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Good to Great – Book Review – Cho-I Chang

by on November 9, 2008

In 1994, James Collins and Jerry Porras coauthored the bestselling book “Built to Last”. The book can be proclaimed to be one of the best writings in the management field. For the book, Collins and Porras spent six years comparing 18 well-known and well-established companies with 18 counterparts in specific areas of business. Two years later, Collins formed a team with 21 researchers, including himself, and spent five years finding out the differences between good companies and great companies (P. 5). In 2001, Collins published Good to Great.

Collins and his team looked at companies from 1965 to 1995 that appeared on the Fortune 500. They systematically searched and selected 11 companies: Abbott Laboratories, Circuit City, Fannie Mae, Gillette, Kimberly-Clark, Kroger, Nucor, Philip Morris, Pitney Bowes, Walgreens, and Wells Fargo (P. 7). Collins and his team also picked two sets of comparison companies. The first group, “Direct Comparisons”, was comprised of companies that were in the same industry and with the same opportunities and similar resources as the good to great companies. The companies in the “Direct Comparisons” group, however, showed no growth. The second set, “Unsustained Comparisons”, consisted of companies that made a short-term shift from good to great but failed to sustain the change (P. 8).

The book set out to answer the question: can a good company become a great company, and how? The answer, according to Collins, is that the good to great companies are able to grasp the three discipline stages—“Disciplined People”, “Disciplined Thought”, and “Disciplined Action”—at a particular time point to enable transformation. In other words, the discipline stages push the “Flywheel” forward turn after turn from good to great to build to last.

The core chapters of the book are built around the discipline stages. Within each of the three stages, there are two key concepts. In “Disciplined People” stage, the two key concepts are “Level 5 Leadership” and “First Who…Then What”. In “Disciplined Thought” stage, the two key concepts are “Confront the Brutal Facts” and the “Hedgehog Concept”. In “Disciplined Action” stage, the two key concepts are “Culture of Discipline” and “Technology Accelerators”. The “Flywheel” is wrapped around the stages to capture the process of going from good to great (P. 12). Level 5 Leadership: The book divides leadership into five levels of hierarchy. The fifth level is the highest level in the hierarchy of executive capabilities that Collins and his team identified in the research.

· Level 5: Level 5 Executive – “Builds enduring greatness through a paradoxical blend of personal humility and professional will” (P. 20).

· Level 4: Effective Leader – “Catalyzes to commitment to and vigorous pursuit of a clear and compelling vision, stimulating higher performance standards” (P. 20).

· Level 3: Competent Manager – “Organizes people and resources toward the effective and efficient pursuit of predetermined objectives” (P. 20).

· Level 2: Contributing Team Member – “Contributes individual capabilities to the achievement of group objectives and works effectively with others in a group setting” (P. 20).

· Level 1: Highly capable individual – “Makes productive contribution through talent, knowledge, skills, and good work habits” (P. 20).

Collins and his team defined the characteristic of Level 5 leaders as “modest and willful, humble and fearless” (P. 22). Collins gave an example to help readers quickly grasp the concept of Level 5 leader-United States President Abraham Lincoln. “Abraham Lincoln never let his ego get in the way of his primary ambition for the larger cause of an enduring great nation” (P. 22). However, Level 5 leadership is not just about humility and modesty, but about unwavering resolution. Level 5 leaders will do what must be done to make the company great (P.30). Also, Level 5 leaders practice the “Window and the Mirror” attitude. Level 5 leaders would never admit to the fact that he/she is the key for the success; they attribute the success to luck or team work, while the leaders in the comparison group would do just the opposite (P.35). The book identifies the characteristics of Level 5 leaders, but it does not teach us the steps to become Level 5 leaders. Some people are born with elements to become Level 5 leaders, but I believe that we can acquire such elements through training and learning.

First Who…Then What: The executives who ignited the transformation from good to great did not come up with a strategic plan first. They first figured out who were the right people for the job. “If we get the right people on the bus, the right people in the right seat, and the wrong people off the bus, then we’ll figure out how to take it someplace great” (P.41). This indicates that people are not the most important assets of the company, but the right people are (P.51). The idea of getting the right people on the team is the key point of this chapter. Level 5 leaders answer the “who” question before the “what” decision. However, I think the idea of getting the right people on the bus and on the right seat while getting the wrong people off is a bit extreme and cruel. How could one define who’s right and who’s wrong? If a company cannot provide training or guidance to lead people to change, there is a possibility that the company may lose potential “right people”.

