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In a relatively free market economic system, thousands of companies are born each day, and thousands die. Millions, meanwhile, coast along not doing anything remarkable. They're happy to be merely good at what they do and keep making money. A few though grow spectacularly. Are these the internet startups that we've all heard of, the 10Xers that turn their founders into billionaires?
Actually, a lot of them are not. They're comparatively normal companies producing everyday things that seem to suddenly move well ahead of their industry peers. For instance, the American drugstore chain Walgreens is an old company, which, for four decades, followed the general market in its performance. Then, in 1975, the company left the average and began its remarkable success. From 1975 to 2000, it outperformed the stock market by 15 times. It also outperformed the tech star Intel by two times, the much-lauded General Electric by five times, and the famed Coca-Cola company by eight times. What accounts for the sudden and sustained rise out of mediocrity?
Business thinker Jim Collins began a five-year research effort to find out. The result was good to great, why some companies make the leap, and others don't. This seminal corporate strategy book was published in 2001. We'll explore what Collins' team found in some detail, focusing on three key areas.
First, the importance of leadership and having a people-first strategy. Second, the need for brutal honesty simultaneous with high ambition. And third, the role of disciplined action in building a great company. We'll conclude by taking a look at any potential criticisms of Collins and good to great, as well as the wider impact and legacy of his work.
One factor emerges above all else that can allow, or prevent, a company from reaching greatness. It's leader. A bad leader can hold an otherwise exceptional company back, while a great leader can put everything in place to jumpstart the movement. But what makes a leader great? Collins established a hierarchy that ranked the personality, characteristics, and capabilities of the leaders his team studied.
At the lowest level, level one, are leaders who are competent, but unlikely to bring any great positive change to the company. Level two and three leaders contribute at a slightly higher level, making incremental changes to help a company towards its goals. But they're not capable of affecting revolutionary improvements. Level four leaders are where things start to get interesting. These executives are often brilliant, dedicated, and ambitious. They tend to bring massive change to the companies they lead, often revolutionizing them in short periods of time. Some of the most celebrated CEOs in history have been level four leaders.
An example is Leia Eccocca, who was brought in from Ford and turned Chrysler around from near disaster. But why are well-known leaders like this, not at the pinnacle of Collins' hierarchy? Eccocca, like other level four leaders, was focused primarily on himself, not his company. Though undeniably effective, he formed a cult of personality and failed to set the company up for success after his departure. Once he left, there were no structures in place to allow Chrysler to go from strength to strength.
This is where Collins introduces level five leaders. This kind of leader has all of the knowledge of the level four, as well as the high ambition. But their ambition is for the company as a whole, not for themselves. The archetypical level five leader, discussing good to great, is Abraham Lincoln, a modest, empathic, soft-spoken leader who is able to sacrifice himself personally to achieve lasting improvement for the institution he believed in, the union of the United States. In the realm of business, many level five leaders are less well-known than level fours, for the simple reason that they want the limelight to be not on them, but their company. A level five leader is not sufficient on its own to create a great company, but it's a necessary first step. Without a dedicated, selfless, talented person on top, no company can achieve lasting greatness.
Collins talks about a company called Rubbermaid. It had several years of greatness, but was unable to sustain it after the departure of its CEO Stanley Galt.
柯林斯谈到了一个名叫 Rubbermaid 的公司。它曾经有过几年的盛世,但在其首席执行官 Stanley Galt 离职后无法维持。
He worked long hours controlling every aspect of the company from the top down. He did the hiring, set the goals, and made the decisions. But when he quit, there was nobody else who could effectively succeed him. Nobody knew how the company worked.
After years of mediocrity, the company was sold. Level four leaders tend to take situations like this as another example of their excellence.
公司多年来表现平庸,最终被出售。4级领袖通常会将这种情况视为他们卓越的又一例证。
Look, I was so great the company fell apart after I left. In fact, the failure to create a company that can outlast them is the key differentiator between a good leader and a great one.
My far the most important thing that a level five leader does is ensure the company is populated by great people.
在我看来,5级领导者最重要的一件事就是确保公司拥有众多优秀人才。
That may seem obvious, but Collins's next point is not. In many of the outstanding companies he looked at, great people actually came before the development of a great plan.
