Book Notes – Collins – Good to Great

Study of a few companies that had an inflection point in their results going from good to great.

• Leaders of the companies that went from good to great seem to be the opposite of what we usually think of, not flashy or high profile. Mix of humility and will “Level 5 leadership”
• The right people and in the right places set the direction. More important to have the right people first.
• Confront the facts but keep believing you will succeed.
• Find something you can be the best at, make it the core of the business, drop the rest even it if is currently your core
• If everyone is disciplined, it removes the need for hierarchy, bureaucracy and excessive controls
• Use new technology selectively and carefully to reach goals not for the sole purpose of using technology
• Slow, steady transformation to build momentum, not massive rapid changes

Disciplined people, disciplined thought, disciplined action

Growth of leadership to “level 5” – capable individual -> contributing team member -> competent manager -> effective leader -> level 5 leader

Level 5 leaders think of the organization before themselves. They are a mix of humility and will. They set up their successors for success and are modest. Good-to-great CEOs typically came from inside the organization. Attribute success to external factors, blame themselves when things go poorly. More delivery than show.

People are the most important but getting those people (the right ones) in before setting the direction is as important. “First who, then what”. Compensation does not seem to correlate with going from good to great, compensation must be enough to get the right people in, not to motivate them. Significantly less layoffs in good-to-great companies, getting and keeping the right people is the key. People either stayed a long time or left quickly. No hesitation in moving people to make sure they are in the right place or if they needed to leave. When in doubt, don’t hire, put best people on biggest opportunities not biggest problem. Debate for the best answer but unify behind decision.

Need to face the facts, accept them, and find a way forward. Need to remove filters – need to hear the bad news, need the truth. 4 practices – lead with questions not answers (you don’t know enough to understand) – engage in dialogue and debate, not coercion (everyone engaged in getting the best answer) – conduct autopsies without blame (get to the truth, understand and learn) – build red flag mechanisms (make it so some info can’t be ignored). However despite the facts, need to have unwavering faith you will succeed.

Need to be focused on one thing, consistent. Intersection of 3 things – what can you be the best in the world at – what drives your economic engine – what are you passionate about. Need to understand where all 3 intersect and potentially drop “core” businesses that can only be good at, not great. Develop and track the right KPI based on profound insight into economics. Only do what passionate about vs get passionate about what you are doing. Understanding of the organization and outside world leads to the good decisions and consistent actions.

Freedom and responsibility within constraints of a system. Hire disciplined people so did not need to manage people, just the system. Build a culture of discipline, find how to be the best, do what is necessary to get there and continually improve. Discipline not to do things that do not fit in their focus even if they are big opportunities. Eliminate things that do not support the focus, don’t partial fund, fully fund or don’t fund.

Technology accelerates momentum, it does not create it. Link back to the focus of the org and how to use them. Become a pioneer in the application of a technology if it fits in the focus.

Slow steady process, not grandiose, not obvious until after the change. Do not let themselves be pushed into short-term pressures. Let the momentum show the results and build. Acquisitions used to accelerate momentum, not create it.

The point of companies is not cash flow and profits. Preserve core values and purpose while adapting to changing world.