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BOOK REVIEW

GOOD TO GREAT

by Jim Collins
Six Key Elements of a
“Good to Great” (G2G) Company
Element 1 :
Level 5 Leadership
Element 2 :
First Who…..then What
Element 3 :
Confront the Brutal Facts
(Yet Never Lose Faith)
Element 4 :
The Hedgehog Concept
Element 5 :
A Culture of
Discipline
GOOD IS THE ENEMY OF
GREAT
THE 11 G2G cOMpANIES
wERE:
GOOD TO GREAT
cOMpANIES
RESEARcH FINDINGS
 Larger-than-life, celebrity leaders who ride in from the outside are negatively
correlated with taking a company from good to great
 The structure of executive compensation is not a key driver in corporate
performance
 Strategy per se did not separate the good-to-great companies from the
comparison companies
 Good-to-great companies paid attention to what not to do and what to stop
doing
 Technology can accelerate a transformation, but it cannot cause a
transformation
 M&A plays virtually no role in igniting a transformation from good to great
 Good-to-great companies paid scant attend to managing change, motivating
people, or creating alignment
 Good-to-great companies had no name, tag line, launch event, or program to
signify their transformations
 Good-to-great companies were not, by and large, in great industries, and
some were in terrible industries
Good To Great

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Buildup
Level
Level 55 First Who… Confront the Hedgehog Culture of Technology
Leadership
Leadership Then What Brutal Facts Concept Discipline Accelerators
Disciplined People Disciplined Thought Disciplined Action

Flywheel
Level 5 Leadership

5 : Level 5 Executive
4 : Effective Leader
3 : Competent Manager
2 : Contributing Team Member
1 : Highly Capable Individual
LeveL-5 executive

 Very humble on a personal level


 Possesses a great deal of drive and desire to succeed, where
“success” is not personal
 AVOID : Ego and Credit
 Level 5 leaders look outside the window to accredit
 Thank others and luck
 Level 5 leaders infected with an incurable need to produce
sustainable results
 Rather talk about the company than themselves
 Level 5 leaders set up successors for success
the window & the mirror
effect
Everyone outside the
window points inside
directly at Level 5 leader
saying “He was the Key;
without his guidance and
leadership, we would not
have become a great
company”

Level 5 leaders look out


the window to apportion
credit to factors outside
themselves when things Level 5 leader points right
go well back out the window and
At the s ame ti me , they says “Look at all the great
look in the mirror to people and good fortune
that made this possible; I am
apportion responsibility, a lucky guy”
never blaming bad luck
when things go poorly
Good To Great

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Buildup

Level 5 First Who…Confront the Hedgehog


First Who… Culture of Technology
Leadership Then What Brutal Facts Concept
Then What Discipline Accelerators
Disciplined People Disciplined Thought Disciplined Action

Flywheel
firSt who…then whAt

First who,
Ensured thethen
rightwhat
people “on the bus”
before
The anything
research else, get
indicated that the wrong did not
compensation
“…the
G2G ‘who’ questions
companies don’t come before
depend on thethe ‘what’ of
brilliance
correlate
people at
theall bus,
offperson with then
the “good
figuretoout
great” process.
any one ;a “lone genius”
questions
No particular– compensation
before vision, scheme
before appeared
strategy, to
where to drive It.
be advantageous
before tactics, before organizational structure,
before technology”
why do it thiS
wAy?

If you have the right people on the


bus, problem of motivation and
people managing are diminished

If you have the wrong people,


doesn’t matter whether you
have the right direction
LeAderS were rigorouS, not
ruthLeSS in peopLe
deciSionS
There are three steps on how the companies can be rigorous:

• Don’t hire someone unless you’re 100% sure that they’re


the right person. It’s better to wait and get someone that
you know is a good fit
• Once you realize you need to fire someone, don’t put it
off. Do it quickly and fairly
• Put the best people on the biggest opportunity not the
problems

LeSSon LeArnt
• People are NOT your most important asset. …..The
RIGHT people are
Good To Great

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Buildup

Level 5 First Who… Confront theHedgehog


Confront the Culture of Technology
Leadership Then What BrutalBrutal Facts
Facts Concept Discipline Accelerators
Disciplined People Disciplined Thought Disciplined Action

Flywheel
All good-to-great companies began the
process, finding a path to greatness by
confronting the brutal facts of their
current reality
confront the BrutAL fAct
(YET NEVER LOSE FAITH)

Mustlofty
Having
 create
goalsa can
culture wherein
be good, but you can
never lose sight
people haveofanwhat the realityto
opportunity is on
the ground
hear the truth
StockdALe pArAdox

Retain absolute faith that


“you can” and “will prevail”
in the end

AND at the same time confront


the most brutal facts of your
current reality, whatever they
might be with discipline
Let the truth Be
heArd

4 basic practices :

 Lead with questions, not answers

 Engage in dialogue and debate, not coercion

 Conduct autopsies, without blame

 Build red flag mechanisms where information cannot


be ignored
Good To Great

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Buildup

Level 5 First Who… Confront the Hedgehog


Hedgehog Culture of Technology
Leadership Then What Brutal Facts Concept
Concept Discipline Accelerators
Disciplined People Disciplined Thought Disciplined Action

Flywheel
THE HEDGEHOG CONCEPT

An ancient Greek parable:

• The fox knows many things


• The hedgehog knows one big thing
and stick to it
Foxes pursue many ends at the same time and see all the
world in its complexity

