Is a company with average results doomed to remain average? Or are you personally stuck at your ‘average’ level
Or, are you like me, in pursuit of what makes people or companies great?
Let’s take a look at the process of going from good to great, referring extensively to Jim Collins’ excellent book. Note, Collins’ findings from his exhaustive research project is not limited to business context; the framework he identified is the physics of good-to-great, which you can apply to yourself or any organization.
I encourage you to examine the following in light of your own life. You can accurately personalize the concepts by replacing ‘company’ with ‘person’.
Good is the enemy of Great.
Good is the reason so little becomes great.
Jim Collins’, extraordinary curiosity resulted in a 5 year research project into the inner workings of companies that went from good to great. His key question was, “Can a good company (person) a great company (person) and if so, how?”
The rigorous project determined that you can turn a good organization into one that produces great sustained results.
Looking into the Good-to-Great process…there were four phases in the research
- Search for companies
- Doing the comparison set
- Climbing in the ‘black box’ of good to great, figuring out what’s in there
- Taking the chaos of tons of data and creating concepts out of it.
Phase 1 – Search for companies showing basic patterns
The criteria was 15 years of cumulative stock returns at or below the general market, punctuated by a transition point, then cumulative returns at least three times the market over the next 15 years. Imagine, 15 years flat….transition point….up 15+years. They found 11.
Every company had to demonstrate a good-to-great pattern, independent of its industry. The project did not include subjective (e.g. social) results, to avoid introducing their own personal biases. Results showed you can turn a company from good to great in the most unlikely circumstances.
Phase 2 – Contrasting good-to-great companies to a comparison set
The critical question is not what they have in common, but “what do they have in common that sets them apart from the comparison company?”
The research team made two sets comparisons: direct comparisons (companies almost clones of each other at the time of transition) and unsustained comparisons (mad a short term shift from good to great but failed to maintain the trajectory).
Phase 3 – Looking inside the ‘black box’
The research team made a complete list of companies, followed by deep analysis of each case. They included all articles written to 50 years back; interviewed the CEO’s of the time… doing qualitative and quantitative analyses.
The project took 10 ½ people-years of effort. The masses of data was like looking inside a giant black box. Instead of beginning with a theory and setting out to prove it, the team made empirical deductions directly from the data gathered.
The core of the method was a systematic process of contrasting good-to-great examples to contrast companies, asking “what’s different?”
Collins’ team took particular note of “dogs that did not bark”. Based on the classic book, Silverblade, where Sherlock Holmes identified the dog in the night time that didn’t bark as the key clue he was able to solve the mystery – the suspect was someone the dog knew. These ‘dogs that didn’t bark’ provided some of best clues, leaving the team astonished at what they didn’t see.
8 ‘dogs that did not bark’
- 10 out of 11 good-to-great company leaders or CEOs came from the inside. They were not outsiders hired in to ‘save’ the company. They were either people who worked many years at the company or were members of the family who owned the company. The comparison companies tried outside CEO’s six times more often.
- There was NO systematic pattern that linked specific forms of Executive compensation to the process of good-to-great. The idea that the structure of executive compensation is a key driver in corporate performance was not supported by data.
- There was no evidence that great companies spent more time on strategy and long range strategic planning. They found, to begin the transition from good to great, the ‘stop doing’ list (what they decided to get rid of) counted more than the ‘to do’ list.
- Technology and technology-driven change has virtually nothing to do with igniting a transformation from good to great. Technology can accelerate it, but it can never be the fundamental prime mover in a shift.
- Mergers and acquisitions had virtually no role in igniting a transformation, i.e. they were not there at the beginning. Two big mediocrities joined together never make one great company. You can’t go from good to great by buying something.
- Good-to-great companies paid little attention to managing change, motivating people, creating alignment. Under the right conditions, they learned these problems naturally take care of themselves.
- Good to great transformations didn’t need any new name, tagline, launch event, or program to signify their transformation. Often the magnitude of the transformation only became clear in retrospect. The leap was in the performance results, not a revolutionary process.
- All the good-to-great companies were not ‘in the right place at the right time or in a great industry’. Greatness is NOT a function of circumstance; it is largely a matter of conscious choice.
Phase 4 – from chaos to concept
The research team analysed the mass of chaotic data through an iterative, looping process, testing to break patterns till it all hung together. Every primary concept in the final framework showed up as a change variable in 100% of good-to-great companies and in less than 30% of other companies in the pivotal 15 years.
The Framework of good-to-great – the Flywheel concept
The process resembles pushing a giant, heavy flywheel in one direction, turn upon turn upon turn; building momentum till the point of a breakthrough and beyond.
- Leadership – Self effacing, quiet, reserved, shy. A paradoxical blend of personal humility and professional will. More like Lincoln, Socrates than Patten, Caesar.
- First who, then what – Didn’t they begin by setting new vision, strategy? No, they first got the right people on the bus and wrong people off, then set vision and strategy. People are not your best asset, the right people are your best assets.
- Confronting the brutal facts but never losing faith – Every company embraced ‘the Stockdale Paradox’– they must maintain unwavering faith that you can and will prevail in the end regardless of the difficulties, and at same time have the discipline to confront the brutal facts of your current reality whatever they might be and however unpleasant.
- The ‘Hedgehog concept’ – gaining simplicity from seeing what is essential, and ignoring the rest. Just because something has been your core business, doesn’t mean you can be the best in the world. If you can’t be the best in the world at your core business, then your core business cannot form the basis of a great company. It must be replaced with a simple (‘the hedgehog’) concept that reflects deep understanding about the intersection of the three circles:
- What you can be best in the world at, realistically, and what you cannot be best in the world at
- What drives your economic engine
- What you are deeply passionate about
- Building a culture of discipline – When you have disciplined people, you don’t need hierarchy; when you have disciplined thought, you don’t need bureaucracy; when you have disciplined action, don’t need excessive controls. When you combine a culture of discipline with an ethic of entrepreneurship, you get the magical alchemy of great performance.
- Technology Accelerators – Late in the process, after you’ve made a breakthrough. Good-great companies think differently about technology; they never use it as the primary means of igniting transformation. But they are pioneers in the application of carefully selected technology.
The over-arching Flywheel concept that wraps around most of the concepts, contrasts with the Doom Loop – those who launch revolutions, dramatic change programs, wrenching restructuring will almost certainly fail to make a sustained leap good-great. No matter how dramatic the transformations, great transformations never happened in one foul swoop. There is no single defining action, no grand program, no one killer innovation, no lucky break, no miracle moment.
To then take a company with great results and turn it into an enduring company of iconic stature, requires core values and purpose beyond just making money, combined with the key dynamic preserve the core and stimulate progress.
Almost any organization can improve its stature and performance, become great, if it conscientiously applies this framework. Becoming great is a choice, not a function of circumstance. Are you satisfied with the results you or your company continue to produce?