The obvious thing for a company to do would be to first set a target and then find staff willing and able to work towards that target. But this isn't the optimal approach. The right people, aligned with the core values of the company, will be self-motivated and able to adjust to changing circumstances.
The wrong people, even if specifically hired to fit a company's circumstances, will be unable or unwilling to adapt to change on the same level. Here is Collins speaking at the Global Leadership Summit.
And focusing on your unit means above all being a first two leader rather than a first what leader and that the number one executive skill for building a pocket of greatness of any size is figuring out who should be in the key seats on the bus.
This is best explained in the example of Wells Fargo. Starting in the early 1970s, Wells Fargo began to focus on hiring outstanding talent above all else, even above having a position in mind. Rather than creating a job and then filling it, Wells Fargo found intelligent people who agreed with its vision as a company and brought them on board.
When banking deregulation hit, these brilliant employees were able to adapt. Wells Fargo dealt with the challenges better than almost any other bank and it emerged stronger than ever.
In terms of the economic of America, almost had the opposite approach in hiring. It intentionally staffed the company at some of the highest levels with executives who were merely competent.
就美国经济而言,在雇用方面几乎采取相反的方法。它有意将公司的一些最高级别职位安排给仅仅称职的高管。
The thinking was that these mid-rate executives would be more effective followers and would inspire those below them to work harder. The plan worked well enough while the economy was strong.
Dick Cooley, the CEO at the time, was a good level four leader. When the economic climate changed, Bank of America floundered. Cooley could not single-handedly keep a struggling company strong and the lack of innovative executives below him made sure that he wouldn't get much help.
But after a few years of increased deregulation, Bank of America lost over a billion dollars. It was eventually able to save itself from ruin by jettisoning its previous strategy and hiring more dynamic executives.
但是,经过几年的放松管制之后,美国银行(Bank of America)亏损了超过十亿美元。最终它通过摒弃之前的战略和聘请更有活力的高管来拯救自己。
Many of these executives were former employees of Wells Fargo who brought their people first mentality, corporate culture, and success along with them.
很多这些高管曾是富国银行的前雇员,他们带着关注员工的态度、企业文化和成功经验一同到了这里。
When hiring Collins says, nothing should be forced. It may be tempting to push growth by hiring the first available competent employee. But the good to great companies tend to hire slowly and carefully. It's better to wait for the right person than to waste time and money on making the wrong person fit.
In this episode, we began our exploration into Good to Great by Jim Collins. We learned that in the ranks of leadership, a level four leader prioritizes their own genius over the company.
A level five leader puts the company first, allowing everyone to flourish. A key to this is hiring with a people first mentality. Some innovators who excel fill positions rather than creating positions to be filled with mediocre workers.
Next time, we'll continue with a lesson in brutal honesty and high ambition. Enjoying this episode of Book Insights? If so, keep listening and learning. There's a collection of over 100 titles you can read or listen to now at memodeapp.com slash insights.
Business thinker Jim Collins wanted to know what separated the middle of the road companies from those that blasted off into the stratosphere.
商业思想家吉姆·柯林斯想知道什么区分了那些墨守成规的公司和那些冲向高空的公司。
In their management laboratory in Boulder, Colorado, Collins and his team began by identifying companies that had undeniably made a transition from Good to Great. This group was very select and had to meet tight criteria.
They filtered these companies to weed out ones that were just lucky, riding the overall success of the economy or industry trends. They set criteria that narrowed the group down to 11 companies, less than 1% of their data set.
Then Collins and his researchers created a contrasting set of comparison companies to serve as a control group. Each of these 11 comparison companies was in the same industry, faced similar circumstances and largely performed the same before the transition. But while the first set of companies changed almost beyond recognition, the second set stayed the same.
Why? Well, it's not only that they're coming up with a preferred explanation prior to doing the research, then finding or forcing data to fit the hypothesis. Collins's team took a more empirical approach. Their focus on data alone uncovered a number of consistent factors that, in every single case studied, played a part in the transition from Good to Great.
