“Good to Great” by James C. Collins

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Jim Collins is one of the most powerful business writers of modern times who started out as a teacher in Stanford’s Graduate School of Business. He is the author or co-author of four books, including the modern-day management classic “Built to last.” He is a true seeker in a scientific sense. Powered by questions as to what makes some companies in the USA thrive so much better than most others, his quest led him to one of the greatest researches of recent times, research that included thousands of American companies and spanned half a decade (Ashby and Miles, 2002). His research was propelled with the desire to unearth the factors behind their consistent success. The resultant fruit of his research is the book “Good to great: Why Some Companies Make the Leap.” From his management research laboratory in Boulder, Colorado, Collins teaches and consults for both corporate and nonprofit organizations. Formerly a faculty member of the Stanford Graduate School of Business, Collins is a recipient of its Distinguished Teaching Award (Ashby and Miles, 2002).

Good to Great, which was published in 2001, is based on a comparative study of 11 transformational companies to other firms in the same industries, in similar situations but unable to excel in performance. It outlines a series of principles that begin to explain why some organizations become great, and others do not. “It was a book written after the tremendous success of Jim Collin’s first book “Built to Last.” While most people would like to see this book as a sequel to his earlier book, the author clearly states in one of his interviews, “In an ironic twist, I now see Good to Great not as a sequel to Built to Last, but more of a prequel.” –Jim Collins (Mast, 2003). After the first book, the author spent some time in anticipation of what would be the next spark to set the fire of passionate curiosity ablaze within him. He confesses, in an interview, that it was only when a well-regarded business consultant of his remarked that his “Built to Last” was useless in the light of the truth that all the companies that lasted were already great (Mast, 2003). That kindled the curiosity of Jim Collins with the research question, how good companies can become great. In today’s world of globalization, the boundaries limiting businesses are fast becoming invisible. The entire world has become the playground for business people. Professionalism is touching new standards in business practices. Management is the most favorite subject these days. As such, this book by Jim Collins is a welcome send to aspiring companies, students, and practitioners of management. This book has been based on research data collected on 1435 American companies by 21 students of management (Williams, 2005).

One principle states that greatness is never caused by a single event or program. Rather an organization is able to achieve greatness only by pushing in an intelligent and consistent direction for years and even decades. But at the same time, the organization must have the courage to face the “brutal facts.” Collins calls this cumulative process the “flywheel” effect. The mediocre companies followed a pattern he calls the doom loop where they tried to immediately jump to breakthrough. “Every good-to-great company embraced [the following]: you must maintain unwavering faith that you can and will prevail in the end, regardless of the difficulties AND at the same time have the discipline to confront the most brutal facts of your current reality whatever they might be.” (Collins, 2001, p. 13) Collins compares “the doom loop” innovations in typical organizations with “the flywheel effect” that he found in the good-to-great companies. The doom loop sequence is disappointing results; reaction without understanding; new direction, program leader, event, fad; no build-up; no accumulated momentum. Whereas organizations with flywheel effect capacities face disappointing results and then: Step forward with what Collins calls “the hedgehog concept” (passion, best ideas, economic investment); accumulate visible results; people line up energized by results; flywheel builds further momentum. (p. 175). Collins concludes: “The good-to-great companies understood a simple truth: tremendous power exists in the fact of continued improvement and the delivery of results” (p. 174). Collins also stresses the importance of discovering core values and purpose beyond just making money. Collins holds that great companies have core values that are well communicated throughout their organization and are strongly built into the organization and preserved. Collins (2001) and his colleagues could not really decide whether to have a chapter on the technology though their preconceptions told them “there must be a technology chapter” (p. 159). They confess that they were quite surprised to find that 80% of the good-to-great executives they interviewed didn’t even mention technology as one of the top five factors in the transition from good to great, and in some cases, when technology was mentioned as a factor, it was ranked fourth and only two executives out of 84 ranked it number one (p. 155). Collins and his team conclude, rightly, that we should treat “technology as an accelerator, not a creator of momentum” (p. 152).

