Good to Great GROUP 6

Joshua Beason, Nathan Greene, Isaac Sinclair, Luke Stump, Jonathan Hassler, Min Nguyen, Angela Pacitti

Chapter One

Good Is The Enemy of Great

  • Collins went out to prove that staying good does not allow great to exist
  • Searched and found 11 great companies that had 15 year sustainability and cumulative returns at at least 3 times the market
  • Companies included: Abbot, Circuit City, Fannie Mae, Gillette, Kimberly-Clark, Kroger, Nucor, Philip Morris, Pitney Bowes, Walgreens, Wells Fargo
  • Research included direct comparisons companies and unsustained comparisons
  • Direct comparisons included: Upjohn, Silo, Great Western, Warner-Lambert, Scott Paper, A&P, Bethlehem Steel, R.J Reynolds, Addressograph, Eckerd, Bank of America
  • Unsustained comparisons included: Burroughs, Chrysler, Harris, Hasbro, Rubbermaid, Teledyne
  • Through research, Collins found that there are timeless "physics" of Good to Great
  • Certain immutable laws of organized human performance will not change
  • It is important to consider how to take a good organization and turn it into one that produces sustained great results
  • It is completely possible to turn good to great

Chapter Two

Level 5 Leadership

  • All good to great transformations had Level 5 Leaders
  • The hierarchy of leadership (highly capable individual, contributing team member, competent manager, effective leader, level 5 executive)
  • Level 5 leaders all paved the road for future leaders
  • Humility+will= the two sides of a level 5 leader
  • The Stockdale paradox
  • Workhorse not a show horse
  • Do not take credit for success
  • Many have the potential to become Level 5 Leaders

Chapter Three

First Who....Then What

  • Finding the right people are important
  • The right people are very important to set up great teams and lead people from good to great (Ex. Wells Fargo, Fannie Mae)
  • Get the right people on the bus, wrong people off the bus, and then figure out where to drive it
  • A genius cannot make the company great forever even with a thousand helpers
  • It is necessary to get the right people and build a superior executive team to figure out the best path to greatness
  • It is who you pay, not how you pay them
  • There is no systematic pattern linking executive compensation to the process of going from good to great
  • The purpose of a compensation system is to get the right people on the bus in the first place, and to keep them there
  • It is significant to keep the company rigorous but not ruthless
  • In order for a company to be rigorous they need to: get and keep enough right people to build greatness for the company, announce people to quit the position before waiting too long, and put the best people on the biggest opportunities,not the biggest problems
  • It is possible to build a great life along with business
  • Good to great management teams unify behind decisions, regardless of parochial interests

Chapter Four

Confront the Brutal Facts (Yet Never Lose Faith)

  • Always face the brutal facts
  • Dealing with the truth is always practical to solve problems
  • Kroger accepted the market change and was able to continue and develop the business effectively while A&P had to cope with many difficulties due to not facing the fact of change
  • Facts are better than dreams
  • Instead of turning away from the reality, it is much better to deal with trouble by using the ability to solve issues and continue to make things great
  • Good-to-great companies refine the path to greatness with the brutal facts of reality
  • To create a climate where the truth is heard: lead with questions not answers,engage in dialogue and debate not coercion, conduct autopsies without blame, and build "red flag" mechanisms
  • Have unwavering faith amid the brutal facts
  • In confronting the brutal facts, the good-to-great companies left themselves stronger and more resilient, not weaker and more dispirited
  • Even thought it might take a long time, it is important to persistently find a way to prevail
  • The stockdale paradox

Chapter Five

The Hedgehog Concept

  • It is important for a company to think simply and focus on one thing
  • The question to ask is What can you be the best at?
  • The hedgehog strategy is not a strategy or goal, but an understanding
  • It is important for the company to understand where they are as a company
  • For a company to be great, they need to stop chasing what other people are doing, and become the best in what they do best.
  • Walgreens is an example of a sucsessful practical company
  • The hedgehog strategy is accomplished by creating a group of executives that work as informants
  • When consulting the council: ask questions, dialogue and debate, make executive decisions, and conduct autopsies and analysis
  • A company may go through this cycle for 4 years until they hit their revelation

