?◦ What drives your economic engine?

“It’s not about being great at everything, it’s about being the best in the world at something.”

A Culture of Discipline A culture of discipline is highly elusive. Having discipline eliminates the need to

spend energy on micromanagement. For a culture of discipline, you need:

◦ Disciplined People◦ Disciplined Thought◦ Disciplined Action

Technology Accelerators Technology can never be the driver of

change. Powerful technologies must be used as

powerful tools.

The Flywheel and the Doom Loop

Greatness is achieved through persistence, not sweeping change.

Persistent effort has a cumulative effect on the companies’ “momentum.”

Concepts apply not to new economy, or old economy, but both

What makes enduring organizations of any type?

Take the data as evidence and make your own conclusions

In Summary