Jim Collins’s finding is that a good company becomes great by virtue of having the right people in the right job, facing the real facts, however hard and cruel they may be, having a simple concept for the business, being extremely disciplined, and using technology to the best advantage. He further talks of a new category of leaders – “Level- 5 leaders” – he calls them. “The essence of a Level 5 is someone who is ambitious first and foremost for the cause or the organization, not for themselves, and has the stoic will to make good on that ambition,” Collins says. These were people with special leadership skills who, according to the author, had a huge role in the success of great companies. Senior executives in good-to-great companies invested in building the company and not themselves. They showed high levels of personal humility and professional resolve, and fearlessness. Collins found that the good-to-great leaders in his study “channel ambition into the company, not the self; sets up a successor for even greater success in the next generation” (p. 36). His findings may sound simple, but the truth they contain can be analyzed and found to have meaning in a wider context. He implies that a great leader need not be a high-profile person or a celebrity. In fact, one of his major findings was that high profile, charismatic, ego-centric people were often an obstacle to the transition from good to great (Williams, 2005). Collins cites examples of good to great leaders such as Darwin Smith, Lyle Everingham, David Maxwell, Cork Walgreen, George Cain, and Ken Iverson. Thou these leaders were not commonly known, they excelled at well-known leaders in terms of actual output. Jim Collins calls them the Level 5 leaders. Level 5 leaders were generally simple, humble people, performing their tasks with vision, humility, and discipline every day. They had the special ability to pick the right kind of people for the company, firing the wrong kind of people, placing the right people in the right jobs. Furthermore, these Level 5 leaders exhibited three characteristics: Competence, Chemistry, and Character (Burke and Cooper, 2004). These leaders had the art of facing brutal facts of reality with astute discipline and humility. Their simple attitude made them great communicators. Level 5 leaders focus just as much upon what they and the business need to STOP doing and what should be abandoned as they do on what new practices and processes they need to adopt in the interests of greatness. Practically speaking, shedding much-loved brands, products, and practices can be one of the toughest decisions that CEOs and their Boards have to make. Above all, Level 5 leaders are, according to Jim Collins, people who remained committed to the company.

The principles held in the book may be relevant not only to profit-based businesses but also to nonprofit educational institutions. In the context of higher education in America, “great” may have different connotations depending upon the institution (Kurz and Scannell, 2004). While some institutions may aspire for academic prestige, some may want the best campus placements, and some others may seek transformation effect on students. Collin’s research is relevant to higher education in America because he holds that becoming best at something isn’t about a charismatic leader but about leaders who can “channel their egos away from themselves” in the quest for greatness. Collins also says that it is important to have the right team and then set the goal for the institution. Collins calls it, “First who, then what.” This underlines the main fault in today’s educational institutions, where the focus is more on the plan rather than on having the right people (Kurz and Scannell, 2004). Collins says that in a disciplined culture, “stop doing” lists are more important than “to do” lists. This fact is worthy of being noted by higher education institutions that are generally poor at terminating programs, eliminating divisions, and limiting expectations. Jim Collins says that great organizations use technology to advance their plan, strategy, and/or momentum, not create it. In practical life, many educational institutions expect to transform their business through online educational programs rather than seeing how technology can advance what they already do. Thus the book helps institutions to identify where they are going wrong.

Once the right people are in place, Collins found that greatness emerged from institutions identifying the intersection of a) what they could be “best in the world at,” b) what they could be “passionate about,” and c) what “drives their economic engine,” and then pursuing that insight with discipline and consistency. The pursuit of this goal is termed the Hedgehog Concept. Citing a Greek parable about the complex fox that knows a little about many things, vs. the simple hedgehog that knows one thing very well (Frederick, 2007), Collins’ finding is that companies that are able to effectively communicate, execute and remain focused on a proven, basic business plan are more like the hedgehog than the fox. And according to Jim Collins, the hedgehogs have the best chance of success. Confronting hard reality and working through the ‘Stop doing’ list moves a Level 5 leader more towards being a “hedgehog.” Hedgehogs provide the analogy because of their ability to recognize the one big, critical factor facing them, and so they are able to break down the complex, and multi-faceted, into a fundamental and focused single idea as opposed to foxes, who know a great many varied and small things and may diffuse and spread their efforts too widely. Most good-to-great leaders, it seems, from Collins’ study, are ‘Hedgehogs’ rather than ‘Foxes.’

