Jim Collins, 2001
This book is about why some companies outperform the market. The author selected several companies that outperformed the market for more than 15 years to avoid luck effect. He with his research team conducted interviews, questionnaires to understand why those companies rather than others.
This book is very easy and nice to read. Concept are well explained, and illustrated with various big companies. This is not about startups, so all discoveries for those companies may not apply to them.
The book is well structured. The main ideas are presented first in each chapter, then illustrated by examples, and then a two-pages summary at the end. The book can be read just looking at these last chapter pages, but illustration are helpful, always comparing two companies in the same segment, why one failed, while the other excel;
The author started this research motivated by pure curiosity. He performed the analysis into four phases:
He identified three main characteristics that changed good companies into great ones:
The chapters are briefly described in one paragraph each.
The author underline that because he studied companies over a long period and over different fields, the results are timeless, and independent of the technology used. It is mostly a human problem, not a business one. The same concept could be applied to other “entities”: Good to great schools, newspapers, churches, government, etc.
The authors describe 5 level of performance:
Great companies are often driven by level 5 leaders. They put their ego and self-interest away, and dedicate to the company with ambition. They are oriented towards results. They don’t talk about themselves. They often have normale lives
Sometimes, they even say they are not necessary. This type of leaders gives autonomy and guidelines. So everyone knows what to do when it is not here. In the interviews, those who described their leader used words like:
Quiet, humble, modest, reserved, shy, self-effacing, …
When things go well, they look out of the windows. When things go wrong, they look in the mirror.
Level 5 leaders can catalyze the transformation of low-level leaders into effective leaders.
Leader who put themselves first may select weak leaders for succession, leading to failures. If the organization is too hierarchic, always accepting decision from above, initiative will never appears. People need some freedom, to be recognized and respected, they are not child not slaves.
Conflict is okay in a company as long as debate can occurs, to understand the position of the others. However, if it is always the one with the bigger voice that won the debate, it doesn’t work.
During the transition, executive did not change the direction to take. They changed the people. Assets are not people, Assets are good people. Great vision without great people doesn’t lead anywhere. If you have the good persons, it is easy to adapt.
Good people are:
On the other side, it is not recommended to have one genius and many helpers to implement its ideas. If the genius leaves, there is only helpless helpers left. Genius are a type of level 4: They would need to find what first, and then who would do it.
Pay does not really impact the outcome, nor how you pay them (stock option, salary, bonuses). You need a minimal package, but putting more on the table won’t help to deliver more. Leaders 4 gain more money than leader 5, even if they lead to lower results.
Rigor doesn’t mean ruthless. Best people can concentrate on their work, not on the politics or fights.
Advises:
It is useless to hire many people and to keep the best after three years, it is not efficient.
Facts are better than dream. Better look at the future, the possible new issues, rather than looking (too long) at the past, about achievement. What was true yesterday may no more be true today. You need to adapt.
Stockdale paradox: even facing a crisis (brutal fact), they stay consistent, keep faith.
The fox knows many things, but the hedgehog knows one big thing.
The fox is diffused, try to do several things at the same time, with different goals. The hedgehog focuses: they simplify a complex world into a unified vision.
Finding the core of a company is not straightforward, it can takes up to 4 years.
Three circles to find what we are good at:
Great companies know the answer to the three questions, and is able to translate it into a single concept / direction.
Also, what can we not do better than other companies.
The hedgehog concept is not the goal to be the best. It is an understanding of what you can be the best at.
The economic driver can be seen as the variable you need to optimize:
The economic driver allows to deeply analyze our situation. Growth is not measurable, and doesn’t apply.
One hiring strategy is to select only people who are passionate about the product of the company or whatever related. Skills can always be learned. However passion cannot.
There are some pages (page 104) which explain how to run the analysis.
Few startups become successful because they ignore hedgehog concept. People have a lot of imagination, and try many things. However, taking many direction prevent from creating one strong basis. Instead:
All is disorganized, with a lack of planning and commitment.
We need to avoid bureaucracy: innovation vanish when bureaucracy and hierachy occur. These two stuff are here to compensate for incompetence and a lack of discipline. Bureaucracy is the symptom and the disease at the same time.
To have great organisation, culture must be oriented towards:
Great companies put rules, clear constraint, while giving freedom.
Everyone would like to be the best. What prevent from reaching it is ego.
Anything that does not fit with our Hedgehog Concept, we will not do.
A great company is more likely to die from too much opportunities than starvation. It needs to select the best opportunities.
Do you have a todo list ? And what about a not-todo list ?
If you couldn’t justify to your peers the need for at least fifteen people reporting to you to fulfill your responsibilities, then you would have zero people reporting to you.
How can we use new technologies to enhance our current job ? Companies become great if they figure out how to apply the technology.
We must be careful about bubbles. Bubbles have always existed, we must not be fooled by it. Great companies must not rely only on them, must select the most relevant.
Mediocrity is often a management failure, not a technological failure.
Technology is a liability, not an asset. It is accessible to all.
Great companies focus on strategies, but not competitive strategy, they think first about their direction. They don’t wait for the other to sink.
Good-to-great transformation doesn’t happend in one day. It takes time to get momentum. They become great thanks to cumulative effort.
Tagging the transformation doesn’t help. The content matter. It must not have an end. People become aware of the transformation when it is well started. Saying “we will put in place the program X” will not help people to feel the change and commit to it.
The doom loop is about manager saying “let’s go in this direction”, try to motivate the troops, and then change of direction because results are not here. People feel tired after a few round, and it doesn’t lead anywhere.
One of the previous book of the author was “build to last”. So this chapter is dedicated to the connection between the two.
The research conducted for this book was done as if the previous book did not exist.
BHAG: Big Hairy Audacious Goal.
In build-to-last, money is like blood flowing. Not scare, easy to get so focusing on it is not the main object.
There is a need to preserve things as well to change some.
There are key ideas:
Turning good into great takes energy, but it ads energy back, motivation. However, perpetuating mediocrity leads to depression.
Good people, clear vision, discipline.
These answers are not surprising. Nevertheless, this book provides good examples and clear definitions.
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