Good to Great

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Jim Collins Random House 2001 0712676090 Dr Andrew Wright, Director of Professional Services, Dynamic Technologies Ltd

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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:

• First, the majority of the book is a description of the common features of “good to great” companies and how they differ from the comparison groups.
• Second, much shorter, is a linking of this work into the findings of Collin’s first book “Built to Last”.

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:

• Establish leadership that is dedicated to the company rather than themselves.
• Build a management team with the “right people” that are self-disciplined and work together as a team.
• Confront the brutal truth about the company and the marketplace, but retain faith in the company.

Breakthrough phase:

• Establish a robust, focussed economic model for making a sustained profit, based on a primary core performance metric.
• Stick to it – self discipline from the management team not to be distracted into ventures outside that economic model.
• Apply technology judiciously only as an accelerator of profit growth.

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:

• “Good to Great” CEOs were virtually all home-grown, not parachuted in with a fanfare. Their commitment is to the success of the company, not their ego.
• “Good to Great” companies sorted out the right executive team BEFORE deciding on their strategy.
• “Good to Great” companies focused on one concept (not product) they could be the best at and stuck to it, allowing for flexible response to market changes (though Gillette, one of the best performing companies in the study, has since hit problems attributed to inflexibility)

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.

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