Jim Collins does not make blatant statements. He supports his statements with suitable examples. He illustrates the Hedgehog concept with the case of Walgreens, which worked on the concept of being the best, most convenient drug store with high profit per customer visit. “In classic hedgehog style, Walgreens took this simple concept and implemented it with fanatical consistency” (Collins). Walgreen Co.’s leaders argue that the company’s obsessive attention to the basics of drug store retailing is the secret of its remarkable success in the realm of drug store retailing. Even when it faced severe competition from Wal-Mart and the merger of CVS and Caremark, Walgreen continued to focus on offering convenient access to health care services and consumer goods, and during this period, “Walgreens drove sales and earnings to new heights, saw big increases in pharmacy and front-end business, and opened more new stores than at any time in its history” (Frederick, 2007).

The book has many nice case studies and examples. Though it downplays the importance of strategic planning, the key points presented by the author are truly elements of a well-developed and implemented strategic plan. The importance that Collins gives to people management is striking and thought-provoking. The book has a few limitations as well. The companies cited by Mr. Collins are large companies: Abbott, Circuit City, Fannie Mae, Gillette, Kimberly-Clark, Kroger, Nucor, Phillip Morris, Pitney Bowes, Walgreens, and Wells Fargo. All of these companies are likely to have strategic planning as part of their development, but Jim Collins chooses to ignore their strategic planning and focuses on other requirements such as leadership, human resources, and goal setting. Without a good strategic plan, it is hard to accept that an organization can succeed in today’s competitive world. Moreover, the fact that these companies are large companies makes the findings questionable in the context of small and midsize companies. The validity of the author’s theories rests on the fact that this book is based on extensive research conducted on about 1435 American companies, of which only 11 were selected as truly successful companies based on a specific set of criteria, the most important one being that the company should have maintained its run of success for over fifteen years. The author cites leadership of a certain kind, with certain fixed qualities, as the main reason for a company’s success. Though this statement is backed by numerous data, one cannot help thinking that there are likely to be different styles of leadership, and what has been a success in a particular set of conditions need not always translate to greatness in another set of conditions. Also, in today’s world, the man at the helm doesn’t stay that long at the same position. CEOs are on time-bound missions. So, to have a fifteen-year stretch of success, one needs to have fifteen years of Level 5 leaders. This is very difficult. Despite one’s differences on certain inferences drawn by the author, what cannot be denied is that this book is tremendously thought-provoking. This book has served to be a moral refresher in the sense it talks of age-old cherished values of leadership like simplicity, humility, discipline, and character (Fullan, 2003). After all, in a changing world that changes climate and color by the hour, what remains unchanged is man’s desire to keep evolving – evolving as a better leader, evolving as a better human being. That desire is mirrored with great passion in this great book.

Basically, Jim Collins, in his book “Good to Great: Why some companies fail to make the leap,” outlines the principles underlying the consistent success of a company. In the modern business world of today, there is a high level of competition due to globalization, liberalization of markets, and digitalization of information. Advances in communication technology have changed the way business is done today. Hence many companies have been distracted by these changes in the environment and find it difficult to cope consistently with such changes. Jim Collins books is a book that takes people back to the basics of business and reminds them in a scientific manner that leaders are important, and so are the people in the organization. He emphasizes the importance of having a strong business ethic, well-defined goals, and determination to stick to the main value of the company and taking the organization towards goals beyond monetary profit. It is thus a work that is highly relevant to the business world today, and as Jim Collins says in his interviews, these simple principles can be applied to any organization or team.

Bibliography

Ashby, D. Meredith and Miles, A. Stephen. Leaders Talk Leadership: Top Executives Speak Their Minds. Oxford University Press. New York. 2002.

Burke, J. Ronald and Cooper, L. Cary (2004). Reinventing Human Resources Management: Challenges and New Directions. Routledge Publishers. New York.

Collins, J. (2001). Good to Great. Harper Collins Publishers. New York, NY.

Frederick, Jim (2007). The hedgehog vs. the elephant: winning the Walgreen way. Drug Store News.

Fullan, Michael (2003). Change Forces with a Vengeance. Routledge Falmer Publications. London.

Kurz, Kathy and Scannell, Jim (2004). Getting to great: just what does Jim Collins’ Good to Great have to do with higher education? Plenty. University Business.

Mast, Carlotta (2003). Q&A with Jim Collins: The Best-Selling Author Talks about Moving Schools from Good to Great. School Administrator, Volume 60, Issue 11.

Williams, Michael (2005). Leadership for Leaders. Thorogood Publishers. London.

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“Good to Great” by James C. Collins

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