In this episode, we'll continue our dive into Collins's best-seller Good to Great by learning about the need for brutal honesty, as well as high ambition. Once the right people are in place, Collins found that a company must conduct a two-step evaluation. First, it must determine where it and the industry stand. If things are on the right track and just need a few adjustments, that's fine. But this evaluation needs to be brutally honest.
In the early 20th century, the grocery store chain A&P seemed unstoppable. It was at one point the largest in its industry and the second largest company of any type in the United States. But by the 1970s, retail tastes had changed, and A&P became stagnant. It specialized in small, bare bones, utilitarian stores, but growing affluence was leading consumers to prefer large, overstocked, big-box stores.
A&P did what any good company would do. It studied the trends and saw that super stores were the future. It opened one of its own, which turned out to be more successful than an average A&P store. The hypothesis was proven. This new store was the future. So A&P closed it. Its president at the time, Ralph Berger, saw the super store as too different from its core business. A.P. looked at what needed to be done, understood it, and ignored it.
When good to great was published, A&P was a middleing company. Though a shell of its former self, it did continue as a moderately successful, though unremarkable company. In 2015, after a continued failure to adapt, it was forced to close, having been ultimately unable to face the facts of reality and adjust to them.
The supermarket chain Kroger faced similar circumstances. Like A&P, it was founded in the late 19th century and flourished in the early 20th, but growth had slowed by the middle of the 20th century. Kroger saw the same evidence that A&P did. But instead of avoiding it, Kroger put all of its efforts towards closing older, smaller stores and replacing them with the giant ones that it knew to be the wave of the future.
Though it meant turning back on tradition and making countless tough decisions, Kroger's leadership team knew it had to be done. One of the things that makes a good company great, Colin says, is how it uses data. This flows from having good people. A&P was described as a Hermit Kingdom with top-down rule, while Kroger had level 5 leadership and a strong group of executives.
For this reason, when A&P's leader decided to ignore the truth, there was nobody to stop him. Kroger, on the other hand, was led to the truth by a group examination, not given a pre-ordained conclusion from above. In his interviews with executives at great companies, Colin's identified certain tactics that are used to create productive dialogues that lead to good decisions.
When using these strategies, meetings end with the truth, not with whatever the head of the meeting sought to achieve. The first is to start with questions. If a meeting starts with an answer, or even a goal that is held by the higher ranking leader in the meeting, there is a subconscious pressure for those below to agree with it. Great companies start with a question and follow it with open dialogue and debate.
Rather than any person present fighting for their preferred decision, everyone should be fighting for the truth. Essentially, this boils down to creating an environment in which any member of the company no matter their rank can point out problems or errors that the company is making without fear of reprisal.
But once the truth is obtained, the company still needs to be able to stand out and to differentiate itself to become truly great. Colin's here introduces the hedgehog concept. From the parable of the hedgehog and the fox, in this tale, there is a battle between the fast-cunning fox who knows many things and the simple hedgehog who knows one big thing.
When the fox attacks, no matter which strategy it uses, the hedgehog curls into a ball of spikes and defeats it every time. A great company must be like the hedgehog. It must have one thing above all else that it can be the best in its market at. A single, clarifying reason for being so that it doesn't become confused, scattered, directionless, and mediocre.
In finding what it can be the best in its market at, a company's goal needs to balance realism with ambition. It can't just be some lofty, over-idealized goal to endlessly strive for. A hedgehog concept must be achievable and it also needs to drive the company economically. Ago, no matter how desirable, cannot work if it doesn't make money. Lastly, the concept must ignite passion in the staff. This is not forced, corporate, top-down passion, but true and organic.
Here is Colin's himself speaking at the Global Leadership Summit. But the deep inner essence of level five is the idea of service, of leading in service to a cause. We are talking here about ambition, the channel, outward, into a purpose, into something that is bigger and more important than we are.
Croger's hedgehog concept was to become the best in the world at operating superstores, where customers could choose from a nearly unlimited variety of all of their day-to-day needs. This goal was very ambitious, yet achievable. Croger had the people, resources, and knowledge required to put the plan into practice. In 1973, prior to Croger's transition, the value of Croger and AMP on the stock market were roughly equal. Twenty-five years later, there was a different story. A dollar invested in AMP in 1973 would have returned $2.48 in 1998. A dollar invested in Croger, on the other hand, would have returned almost $200. This is the power of conducting an evaluation, facing the facts, and reacting to them with honesty and ambition.
