Good to Great by Jim Collins is a business bestseller written in 2001 with timeless lessons and techniques. In this book, the author has shared his own success story of how he transformed from an average manager into one who was able to lead companies that went on to become great successes.
The “Good to Great by Jim Collins” is a book that discusses the factors that contribute to good companies becoming great. The book breaks down into three sections; finding your unique value, building compelling and sustainable competitive advantage, and developing leaders who make everyone better. Read more in detail here: good to great summary by chapter.
Are you seeking for a synopsis of Jim Collins’ book Good to Great? You’ve arrived to the correct location.
After reading Jim Collins’ book, I wrote down a few significant takeaways.
If you don’t have time, you don’t have to read the whole book. This book synopsis summarizes all you can take away from it.
Let’s get this party started right now.
I’ll go through the following points in this Good to Great: Why Some Companies Make the Leap…And Others Don’t book summary:
What makes anything go from good to great?
In Good to Great, the author and his research team reveal the results of their five-year investigation. After years of average performance, public firms that had maintained success were found, and the elements that distinguished them from their mediocre rivals were highlighted.
These elements have condensed many essential principles in leadership, culture, and strategic management.
Who wrote the book Good to Great?
Collins has also spoken at the Stanford Graduate School of Business, BusinessWeek, and the Harvard Business Review. He is a speaker, author, and consultant. Built to Last, one of his earlier works, was a big seller.
An acquaintance inspired Good to Great by pointing out that his previous book only looked at how great organizations stayed great, not how they might become great in the first place.
For Whom is Good to Great?
The journey from good to great is not for everyone. If you are one of the following folks, you may like the book:
- Executives, investors, and managers who want to transform their businesses from mediocrity to excellence.
- Entrepreneurs that wish to create a successful business from the ground up
- Anyone interested in effective leadership, a positive business culture, and sound strategic planning should attend.
Summary of a Good to Great Book
Introduction
Jim Collins shows how great firms stay great by sustaining high performance in his previous book Built to Last. However, the majority of businesses aren’t fantastic. The more relevant issue, in light of this, is: How can firms go from excellent to great? What do they do differently from their competition, who are generally average at best?
Over the course of five years, Jim Collins and his research team investigated three groups of publicly traded US corporations to answer these questions:
These firms went from “excellent” to “great” during the following 15 years, earning cumulative returns of at least three times the overall stock market.
Direct comparison firms stayed average or deteriorated throughout this transition, while having about the same chances as good-to-great enterprises.
Companies with unsustainable comparisons dropped back to a performance level much below the stock market average after their climb.
During their investigation, Collins and his colleagues looked at over 6,000 news pieces and 2,000 pages of CEO interviews. We wanted to learn what the good-to-great organizations did differently in order to assist other businesses make the same jump toward greatness.
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Lesson 1: A basic “Hedgehog notion” provides a clear path.
Consider a cunning fox stalking a hedgehog, coming up with new tricks every day to eat the delectable creature. Hedgehogs constantly wrap themselves into prickly, unbreakable balls when threatened. Hedgehogs prosper every day because they stick to this basic method.
Good-to-great organizations ask themselves three questions in order to come up with their own basic Hedgehog concept:
What can we be the greatest at in the world?
How can we be enthralled by something?
What is the most important economic indicator to watch?
After four years of iteration and discussion at the intersection of the three issues, a good-to-great firm created its own basic Hedgehog idea. Every choice after that was made in accordance with it, and success followed.
Consider the pharmacy chain Walgreens. They just resolved to be the most handy and reasonably priced pharmacy. By pursuing it tirelessly, their Hedgehog idea outperformed the stock market by seven times.
Their opponent, Eckerd Pharmacy, lacked the basic Hedgehog idea and developed erratically in various incorrect directions, finally ceasing to exist as a separate entity.
Lesson 2: Success is achieved by little, gradual actions.
In hindsight, it looks that good-to-great businesses undergone a significant shift. Companies were transforming at the time, but they were frequently unaware of it: their transition lacked a clearly defined motto, launch event, or change program.
Their basic method, the Hedgehog idea, was the consequence of a series of small, incremental pushes. These little gains encouraged individuals to keep pushing until they had amassed enough speed to make a breakthrough. As a consequence of persistent trust and dedication to the Hedgehog principle, a virtuous loop of inspiration and success occurred.
