“Good to Great”

by Jim Collins
Some Highlights

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The Sample of Good to Great
Companies
 Start with 1,435 good companies. Examine their performance over
40 years. Then find the 11 companies that went from mediocre and
became great *.
 The 11 good-to-great companies that Collins found averaged returns
6.9 times greater than the market’s—more than twice the
performance rate of General Electric under the legendary Jack
Welch.
 Circuit City - 18.50x market  Kroger - 4.17x market
 The surprising  Fannie Mae - 7.56x market  Nucor Corp - 5.16x market
good-to-great  Gillette - 7.39x market  Wells Fargo - 3.99x market
list included  Walgreens - 7.34x market  Abbott Laboratories - 3.98x
many  Philip Morris - 7.06x market
market
unheralded  Pitney Bowes - 7.16x market
 Kimberly-Clark Corp - 3.42x
market
companies
 One such surprise, the Kroger Co.—a grocery chain—bumped along
as a totally average performer for 80 years and then somehow broke
free of its mediocrity to beat the stock market by 4.16 times over
the next 15 years. And it didn't stop there. From 1973 to 1998,
Kroger outperformed the market by 10 times.
* 15 years of cumulative stock returns at or below market, then a transition
point followed by cumulative stock returns at least 3 times higher than the
market over the next 15 years
Good vs Great

 Good is the ENEMY of great

 Ifone is good there is very little need to
change: “If it isn’t broken, don’t fix it”
 To become great requires a new vision
 It requires different leadership
Discipline - It starts with people

 To go from Good to Great requires:

 Disciplined People
 Disciplined Thought
 Disciplined Actions
 First who, then what.
 One needs disciplined people, who apply disciplined
thought and take disciplined action.
 How does one get the right people?
 Are the good people on the bus?
 Are the wrong people off the bus? And
 For those on the bus; are they sitting in the correct seats?
But, you need a great leader – a Level 5

 The level 5 leader in all the good to great companies were

all “cut form the same cloth”
 It is all about the type of leader
 One who does not lead by inspired talk but by inspired
thought (discipline)
 It’s about humility
 Constantly asking the question: “Do I measure up?”
 It’s not about “me”, it’s about the company, the goal.
The window or the mirror?

 All these leaders, when asked how they

succeeded answered: “We were lucky”
 But the real answer is probably more
about the window or the mirror:
 It’s not just about the leader it’s about the
team/the people
 These successful leaders point out the
window at the things/people who led to
the success, and to luck, when things go
well
 When things go bad, they look in the
mirror asking themselves how they have
failed and what they need to do to fix it.
Confronting the brutal facts

 It’s about disciplined thought to confront the

brutal facts
 The Stockdale Paradox
 One requires the unwavering faith that one can prevail
despite the constraints.
 This needs to be balanced with the discipline to face the
brutal facts about one’s situation.
 Those who do not make it through trying
circumstances are the optimists. They die of
broken hearts when things do not work out as
planned.
The Hedgehog Concept

Passionate /
Born to do this

Best in the world Economics /

key value drivers

 Are you engaged in work that fits your own three circles:
 What you are passionate about, what you are genetically
encoded for?
 What can you be the best in the world at (and what can you
not)?
 What can you get paid for?
Bringing it all together

 To go from Good to Great requires disciplined

people, with disciplined thought, to take
disciplined action to stop doing that which does
not fit the three circles.
 Once the point of intersection is determined, one Preserve

needs to action a Stop Doing List! Core values

Core purpose

 The fundamental distinguishing dynamic of

enduring great companies is that they preserve a
cherished core ideology while simultaneously Stimulate
stimulating progress and change in everything that Change

is not part of the core ideology. Practices

Goals & Strategies
 Put another way, the most enduring and successful
corporations distinguish their timeless core values
and enduring core purpose (which should never
change) from their operating practices and
business strategies (which should be changing
constantly in response to a changing world).