Today, Croger is the second-largest general retailer in the United States, behind Walmart, and the country's third-largest employer, with almost 3,000 supermarkets and department stores. In this episode, we broke down Jim Collins' concepts of brutal honesty and high ambition in companies. A company's leaders must maintain absolute brutal honesty and allowed dissent, ideas, and questions from anyone. A great leader will listen to anyone and adapt accordingly.
Collins compares a company to a hedgehog who only knows one thing, but excels at it. A smart organization will pursue that one goal with high ambition. Next time, we'll wrap up our look into Good to Great. Why some companies make the leap and others don't? We'll learn about the role of disciplined acting in building a great company.
Enjoying this episode of Book Insights? If so, keep listening and learning. There's a collection of over 100 titles you can read or listen to now at memodeapp.com slash insights. As author and business thinker, Jim Collins speaking at the Global Leaders Summit. After researching the successes and mediocrities of multiple companies, Collins put his findings into the best-selling book Good to Great. Why some companies make the leap and others don't?
In this episode, we're concluding the book insight into Good to Great by looking at the role of disciplined action. And we'll look at the legacy of the book. Once the right people are in place and there is a clear strategy, a great company must follow through with disciplined action. This will involve walking a line between freedom and responsibility, a culture of honesty, open concept meetings, and red flag mechanisms will allow self-correction. Better than having to scramble to put out each fire from the top down.
Smaller problems are taking care of by lower down teams, leaving higher ups to spend their time and mental energy on larger concerns. But greatness requires that people actually buy into these values of freedom and responsibility. A level 4 leader may feel tempted to take the quick and easy way by imposing authority from above, imposing mass firings, cutbacks, or personal overhalls of the way the company is run.
But to get on the path to greatness, a firm must solve its problems the way a level 5 leader would, through honest evaluation and discussion that results in organic revisions to plans. Discipline of this kind has a very clear purpose. To enable the company to keep all of its efforts focused on its hedgehog concept, every company will be tempted by a myriad of opportunities that may see a new market to enter or a hot new technology to take advantage of, or a struggling company to acquire.
But if these ventures do not further the hedgehog concept, they should be avoided. Failing to do so will cause a company to lose focus on what can make it great.
但如果这些企业不符合我们的刺猬概念,就应该避免参与。如果不遵守,公司将会失去集中精力做大的关键。
If absolutely necessary, a hedgehog concept can be revised, but it's important that this occurs organically and as a result of an actual change in circumstances, not at the whims of those in charge. Intentation and danger can be even greater when a company is struggling.
It will all often fall into the trap of diversifying as a last-ditch effort to salvage things. One of the successful companies in Good to Great, Pitney Bose, fell into this trap for years.
After losing a monopoly on its key technology, postage metering, profits began to diminish year after year. It began to panic, ignoring the core strengths that made the company great in the past, and began acquiring other companies like there was no tomorrow. Within just a few years, Pitney Bose had spent over half of its equity on acquisitions, primarily in industries completely unrelated to its core business.
Collins tells how its level 5 leader turned things around and regrouped the company under the banner of office technologies. While less single-minded than its initial focus, this revised hedgehog concept was much more specific than the unstructured purchasing frenzy that the company had undertaken before his arrival.
If a hedgehog concept is arrived at through honest evaluation, it can only change it and move forward through brutal honesty about what is actually possible. Today, Pitney Bose is worth a fraction of what it once was, but it is still a $3.4 billion company.
The comparison company that Collins profiles, Addresso Graph, no longer exists. Even when all the right pieces are in place, corporate greatness still takes many years and frequently decades.
In interviews with the Good to Great Companies, Collins and his team found that in every single case there was no immediate revolution or defining moment where it was clear that greatness had been achieved. Instead, unusual success came about one day at a time through what Collins calls the flywheel.
