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GOOD TO GREAT By Jim Collins. Chapter 1: Good is the Enemy of Great. Team 2 Presenters: Gabriel Gamez Chris Flockerzy Nancy Nguyen Sarah Doyle Raquel Vasquez Lydia Herschap Quintin Jordan Monica Del Bosque . Introduction/Concept Research.

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GOOD TO GREAT

By Jim Collins

Chapter 1: Good is the Enemy of Great

Team 2 Presenters:

Gabriel Gamez Chris Flockerzy

Nancy Nguyen Sarah Doyle

Raquel Vasquez Lydia Herschap

Quintin Jordan Monica Del Bosque

introduction concept research
Introduction/Concept Research
  • Why is Greatness so Uncommon
  • Epiphany of 1996 & Research
  • Analysis of corporations
  • transitioning from good to great
  • Can a Good Company Become a Great
  • Company? and if so, How?
best buy vs circuit city
Best Buy vs. Circuit City

Asset to Liability Ratio Best if Under 36%, higher than this percentage is considered a high risk.

phase 1 the search
Phase 1: The Search
  • To find companies that showed the good-to-great pattern
  • TheBasic Pattern:
  • 15 year cumulative stock at or below the general stock market
  • Punctuated by a transition point
  • Cumulative returns at least three times the market over the next 15
  • years
  • Why 15 years?
  • It would transcend one-hit wonders and lucky breaks.
  • It would exceed the average tenure of most CEO’s. Helping to
  • separate the great companies from the companies that just happened
  • to have a single great leader.
  • Why three times the market?
  • It exceeds the performance of most widely acknowledged great
  • companies.
criteria for selection as a good to great company
Criteria for Selection as a Good-to-Great Company

“The focus of this particular research effort is on the very specific question of how to turn a good organization into one that produces sustained great results.”

Jim Collins

Company shows a pattern of “good” performance punctuated by a transition point, after which shifts to “great” performance.

The good-to-great performance pattern must be a company shift, not an industry event.

At the transition point, the company must have been an established ongoing company, not a start-up. Also it had to have been publicly traded with stock return data available at least ten years prior to the transition point.

Transition point had to occur before 1985

The company had to appear in the 1995 Fortune 500 rankings, published in 1996

Finally, at time of selection, the company should still show an upward trend.

good to great selection process
Good-to-Great Selection Process

Cut 1

1,435 companies

Selected from Fortune 500

1965 - 1995

Cut 2

126 companies

Selected from full CRSP data pattern analysis

Cut 3

19 companies

Selected into industry analysis

Cut 4

11 companies

Selected into good-to-great set

the entire study set
The Entire Study Set

Good-to-Great Companies

Direct Comparison Companies

Unsustained Comparison Companies

Abbott

Circuit City

Fannie Mae

Gillette

Kimberly-Clark

Kroger

Nucor

Philip Morris

Pitney Bowes

Walgreens

Wells Fargo

Upjohn

Silo

Great Western

Warner-Lambert

Scott Paper

A&P

Bethlehem Steel

R.J. Reynolds

Addressograph

Eckerd

Bank of America

Burroughs

Chrysler

Harris

Hasbro

Rubbermaid

Teledyne

phase 2 compared to what
Phase 2: Compared to What?
  • Goal: To find what the good-to-great companies shared in common and how they were distinguished from their industry.
  • Process: Compare the good-to-great companies against “direct” comparison companies and “unsustained” comparison companies.
    • Direct Comparison Company- a company who is in the same industry and has the same resources and similar opportunities as a great company, but did not transition
    • Unsustained Comparison Company-a company who did transition to greatness but was unable to sustain it for 15 years
direct comparisons
Direct Comparisons
  • Tried to create a “historical controlled experiment” to conduct a direct comparative analysis, in order to find the distinguishing variables that account for the transition from good to great.
  • Why did the direct comparison companies fail?
  • What was different?
direct comparison selection method
Direct Comparison Selection Method
  • Six Criteria:
    • 1. Business Fit- similar products and services
    • 2. Size Fit- same basic size based on a revenue ratio
    • 3. Age Fit- founded in the same era
    • 4. Stock Chart Fit- the cumulative stock returns to the market of the comparison company should roughly track the pattern of the good-to-great company, until the point of transition, and then is outperformed.
    • 5. Conservative Test- at time of transition is more successful
    • 6. Face Validity- in a similar line of business and at the time of selection into the study, is less successful than the good-to-great company
scoring scale and example
Scoring Scale and Example
  • 4= fits the criteria extremely well
  • 3= fits the criteria reasonable well
  • 2= fits the criteria poorly
  • 1= does not fit the criteria
unsustained comparisons
“Unsustained” Comparisons
  • To determine how a company can sustain great results and why these comparison companies failed to.
  • Question of Sustainability
    • Resnick and Smunt Critique
unsustained comparison example
“Unsustained” Comparison Example

