#19. Good to Great: Jim Collins

Good to Great was one of these business books I had heard a lot of people talk about, and so decided to read myself. What surprised me when I picked it up was that rather than being the musings of some self-identified management 'guru', it was instead based on the results of a five-year study at the University of Colorado. Collins' previous book, Built to Last, was similarly based on a research project, looking at what it was that made enduring large companies successfully.
In Good to Great, he looked at what made good companies make the leap to being great companies. And these were not just 'flash-in-the-pan' successes – the selection process ensured that the 11 companies included in the study produced outstanding results for 15 years. The methodology for both the selection of companies, their analysis and the comparison with others in their sector was complicated and data-driven, and ultimately this is what makes the book good. Collins and his team of graduate student researchers puzzled over the data to truly understand what made these companies tick, and sometimes they had to deal with information that on the surface, didn't seem to make any sense.
In the end, they came up with a conceptual framework, based on the findings of this research, that shows how a good company can make the leap to greatness.
The components of this framework were:
1. Level 5 Leadership
2. First Who, Then What
3. Confront the Brutal Facts
4. Hedgehog Concept
5. Culture of Discipline
6. Technology Accelerators.
These six components work together through a buildup and breakthrough stage, and Collins also makes the comparison between what he calls the Flywheel and the Doom Loop – one where a company creates positive momentum, and the Doom Loop, as you might guess, where it is negative momentum.
Throughout the explanation of this theoretical framework, he uses examples of the 11 Good to Great companies to illustrate how they work in practice, and there are extensive appendices providing more detail of the analysis and research process. There is also a section which links the concepts from Built to Last with those discovered through the Good to Great study.
While overall it is grounded so much more heavily in verifiable fact rather than someone's opinion and as such contains excellent insights for business owners, as a book I found it hard going at times.
I also had a few question marks over some of the companies included under the heading of 'greatness' – for instance, in terms of performance Phillip Morris delivers, but should we really be looking to a company which profits from addiction as a model? Another of the 'great' companies was Fannie Mae – while in 2001, when the book was published, surely no one could have predicted its role in the unwinding of the US economy, but still, reading the comments about its innovative model of packaging mortgage backed securities and the role these played in its success left me a little bemused in the light of recent events.
Definitely worth a read for anyone aspiring to create a large, 'great' company – or if you're interested in a more empirical approach to business-building theory.