This is the second book by Jim Collins, Built to Last being the first. In Built to Last, Jim wrote about entrepreneurs who started businesses and managed to build big, profitable organizations from nothing.
Yet, Jim learned that while the stories in Built to Last were interesting, some people who read his book didn’t really want to hear about companies that grew into being great after being born. These readers really wanted to hear about companies that had been good but were able to break through and become great.
That question spawned Good to Great which looks at how average, or below average, companies turned themselves around to become something that grew many times faster than the stock market.
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Collins and his research team established very specific criteria for defining greatness. For example, a company needed to show 15+ years of turnaround after 15 years of mediocrity. The purpose of this time frame was to account for any temporary effect that one charismatic CEO could have on an organization.
Out of their sample size of 500 companies (SMP 500) they got only a few companies that met their criteria and Good to Great is about a scientific study (as scientific as management studies can be) of the commonalities in those organizations.
There are a few big takeaways that I’d like to highlight.
1. Problems are my fault, success is yours
During the course of their study, Jim and his team developed the concept of what they termed a Level 5 leader, and the big thing that stuck out to me was how a Level 5 leader deals with problems — and successes — in their organization.
When confronted with a failure, a Level 5 leader quickly owned up to it and took responsibility for it. They reviewed any and all decisions that led to the failure and determined how to make sure the mistake was never repeated.
This wasn’t a blame and shame session; it was simply an objective analysis of the decision.
Now when it came to success, these leaders were quick to attribute those to external factors like their team, or luck, as the reason for their success.
Level 5 leaders were humble when it came to success and felt that 90% of the time it was the smart people around them that really deserved the credit.
2. Right people first
Piggy backing off that concept was the fact that the first thing great CEO’s did was get the right people on the bus. They didn’t decide where the bus was going (as in what the strategy for the business was) but they surrounded themselves with smart people who were the right fit for their organization.
Only once they had the right people, with a solid work ethic, did they pick a direction. Then the whole team buckled down and kept pushing in one way until they broke through and became an ‘overnight success’. Typically that overnight success was 5 to 10 years in the making.
That’s 5 to 10 years of sticking with their Hedgehog.
Okay, now I just told you about the Hedgehog concept, which is another major takeaway.
During their study, Jim and his team developed what they call the Hedgehog Concept. (I urge you to read the book for the full story.) Leaders of good companies were much like foxes — cunning and wily, but lacking in clarity and focus. The great leaders, on the other hand, were more like hedgehogs — focused, and able to take a complex world and simplify it.
The Hedgehog concept has 3 key pieces:
- What can you be the best at in the world?
- What drives your economic engine?
- What are you deeply passionate about?
Build your business around those 3 things, remain focused on them, pushing and pushing, and you’ll achieve breakthrough.
Yes, I wholeheartedly recommend this book for any entrepreneur. It’s entirely worth your time to read through it. I’m getting a physical copy to read (I listened to it on Audible the first time) so I can work through the material in more depth.