Good-to-Great Companies

Transition Point

Harris Corporation

great companies 2009 status
“Great” Companies 2009 Status

-cnn.money.com Fortune 500 2009 list

phase 3 inside the black box
Phase 3: Inside the Black Box

Great Results

What’s Inside The Black Box

Good Results

phase 3 inside the black box1
Phase 3: Inside the Black Box
  • Good to Great …a process
    • All concepts were derived directly from the evidence

“Core Method was a systematic process of contrasting the good to great examples to the comparisons, always asking, “What’s the difference?”

the dog that did not bark
The dog that did not bark
  • Dogs that were expected to bark but didn’t, turned out to be some of the best clues.
    • Famous CEO
    • Well defined strategy
    • Technology
    • No launch event
phase 4 chaos to concept
Phase 4:Chaos to Concept
  • Looping back and forth
  • Developing ideas and testing them against the data
  • Revising the ideas
  • Building a framework
  • Seeing it break under the weight of evidence
  • Rebuilding it yet again
  • Repeatinguntil everything hangs together in a coherent framework of concepts
  • Taking lumps of unorganized info,seeing patterns, and extracting order from the mess (Focus on strengths)
meeting the concept criteria
Meeting the Concept Criteria
  • Each concept met a rigorous standard before it was deemed significant
  • Each concept was a change variable in 100% of the good to great companies and only 30% of comparison companies
  • Any insight that failed did not make it into the book as a chapter level concept
a process built on humility
A process built on humility
  • DON’T SETTLE, you could be wrong!
  • If you’re not wrong frequently, you’re not trying hard enough.
  • We’re smart only if we admit we’re not so smart.
chaos to concept example gillette
Chaos to Concept Example: Gillette
  • Chaos: Gillette didn’t track success of most promotional programs (didn’t know how each in store piece was used or how many made it into stores)
  • Gillette needed to focus strategy on placement rather than quantity
  • What was the most cost effective way to do this?
gillette cont
Gillette cont.
  • “Each piece needs to meet our objective now, if it doesn’t, we need to look at what we’re doing.” Leslie Palmer (Gillette Communications Manager)
  • Responsible for communication between 300 sales reps and marketing groups
  • No communication
  • “Sending in bulk”
  • ½ of promotion displays not being used
gillette s solution
Gillette’s solution
  • Palmer found info from sales reps, rather than using her position to make an uneducated decision
  • Because reps price and promote products, and talk to store management, Palmer found through surveys that promotion material was sent, “to late, heavy, much, and often.”
  • The decision led to an improved company approach, and provided detailed product placement information (what was most popular and where) and generated new ideas for promotion products
level 5 leadership
Level 5: Leadership
  • According to Jim Collins, leaders:
    • Were thought to be:
      • Celebrities
        • High profile company leaders
    • Are actually:
      • Quiet
      • Reserved
      • Humble
  • Image found at: http://images.google.com/imgres?imgurl=http://www.paperhall.org/inductees/photos/2004pix/d_smith.jpg&imgrefurl=http://www.paperhall.org/inductees/bios/2004/darwin_smith.php&usg=__2IKzVENxeZGLIxjMoqCItFLPcZU=&h=460&w=356&sz=76&hl=en&start=1&um=1&tbnid=OruVp1yVRjG0uM:&tbnh=128&tbnw=99&prev=/images%3Fq%3Ddarwin%2Be.%2Bsmith%26hl%3Den%26rls%3Dcom.microsoft:en-us%26sa%3DX%26um%3D1