Confront the Brutal Facts: According to the Collins, good to great companies made more good decisions than comparison companies. “All good to great companies began the process of finding a path to greatness by confronting the brutal facts of their current reality” (P.88). Although it is a well-known fact that overlooking reality will lead companies to failure, very few companies have the courage to deal with reality. In order for companies to have the courage to deal with reality, companies need to create a climate where the truth can be heard. The book offers four basic practices to create a climate where the truth is heard.

1. “Lead with questions, not answers”: Grasp the fact that you do not yet understand and then ask the questions that will lead to the best possible insights (P. 74-75)
2. “Engage in dialogue and debate, not coercion”: Encourage a real healthy debate, and reach a conclusion and move on (P. 75-77)
3. “Conduct autopsies, without blame”: Instead of blaming others for the mistake, investigate to avoid the same mistake (P. 77-78)
4. “Build red flag mechanisms that turn information into information that cannot be ignored”: Build mechanisms to communicate and turn information into information that cannot be ignored (P. 78)

The key takeaway from this chapter is that companies must face brutal facts, and yet never lose faith in their final goal. That is the key idea that drives companies from good to great.
The Hedgehog Concept (Three Circles): The book asks a question in the beginning of the chapter: are you a hedgehog or a fox? In Isaiah Berlin’s famous essay “The Hedgehog and the Fox”, he divided the world into hedgehogs and foxes. “The fox knows many things, but the hedgehog knows one big thing” (P. 90). The fox is a sly animal that plans complex methods to attack the hedgehog. When hedgehog senses an attack, it becomes a sphere of sharp spike, pointing outward in all direction. Despite the fox’s schemes, the hedgehog always wins because it focuses only on one critical things that protects itself (P. 90-91). The key to understand the three circles of the Hedgehog Concept is to think three interlocking circles, representing

1. “What you can be the best in the world at (and equally important, what you cannot be the best in the world at)” (P. 95)
2. “What drives your economic engine” (P. 95)
3. “What you are deeply passionate about” (P.96)

The key takeaway from the chapter is that if companies can act like hedgehogs to focus on one big thing (bring all three circles together) and stick to it, they can achieve from good to great.
A Culture of Discipline: The reason why good companies fail to become great is not their lack of opportunities. Rather, it is because they have too many opportunities that they could not digest them. That is why building a discipline culture is one of the steps to build from good to great. The main point of the chapter is to “build a culture full of people who take disciplined action within the three circles, fanatically consistent with the Hedgehog Concept” (P. 123-124). The good to great companies hire self-disciplined people and provide them freedom and responsibility within a framework. The self-disciplined people (right people) will engage in disciplined thoughts (the Hedgehog Concept) and then take disciplined actions (doing things that are in the three circles) (P. 124-142). The key takeaway from the chapter is that there will be many great opportunities, but companies need to choose the opportunities that fit within the three circles.

Technology Accelerators: Good to great companies think differently about technology. “The good to great companies used technology as an accelerator of momentum, not a creator of it” (P. 152). The good to great companies didn’t begin their transformation with technology, but they all become pioneers in the application of technology once they fit the technology with their Hedgehog Concept (P. 153). In Collins’s opinion, even if you give the exact same leading edge technologies to the comparison companies for free, those companies will still fail to create the same result as the good to great companies (P. 162). Some people believe that technologies do not matter in an organization because every company has technologies. However, if a company can use technologies to help it achieve excellence, then technologies matter.

The ideas above will push the “Flywheel” forward turn after turn to achieve from good to great to build to last. The good to great companies understand a truth: “tremendous power exists in the fact of continued improvement and the delivery of results” (P.174). There is no doubt that pushing the “Flywheel” forward will take great effort. However, when you keep pushing in a consistent direction, it will move a little faster. At some point, you will reach a breakthrough, and the “Flywheel” will turn a hundred times , and then a thousand times, faster. When you reach that point, your challenge will no longer be good to great but becomes how to maintain such greatness. In conclusion, the book is great for anyone who wants to understand how to achieve greatness. The book provides great real life examples; also, Collins throws in frequently asked questions to provide answer to common questions that pop up in readers’ mind. Overall, this is a great book for any level of management because greatness does not only exist in the executive level.
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