Book Club #31: Good to Great: Why Some Companies Make the Leap and Others Don’t, by Jim Collins

Good to GreatThere’s a reason you’ll find Jim Collins books on the shelves of many C-Suite managers: there’s helpful advice and thinking in them, particularly for large, publicly-traded companies. But in recent years some of his books, including Good to Great, have come under fire for being “wrong.” In this review we will address some of those concerns, but first, some great points that make the book worth reading.

The Right People on the Bus

If you’ve ever heard of or used this phrase, you’ve already learned one of the key lessons of Good to Great. Instead of seeking to motivate the people you already have with mission and vision, start by hiring people who buy into your mission and vision. When you’ve got the right people, you also have to make sure they are in the right seats, i.e. sometimes you have someone who is culturally aligned with you but is in a role that doesn’t leverage his/her strengths. 

Confront Brutal Facts

Collins tells a fascinating story of “short pay” in Chapter 4. Bruce Woolpert of Granite Rock allowed customers full discretionary power on how much of an invoice would be paid based on satisfaction. The customer does not need to return the product or ask for permission. He/she simply circled the offending item on the invoice, deducted the item from the total, and sent a check for the balance. “Red flag mechanisms” like these, allow companies to treat errors and problems as information (and to proactively respond in a way that shows the company values customer satisfaction above all else).

Elsewhere in this same chapter Collins underlines the importance of acknowledging shortcomings so that companies can improve. Less echo chamber, more constructive dialogue. 

Be a Hedgehog

In a chapter called The Hedgehog Concept, Collins puts forward an intersection of three areas: passion, economic engine, opportunity to be best in the world. He notes that the companies he labeled as “good to great” in his study all focused on this intersection with the simplicity and single-mindedness of a hedgehog.

The ability to be a hedgehog allows companies to not be tied to “what we’ve always done” and consider taking bets on where the market is going. One of the most shocking moves Collins documents is Kimberly-Clark’s willingness to sell all its mills in order to become the best in the world in consumer products or Walgreens’ ability to end its nostalgic food service component to focus on clustered convenience both in-store and online.

But, Two Companies Went Bankrupt…

Much has been made of the fact that two companies that Collins profiled, Circuit City and Fannie Mae, have both gone belly-up, for entirely different reasons. But this isn’t a sufficient reason to discard Collins’ book, which is so extensively researched that there are over 40 pages of appendices documenting the methods and questions for its findings. It’s simply a reminder that having a great company doesn’t guarantee that you can’t fail, or that market conditions can’t suddenly and catastrophically change.

Indeed, Collins’ book takes readers on a journey, from getting the right people on the bus all the way to pushing a reinforcing flywheel of momentum that takes a company from “doing fine” to “killing it.” But practices that worked for publicly-traded businesses will work for small businesses too, especially around leadership and innovation. No matter what size your business is, if you become great, you can’t rest on your laurels. You have to always keep tweaking and refining so that complacency doesn’t set in. Greatness never rests, even though sometimes it ends.

Want some ideas on how to take your company from good to great before you exit? Let’s talk.