Book Report: Good to Great

My personal notes from the book, “Good to Great,” by Jim Collins

I read this book when it first came out, but it wasn’t until I revisited it years later that its content made a lasting impression. The company that I was working for decided to implement EOS (Entrepreneurial Operating System), and Good to Great was required reading.

I’m a notetaker. When I read for the purpose of learning, I’ve found that detailed notetaking is the difference between understanding and retaining information, and having it drift through my brain momentarily. These are my notes from my time studying (and implementing) the principles in this book.

Good is the enemy of Great.

We will never become a great organization if we are satisfied with being a good one.

Level 5 Leadership

Level 5: Level 5 Executive
Builds enduring greatness through a paradoxical blend of personal humility and professional will.
Level 4: Effective Leader
Catalyzes commitment to and vigorous pursuit of a clear and compelling vision, stimulating higher performance standards.
Level 3: Competent Manager
Organizes people and resources toward the effective and efficient pursuit of predetermined objectives.
Level 2: Contributing Team Member
Contributes individual capabilities to the achievement of group objectives and works effectively with others in a group setting.
Level 1: Highly Capable Individual
Makes productive contributions through talent, knowledge, skills, and good work habits.

Level 5 Leaders…

Embody a paradoxical mix of personal humility and professional will. They are ambitious, but ambitious first and foremost for the company, not themselves.
Set up their successors for even greater success in the next generation, whereas egocentric Level 4 leaders often set up their successors for failure.
Display a compelling modesty, are self-effacing and understated. No egos.
Fanatically driven, infected with an incurable need to produce sustained results.
They are resolved to do whatever it takes to make the company great, no matter
how big or hard the decisions.
Display workmanlike diligence — more plow horse than show horse.
When things go well, they attribute success to factors outside themselves.
When things go poorly, they blame themselves and take full responsibility.

First Who…Then What

Transformation begins by first getting the right people on the bus (and the wrong people off the bus) before figuring out where to drive the bus.
“Who” decisions come before “What” decisions (before vision, before strategy, before organization structure, before tactics).
When in doubt, don’t hire—keep looking.
When you know you need to make a people change, act.
Put your best people on your biggest opportunities, not your biggest problems.
Great management teams consist of people who debate vigorously in search of the best answers, yet unify behind decisions regardless of partial interests.

Confront the Brutal Facts (Yet Never Lose Faith)

The Stockdale Paradox: Retain absolute faith that you can and will prevail in the end, regardless of the difficulties, AND at the same time confront the most brutal facts of your current reality, whatever they might be.

When you start with an honest and diligent effort to determine the truth of your situation, the right decisions often become self-evident.
It is impossible to make good decisions without infusing the entire process with an honest confrontation of the brutal facts.
To be great, a culture must be created wherein people have tremendous opportunities to be heard and, ultimately, for the truth to be heard.
For the truth to be heard, you must…
– Lead with questions, not answers.
– Engage in dialogue and debate, not coercion.
– Conduct autopsies, without blame.
– Build red flag mechanisms that turn information into information that cannot be ignored.
Great companies experience as much adversity but respond differently. They hit the realities of their situation head-on. As a result, they emerge from adversity even stronger.
Leadership does not begin just with vision. It begins with getting people to confront the brutal facts and to act on the implications.
Spending time and energy trying to “motivate” people is a waste of effort. If you have the right people, they will be self-motivated. The key is to not de-motivate them. One of the primary ways to de-motivate people is to ignore the brutal facts of reality.

The Hedgehog Concept (Simplicity within the Three Circles)

The key is to understand what your organization can be the best in the world at, and equally understand what it cannot be the best at—not what it “wants” to be the best at.
The Hedgehog Concept is not a goal, strategy, or intention; it is an understanding.
If you cannot be the best in the world at your core business, then your core business cannot form the basis of your Hedgehog Concept.
Great companies are more like hedgehogs—simple, dowdy creatures that know “one big thing” and stick to it. Other companies are like foxes—crafty, cunning creatures that know many things yet lack consistency.
Getting the Hedgehog Concept is a process. In the Good to Great study, it took on average 4 years.
You do not need to be in a great industry to produce sustained great results. No matter how bad the industry, great companies figure out how to produce truly superior economic returns.

A Culture of Discipline

Sustained great results depend upon building a culture full of self-disciplined people who take disciplined action, fanatically consistent with the three circles.
Bureaucratic culture arise to compensate for incompetence and lack of discipline, which arise from having the wrong people on the bus in the first place.
A culture of discipline involves a duality. On the one hand, it requires people who adhere to a consistent system; yet, on the other hand, it gives people the freedom and responsibility within the framework of that system.
A culture of discipline is not just about action. It is about getting disciplined people who engage in disciplined thought and who then take disciplined action.
Great companies appear boring from the outside, but upon closer inspection, are full of people who display extreme diligence and intensity.
Do not confuse a culture of discipline (highly functional) with a tyrant who disciplines (highly dysfunctional).
The most important form of discipline is fanatical adherence to the Hedgehog Concept and a willingness to shun opportunities that fall outside the three circles.
The more an organization has the discipline to stay within its three circles, the more it will have opportunities for growth.
The fact that something is a “once-in-a-lifetime opportunity” is irrelevant, unless it fits within the three circles. A great company will have many once-in-a-lifetime opportunities.
The purpose of budgeting in a great company is not to decide how much each activity gets, but to decide which arenas best fit with the Hedgehog Concept and should be fully funded (and which should not be funded at all).
“Stop doing” lists are more important than “to do” lists.

Technology Accelerators

Great organizations avoid technology fads, yet they become pioneers in the application of carefully selected technologies.
The key question about technology is: Does the technology fit directly with your Hedgehog Concept? If yes, then you need to become a pioneer in the application of that technology. If no, then you can settle for parity or ignore it entirely.
Great companies use technology as an accelerator of momentum, not a creator of it.
Technology by itself is never a primary root cause of either greatness or decline.
“Crawl, walk, run” is the most effective approach, even during times of rapid and radical technology change.

The Flywheel and the Doom Loop

Great company transformations often look like dramatic, revolutionary events from the outside, but they feel like organic, cumulative processes to people on the inside.
Transformation will never happen in one fell swoop. There is 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. 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.
Trying to jump immediately to breakthrough causes the company to lurch back and forth, failing to maintain a consistent direction.
Great companies never try to create breakthrough with large, misguided acquisitions. Instead, they use acquisitions after breakthrough to accelerate momentum in an already fast-spinning flywheel.
Great leaders spent essentially no energy trying to “create alignment,” “motivate the troops,” or “manage change.” Under the right conditions, these things take care of themselves.
Alignment follows from results and momentum, not the other way around.