BOOK REVIEWGOOD-TO-GREAT PRESENTED BY: Norhasliza Ibrahim Sitynoryasmin Ahmad Khairuddin Azlida
INTRODUCTION Author: James C. Collins Language: English Publisher: William Collins Publication date: October 16, 2001 Media type: Hardcover Pages: 320
Chapter: 9 chapters include: 1. Good is the enemy of great 2. Level 5 leadership 3. First Who..Then What 4. Confront the Brutal Facts (Yet never lose faith) 5. The Hedgehog Concepts (Simplicity within the three circles) 6. A culture of Discipline 7. Technology accelerators 8. The Flywheel and the Doom Loop 9. From Good to great to built to last
HISTORY OF AUTHOR • James C. "Jim" Collins, III (born 1958, Boulder, Colorado) is an American business consultant, author, and lecturer on the subject of company sustainability and growth. • Jim Collins frequently contributes to Harvard Business Review, Business Week, Fortune and other magazines, journals, etc. • He is also the author of several books: How the Mighty Fall: And Why Some Companies Never Give In, Built to Last: Successful Habits of Visionary Companies, and Good to Great.
Books 1994: Built to Last by James C. Collins and Jerry I. Porras (Paperback, Hardcover, CD) 1995: Beyond Entrepreneurship: Turning Your Business into an Enduring Great Company by James C. Collins and William C. Lazier (Paperback & Hardcover) 2001: Good to Great: Why Some Companies Make the Leap … And Others Don’t by James C. Collins (Paperback, Hardcover, CD). 2005: Good to Great and the Social Sectors by James C. Collins (Paperback) 2009: How the Mighty Fall: And Why Some Companies Never Give In by James C. Collins
CHAPTER 1: GOOD IS THE ENEMY OF GREAT • Emphasis on how the good company can be transform to the great company • This research is a journey on getting the inner working of good to great Concept research • identifying the company that has make leap from goods to great • Comparison GTG companies with the comparison companies. • performance of the companies were measured based on their cumulative return stocks • There is no warranty that the huge company could leap to great company. The Walgreens has beat $1 invest in Intel by 2 Times, General Electric by 5 and Coca Cola by 8 times. • The successful of Walgreens bring the curiosity on why Eckerd with the similar resources and opportunity were not being able to make a leap.
The research has four phases Phases 1 Establishing team - The teams consist of four to six people teams have to identify the company with good to great pattern in at least 15 years. Phases 2 Identify factors that good to great company share in common then distinguished them against the comparison companies.
Phase 3 Inside The black Box Collected publish material / interview Coded according to strategy, technology and leadership Analyzed and be debated to further drawing the potential conclusion of the involving company and the teams are welcome to raise their voices on any comment
Phase 4 Chaos to Concept • Simulate the outcomes by testing against data in order to build framework, break it and rebuild it against. • The simulation shows good to good has change 100% of while comparison company make changed estimated 30 %. • Level 5 Leadership • occurs during the transition from good to great and most of them are sticking on the Stockdale Paradox, and believe the businesses not definitely good in their core business. • discipline culture in each company. • Enduring Great Companies • Good To Great Concept + Sustained Great Result + Built To last Concept Enduring Great Companies
Findings • Based on the study, the research team found that • Larger than life: Most of the inner celebrity shows the positive correlation with taking good to good. Its proved whereby 10 out of 11 good to great ‘s leader are from inside • There is no linking between executive compensation and the process of going good to great • Both good to great and comparison companies has their range of strategic planning • Most of the good to great company focus on what they should stop instead of what they should do • Technology were not cause the transformation in the good to great company
Mergers and acquisition has no impact on the movement of good to great company • The good to great company has very few attained in managing change, motivation and creating alignment • There also unaware of official launch event for the transformation • It is not necessary the good to great company shall be at large and in great industry , since they are company in the terrible industry has move from good to greats.
LESSON LEARNT • The author has taken the good move on this research, it tremendously give us the information and facts that we never expect: • The company that success on the transformation has the level 5 leadership. The transition process may create the leaders level 5. Nowadays, the organization should take serious action on the talent management practices since it were proven the leadership is came from the inner organization. The huge investment to launch the transformation never worth for the value, this is because it has never happened in one slope. Small company in terrible industry also has a chances to success in their transformation.
CHAPTER 2: LEVEL LEADERSHIP • This chapter will distinguished traits of good to great leader or Level 5 leaders. Kimberly Clark Case Study • Darwin E smith, decision with switching the business from coated paper company to paper based products. • He believed the competition and the good economy will make the succeed • The level 5 leaders usually will to cuts against controversy as long as their ambition is achieve.