Take Nucor, for example, whose stock has beaten the market by five times. Nucor learned in 1965 that they could create steel better and cheaper than anybody else by using mini-mills, a less expensive and more flexible method of steel manufacturing. Customers came from building a mini-mill, so they constructed another, and so on.
Ken Iverson, the business’s CEO, believed that if they continued pushing in the same direction, they may one day be the most lucrative steel company in the United States. This aim took nearly two decades to achieve.
Instead of making abrupt adjustments and hasty purchases to shift their fortunes, comparison organizations aimed to create constant momentum in one direction. Because the findings were disappointing, they felt disappointed and tried a different approach, not allowing the flywheel to accelerate.
Lesson 3: Technology should be seen as a means to an objective rather than an end in itself.
New technology was generally employed by good-to-great organizations to increase their momentum in the direction they were already moving, rather than to signal where they were going. They saw technology as a means to a goal rather than an end in and of itself.
Companies comparing goods often saw new technologies as a danger, fearful of being left behind in a technological craze, and rushed to implement them without a comprehensive plan.
A good-to-great firm, on the other hand, thought long and hard about whether a certain technology would help them advance faster. Then they became technological pioneers; otherwise, they disregarded it or accepted it at the same rate as their industry.
Walgreens, a prominent pharmacy business, is an outstanding example of using modern technologies.
At the beginnings of the e-commerce boom, the online pharmacy firm Drugstore.com was created amid enormous market buzz. Walgreens’ stock value decreased by 40% as a result of the idea that the company was hesitant to implement internet operations, and pressure was mounting for them to embrace this new technology.
Rather of abandoning up, they thought about how an online presence may help them achieve their initial goal of making the pharmacy experience even more easy while also boosting earnings per client.
Walgreens.com, which launched online prescriptions, for example, little over a year later, bolstered their initial plan. In the same time period, Walgreens almost quadrupled its stock price while Drugstore.com virtually lost all of its value in a year.
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Lesson 4: Level 5 leaders create successful changes from excellent to outstanding.
All organizations have level 5 leadership throughout their move from excellent to outstanding.
A Level 5 leader is a great person, team player, manager, and leader who is also relentlessly ambitious for the firm. They are, however, modest. Their ambition for their firm to succeed long after they depart stems from an obsessive concentration on outcomes.
Level 5 leaders are humble and subtle rather than conceited. Despite claiming credit for their company’s triumphs and downplaying their personal contributions, Level 5 executives are not afraid to take responsibility for a company’s failures.
Darwin Smith established Kimberly-Clark as one of the world’s largest paper consumer products corporations. He had no desire to build a hero or superstar persona. He spent his vacations working on his farm in Wisconsin, and his favorite friends were plumbers and electricians, in addition to dressed like a country lad.
On the other side, the CEOs of two of the three comparative firms had massive egos that were detrimental to the company’s long-term performance. There was no succession plan in place, specifically.
Under the leadership of Stanley Gault, the renowned authoritarian and successful CEO of Rubbermaid, the firm went from being Fortune Magazine’s most regarded company to being bought by a rival in only five years.
Lesson 5: The right people in the right locations are the foundation of greatness.
Even before a clear route ahead is identified, the appropriate people are recruited into the organization and the incorrect people are eliminated in every transition from excellent to outstanding.
For the appropriate individuals, there will ultimately be a road to success. When Dick Cooley took over as CEO of Wells Fargo, he knew he’d never be able to forecast the massive changes that would be brought about by the impending deregulation of the banking sector.
He reasoned that if he hired the greatest and smartest individuals, they would be able to prosper together. He was absolutely correct. Warren Buffett dubbed Wells Fargo’s leaders “the greatest management team in business” after the company’s meteoric rise.
The greatest businesses prioritize discovering individuals with the correct personality qualities above finding people with the proper abilities, arguing that the right people can always be taught and educated.
Companies with the proper staff didn’t had to worry about motivation. They concentrated on who they paid rather than how they paid in order to create a culture where hard people flourish and lazy workers depart. Many senior executives went straight away, while others remained for years.
