Book Summary: Good to Great

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Reading Time: 5 minutes

The vast majority of companies never become great. Why? Because the vast majority become quite good. Is this confusing? In this article, we will learn how companies move from good to becoming great.

One inherent quality is: the good-to-great companies did not focus primarily on what to do to become great; they focused equally on what not to do and what to stop doing.

I will divide this article into 8 different principles to understand how Good Companies become Great.

While I walk you through principles, keep in mind – this article is about the timeless principles of good-to-great. It’s about how you turn a good organization into one that produces sustained great results, using whatever definition of results best applies to the organization.

Principle #1 – Leadership

Some of the qualities exhibited by good-to-great leaders are, quiet, humble, modest, reserved, shy, gracious, and did not believe in their own publicity; and so forth.

Great leaders channel their ego away from themselves and into a larger goal of building a great company. It is not that great leaders have no ego or self-interest. Indeed, they are incredibly ambitious – but their ambition is first and foremost for the institution, not themselves.

Good-to-great leaders didn’t talk about themselves. During interviews, the good-to-great leaders talk about the company and the contributions of other executives as long as they would like but deflect discussion about their own contributions.

Great leaders are fanatically driven, infected with an incurable need to produce results. They will sell the mills or fire their brother if that is what it takes to make the company great.

They would not blame something or someone outside themselves for poor results, and would not stand in front of the mirror and credit themselves when things go well. They would rather blame themselves, taking full responsibility for failure.

Principle #2 – First Who…Then What?

We expect good-to-great leaders to begin by setting a vision and a strategy. Instead, they first get the right people on the bus, the wrong people off the bus, and the right people in the right seats – and then they figure out where to drive the bus. For them getting the right people in the company is more important than vision and strategy.

In determining “the right people,” the good-to-great companies placed greater weight on character attributes than on specific educational background, practical skills, specialized knowledge, or work experience.

The focus here is to hire outstanding people whenever and wherever they are found, often without any specific job in mind. That’s how the future is built of a company. It’s hard to see the changes that are coming, they will come inevitably. Outstanding people hired will be flexible enough to deal with them.

Principle #3 – Confront Brutal Facts…Yet Never Lose Faith

Every great and good company desires to pursue a vision of greatness and there is nothing wrong with it. After all, the good-to-great companies also set out to create greatness. But unlike the comparison companies, good-to-great companies continually refine the path to greatness with the brutal facts of reality.

Companies must confront the brutal facts of reality head-on and completely change their entire system in response rather than stick with what is not right.

The company must start with an honest and diligent effort to determine the truth of its situation, the right decisions often become evident. It is impossible to make good decisions without infusing the entire process with an honest confrontation of the brutal facts. Great companies maintain unwavering faith that they can and will prevail in the end, regardless of difficulties.

Principle #4 – The Hedgehog Concept: Simplicity within Three Circles

This is a concept based on Hedgehog versus a fox. The fox as you know is cunning and quick while hedgehog is slow and can be an easy victim. While fox looks like the obvious winner, hedgehog knowing little how to sense danger always wins.

Hedgehog sensing danger becomes a sphere of sharp spikes to protect himself. What does all this talk of Hedgehogs and foxes have to do with good to great companies?

Those who built good to great companies were, to one degree, or another, hedgehogs. They specialized in very little they knew. By this, we can now know great companies are that operate in niche businesses they understand well.

To have a fully developed Hedgehog Concept, you need all the three circles presented to you on your screen. If you make a lot of money doing things at which you could never be the best, you’ll only build a successful company, not a great one. If you become the best at something, you’ll never remain on top if you don’t have an intrinsic passion for what you are doing.

Finally, you can be passionate all you want, but if you can’t be the best at it or it doesn’t make economic sense, then you might have a lot of fun, but you won’t produce great results.

Principle #5 – A Culture of Discipline

All companies have a culture, some companies have discipline, but few companies have a culture of discipline.

Great companies start with disciplined people. The transition begins not by trying to discipline the wrong people into the right behavior, but by getting self-disciplined people on the bus in the first place.

Next, we have disciplined thought. You need the discipline to confront the brutal facts of reality while retaining resolute faith that you can and will create a path to greatness. Most importantly, you need the discipline to persist in the search for understanding until you get your Hedgehog Concept.

Finally, we have disciplined action. This order is important. Companies that did not make it great often tried to jump right to disciplined action. But disciplined action without self-disciplined people is impossible to sustain, and disciplined action without disciplined thought is a recipe for disaster.

When companies combine a culture of discipline with an ethic of entrepreneurship, you get the magical alchemy of great performance.

Principle #6 – Technology Accelerators

No technology, no matter how amazing — not computers, not telecommunications, not robotics, not the Internet — can by itself ignite a shift from good to great.

No technology can turn the wrong people into the right people. No technology can instill the discipline to confront brutal facts of reality, nor can it instil unwavering faith.

No technology can create a culture of discipline. No technology can instill the simple inner belief that leaving unrealized potential on the table.

Good-to-great companies think differently about the role of technology.

They never use technology as the primary means of igniting a transformation. Technology by itself is never a primary, root cause of either greatness or decline. They use it as a mean to accelerator their existing business.

Principle #7 – The Flywheel and Doom Loop

Does this sound Spanish to you? Let me explain what it means.

A flywheel is a circular object that spins faster when it catches momentum.

Similarly, good companies transform to great gradually and not overnight. Such companies had no name for such transformations. There was no launch event, no tag line, no programmatic feel whatsoever. The good-to-great companies tended not to publicly proclaim big goals. Rather, they began to spin the flywheel- understanding to action, step after step, turn after turn.

After the flywheel built up momentum, they’d believe they can achieve their goals.

The flywheel is a wraparound idea where each piece of the system reinforces the other parts of the system to form an integrated whole that is much more powerful than the sum of the parts.

Companies that launch revolutions, dramatic change programs, and aggressive restructuring plans will almost certainly fail to make the leap from good to great.

Principle #8 – From Good-to-Great to Built-to-Last

Great companies focus on building a company that would last for a long time. This final shift requires core values and a purpose beyond just making money combined with the key dynamic of preserve the core / stimulate progress.

Great companies Preserve the core ideology as an anchor point while stimulating change, improvement, innovation, and renewal in everything else. Change practices and strategies while holding core values and purpose fixed.

Walt Disney provides a classic case of preserve the core and stimulates progress, holding a core ideology fixed while changing strategies and practices over time, and its adherence to this principle is the fundamental reason why it has endured as a great company.

If a company is doing something they care about and believe in its purpose deeply enough, it is impossible to imagine not trying to make it great.

That’s all, dear readers. Thanks for reading 🙂

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Vishnu Kapadia
Vishnu Kapadia is the founder of MJK Finvestment
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