Good to Great
Jim Collins is already well known for his internationally best-selling book “Built to Last”, an analysis of what makes great companies stay great. “Good to Great” is a prequel to “Built to Last” and is the result of a 5 year academic research project into how merely good companies become great. The style of the book is highly factual and analytic, reporting on the team’s analysis of 29 US Fortune 500 companies, with no messianic fervour or guru-like dictating courses of action, yet is remarkably readable and I found myself enjoying it in a way I rarely find with business textbooks.
The team selected all US Fortune 500 companies that had 15 years of average stock return performance followed by 15 years performance outstripping the market by at least 3-fold as having made the transition from “good to great”. This tough criterion left only 11 companies in the sample group.
For each “good to great” company, its nearest equivalent at the transition point from good to great was chosen as a comparison, giving 11 companies in the “direct comparison” group who were good but didn’t become great.
Further insight resulted from looking at 7 companies that made a transition from good to great but then relapsed, the “unsustained comparison group”.
The book comprises two parts:
The results of the analysis are presented as a model that is common to all the good to great companies, but which is not apparent in the comparison groups. The model is:
Build up phase:
Few of Collins’ findings are genuinely astounding, mainly giving a warm feeling of “I had a feeling that was the right way to do things”, but there are some that are completely at odds with common practice in publicly owned companies:
Collins doesn’t push this as a recipe for success – there is clearly an element of good fortune in correctly identifying a winning economic model – but proposes that the model is prerequisite for the transition from good to great.This book is a very worthwhile read.
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