Good to Great: Why Some Companies Make the Leap… and Others Don’t (Jim Collins)

3.5 out of 5 stars

Cut to the Chase:
A well-written synopsis of 11 “great” companies and some of their similar characteristics, this is a fun, quick read that is great in terms of party trivia and information… but it’s tougher to judge if you’re looking for more of a business how-to.  Partially, it has aged poorly — many of the companies selected have since had meltdowns of epic proportions (for example: Fannie Mae, Circuit City), and the “how to” part of the book feels generalized and far more subjective than the methodology/selection criteria would have you believe. Still, you’ll learn quite a few fun facts about how some of these business started and/or converted to become the giants they are today.

Greater Detail:
The main premise of this book is that though there are many very successful, long-lasting corporations out there (Coca Cola, GE, etc), there are a handful of companies that transcend just long-lasting durability, and become truly “great” companies.  The selection criteria (mostly explained in the appendices) identified 11 “great” companies out of 1,435 analyzed, mostly via things like stock performance (the companies chosen were at about market average for about 15 years, and then jumped to being about seven times better than market over a period of 15 years, hence the title: good to great).

The idea was to then take a more in-depth look at the 11 companies to see what similarities existed, and to then compile kind of a how-to in terms of what distinguishes the greats.  Some of the ideas explored are things like:

1. The Level 5 Leader — Collins proposes the idea of a leadership hierarchy of skills;  a Level 5 leader is a dual personality of sorts — someone who is basically modest, but willful and stubborn, almost introverted and shy, but simultaneously fearless (this is kind of the opposite of say the CEO-centric view where Apple was in part defined by Steve Jobs as a leader and a personality, Bill Gates by Microsoft, etc). He argues that the Level 5 leader is someone who does what’s in the best interests of the company — no matter what (preparing for crises before they happen, sacrificing part of their lives often, etc).  Counter examples given are leaders who so define the role that they’re unable to appoint successors, or have a successful successor — the argument here is about systematic management, filling the role that the company needs, for the good of the company, and almost without personal ego.

2. The Flywheel and the Doom Loop — Even though the media sometimes portrays changes as though they’re instantaneously effective or immediately impactful, in reality, most companies that are successful slowly build momentum via a flywheel effect, constantly confronting the “brutal” truths and having faith that with discipline and continued effort and momentum, a breakthrough will happen.  The Doom Loop is when there is a lack of patience that leads to continued cycles of new leaders, new directions, and new innovations, without ever waiting to see something through.

3. The Hedgehog Concept — This is the concept of doing one thing really, really well.  Here the argument is that you don’t have to be the best at everything, that Walgreens became a great company by getting rid of its restaurants (it had over 500 at one point) and focusing on what it was strongest in — being a convenient drug store.  It focused on location, location, location (always being on a corner, for example), offering 24-hour pharmacies, flu shots, expanding into poorer neighborhoods, and being an almost pervasively convenient option for its customers.  It basically asks companies to think about what they can really be best at and specialize a little, find something they are passionate about that they can truly excel at.

As I’ve said, it’s an interesting read. and in terms of things to make you think, there’s a lot of good cocktail party fodder — is it better to have an invisible leader who sacrifices everything for their company? Or is there benefit to having a targeted leader to focus on (the Zuckerbergs and Jobses, leaders who are synonymous with a company’s image).  But if you’re reading it now, more than a decade after its initial publication, it’s hard to take it as seriously when it talks about Fannie Mae (which has gone through a federal takeover/bailout) or Circuit City (which has filed for bankruptcy) or even Wells Fargo, which has had its share of legal and financial troubles.  Also, though it’s a nice retroactive, backwards-looking book about what has helped 11 particular companies, it’s hard to know how much is truly applicable going forward.  So in that sense, it’s less of a how to go from good to great, and more of an interesting, almost historical read, about how these particular companies made the jump (and then sometimes plummeted back).

Comparisons to Other Books:
I had a similar experience with Collins’s Built to Last, which was supposed to detail the successful habits of “visionary” companies. It was a fun synopsis of a six-year research project by Stanford, and I learned all sorts of interesting trivia, but, as with many books that are backwards-looking studies of still-in-business companies, it’s sometimes hard to take the overarching messages seriously knowing how some of the chosen companies have performed since publication.  I think these are great books if you’re looking to read something interesting about the business world, but I’m not sure I’d really call them instructive per se.

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