Good to Great - Book Review!

Recently, I read this book, Good to Great by Jim Collins and found it very practical. It is about companies who have performed exceptionally well in the US and about what they did differently as compared to their competition. Interestingly, I found that Bajaj Auto Ltd in India seem to have followed the Good to Great steps. Hope you enjoy reading my review of this book...

Good to Great By Jim Collins

Jim Collins the well known management guru has produced yet another best seller after his well known book, Built to Last. After Built to Last became a best seller and widely appreciated, once, Jim Collins happened to meet the Managing Director of Mckinsey & Company, Bill Meehan at San Francisco. During the conversation, Bill mentioned that, Built to Last was a wonderful book; however, it spoke only about great companies but did not try to explain how about how to achieve greatness. This triggered an interesting thought process in Jim Collins in studying the turnaround that had happened in some of the companies in the U.S that made them great from being mediocre. This study has lead to the book, Good to Great. This book essentially answers one question, which many corporates across the globe would like to understand.
What makes some companies perform exceptionally well while most others are mediocre?
The author had researched on a host of Fortune 500 companies and had chose eleven companies that have performed exceptionally better than the market over a period of time. These companies are from diverse lines of business ranging from paper manufacturing to banking. The companies that were considered to be ‘Good to Great’ by Jim Collins are as follows:
Abott, Circuit city, Sallie Mae, Gillete, Kimberly Clark, Kroger, Nucar, Philip Morris, Titney Bowes, Walgreens and Wells Fargo
The concepts discussed in this book evolved out of studying these companies as against a set of their immediate competitors. The high level framework of the findings can be classified as three stages of Disciplined People, Disciplined Thought and Disciplined Action.
Within each of these three stages, two key concepts have been described. Wrapping these concepts together is a framework which is a gestalt of transformation from good to great. Six key concepts that have been identified to be the common attributes among all companies that have shown a turnaround from good to great are the following:
Level 5 leadershipFirst Who then WhatFace the brutal fact, Yet Never Lose FaithHedgehog conceptCulture of DisciplineTechnology Accelerators andThe Flywheel
Level 5 leadership
Every good to great company was observed to be managed by a Level 5 leader when the transformation took place. Level 5 is considered as the top of the five levels of leadership. The commonly observed characteristics of these Level 5 leaders are particularly surprisingly. They were found to be very modest, self-effacing and often shy individuals. However, they were all highly driven towards bringing sustained growth to their companies and are not as much particular about their own personal successes or failures. Most importantly, these leaders were not those dazzling celebrities but the ones who often look out of the window to give credit to others for the successes and always take ownership of any failures. The author goes on to mention that it is not difficult to actually get one of those Level 5 leaders. Often they are the people around us; it’s just that one should know what to look for in individuals who have the potential to evolve into Level 5 leaders.
First Who then What
The second thing that all these companies have been religiously following is that they always took the right people on board even before working on the right strategies. These companies did not believe in having a genius leader surrounded by a group of followers. For these companies, always people come first. They believe that the key to success is keeping the right people at the right place. At the same time, they were all found to be extremely rigorous in their people choosing processes. They were ready to wait till they were fully convinced about the right person for the right place and when they made these changes they understood that the choice of people is more to do with characteristic traits and innate capabilities and less to do with the specific knowledge or skills. They were also always quick to act to make people changes when necessary. Face the brutal fact, Yet Never Lose Faith
The transformation process of the Good to Great companies always started with facing the brutal facts. Accepting the reality was the key to the transformation. The key to greatness is the belief in the Stockdale Paradox which says that, Accept the truth however brutal it might be but have faith that we will prevail in the end, regardless of the difficulties. To achieve this, the organization should develop the culture which provides opportunity for the people to be heard. This could be achieved through, debates and the culture of raising red flags that get noticed, always. It has been observed that companies which had the culture of facing the brutal facts always were able to handle adversities better than others.
Hedgehog Concept
Companies require a deep understanding of three important facts for sustaining in their respective businesses. The author calls these facts as three circles. The three circles are the following:
1. What you can be best in the world at – All Good to Great companies had clearly understood their strengths in terms of what they can be best in the world. Equally important has been to understand what the company is not best at. This is different from the core competency of the company. It is not what the company knows to do but what the company can be world’s best at. 2. What drives your economic engine – Companies needs to understand the key driver of their economic engine. This is the element of the business that brings in major portion of the revenue for the company. This can be measured against anything, depending on the nature of the business such as, profits per demographics, profits per product or per brand category.3. What you are deeply passionate about - Companies should also look at the things that they love doing. This could even be very different from the core competency of the company.
