Saturday, April 18, 2009

Summary of Good to Great by James Collins

Eleven companies who had been average enterprises for many years, and renewed themselves using these principles and then consistently beat the general stock market by three times over fifteen years.

The Seven Key Principles

1. Level Five Leadership

Personal humility & professional will.
Are ambitious for their company's success first and foremost, themselves second. Set up successors for even greater success.
Modest, self-effacing, understated.
Fanatically driven to produce sustained, long term results. Workmanlike diligence vs. show horse.
Often attribute success to things other than themselves.

2. First Who... Then what

Get the right people on the bus, and the wrong people off.
"Who" questions come before "what" questions - rigorously applied. Get everyone on the team to lead the organization to success.
Rigorous leaders, not ruthless. Did not use mass layoffs or restructuring. When in doubt - don't hire..., keep looking.
Don't seek growth without the right people on board.
When you know you need to make a people change - act.
Put the best people on the biggest opportunities - not on problems. Teams debate and dialogue vigorously to find best solutions.
Compensation is meant to attract and keep the best - not motivate them.
The right people are your most important assets.
The right people has more to do with character traits and innate capabilities than with specific knowledge, background or skills.

3. Confront the Brutal Facts (Yet Never Lose Faith)

Confront the brutal truth of current reality, yet never waiver that you'll win in the end.(Stockdale Paradox)
Create a culture wherein telling the truth is more important than good performance.

• Lead with questions, not answers.
• Dialogue and debate, not coercion.
• Conduct debriefs and autopsies, without blame.
• Use red-flag mechanisms that insures they are seen.

Respond to adversity, by hitting realities head on - stay focused on vision.
Don't worry about motivating people. Get the right people and they are motivated.

4. The Hedgehog Concept (Simplicity Within the Three Circles)

What You Can Be The Best In The World AT.
What You Are Deeply Passionate About.
What Drives Your Economic Engine.

The entire organization must understand deeply the above three.
Reaching this understanding is an iterative process - may take years.
You must have a passionate council constantly searching for the three answers -Relentlessly dialoguing & debating the truth.
The company's strategies and goals are set to achieve the three circles.

5. A Culture of Discipline

A culture of self-disciplined people, disciplined thought and disciplined action fanatically consistent with the three circles.
Getting the right self-disciplined people on the bus eliminates the need for bureaucracy.
Paradox: Must operate consistently within the system, but also be enormously creative and innovative within it.
This is not about tyrants - it is about a culture of discipline. Everyone leads. Most important discipline is adherence to the three circles. This creates the greatest opportunities for growth.
"Once-in-a-lifetime" opportunities are irrelevant unless they fit within the three circles.
Budgeting is more about what gets fully funded and what doesn't get funded, vs. spreading the money around.
"Stop doing" lists are more important than "to do" lists.

6. Technology Accelerators

Become pioneers in using carefully selected technologies.
Does the technology help us achieve our three circles? Avoid fads.
Technology is the accelerator of the momentum, not the cause of it. See the three circles.
All the comparison companies had access to the some technologies, but not the some environments in which to apply them.
Good to great companies "stay the course". Comparison companies react.
80% of Good to Great company executives didn't include technology as one of the top five keys to their success.
Crawl, walk, run is a good strategy even with technology.

7. The Flywheel and the Doom Loop

The good-to-great transformations look like dramatic, revolutionary events to outsiders, but they feel like organic, long term, cumulative processes to people on the inside.
Sustainable transformations follow a predictable pattern of buildup and breakthrough. Like moving the flywheel, it takes a lot of sustained effort in the beginning, but with consistency the effect is cumulative.
Comparison companies lacked the long-term consistency. Too often they would try to jump to breakthrough, without the organizational strength to sustain it. Acquisitions rarely worked.

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