Good to great chapter 7 technology accelerators
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Good to Great Chapter 7: Technology Accelerators. Group 5: Laura Moore Jeffri Vaughn Grant Gerhardt Patrick Kirkland Chet Visser. Good to Great Chapter 7: Technology Accelerators The Hedgehog.

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Good to Great Chapter 7: Technology Accelerators

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Good to Great Chapter 7:Technology Accelerators

Group 5:

Laura Moore

Jeffri Vaughn

Grant Gerhardt

Patrick Kirkland

Chet Visser


Good to Great Chapter 7: Technology AcceleratorsThe Hedgehog

  • In every good-to-great case it was never just technology, but “The pioneering application of carefully selected technologies”

  • “Technology-induced change is nothing new. The real question is not, what is the role of technology? Rather, the real question is, how do good-to-great organizations think differently about technology?”


Drugstore.com VS. Walgreens

  • Drugstore.com opened an internet pharmacy for people to order their prescriptions online and have them mailed to them.

  • Walgreens stock price dropped 40% when Drugstore.com challenged Walgreens.

  • Walgreens was very quiet and simply said, “We’re a crawl, walk, run company.”

  • Drugstore.com did the opposite: ran first, then walked, and crawled last as their value dropped and debt grew.

  • Walgreens ended up prospering during the “.com” craze with their well planned strategy.


Good VS. Great

  • Great companies (Hedgehogs) find ways to use new technology for advancing their business before anybody else, and make sure it will work with extensive research.

    • For Example: Kroger used barcode scanners for speedier checkout and more efficient inventory. Later, Wal-Mart would use JIT Inventory to keep inventory costs low.

  • Good companies (Foxes) implement new technologies after they have been successfully used by someone else.

    • For Example: Everybody else soon followed Kroger and their barcode scanners. Later, some followed Wal-Mart’s JIT inventory system, but many have not yet adopted this strategy.


Technology Accelerators in the Good-to-Great Companies

  • Abbot

    • Computer technology to increase economic denominator of profit per employee

  • Circuit City

    • Sophisticated point-of-sale and inventory-tracking technologies

    • Able to operate a geographically dispersed system with great consistency

  • Fannie Mae

    • Sophisticated algorithms and computer analysis to more accurately assess mortgage risk, thereby increasing economic denominator of profit per risk level

    • Increases access to home mortgages for lower-income groups, linking to passion for democratizing home ownership


Technology Accelerators in the Good-to-Great Companies

  • Gillette

    • Sophisticated manufacturing technology for making billions of high-tolerance products at low cost with fantastic consistency

  • Kimberly-Clark

    • Manufacturing-process technology, especially in nonwoven materials, to support their passionate pursuit of product superiority

    • Sophisticated R&D labs

  • Kroger

    • Computer and information technology to the continuous modernization of superstores

    • First to seriously experiment with scanners, which it linked to the entire cash-flow cycle, thereby providing funds for the massive store-revamping process


Technology Accelerators in the Good-to-Great Companies

  • Nucor

    • Most advanced mini-mill steel manufacturing technology

    • Willing to make huge bets (up to 50% of corporate net worth) on new technologies that other viewed as risky, such as continuous thin slab casting


Technology Accelerators in the Good-to-Great Companies

  • Philip Morris

    • Both packaging and manufacturing technologies

    • Bet on technology to make flip-top boxes – the fist packaging innovation in 20 years in the industry

    • First to use computer-based manufacturing

    • Huge investment in manufacturing center to experiment with, test, and refine advanced manufacturing and quality techniques


Technology Accelerators in the Good-to-Great Companies

  • Pitney Bowes

    • Advanced technology to the mailroom

    • Mechanical postage meters

    • Invested heavily in electrical, software, communications, and Internet engineering for the most sophisticated back-office machines

    • Huge R&D investment to reinvent basic postage meter technology in the 1980s


Technology Accelerators in the Good-to-Great Companies

  • Walgreens

    • Satellite communications and computer network technology, linked to its concept of convenient corner drugstores, tailored to the unique needs of specific demographics and locations

    • Big investment on a satellite system that links all stores together, like one giant web of a single corner pharmacy

    • Led the rest of the industry by at least a decade


Technology Accelerators in the Good-to-Great Companies

  • Wells Fargo

    • Technologies that would increase economic denominator of profit per employee

    • Early leader in 24-hour banking by phone, early adopter of ATMs, first to allow people to buy and sell mutual funds at an ATM, pioneer in Internet and electronic banking

    • Pioneered sophisticated mathematics to conduct better risk assessment in lending