Gillette Company Case Study • CEO of Gillette, Colman Mockler -threat when Revlon lead by Ronald Perelman • implement the hostile taking over with the purchase of 44% of their stock and • their stock also bought by Coniston Partners as much of 5.9%. • not to take for granted on the acquisition - many people investing Mockler and team invest on technology and they finally developed new product called Sensor and Mach 3, and it was success and totally drown the demand for the existing product • accept the offered by Ronald Perelman and wish it worth. • Forbes magazine that really gave negative impression to the Gillette team, Mockler was died with heart attack
Ambition for the Company David Maxwell, the CEO for Fannie Mae make lost 1 Million each day before he decided to transform to Wall Street firm. With the transformation his business earns 4 Million each day. Day after, he has to retire, and get the benefit of his retirement package, with the gracious heart, Maxwell is willing to contribute the money to low housing income. Henry v111 with Biggest Dog Syndromes Comparison companies, while for example Scott Paper a leaders at Kimberly Klarks earn the $165,000 per day and to maintain his earn, the business has to cut down on the workforce and Research and development expenses.
Level 5b leader see windows as a way to segregate credited factors when things goes well and were not blaming bad luck when something goes wrong. • There researcher categorized two hypotheses where as those leaders in the level 5 leaders and other categories which do not have level 5 leaders. This categories need to has greater ambition of building something larger and more lasting than themselves. • Level 5 leaders are naturally born with capability and it’s believed they might have significance experience in their life. Steps to becoming leaders level 5 • Level 5 leaders are the key component for business to move from good to great company. Satisfying and powerful idea may enhance the best transition from good to greats. Symbiotic relationship between level 5 and remaining findings would help each level to develop level 5 leaders. Lesson Learnt • The transformation requires the brave decision, because sometimes it requires abnormal decisions, such cases of Abbot Laboratory to remove all nepotism. Level 5 leaders always put the organization as the number one priority and always think about the grow of the company. Level 5 leaders is developed at the time of transition and the most important the organization has to be open in get the powerful ideas that would enhance the transformation and developing level 5 leaders.
CHAPTER 3: FIRST WHO…THEN WHAT This chapter is about to get right people on the business before you figure out where to drive It First who, then what • It is not necessary to set new directions, strategy and to get new people to ensure the successful of the transformation. Good to great companies always understand on whom leaders should join the organization Well Fargo Case Study • Dick Cooley began his talented management team prepare the wrenching change. • efficient when the business is outperform 3 times against general stock market while others bank fell behind. • Contrast to Bank of America, where they followed “weak generals, strong lieutenants. Weak generals are the employee where as wait for the direction from above. After losing I billions, Bank of America realized strong general to turn the bank around. Strong general is approach of recruiting the talented people from the competitor, mostly from Well Fergo
Henry Singleton Case study • The small enterprise has evolved to the corporation and success by has more than 100 acquisition, but once Singleton moved out, and the business were merged with Allegheny, it was failed to be great. • This study also reveals there is no linking between executive compensation and the process from good to great. They believed, right people will do everything with their power. Compensation is more to get right people in business at place and keep them. • Good To Great Company always seems for rigorous, they usually consistency with exact standard at all levels especially at upper management. There are three steps on how the companies can be rigorous: • Practice Discipline, when it doubt, don’t hire and keep looking • When you know there is need to make people change, do it. • Put the best people on the biggest opportunity not the problems. Lesson Learnt Good to Great Company usually take advantage on the level 5 leaders, to get & maintain them, the right people shall be at right places and it appears the crucial the Human resources in recruiting and retains the best resources.
CHAPTER 4 CONFRONT THE BRUTAL FACT (YET NEVER LOSE FAITH)
Facts are better than dreams • Good to great companies did not have a perfect track record. • But on the whole, they made many more good decisions than the comparison companies. • Even more important on the really big choices such as Kroger’s decision to thrown all its resources into the task of converting its entire system to the superstore concept, they were remarkably on target.
Let the Truth be Heard To accomplish this, 4 basic practices must engaged: 1. Lead with question, not answer Leading from good to great does not mean coming up with the answer and motivating everyone to follow your messianic vision. It means having the humility to grasp the fact that you do not yet understand enough to have the answers and then to ask the questions that will lead to the best possible insights.