Darwin E. Smith

Chairman and CEOKimberly-Clark Corporation

leadership in strategic management
Leadership in Strategic Management…
  • Coulter states:
    • Strategic leadership is the ability to:
      • Anticipate
      • Envision
      • Maintain flexibility
      • Think strategically
      • Initiate changes to ensure a valuable future for the organization
      • “Great” leaders have both the attributes described by Collins and Coulter
first who then what
First Who…then What.
  • “The right people are your most important asset.”
    • Great leaders:
      • “First got the right people on the bus”
      • “The wrong people off the bus”
      • “The right people in the right seats”
      • “And then they figure out where to drive it.”
confront the brutal facts yet never lose faith
Confront the Brutal Facts(Yet Never Lose Faith).
  • “Stockdale Paradox:”
    • “Maintain faith that you can prevail, regardless of the difficulties”
    • “Have the discipline to confront the facts of your reality”
  • “Understand your company’s situation”
  • “Listen for the truth”
the hedgehog concept simplicity within the three circles
The Hedgehog Concept (Simplicity within the Three Circles).

Image found at: http://www.emeraldinsight.com/fig/2610300502001.png

phase 4 cont part iii a culture of discipline
Phase 4 Cont. Part III: A Culture of Discipline
  • “All companies have a culture but few have a culture of discipline.”
    • Southwest Airline employees willing to take pay cuts.
    • Wal-mart makes sure suppliers add value while still contributing to achieve low cost
technology accelerators
Technology Accelerators
  • “…pioneers in the application of carefully selected technologies.”
    • Scanners, RFID, Self Checkout, etc….
the flywheel and the doom loop
The Flywheel and the Doom Loop
  • “No matter how dramatic the end result, the good-to-great transformations never happened in one fell swoop.”
    • Large emphasis on developing good relationships internally and externally
from good to great to built to last
From Good to Great to Built to Last
  • “This Book is about how to turn a good organization into one that produces sustained great results.”
  • Laying the groundwork for an Enduring Great Company.

Good to Sustained Build to Enduring

Great Great Last Great

Concepts Results Concepts Company

the timeless physics of good to great
The Timeless “Physics” of Good to Great
  • Sustaining In a New Economy
  • Law of Organized Human Performance
  • Good to Great is a Choice
  • Good Company Becoming Great?
key points to take away
Key Points to Take Away
  • Good companies become accustom to being mediocre and so therefore do not become great.
  • Jim Collins and his research team’s overall goal are to discover if and how a company can transition from a good company to a great company with sustained results.
  • According to Jim Collins great companies did not transition in one fell swoop instead it was a combination of disciplined people, disciplined thought, and disciplined action.
references
References
  • Bowersox, Donald J., David J. Closs, and M. B. Cooper. Supply Chain Logistics Management. 3rd ed. New York: McGraw-Hill Irwin, 2010. Print.
  • Collins, Jim. Good To Great. New York: HarperCollins, 2001. Print.
  • Coulter, Mary. Strategic Management In Action. 5th ed. New Jersey: Prentice Hall, 2010. Print.
  • Paper Industry International Hall of Fame, Inc. "Darwin E. Smith." Paperhall.org. Paper Industry International Hall of Fame, Inc. Web. 22 Jan. 2010. <http://www.paperhall.org/inductees/bios/2004/darwin_smith.php>.
  • Pausch, Randy. The Last Lecture. New York: Hyperion, 2008. Print.
  • Website, (2009) Best Buy Financials, http://finance.yahoo.com/q/is?s=BBY&annual. Retrieved January 19, 2009.
  • Website, (2009) Circuit City Financials, http://finance.yahoo.com/q?s=CCTYQ.PK. Retried January 19, 2009.
  • Website, (2009) Circuit City Downfall, http://gizmodo.com/5133179/the-downfall-of-circuit-city-in-convenient-graph-form
  • Website, (2009) Fortune 500 List for 2009. http://money.cnn.com/magazines/fortune/fortune500/2009/full_list/index.html