Good to Great (Jim Collins) - Book Summary, Notes & Highlights
Leading business researcher Jim Collins' book Good to Great is a management book focused on the levers that can help create remarkable companies. Collins uses his great storytelling and multiple case study research methods to create an insightful and interesting read. Throughout the book we follow companies that succeeded in going from good to great such as Gillette, Abbot, and Wells Fargo, but also their comparison companies that failed to make the leap to greatness. This research and storytelling method is both pedagogical and intriguing.
Jim Collins left a teaching and research career at Stanford to become an independent researcher in Colorado. He is viewed as one of the greatest management and business strategy thinkers in the world. Good to Great is often included as one of the most influential business books. The book follows Collins' other successful business book Built to Last which focused on building a great company from the ground up. The story in the book goes that Collins decided to write Good to Great based on a conversation with someone from McKinsey who felt Built to Last did not cover everything they needed.
⏳The Book in 3 Sentences
- To become great you need to find your hedgehog concept, which is where the following three rings overlap: what you can be the best at, what you are passionate about, and what you can make money from.
- Having the right people on board is one of the most important factors for success and should be achieved before figuring out what to do.
- Great leaders are humble in success and take responsibility for failure.
🎨Impressions
When reading the book a lot of what Jim Collins writes feels like common sense and like we should all know these things. However, what I think Collins is doing is showing that it is simple, not easy to achieve this type of greatness. The steps are not overly complex or difficult to understand but they seem harder to execute. As Collins himself writes in the book:
First, I believe that it is no harder to build something great than to build something good. It might be statistically more rare to reach greatness, but it does not require more suffering than perpetuating mediocrity
Combine this with some nuggets of non-obvious insights and I think you can learn a lot from this book.
📖Who Should Read It?
If you have an interest in business, entrepreneurship, or leadership you should read this book! Good to Great offers great insights into how to forge a company into a great one and I believe a lot of business leaders would benefit from reading it. I think there is a lot of value to reading it even if you are not a manager or further from leadership because it can help you identify firms or people with the characteristics that Jim Collins describes in the book. The book also contains great insight into personal growth and some good life philosophy shared by Collins which I enjoyed.
👩🏫Lessons I Have Learned
How my life / behavior / thoughts / ideas have changed as a result of reading the book.
- As someone with sprawling interests and a tendency to go in multiple directions, I will take Collins' lesson on the power of focus and try to focus on the things I want to be great at.
- Being great does not take much more work than being average, it is mostly just about focusing on the right things and doing those correctly. Therefore I will focus more on getting the small things right to ensure that the big things end up right too.
- Finding the right people is more important than what you work on. This is something I will keep in mind when considering where to work or who to work with.
📝Summary + Notes
This book by Jim Collins is a terrific read on the topic of how to run a company and create a firm that consistently delivers above-average results. It is also a great insight into what successful leadership looks like, how we can all strive for greatness, and some amazing life advice. Collins lures you in with the promise of an insightful business strategy book written by one of the most celebrated management and strategy thinkers of our time, but then he also sprinkles in good life advice.
1. Hedgehog concept - Figuring out your zone of genius
A core concept in the book is the Hedgehog concept, a term that Collins coined to describe how great companies have distilled their core essence down to a single statement. To achieve this he suggests a Venn diagram of three circles. The first circle is what you are passionate about, the second is what you can become the best at, and finally what you can make money from. You can see the diagram below in the image. The core insight from this according to me is that you need to lean into your natural advantages and interests to create a competitive advantage, whether we are talking about a company or an individual. Finally, there needs to be a way for you to capture the value of your competitive advantage created by the two first circles. I wrote a bit more about the background of the Hedgehog concept here.
A Hedgehog Concept is not a goal to be the best, a strategy to be the best, an intention to be the best, a plan to be the best. It is an understanding of what you can be the best at. The distinction is absolutely crucial. (Page 98)
Recognize that getting a Hedgehog Concept is an inherently iterative process, not an event. (Page 114)
If you're doing something you care that much about, and you believe in its purpose deeply enough, then it is impossible to imagine not trying to make it great, It's just a given. (Page 208)
Indeed, the real question is not, "Why greatness?" but "What work makes you feel compelled to try to create greatness?" If you have to ask the question, "Why should we try to make it great? Isn't success enough?" then you're probably engaged in the wrong line of work. (Page 209)
2. Humility in success and accountability in failure
In his book, Collins introduces the concept of 'Level 5 Leadership' - a distinction from what he calls 'Level 4 Leadership.' Level 5 leaders are the ones who are able to create lasting greatness in their firms. While Level 4 leaders are effective at maximizing a company's current potential, Level 5 leaders create enduring greatness and lift up the people around them to help them reach their potential.
What sets the Level 5 leaders apart is their ability to channel all their ambition into the firm and remain humble even in success. This allows the leaders to create organizations that can sustain high performance even after they leave. These leaders often attribute their success to luck or the people around them while taking full ownership of their mistakes or failures. Throughout Collins' case studies, humility was a trait shared by the leaders of companies with exceptional performance. I believe this lesson can be important not only for company leaders but for individuals as well. Remain humble even in your successes, praise those around you while staying accountable and you will set yourself up for success.