2. Engage in dialogue and debate, not coercion All good to great companies have a penchant for intense debates, discussions and healthy conflict. Dialogue is not used as sham process to let people “have their say” so they can buy into a predetermined decision rather it is used to engage people in the search for the best answers. 3. Conduct autopsies, without blame Good to great leaders must take an honest look at decisions his or her company makes, rather than simply assigning blame for the outcomes pf those decisions. These “autopsies” go a long way toward establishing understanding and learning, creating a climate where the truth is heard.
4. Build red flag mechanisms that turn information into information that cannot be ignored • Good to great companies have no better access to information than any other company. They simply give their people and customers’ ample opportunities to provide unfiltered information and insight that can act as early warning for potentially deeper problems.
CHAPTER 5 THE HEDGEHONG CONCEPT (SIMPLICITY WITHIN THE THREE CIRCLES)
A simple crystalline concept that lows from deep understands about the intersection of the following circles.
At what you can be best in the world This standard goes far beyond core competence. It is because you possess a core competence doesn’t necessarily mean you are the best in the world at that competence. Conversely, what you can be best in the world at might not even be something in which you are currently engaged. The Hedgehog concept is not a goal or strategy to be the bet at something, it is an understanding of what you can be the best at and almost equally important on what you cannot be the best at.
What drives your economic engine To get insight into the drivers of your economic engine, search for the one dominator (profit per x, for example or cash flow per x) that has the single greatest impact, if you could pick one and only one ratio to systematically increase over time to make a greater impact on what that ratio be. This denominator can be subtle and sometimes even unobvious. The key is to use the denominator to gain understanding and insight into your economic model.
What you are deeply passionate about Good to great companies did not pick a course of action and then encourage their people to become passionate about their direction. Rather, those companies decide to do only those things that they could get passionate about. They recognized that passion cannot be manufactured nor can it be the end result of a motivation effort. You can only discover what ignites your passions of those around you.
Critical point is the “hedgehog concepts is not a goal to be the best, it’s a strategy to be the best, an intention to be the best, a plan to be the best. • It is an understanding of what you can be the best at. • The distinction is absolutely critical”. • Collins points out how companies that stray outside their core competency pay for it dearly. • In contrast, when a great company can no longer do a certain thing better than someone else, despite the fact that it had been doing it for a long time, it dropped that line at work and it never looked back.
Getting the hedgehog concepts (an interactive process) Ask Question, Guided by the three circles Dialogue and debate, Autopsies and analysis THE Guided by the three circles Guided by the three circles COUNCIL Executive Decisions
Characteristics of the Council 1. The Council exists as a device to gain understanding about important issues facing the organization. 2. The Council is assembled and used by the leading executive and usually consists of five to twelve people. 3. Each council member has the ability to argue and debate in search of understanding, not from the egoistic need to win a point or protect a parochial interest. 4. Each council member retains the respect of every other council member without exception. 5. Council member come from a range of perspectives but each member has deep knowledge about some aspect of the organization and/or the environment in which it operates.
6. The Council includes key members of the management team but is not limited to members of the management team, nor is every executive automatically a member. 7. The council is a standing body, not an ad hoc committee assembled for a specific project. 8. The Council meets periodically, as much as once a week or as infrequently as once per quarter. 9. The Council does not seek consensus, recognizing that consensus decisions are often at adds with intelligent decisions. The responsibility for the final decision remains with the leading executive.
10. The Council is an informal body, not listed on any formal organization chart or in any formal documents. 11. The Council can have a range of possible names, usually quite innocuous. In the good to great companies, they had benign names like Long-Range Profit Improvement Committee, Corporate Products Committee, Strategic Thinking Group and Executive Council.
CHAPTER 6 A CULTURE OF DISCIPLINE
The Good to Great Matrix of Creative Discipline Hierarchical Organization Great Organization High Culture of Bureaucratic Organization Start-up Organization Discipline Low Low Ethic of High Entrepreneurship
This means following: • Build a culture around the idea of freedom and responsibility, within a framework. • Fill that culture with self-disciplined people who are willing to go to extreme lengths to fulfill their responsibilities. They will “rinse their cottage cheese” • Don’t confuse a culture of discipline with a tyrannical disciplinarian. • Adhere with great consistency to the Hedgehog Concept, exercising an almost religious focus on the intersection if the three circles.
To create a culture of discipline, you must: ● Build a culture around the idea of freedom and responsibility, within a framework. Good-to-great companies built a consistent system with clear constraints, but they also gave people freedom and responsibility within the framework of that system. • Fill your culture with self-disciplined people who are willing to go to extreme lengths to fulfill their responsibilities. People in good-to-great companies tend to be almost fanatical in the pursuit of greatness, they possess the discipline to do whatever it takes to become the best within carefully selected arenas and then seek continual improvement from there.