First, the necessary preconditions to start the flywheel must exist. Discipline people, discipline thought, and discipline action. Then the company must put these ideals into practice. Slowly but surely, results will start to accumulate. Unless, of course, someone stops the flywheel. No greatness is impervious to interference.
If discipline disappears at any level, things can come to a grinding halt. When it does, the opposite of the flywheel can emerge, the doom loop. A problem causes a fall in momentum, which in turn leads to poor results. The undisciplined company reacts without a true understanding of the root cause of the problems, which, if not corrected, ultimately leads to failure.
In this book insight, we broke down Jim Collins' Good to Great into three key ideas. First, leadership is about putting the company and people first. A leader who puts their ego first will leave a company and disarray after they're gone.
Miring capable thinkers who excel in their field, then allowing them to fill positions and create solutions will create a strong and adaptable foundation. Second, brutal honesty. A company must be absolutely honest with itself about where it is going and be able to accept changing tides and dissenting opinions.
This ties into the third idea, discipline action. Great leaders will understand the strengths of their company and maintain ambition in its goals, even in times of turbulence.
这与第三个想法,纪律行动,有关。优秀的领导者将了解他们公司的优势,并在动荡时期保持其目标的雄心。
Good to Great is approaching its 20th anniversary. Despite massive economic and technological changes, you could say its lessons are timeless, evidenced by the fact that the book still sells over 300,000 copies a year.
Perhaps part of the enduring appeal is that, unlike many other business authors, Collins isn't writing from a personal, one-sided perspective at the helm of a single company. He objectively studied multiple companies in a data-driven way.
Despite this, not every company studied has continued its success. A 2007 article by Stephen D. Levit of Freakonomics fame implied that the subsequent results of some of the featured companies invalidates the concept of the book. But this misses the point.
Collins' aim with Good to Great was to highlight principles that, if followed, allow greatness to flourish. He never claimed that the companies that follow these principles are suddenly forever great and impervious to change. The fact is that most of the companies studied continued to be successful, even if they no longer outperform.
Of the 11 great companies Collins looked at, most, including Walgreens, Kroger, Wells Fargo, Gillette, Kimberly Clark, and Philip Morris, have continued to perform well.
One notable exception is government-backed mortgage loan company, Fannie Mae. When the housing bubble burst in 2007, Fannie Mae lacked the flexibility to mitigate the damages. Since then, Fannie Mae has struggled to be anything close to Good, let alone great. It failed to do its job in providing proper due diligence in the loans it was guaranteeing.
It's also possible that historic events like the housing market collapse couldn't be accounted for in Collins' examination, or that government-sponsored entities operate too distinctly to fit in with his findings.
Circuit City is another of Collins' stars that bit the dust. Its story nearly mirrors that of A&P as studied in the book. Just as A&P was left behind when unwilling to abandon its traditional small-scale grocery stores in favor of big box stores, Circuit City struck with its small, outdated suburban outlets. Meanwhile, companies like Best Buy had successfully moved towards large format locations.
Circuit City was aware of the prevailing trends that would lead to its downfall, but was unwilling to take the steps necessary to prevent it from occurring. It folded in 2009. Former Circuit City CEO Alan Wirtzell had been crucial in the company's earlier success. In her book, Mindset, Carol Dweck identifies Wirtzell as a growth mindset leader, displaying the ability to, as a level 5 leader, must, adapt, change, and learn according to circumstances.
True to Collins' Good to Great Principles, it was after Wirtzell departed in 1986 and later left the board in 2001 that Circuit City floundered. Wirtzell even wrote a book about it, Good to Great to Gone, the 60-year rise and fall of Circuit City.
If anything, the company's failure only serves to strengthen Collins' argument that when a company loses direction, decades worth of efforts can be wasted and end in failure. It's not Rocket Science to come up with a product and business model that can sustain a large company, but in the end, success or failure always comes down to one thing. Management.
Thank you for listening to Book Insights. Check out the rest of our content at memo.com. Please keep in mind that the information provided in or through our book insights episodes is for educational and informational purposes only. It's not intended to be a substitute for advice given by qualified professionals and should not be relied upon to disregard or delay seeking professional advice.