Technology as an Accelerator, Not a Creator, of MomentumFannie Mae

  • Jim Johnson became CEO of Fannie Mae and hired a consulting firm to conduct technology audit

  • Lead consultant, Bill Kelvie, used a four-level ranking

    • Four is cutting edge

    • One is stone age

  • Fannie Mae ranked two


Technology as an Accelerator, Not a Creator, of MomentumFannie Mae

  • Kelvie was hired to move the company ahead

  • When Kelvie came to Fannie Mae in 1990, the company lagged about 10 years behind Wall Street in the use of technology

  • Over the next five years, Kelvie took Fannie Mae from a two to a 3.8 on the four-point ranking

  • Created over 300 computer applications

    • Sophisticated analytical programs to control the $600 billion mortgage portfolio

    • Online data warehouses covering 60 million properties and streamlined workflows

    • Reduced paper and clerical effort


Technology as an Accelerator, Not a Creator, of MomentumFannie Mae

  • “We moved technology out of the back office and harnessed it to transform every part of the business. We created an expert system that lowers the cost of becoming a home owner. Lenders using our technology reduced the loan-approval time from 30 days to 30 minutes and lowered the associated costs by over $1,000 per loan.” – Kelvie

  • The system has saved home buyers nearly $4 billion


Technology as an Accelerator, Not a Creator, of MomentumFannie Mae

  • Fannie Mae transition began in 1981, yet the company lagged behind in the application of technology until the early 1990s

  • Technology became of prime importance to Fannie Mae AFTER it discovered its Hedgehog Concept and AFTER it reached breakthrough

  • Technology was a key part of what Fannie Mae leaders called “the second wind” of the transformation and acted as an accelerating factor

  • Same pattern holds for Kroger, Gillette, Walgreens, and all the good-to-great companies

    • Pioneering application of technology usually came late in the transition and never at the start


Technology as an Accelerator, Not a Creator, of Momentum

  • When used right, technology becomes an ACCELERATOR of momentum, not a creator of it

  • The good-to-great companies never began their transitions with pioneering technology, for the simple reason that you cannot make use of technology until you know which technologies are relevant

    • Relevant technologies are those that link directly to the three intersecting circles of the Hedgehog Concept


Technology as an Accelerator, Not a Creator, of Momentum

  • To make technology productive in a transformation from good to great, ask the following questions:

    • Does the technology fit directly with your Hedgehog Concept?

      • Yes: You need to become a pioneer in the application of that technology

      • No: Ask another question

    • Do you need this technology at all?

      • Yes: All you need is parity, don’t need the most advanced technology to be a great company

      • No: The technology is irrelevant and can be ignored


Technology as an Accelerator, Not a Creator, of MomentumGood-to-Great Companies

  • Good-to-great companies remained disciplined within the frame of their Hedgehog Concept

  • Their relationship to technology is no different from their relationship to any other category of decisions

    • Disciplined people, who engage in disciplined thought, and who then take disciplined action

  • If a technology doesn’t fit squarely within their three circles, they ignore it

  • Once they understand which technologies are relevant, they become fanatical and creative in the application of those technologies


Technology as an Accelerator, Not a Creator, of MomentumComparison Companies

  • In comparison companies, only three cases of pioneering in the application of technology

    • Chrysler: Computer-aided design

    • Harris: Electronics applied to printing

    • Rubbermaid: Advanced manufacturing


Technology as an Accelerator, Not a Creator, of MomentumComparison Companies

  • Demonstrates that technology alone cannot create sustained great results

    • Chrysler made superb use of advanced computer-aided and other design technologies but failed to link those technologies to a consistent Hedgehog Concept

    • No advanced technology by itself could save the company from massive downturn


Technology as an Accelerator, Not a Creator, of Momentum

  • Technology without a clear Hedgehog Concept, and without the discipline to stay within the three circles, cannot make a company great


Technology Trap

  • The 20th Century’s theme: Technology

    • In the 20th Century we saw some of the most earthshaking advances in technology

      • Ex. Aviation, Cars, Electricity, Computers, Nuclear Energy

    • This theme is proven by Time’s Choice of Albert Einstein as Man of the Century and Jeff Bezos of Amazon.com as the 1999 Man of the Year


  • Master’s Forum Seminars

    • For 15 years had one constant theme “Technology, Change, and the connection between the two”

      • The reason is that “people do not always know what they do not know.” They are always afraid of some previously unknown technology cropping up and hurting them.

    • What do good-to-great executives think of technology?