Chapter Six

A Culture of Discipline

  • Great companies build a culture of discipline; through people, thought and action
  • Build a culture around the idea of freedom and responsibility, within a framework.
  • A culture is not one person. A disciplined culture is not a bureaucracy or hierarchy
  • Hire self-disciplined people that don’t need to be managed. Then manage the framework, not the people
  • Fill that culture with self-disciplined people who are willing to go to extreme lengths to fulfill their responsibilities. They will “rinse their cottage cheese.”
  • Don’t confuse a culture of discipline with a tyrannical disciplinarian
  • A successor is part of a disciplined culture.
  • Adhere with great consistency to the Hedgehog Concept, exercising an almost religious focus on the intersection of the three circles
  • Say “No, thank you” to even “once-in-a-lifetime opportunities” if they don’t fit into the three circles.
  • The more an organization has the discipline to stay within its three circles, the more it will have attractive opportunities for growth.
  • Create a “stop doing list” and systematically unplug anything extraneous (Ex. Kimberly-Clark)
  • Budgeting in good-to-great companies is a decision of what activities should be fully funded and what should not be funded at all.

Chapter Seven

Technology Accelerators

  • When a company takes a slow methodical approach to embracing technology it is known as the crawl, walk, run approach
  • Good-to-great companies need to think whether the technology fits to their hedgehog concept or not
  • Good-to-great companies use technology as an accelerator, not a creator of momentum
  • Research showed that pioneering technology as the only method when it comes to change is costly
  • Technology along with a solid foundational business plan creates an accelerant when the change is made
  • Great companies do not vary from foundational concepts that the company was built on in order to be the first to introduce a new technology
  • Good-to-great companies avoid bandwagons and fads but cautiously apply some technologies
  • Kroger brought in application of scanners which were linked to the cash flow cycle and helped completely make-over the company as a whole
  • Nucor started the application of advanced mini-mill steel manufacturing technology (thin slab casting) but used the consistency of the company and management in order to use the technology to grow
  • In interviews with the executives of the good-to-great companies nearly 80 percent of them did not mention technology as a top five factor in transition
  • While technology is important the executives believe it is something that is a secondary priority to the company

Chapter Eight

The Flywheel and the Doom Loop

  • A flywheel is used to illustrate what best goes on within a company as it takes the step from becoming a good to great company
  • No one act or decision can be determined as the “breakthrough” that caused a company to become great
  • Every idea, decision, technological advancement accumulates towards the success of going from good to great
  • The outside perspective of this looks like the company went from zero to one hundred almost instantaneous
  • Inside analysis can show that it is years of little things added up to produce such a transformation (Ex. Circuit City)
  • Quotes from all eleven companies has the same message that it took several years to get to where they are now and that there were no one off events that caused them to switch from a good to great company
  • Regardless of short-term pressures whether it is from being close to bankrupt or falling behind competitors in the stock market, patience and careful planning win the day (Ex. Abbott)
  • One of the biggest reasons good companies become great ones is that their foundation is set on continuing to improve and become more efficient as each year passes
  • Good to great companies are able to adapt and mold well to change that is for the better
  • Quite the opposite of the Flywheel Effect, the Doom Loop is what is most commonly seen among comparison companies that usually resulted in failure
  • Rather than discreetly implementing new strategies, not knowing if they would work or not, comparison companies would make it as public and known as possible in hope of gaining traction towards becoming a great company
  • This results in sporadic and disjointed momentum that made it very difficult for anyone to get properly excited and motivated to help make the company great
  • Studies of good to great companies and comparison companies showed that great companies were better equipped in making acquisitions work to their favor
  • What can also occur is that a company can follow the flywheel and lead their company to great success, but when leadership is switched, it can have dire consequences
  • Leadership could become like a wrench stuffed in the cog of a machine and bring the whole operation and its success to a grinding halt

Chapter Nine

From Good to Great To Built to Last

  • Good to Great was not built off of Build to Last, they started from scratch
  • Good to Great was not a sequel to Build to Last but a prequel
  • Concepts in Good to Great are linked in relationship to concepts in Built to Last
  • For enduring great companies, profits and cash flows are essential for life, but are not the point of life
  • Core values are essential for enduring greatness but it doesn't matter what the core values are
  • Bad BHAGs are set with bravado; good BHAGs are set with understanding
  • The point of this book is not to “add” findings but to realize that much of what is being done are already doing is a waste of energy
  • The question everyone should ask is "What work makes you feel compelled to try to create greatness?"
  • It is impossible to have a great life unless it is a meaningful life, and it is very difficult to have a meaningful life without meaningful work
  • The deepest satisfaction is knowing your time on earth has been well spent, and that it mattered

Sources

Collins, J. (2001). Good to great: Why some companies make the leap...and others don’t. New York, NY: Harper Collins Publisher.

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