Good to Great

by Jim Collins
Reviewed date: 2007 Jan 28
218 pages
cover art

Good to Great is the result of research into what qualities separate great companies from good ones. Collins and his research team used information on publicly-traded American companies to identify 11 companies that make the transition from merely good to enduring greatness--and then compared those companies to their direct competitors that did not become great. Good to Great explains the key qualities that enabled greatness.

For the purposes of Collins's study, great is defined as fifteen years of sustained returns of three times the general market.

Good to Great explains a number of qualities of great companies, but the most important of these are:

  • Level 5 leadership
  • The Hedgehog Concept
  • Core values

A flashy, charismatic CEO may lead a company to greatness, but rarely to sustained greatness after his retirement. Such a man is a Level 4 leader--high capable but not desirable for the long-term survival of the company. A level 5 leader is just as capable as the Level 4 leader, but his effort is focused on his passion: the company. His ego takes a back seat to the good of the company.

The Hedgehog Concept is the central theme of Good to Great. In a nutshell, a hedgehog concept is an articulation of the goal of the company. The goal must be something that 1) you are deeply passionate about, and 2) you can be the best in the world at. Good companies settle for being good at something; great companies identify something they have to potential to do better than anyone else in the world, and then devote themselves single-mindedly to achieving that goal.

Bu why have a Hedghog Concept at all? Why strive for greatness? Companies must be motivated to greatness by a set of core values--the company's central "purpose beyond just making money." And that brings out a crucial finding: "It is not the content of a company's values that correlates with performance, but the strength of conviction with which it holds those values, whatever they might be." Put another way:

There are no specific "right" core values for becoming an enduring great company. No matter what core value you propose, we found an enduring great company that does not have that specific core value. A company need not have passion for its customers (Sony didn't), or respect for the individual (Disney didn't), or quality (Wal-Mart didn't), or social responsibility (Ford didn't) in order to become enduring and great. ... core values are essential for enduring greatness, but it doesn't seem to matter what those core values are. The point is not what core values you have, but that you have core values at all, that you know what they are, that you build them explicitly into the organization, and that you preserve them over time.

I am neither an entrepreneur nor a manager. I will never run a company or help to lead a company to greatness. Still, Good to Great is an interesting book to read, and I hope it will prove valuable.

Archive | Search