With a deep understanding of these three circles, crystallize a simple understanding for the company which is essentially the intersection of these three circles. The Good to Great companies made all their decisions by matching them against these three circles. To make these decisions, the Good to Great companies had a team which consisted of individuals with varied competencies, which the author calls a council. This council would primarily brainstorm and debate on the opportunities guided by the three circles. Although different organizations called this council by different names, without exception all Good to Great companies were observed to consist of such a setup.
Culture of Discipline
Bringing sustained results depend primarily upon building teams that have self-discipline ingrained in them. The author says that bureaucracy brings in inefficiency and is unnecessary for self-disciplined teams. Culture of discipline involves a duality of responsibility that comes along with freedom. This culture of discipline applies to all concepts that we have discussed so far. This discipline should be applied right from bringing in the right people till making any decisions by adhering strictly to the three circles concept. This means willingness to shun from opportunities that do not fall inside the three circles of the organization. Also, companies should make a ‘stop doing list’ along with the ‘to do’ list. The author finally cautions that this culture of discipline should not be misunderstood to be a tyrant who disciplines everyone around. This would only de-motivate the self motivated individuals in the team.
Technology Accelerators
One very interesting observation that the author presents regarding technology is that, 80% of the 84 CEOs interviewed as part of this research never mentioned about Technology in their top five factors of transformation. This drives home an important point that, technology cannot be the creator of a transformation; however, it is a great accelerator of the turnaround.Technology decisions must be closely associated with the Hedgehog concept and only those measures that fit in the three circles be considered by the organization. Technology changes for the sake of it have never resulted in any benefit to growth of an organization. This does not recommend companies to stay away from upgrading technologies but conveys that technology should be dealt with thoughtfulness and creativity. Almost all the good to great companies studied were pioneers of technology; it’s just that, they never considered technology as the reason for the turnaround.
The Flywheel and the Doom Loop
When the good to great companies underwent the transformation, the transformation was gradual. It was never a big bang approach. In most of the cases, there were no launch events, no tag lines about the turnaround. Most people involved in the transformation were not even aware of the extent of the transformation when the change actually happened. They could appreciate this only in retrospect. This brings in the point that, these changes happen gradually over a period of time like turning a flywheel, inch by inch, until the flywheel attains the momentum of breakthrough. The external world notices the company only when this breakthrough is achieved but the transformation would have started much before the company gets noticed. When the competitors of the good to great companies were studied, most of them had a big level launch of the change process and tried to bring in changes in one go which turned out to be ineffective.
‘Good to Great’ to ‘Built to Last’
The author concludes the book by comparing the concepts of ‘Good to Great’ with that of the author’s previous book ‘Built to Last’. The author opines that Good to Great is a prequel to Built to Last and not a sequel as people might normally perceive it to be.
Interesting Anecdote from the Book
All the above mentioned concepts have been explained by providing instances of various actions taken by those chosen ‘good to great’ companies and the effect that it had towards making them great. One such interesting note was about the company Kimberly Clark. Once, when P&G had announced that it was going to enter into the paper market in a big way, many of the paper companies accepted to be the second level players, considering the size and power of P&G. However, Kimberly Clark clearly understood what it can be worlds best in specialised paper products.
Just before the start of their council meeting, the CEO of Kimberly Clark stood up and asked everyone to stand in silence for one minute. After one minute, he said, that, it was their mourning for P&G. This greatly motivated the team and they eventually came out to be the market leaders in producing specialised paper products. This incident explains how a company won competition by accepting the brutal facts and at the same time believing that they will prevail in spite of everything – the Hedgehog Concept.
Additional Observation: An Indian ‘Good to Great’ Company
In the Indian environment, one company that seem to qualify is Bajaj Auto Ltd. This company was a mediocre scooter manufacturing company for a long time, which has transformed recently into a major two-wheeler manufacturer in India. The world is taking notice of this turnaround, now. However, deeper analysis shows that Bajaj had started their transformation efforts almost a decade ago and were moving their flywheel, inch by inch. This company, as one could observe on deeper study, has undergone the transformation and have stuck to the six concepts explained in this book.
• They had the right person on the top, Rajiv Bajaj, a Level 5 leader
• The first thing that he did was bringing the right people and getting rid of the people who were a misfit to the organization – First Who then What
• The company could face the brutal fact about the sinking market for scooters – Face the brutal fact, Yet Never Lose Faith
• It understood the three circles, which included a passion for motorcycles, where it had the potential to be worlds best at - Hedgehog concept
• The company improved its quality standards to world standards and their efficiency by three folds – Culture of Discipline
• Invested in setting up a new plant for product development that is now the R&D centre for the company – Technology Accelerator
Having said this, it’s to be seen, if this company which has transformed itself from ‘Good to Great’ has also been ‘Built to Last’.