”You can accomplish anything in life, provided that you do not mind who gets the credit.” -HARRY S. TRUMAN (Page 17)
Darwin Smith stands as a classic example of what we came to call a Level 5 leader-an individual who blends extreme personal humility with intense professional will. (Page 21)
Level 5 leaders look out the window to apportion credit to factors outside themselves when things go well (and if they cannot find a specific person or event to give credit to, they credit good luck). At the same time, they look in the mirror to apportion responsibility, never blaming bad luck when things go poorly. (Page 35)
3. Finding the right people is the key to success in business
Collins states that the right people are the most important asset for a business. In a firm, you need to figure out "first who, then what", meaning finding the right people even before deciding what you are working on. It is important to note that according to Collins it is equally important to get rid of the wrong people as to get the right people. Because small things compound and having the wrong people can compound problems, while having the right people will compound the right things.
Another important insight from the book is that successful firms will put their best people on their best opportunities and not necessarily their best business areas currently. Future success will be achieved by focusing on opportunities and not problems. Collins writes that many of the comparison companies would put their best people either on problem areas or the currently largest part of the business, but then you might end up missing the great opportunities. The great firms instead identified which opportunities had the greatest potential and put their best people into working those.
The old adage "People are your most important asset" turns out to be wrong. People are not your most important asset. The right people are. (Page 13)
To be clear, the main point of this chapter is not just about assembling the right team - that's nothing new. The main point is to first get the right people on the bus (and the wrong people off the bus) before you figure out where to drive it. (Page 44)
Same strategy, different people, different results. (Page 56)
The good-to-great companies made a habit of putting their best people on their best opportunities, not their biggest problems (Page 59)
Recall Packard's Law, which we cited in chapter 3: "No company can grow revenues consistently faster than its ability to get enough of the right people to implement that growth and still become a great company” (Page 192)
4. Overnight successes are almost always many years in the making
From the outside change can often look dramatic, but in reality, most of what is termed "dramatic change" is actually gradual. As a result of compounding many small improvements over time, the outcome will eventually look drastic. In the book many of the executives from the great companies mention that their journey did not feel dramatic at all, but instead as a slow and methodical journey. This is often the case when it comes to "overnight successes" both in business and personal achievements.
In the book, Collins mentions the importance of having a flywheel that compounds positive changes. Having this in place will allow cumulative improvements to add up to something great. To achieve these flywheel effects your organization must be set up to learn from mistakes and the data you receive from the market.
Good to great comes about by a cumulative process-step by step, action by action, decision by decision, turn by turn of the flywheel-that adds up to sustained and spectacular results. (Page 165)
Good-to-great transformations often look like dramatic, revolutionary events to those observing from the outside, but they feel like organic, cumulative processes to people on the inside. The confusion of end outcomes (dramatic results) with process (organic and cumulative) skews our perception of what really works over the long haul. (Page 186)
”Somehow over the years people have gotten the impression that Wal-Mart was… just this great idea that turned into an overnight success. But… it was an outgrowth of everything we'd been doing since [1945)… And like most overnight successes, it was about twenty years in the making” -Sam Walton (Page 191)
5. Stockdale paradox: Confront difficult truths while being a rational optimist
Admiral Stockdale is a decorated American military officer who was a POW in the Vietnam War for seven years. He is credited for his great resilience and ability to keep morale high among his fellow inmates. According to him, you must combine a persevering optimism with a brutal realism. Irrational optimism will only make you disappointed and can do more harm than good at the same time you must have a belief that things will get better to overcome challenges. This is illustrated by a story about the prisoners who thought they would get out by Christmas and then when Christmas came they would be so defeated that they would often not make it. Therefore it is important that we start by confronting the facts of any challenge we face. Then we combine that with the belief that we will be able to solve them eventually and then we can make it forward. To me, this is important to remember for personal challenges as well. We can learn a lot from Admiral James Stockdale.
"This is a very important lesson. You must never confuse faith that you will prevail in the end—which you can never afford to lose-with the discipline to confront the most brutal facts of your current reality, whatever they might be." (Page 85)
The Stockdale Paradox Retain faith that you will prevail in the end, regardless of the difficulties. AND at the same time Confront the most brutal facts of your current reality, whatever they might be. (Page 86)
6. Focus is a key to greatness
An important insight from the book is that focused effort will get you much further than spread-out effort. Finding the levers that are the most important and optimizing those will set you up for much more success. This relates to another idea from Collins, which is that it is not more work to achieve remarkable things as compared to average results, it is all about the type of effort you are putting in. So find things you can and want to be good at and you will have an easier time becoming great.
Much of the answer to the question of "good to great" lies in the discipline to do whatever it takes to become the best within carefully selected arenas and then to seek continual improvement from there. It's really just that simple. And it's really just that difficult. (Page 128)
Do you have a "to do" list? Do you also have a "stop doing" list? Most of us lead busy but undisciplined lives. We have ever-expanding "to do" lists, trying to build momentum by doing, doing, doing-and doing more. And it rarely works. (Page 139)
First, I believe that it is no harder to build something great than to build something good. It might be statistically more rare to reach greatness, but it does not require more suffering than perpetuating mediocrity. (Page 205)