Friday, March 7, 2014

Book Review- Good To Great

So I just finished reading Jim Collins’ widely revered book about business, Good To Great (which I will hereby refer to as G2 in the name of succinctness) and I must say it is worthy of all praise. This book for me was about a six month journey to get through, not for any one reason, but a combination of hitting a slow spot, reading other books and just general ADD-type behavior, making this a drawn-out endeavor. Now, that doesn't mean it was a boring book, I just happen to have the mind of an otter.

One of the stand-out features of this book is Collins’ dedication to research and empirical evidence. It is one thing to write a book based on your own experiences or hearsay, but it is an entirely different feel when you can go to the appendices and see where every piece of information came from.  As you can see below, the appendices make up a significant portion of the total content, which should be clue #1 that you will get your money’s worth with this book.

The companies that were finally featured in G2 were narrowed down to 11. Collins and his CU Boulder research team of grad students used somewhat simple, but ingenious methods to identify these “Good To Great” companies. The master list of companies they started with were US publicly traded companies. Publicly traded companies have a “widely agreed upon definition of results” and a “plethora of easily accessible data.” Private companies are under no obligation to disclose their financial results (as they shouldn't) so Collins used companies you could buy stock in yourself. The selection process of the companies was the 15 year period between 1985 and 2000. Collins says “Many companies show a sharp rise for five or ten years with a hit product or charismatic leader, but few companies manage to achieve fifteen years.” Additionally, these companies showed average or below-average results prior to their transition point, as to level the playing field and provide a more apples-to-apples comparison. The transition point was in 1985, where the 11 companies beat the general market (still trying to figure out if the general market means all common stocks available, S&P 500, or Dow 30) by at least 3x for a fifteen year period. Not only did the company have to show great results, it had to do so of its own accord, not just because that particular industry was doing well (think tech companies in the 90s; they all did well because the industry was hot business at the time.) Collins and the research time also provided a list of “comparison companies” to each of the 11, who were in the same industry, had the same resources, but never quite made the leap from good to great. The companies are:
Good to Great
Circuit City
Fannie Mae
Great Western
Scott Paper
Bethlehem Steel
Phillip Morris
R.J. Reynolds
Pitney Bowes
Wells Fargo
Bank of America

It is interesting to note that some of the good to great companies are no longer in existence today. For me, Circuit City is the most notable as it was a store I used to remember going to on the weekends with my dad, and just dreaming about buying all their computer games. This doesn’t take away from what the company did under the period studied despite their current condition.

G2 is divided into 8 sections, the first one called “Level 5 Leadership.” A Level 5 Executive “Builds enduring greatness through a paradoxical blend of personal humility and professional will.” One notable quote from this section is from Darwin E. Smith, a CEO for Kimberly-Clark. He says, “I never stopped trying to become qualified for the job.”

The next section is called “First Who…Then What.” The main takeaways are that you need to get the right people on the bus before you start driving it, and a great company can only grow as fast as it can attract the right people for the company. Wells Fargo had fewer layoffs than Bank of America during the comparison years, and a greater percentage of management lost their job than the people on the bottom when there were layoffs.

Third, we have the section called “Confront The Brutal Facts.” In this section we learn that a great company is one who asks questions and gives people an opportunity to be heard.

Moving on, we come to the section titled “Hedgehog Concept.” The gist of this section is making sure your organization passes this three-part litmus test: What can you make money at, what do you want to be the best at, and what can you be the best at?

Section five is called “A Culture Of Discipline.” Collins writes this section not so much to speak on disciplining individuals, as he does on the organization itself. Playing off the “Hedgehog Concept,” we learn about failed acquisitions that had little or nothing to do with the business or core competency (R.J. Reynolds buying a company that makes shipping containers and an oil company.) This is a violation of the part of the hedgehog concept “what can you be the best at.”

Next we get into a section about technology called “Technology Accelerators.” “The good to great companies used technology as an accelerator of momentum, not a creator of it.” Instead of creating a mediocre website during the initial phase of the dot com boom, Walgreens kicked back like a boss and deliberated instead of heading head first into the internet world. What came out the other side was an inventory and distribution system, and a way to fill your prescription online, and then either pick it up or have it shipped to you. Their online competitor at the time was, who ended up getting acquired by Walgreens in 2011.

The seventh and last section I will talk about (because the eighth section is a dovetail from one of Collins’ books I haven’t read) is called “The Flywheel And The Doom Loop.” The big question that this section asks is what ignites the change of a company from good to great? Is it some big program launched internally?

 (Image courtesy of

Turns out, a lot of the insiders in the companies that turned from good to great had no idea any major breakthrough was happening until it happened. The companies did not have to have big program launch events to motivate the employees because the companies already had the right employees to begin with who were already motivated! George Cain, the CEO of Abbott Laboratories during the good to great period, said, “It wasn’t a blinding flash or sudden revelation from above.” “Our change was a major change, and yet in many respects simply a series of incremental changes- this is what made that change successful.”

G2 is suitable for anyone, from an entrepreneur to a CEO of a Fortune 500 company. It turns out, a lot of the business lessons in this book can be applied to life. For example, getting the right people on the bus (your friends circle) or getting the wrong people off the bus can be very important to surround yourself with people of the same cloth, who have similar goals and aspirations, and will hold you accountable to those. The presence of empirical evidence makes it hard for any reader to debate the facts laid out in this book, which leads me to believe that this book itself is not good, but great.  


Collins, Jim. Good To Great. New York: HarperCollins, 2001. N. pag. Print

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