Don’t confuse a culture of discipline with a tyrannical disciplinarian. Many companies that could not sustain their success had leaders who personally disciplined the organization through sheer force. Good to Great companies had Level 5 leaders who built an enduring culture of discipline, powered by self-disciplined people who acted in the company’s best interests without strict dictums from leadership. • Adhere with great consistency to the Hedgehog Concept, exercising an almost religious focus on the intersection of the three circles. The good-to-great companies at their best followed a simple mantra — “Anything that does not fit with our Hedgehog Concept, we will not do.” They did not launch unrelated businesses or joint ventures in an effort to diversify.
CHAPTER 7: Technology Accelerators • Good to Great organizations think differently, about technology and technological change than mediocre ones. • Good to great organizations also avoid technology fads and bandwagons and they become pioneers in the application of carefully selected technology. • The good to great companies used technology as an accelerator of momentum, not a creator of it. • None of the good to great companies began their transformations with pioneering technology. • so, they are become pioneers in the application of technology once they grasped how it fit with their three circles and after they hit breakthrough. • we discuss how a company reacts to technological change is good indicator of its inner drive for greatness versus mediocrity. • So, great companies respond with thoughtfulness and creativity, driven by a compulsion to turn unrealized potential into results, mediocre companies react and lunch about motivated by fear of being left behind.
The Flywheel Effect The Doom Loop
CHAPTER 8: The Flywheel and the Doom Loop • Good to great transformation often look like dramatic, revolutionary events to observing from the outside, but they feel like organic, cumulative processes to people on the inside. The confusion of end outcomes (dramatic result) with process ( organic and cumulative) skews our perception of what really works over the long haul. • No matter how dramatic the end result, the good-to-great transformation never happened in one fell swoop. There was no single defining action, no grand program, no one killer innovation, no solitary lucky break, no miracle moment.
Sustainable transformations follow a predictable pattern of buildup and breakthrough. Like pushing on a giant, heavy flywheel, it takes a lot of effort to get the thing moving at all, but with persistent pushing in a consistent direction over a long period of time, the flywheel builds momentum, eventually hitting a point of breakthrough. • The comparison companies followed a different pattern, the doom loop. Rather than accumulating momentum-turn by turn of the flywheel-they tried to skip buildup and jump immediately to breakthrough. Then, with disappointing result, they’d lurch back and forth, failing to maintain a consistent direction. • The comparison companies frequently tried to create a breakthrough with large, misguided actuations. The good-to-great companies, in contrast, principally used large acquisitions after breakthrough, to accelerate momentum in an already fast-spinning flywheel.
CHAPTER 9: From Good to Great to Built to Last • From this chapter, the good to great research project, they discuss about the ideas in build to last while doing the good to great research. Actually, built to last, based on six year research project conducted at Stanford Business School in the early 1990s. for example, this group research examined companies like Procter & Gamble (founded in 1937) • So they found early in the research, then they made a very important decision. They decided to conduct the research for Good to Great as if built to last didn’t exist. This was the only way to clearly see the key factors in transforming a good company into a great one with minimal bias from previous work.
Concept in Good To Great • Level 5 leadership • Relationship to Concept in Built to Last • Clock Building, Not Time Telling: Level 5 leaders build a company that can tick along without them, rather than feeding their egos by becoming indispensable. • Genius of AND: Personal humility AND professional will. • Core Ideology: Level 5 leaders are ambitious for the company and what it stands for; they have a sense of purpose beyond their own success. • Preserve the Core/Stimulate Progress: Level 5 leaders are relentless in stimulating progress toward tangible result and achievement, even if it means firing their brothers.
LESSON LEARN • The company use both Good to Great and Built to Last to understand why they great, so, they can keep doing the right thing. For example, if you feel you right or failure, so better is to be successful without being resolutely clear about why are successful.( Robert Burgelmen)- Prof. from Stanford Business School. • To create and find the value from Good to Great and will commit to applying what we learn to whatever we do for our company, social sector work and your own life. • The Good to Great performance pattern must be a company shift, not an industry event. In other word. The company must demonstrate the pattern not only relative to the market, but also relative to its industry.
At the transition point, the company must have been established, ongoing company, not a startup. • This was defined as having operations for at least twenty five year prior to the transition point. • Additionally, it had to have been publicly traded with stock return data available at least ten years prior to the transition point.