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Some companies achieve highly respectable performances, while others can become unbelievable success stories. In 1996, Jim Collins and his team of 21 researchers set out to understand if good companies could subsequently become great companies. For five years, they analyzed data for almost 1,500 profitable businesses to understand what helped them transform from “good” to “great.” The book this led to–Good to Great—isn’t a collection of personal theories but rather the scientific conclusions of this study.
According to the study Collins and his team carried out, leaders who are able to transform their companies into extraordinary enterprises are those who have a combination of personal modesty and professional ambition. They are able to keep their egos in check to serve the greater good of the business. Collins noted that executives who carry too much personal ambition generally prevent good companies from transitioning into excellent ones. On an everyday level, this means taking full responsibility when there is a problem, without blaming others or the circumstances. Good leaders generally attribute their achievements to luck, while others only take credit for their accomplishments.
“Executives who carry too much personal ambition generally prevent good companies from transitioning into excellent ones”
First who, then what
The process of transforming a company into an extremely profitable one begins with the choice of who to bring on board to work with—which should come well before the step that consists of deciding what to do. Collins observed that, in many mid-size operations, bosses are seen as sacred guides and everyone around them is simply there to help them achieve their goal. But the study shows that it is shrewder to bring together a tight team who will be able to propose competent solutions to problems than to impose a master plan on everyone. Leaders owe it to themselves to follow this rule, which also means removing people who do not have adequate skills.
In general, this recommendation applies to managers as well as to entrepreneurs. We are often tempted to concentrate on one idea and then build a team afterward around the goal. However, Collins found that doing the process in reverse was more effective.
“It is shrewder to bring together a tight team who will be able to propose competent solutions to problems than to impose a master plan on everyone”
During their research, Collins and his team found that the most important task for this type of transformation in a company is taking on the problems the business is dealing with in a totally transparent and candid manner. So what doesn’t work well in the company and its organization? What needs to improve before obstacles can be overcome? When faced with these questions, managers and company heads need to instill a climate of confidence so that the employees can become part of the conversation and bring their thoughts and ideas to the table. This can be achieved by doing different things in the workplace, such as making time to get together and talk things over once a week or once a month, installing a suggestion box, setting up the means to make internal communication easier and checking in on a regular basis.
“The most important task for this type of transformation in a company is taking on the problems the business is dealing with in a totally transparent and candid manner”
Collins uses the example of Procter & Gamble’s arrival on the consumer-goods market in the 1960s. Faced with the success of a new competitor, Kimberly-Clark admitted that Procter & Gamble’s products were better than theirs, and they used this as a catalyst for change. By accepting the harsh reality that their brands had been outdone by the competition, the teams at Kimberly-Clark were able to turn this into motivation to become stronger and take the market back from Procter & Gamble. If company leaders can accept that they are “behind the eight ball,” they will be able to unite their teams in hard times and emerge as the winners. There is no point in hiding the truth from employees, even when things are not pretty.
“If company leaders can accept that they are ‘behind the eight ball,’ they will be able to unite their teams in hard times and emerge as the winners”
The hedgehog concept and the culture of discipline
Collins also points out the difference between the ambition you can have for your company and the understanding of what actually makes it an effective company. Thus, the most crucial element for becoming great is objectively targeting the sector in which the company could become the best, the most profitable, and the most passionate in the world. The researchers found that it is more effective to concentrate on one goal at a time, just as a hedgehog does. The underlying parable in the book is that although a fox knows many ways to hunt a hedgehog, the hedgehog successfully concentrates on just one thing: Defending itself.
Using this as a starting point, the best approach is to install rigorous discipline in the company so that does not find it has spread itself too thinly. The most successful businesses are those that learn to do fewer things at one time, whereas less-successful ones tend to live under the constant fear of missing out on an opportunity.
“The most successful companies are those that learn to do fewer things at one time”
In his research, Collins observed that mediocre companies were likely to idolize technology and rely on it. On the other hand, companies that were able to cross the gap from good to great only used technology to accelerate their success and not to create everything from scratch. Eighty percent of the executives interviewed about the transformation process of their companies didn’t mention technology as being a factor, even in the case of pioneering companies such as Nucor—an American steel-products company that reorganized its priorities in the late 1960s and became the number one in the US several years later.
“Mediocre companies were likely to idolize technology and rely on it”
On the whole, we tend to think that we will perform better if we have every gadget going, or that the company would achieve better results if it has a digital platform or services that use cutting-edge technology. Collins helps us understand that this is not always the key to success and that we should not be fooled by this illusion.
Climbing the steps one by one
During the five years that Collins and his team worked on their study, they established that the companies that were unsuccessful in making the transition from good to great generally tried to climb too many steps at once and, as a consequence, had disappointing results. Collins saw that most of the companies were not aware of their transition, did not broadcast it, and did not concentrate on one key decision, grand action plan, or groundbreaking innovation. Success comes down to accepting that it is a process that takes a certain amount of time and is only observable in retrospect.
“Success comes down to accepting that it is a process that takes a certain amount of time and is only observable in retrospect”
Collins illustrates this point using the American pharmaceutical company Warner-Lambert as an example, a direct competitor of Gillette in the 1960s. Each time a new CEO took the helm at Warner-Lambert, they would come in with a new action plan that put the brakes on the one that had previously been put in place. If the new strategy was not seen to be working better than the previous one quickly enough, the CEO would be shown the door without anyone really taking the time to understand the underlying reasons. After a great deal of restructuring, and what Collins describes as a downward spiral, the company disappeared at the end of the 1990s, a victim of its inability to be patient and put things into perspective.
“In wanting to move too fast, we sometimes miss out on potential success”
As the head or manager of a business, it is tempting to want immediate results. Collins’s book helps us understand that in wanting to move too fast, we sometimes miss out on potential success. It is important to accept that economic timescales impose certain lapses of time between the actions carried out and the achievement of the anticipated effects.
Collins has updated his bestseller, first published in 2001, several times. He has sold more than three million copies, and it is considered one of the best management guides on how good can become great.
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Photograph by WTTJ
Translated by Mary Wagonner-Moritz
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