Sunday, October 16, 2005

Book Review: Good to Great


Good to Great: Why Some Companies Make the Leap... and Others Don'tI may, by now, be the last person in America to read Collins' best-seller. No matter, it's exceptional. Using extensive quantitative research, Jim Collins and his team arrived at a set of fundamental differentiators that distinguish great companies from merely good ones.

How, for example, did Walgreens outperform the market by a factor of fifteen times, while its competitor Eckerd turned into an industry laggard? How did Kimberly-Clark meet and beat the master marketers at P&G? And how could Nucor take on -- and soundly defeat -- US Steel? Simple, Collins tells us: all exhibited a suite of traits that supercharged corporate performance.

To illustrate the point: had you invested one thousand dollars in Walgreens in 1975, that stake would have been worth over $560,000 by the year 2000. Contrast that performance with the great names of corporate America: Intel ($309,000), GE ($119,000), Coke ($73,000), Merck ($64,000), and the general market ($37,000).

In a nutshell, the traits include:

o "Level 5 leadership" - leaders that exhibit a unique combination of personal humility and professional discipline with ambition focused on the company, not the individual.
o "First Who, then What" - getting the best people on board, then worrying about fine-tuning corporate direction.
o "Confront brutal facts, without ever losing faith" - also termed "the Stockdale Paradox", this trait involves seeking the truth of the current situation while maintaining a certainty in victory.
o "The Hedgehog Concept" - fundamental discipline at the intersection of what your organization has passion for, what it can be the best at, and knowing the single metric that drives your economic engine (e.g., dollars per customer-visit, if you're a retailer).
o "A culture of discipline" - sustaining excellent results requires nuturing a culture of displined people taking displined action, consistent with the Hedgehog Concept.
o "The flywheel" - good-to-great transitions never happen in one grandiose re-org; instead, they are the result of a consistent sequence of buildups and breakthroughs, one after the other.

Like all great ideas, from the perspective of hindsight, Collins' characteristics look simple, dry, and boring. The book is anything but: it is a unique combination of research report, historical retrospective, and incisive analysis. Put simply, if you work in a business (!), you owe it to yourself to read this book.

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