• Scattered
• Diffused
• Moving on many levels
• Never integrating their thinking into an overall concept
or unifying vision

Hedgehogs simplify a complex world into a single


organizing idea, a basic principle or concept that unifies
and guides everything

• Simplifies a concept
• Reduces all challenges to simple ideas
The good-to-great companies are more like
hedgehogs — simple, dowdy creatures that know
"one big thing" and stick to it. The comparison
companies are more like foxes — crafty, cunning
creatures that know many things yet lack consistency
THE HEDGEHOG CONCEPT

 The Hedgehog concept is not a goal or strategy to be the best at


something, it is an understanding of what you can be the best at

 Hedgehogs simplify the world into a basic principle, see what’s


essential, and ignore the rest

 It took an average of four years for the G2G companies to get a


Hedgehog Concept
Simplicity within
Hedgehog Concept the three circles

What you are deeply


passionate about

One
Big
Thing
What you can What drives
be the best in your
the world at economic
engine
Hedgehog Concept

All Guided by An Iterative


Ask Questions
the Three Circles Process

Autopsies The Dialogue &


Debate
& Analysis
Council

Executive
Decisions
CHaraCTErisTiCs Of THE COuNCil

 The Council is usually consists of five to twelve people , to discuss and


gain insights into the organization

 It should meet regularly, not a one-time group

 Council member come from a range of perspectives but each member


has deep knowledge about some aspect of the organization and/or
the environment in which it operates

 The Council exists to help the chief executive


Good To Great

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Level 5 First Who… Confront the Hedgehog Culture


Culture ofof Technology
Leadership Then What Brutal Facts Concept Discipline
Discipline Accelerators
Disciplined People Disciplined Thought Disciplined Action

Flywheel
a CulTurE Of DisCiPliNE

C ul t ur e of di s c i pl i ne i s n ot j us t a bou t a c t i on .
It i s a bo ut ge t t i ng d isc ip lin e d pe o p le wh o
e n ga g e i n d isc ip lin e d t h o u gh t a nd w ho t he n
t a k e d isc ip lin e d a c t io n

In a c u l t ur e o f di s c i p l i ne , pe o pl e do n ot h a v e
j o bs “ t h e y h a v e r e s po n sib ilit ie s”
The Good To Great Matrix of Creative Discipline

High
Hierarchical Great
Organization Organization
Culture of
Discipline
Bureaucratic Start-up
Organization Organization
Low

Low Ethic of High


Entrepreneurship
The good-to-great companies
appear boring and pedestrian
looking in from the outside, but
upon closer inspection, they're
full of people who display
extreme diligence and a
stunning intensity
A culture of discipline is not
just about action. It is
about getting disciplined
people who engage in
disciplined thought and
who then take disciplined
action.
A culture of discipline involves
a duality. On the one hand, it
requires people who adhere
to a consistent system; yet,
on the other hand, it gives
people freedom and
responsibility within the
framework of that system.
 To create a culture of discipline, you must:

 Build a culture around the idea of freedom and responsibility,


within a framework
 Fill your culture with self-disciplined people who are willing
to go to extreme lengths to fulfill their responsibilities
 Don’t confuse a culture of discipline with a dictatorial
disciplinarian
 “Stop doing” lists are more important than “to do” lists
 Anything that does not fit with our Hedgehog Concept, will

not do
Good To Great

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Level 5 First Who… Confront the Hedgehog Culture of Technology


Technology
Leadership Then What Brutal Facts Concept Discipline Accelerators
Accelerators
Disciplined People Disciplined Thought Disciplined Action

Flywheel
The key question about any technology is: does
the technology fit directly with your Hedgehog
Concept? If yes, then you need to become a
pioneer in the application of that technology.
If no, then you can settle for parity or ignore it
entirely.
The good-to-great companies used
technology as an accelerator of
momentum, not a creator of it. None
of the good-to-great companies began
their transformations with pioneering
technology, yet they all became
pioneers in the application of
technology once they grasped how it
fit with their strategies.
Technology
AccelerATors

The key question about any technology is:

Does the technology fit directly with your Hedgehog


Concept? If yes, then you need to become a pioneer
in the application of that technology. If no, then you
can settle for parity or ignore it entirely

Technology by itself is never a root cause of either


greatness or decline
Technology AccelerATors

 The ideal approach to technology with the


following cycle:
"Pause -- Think -- Crawl -- Walk – Run”

 Do not rush into a new technology revolution


before having an understanding that it can be
used to support your business.
Good To Great

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Buildup

Level 5 First Who… Confront the Hedgehog Culture of Technology


Leadership Then What Brutal Facts Concept Discipline Accelerations
Disciplined People Disciplined Thought Disciplined Action

Flywheel
Flywheel
The Flywheel And The
doom loop

A flywheel is a heavy wheel that takes a lot of energy to


set in motion - to do so usually requires constant, steady
work, rather than a quick acceleration. Great companies’
transformations were like this as well
The Flywheel Effect

The Doom Loop


 Conversely, the “doom loop” is the vicious circle that
unsuccessful companies fall into
 First rushing in one direction, then another, in the hope of
creating a sudden, sharp break with the past that will
propel them to success
 Some attempt to do this through acquisitions, others
through bringing in a new leader who decides to change
direction completely, in a direction incompatible with the
company
 The results are never good
leTs mAke IT hAppen

ThAnk you

Prepared by
Snigdha Majumder
Head of the Department Lean Six Sigma
ITC Hotels Mumbai

Presented on : 24th Jan 2012