      • It is a tool that accelerates success, not one that produces success

      • It is neither a main factor in your success nor your decline


  • 80% of the good-to-great executives interviewed by the author did not even mention technology as one of the top five factors in the transition.

  • When technology was mentioned, it only had a medium ranking.

    • You cannot rely on technology to transition your company from good to great. But, it certainly can help you.


  • Ken Iverson of Nucor was asked where he would rate Technology among the five factors that helped him transit from good to great

    • His answer: Not in the top five

      • Real reason for success: The company’s consistency, and their ability to project their philosophies throughout the whole organization, enabled by their lack of layers and bureaucracy

    • Only 20% of Nucor’s success was based on technology


Early Technology

  • Throughout business and history, there are countless examples of those who were first with a technology or completely relied on technology and fell behind or perished.


Examples

  • Boeing and Dehavilland

    • Dehavilland was the company that actually built the first jetliner, the Comet, some 4 to 5 years prior to the first flight of the 707

    • Dehavilland lost out in the end because of some teething problems that resulted in 3 in-flight breakups of their Comet jetliner

  • USAF and USN During Vietnam

    • Early 1960 Air combat doctrine stated guided missiles made dogfighting obsolete

    • All dogfight teaching was stopped and it was even forbidden to be practiced

    • Resulted in a nearly 1 to 1 kill ratio in aerial combat

    • USN started Top Gun and USAF initiated a similar program, Red Flag, to rectify this problem. Kill ratio improved to 5 to 1.


  • Titanic

    • Believed that new technology of watertight compartments made the ship unsinkable, and new wireless would keep them appraised of ice situation

    • Took on fewer than necessary life boats

    • Barreled into the dark at nearly full speed in poor ice spotting conditions

    • Resulted in massive loss of life due to reliance and over confidence on new and untried technologies


Takeaways

  • Never blindly rely on technology

  • When technology is used correctly and linked to simple, clear, and coherent concepts rooted in deep understanding, technology will drive you towards success

  • When technology is not used correctly, it will accelerate your demise

  • Technology is never the primary cause of a company’s demise. This responsibility usually belongs to the executives and their management techniques


Technology and the Fear of Being Left Behind

  • Technology is important, but as a subset of discipline or perhaps the flywheel.

  • “Why did the good-to-great companies maintain such a balanced perspective on technology, when most companies become reactionary, lurching and running about like Chicken Little, as we’re seeing with the internet?”

    • Chris Jones, Good to Great researcher


Strategy

  • If you had the opportunity to sit down and read all 2000+ pages of transcripts from the good-to-great interviews, you’d be struck by the utter absence of talk about “competitive strategy.”

  • They never talked in reactionary terms and never defined their strategies principally in response to what others were doing.


Strategy

  • The good-to-great companies talked in terms of what they were trying to create and how they were trying to improve relative to an absolute standard of excellence.

  • “We’re just never satisfied. We can be delighted, but never satisfied.”

    • Wayne Sanders, Kimberly-Clark


No Fear

  • Those who built good-to-great companies weren’t motivated by fear.

    • Fear of what they didn’t understand.

    • Fear of looking like a chump.

    • Fear of watching others hit it big while they didn’t.

    • Fear of being hammered by the competition.


Technology Bubble

  • Took place right smack in the middle of the research on good to great.

  • It served as a perfect stage to watch the difference between great and good play itself out, as the great ones responded like Walgreens.

    • Walgreens became great with calm equanimity and quiet, deliberate steps forward—while the mediocre ones lurched about in fearful, frantic reaction.


The Big Point

  • The big point of this chapter is not about technology per se.

  • No technology, no matter how amazing—not computers, not telecommunications, not the internet—can itself ignite a shift from good to great.

  • No technology can make you Level 5.

  • No technology can turn the wrong people into the right people.


The Big Point

  • No technology can instill the discipline to confront brutal facts of reality, nor can it instill unwavering faith.

  • No technology can supplant the need for deep understanding of the three circles and the translation of that understanding into a simple Hedgehog Concept.

  • No technology can create a culture of discipline.

  • No technology can instill the simple inner belief that leaving unrealized potential on the table—letting something remain good when it can become great—is a secular sin.


Conclusion

  • Those that stay true to these fundamentals and maintain their balance, even in times of great change and disruption, will accumulate the momentum that creates breakthrough momentum.

  • Those that do not, those that fall into reactionary lurching about, will spiral downward or remain mediocre.

  • This is the big-picture difference between great and good, the gist of the whole study captured in the metaphor of the flywheel versus the doom loop.


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