Even in grave situations, good-to-great firms seldom recruit the incorrect person; instead, they hire as many appropriate individuals as they can find, regardless of whether they have particular tasks in mind for them.
When those good-to-great organizations realized they had the incorrect individual, they moved quickly. They’d either get rid of them or rotate them to a better location. Dealing with the incorrect individuals afterwards will just annoy the rest of the company.
Lesson 6: The secret to success is maintaining faith in the face of adversity.
The Stockdale paradox, named after a US admiral who was captured during the Vietnam War, describes how excellent-to-great enterprises have always straddled the boundary between good and great.
At the notorious “Hanoi Hilton” jail, Stockdale was tortured repeatedly by the enemy and didn’t know whether he’d ever see his family again. Despite the severe conditions, he never lost hope that he would be able to return home.
Some of his fellow inmates, on the other hand, expected they would be home by Christmas and were devastated when they weren’t. Stockdale subsequently attributed his survival to his capacity to face the truth of his predicament while remaining hopeful.
Good-to-great enterprises addressed the harsh realities of their situation and maintained unflinching conviction that they would prevail.
In spite of stiff competition or radical regulatory changes, good-to-great companies ignored the facts instead of hiding their heads in the sand, and still managed to stay positive. As an example, when Procter & Gamble (P&G) entered the paper-based goods market, two major players responded very differently.
Market leader Scott Paper believed they could never compete with a giant like P&G. The company has tried to diversify and stay in categories where it does not compete with P&G.
Kimberly-Clark relished the chance to compete with the best and even took the time to acknowledge Procter & Gamble in one of its executive meetings.
In the end, Kimberly-Clark owned Scott Paper and dominated P&G in six out of eight product categories two decades later.
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Lesson 7: Leaders must foster an atmosphere in which harsh realities may be freely acknowledged.
When others want to keep him from learning the painful reality, a charismatic, powerful leader might become a problem rather than an advantage.
Instead of providing predetermined answers, leadership should act as a Socratic moderator, asking questions to get genuine viewpoints. Leaders should promote discussion at meetings in order to obtain the best outcomes.
Consider the case of Pitney Bowes, which moved from being a monopolistic maker of postage meters to one of the most successful suppliers of document management solutions. Despite this, Pitney Bowes executives spent the majority of their time in meetings contemplating “scary squiggly things” hidden behind rocks, rather than celebrating their accomplishments.
When we make errors, we should investigate them thoroughly to figure out what went wrong, but we should avoid assigning blame to avoid discouraging individuals from speaking up.
When red flag systems produce alarms at important business signals, managers may be obliged to pay attention to hard truths.
Comparative businesses did not have more or better data; they just addressed it and dealt with it more honestly.
Lesson 8: Adhering to the Hedgehog notion necessitates a self-discipline culture.
David Scott, a former triathlon, used to bike 75 miles per day, run 17 miles per day, and swim 12 miles per day. He still had the self-control to rinse his daily cottage cheese meal before eating it, reducing his fat consumption.
People with good-to-great firms worked with the same passion and intensity as Dave Scott, focusing on their company’s straightforward approach, the Hedgehog Concept.
Consider Wells Fargo, which recognized the value of operational efficiency in a deregulated banking market. The executive dining area was replaced with a cheap college-dorm caterer, and executive pay were frozen.
The CEO chastised employees for submitting reports in flashy, costly binders. While none of this was required for Wells Fargo to become a great firm, it demonstrated that they were willing to go above and beyond.
Discipline in a society is not the same as disciplinary tyranny in a single person. Tyrannical CEOs have been known to provide their firms a brief moment of grandeur, but after they go, their enterprises quickly implode.
Former Rubbermaid CEO Stanley Gault, for example, admits to being a “sincere tyrant” who wanted his subordinates to work 80-hour weeks exactly like him. Rubbermaid lost 59 percent of its value when he departed, owing to the lack of a lasting culture of discipline.
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Final Thoughts
Companies may go from mediocrity to greatness by implementing a basic strategic idea with the proper leaders and employees working in a culture of strict self-discipline.
Additional Reading
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Good to Great is a book that discusses the difference between good and great companies. It goes through the process of how companies can become “great” by following certain steps. The book was written by Jim Collins, who has also written other books such as Built to Last. Reference: good to great criticism.
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