GOOD TO GREAT
“Why some companies make the
leap and others don’t”
The idea that sparked this book was to answer
questions about how some companies become
great, and how they went about doing so?
The study looks at companies ranging from
1965 to 1995, looking for those that, for 15
years, either tracked or underperformed the
stock market, followed by a transition, and
returning at least three times the stock market
for 15 years.
“Good to Great Companies”
Bank of America
GOOD TO GREAT STATS!
Results from transition point to 15 years beyond transition point
* Ratio of cumulative stock returns relative to the general stock market
3.98 times the market
18.5 times the market
7.56 times the market
7.39 times the market
3.42 times the market
4.17 times the market
5.16 times the market
7.06 times the market
7.16 times the market
7.34 times the market
3.99 times the market
What separated the Good-to-Great companies from their
Jim Collins, author of Good to Great and built to last, explains
how these companies used several methodologies to make the
These methodologies included:
Level 5 Leadership
First Who – Then What
Confront the brutal facts
The Hedgehog Concept
Culture of Discipline
Flywheel and the doomloop
LEVEL 5 LEADERSHIP
Jim Collins points out that of 1,435 companies that appeared on
the Fortune 500 in the initial candidate list, only eleven of the
previously mentioned companies made the cut into the study.
In those eleven, all of them had level 5 leadership in key
positions during pivotal transition times
LEVEL 5 LEADERSHIP CHARACTERISTICS
You will likely find level 5 leadership in situations where
extraordinary results exist, but where no individual steps forth to
claim excess credit.
Displaying a compelling modesty
Set aside personal egos and look out the window to attribute
success to factors other than themselves
Possess a great deal of drive and desire to succeed
Success is not personal, but defined by creating something
great that will outlast their time at the helm.
FIRST WHO – THEN WHAT
Good to great leaders understood three simple truths:
Begin with “who”, rather than “what”.
If you have the right people on the bus, the problem of how to
motivate and manage people largely goes away.
If you have the wrong people on the bus, it doesn’t matter whether
you discover the right direction, you still won’t have a great company.
First Who – Then What Case Study Continued
During the 1970’s, CEO Dick Cooley of Wells Fargo foresaw that the
banking industry would undergo drastic change, but he did not pretend
to know what form that change would be.
Instead of mapping out a strategy, he focused on “injecting a stream” of
talent directly into the company (First Who – then What)
He hired outstanding people whenever and wherever he found them,
often without any specific job in mind. “That’s how you build the future,”
CONFRONT THE BRUTAL FACTS
One of the key factors in the success of the great companies
was a series of good decisions. The good decisions flowed
from the fact that they all made a consistent effort to confront
reality, internalizing the facts relative to their market.
CONFRONT THE BRUTAL FACTS CONTINUED
KROGER vs. A&P
Kroger generated cumulative returns ten times the market and
eighty times better than A&P. How did such a dramatic reversal
A&P did not confront the brutal facts of a changing economy.
They instilled marketing models that were of the first half of the
During the time of transition, Americans decided they wanted
Superstores instead of regular grocery chains (everything under
Kroger confronted the brutal facts of reality head on and
completely changed its entire system in response; while the
A&P stuck it’s head in the sand.
Good to Great companies are more like “hedgehogs”, simple
and dowdy creatures that know one big thing and stick to it.
The comparison companies are more like “foxes”, crafty and
cunning creatures that know many things, yet lack consistency.
To go from good to great requires a deep understanding of the
three intersecting circles translated as the “Hedgehog concept”.
HEDGEHOG CONCEPT MODEL
“Simplicity within the three circles”
What are you deeply passionate about?
What can you be
the best in the
What drives your
HEDGEHOG CONCEPT CASE STUDY
WALGREENS VS ECKERD
During the time of transition, Walgreen’s exceeded the market by
over 15 times during 1975 to 2000.
Walgreen’s focused on building the most convenient drug stores,
with high profit per customer visit.
Walgreen’s took this simple concept and implemented with
Eckerd’s got all tripped up by their snazzy strategies for growth.
They focused too much on opportunities to acquire clumps of
stores, with no obvious unifying theme.
BUILDING A CULTURE OF DISCIPLINE
Sustained great results depend upon building a culture full of
self disciplined people who take disciplined action, fanatically
consistent with the three circles.
The more an organization has the discipline to stay within the
three circles with consistency, the more it will have opportunities
The fact that something is a once in a lifetime opportunity is
irrelevant, unless it fits within the three circles.
Stop doing list are more important than to do list.
Great companies adapt and endure to technology.
Great companies use technology to further increase their
leverage, in a conscious, directed way, rather than rushing to
embrace it for the sake of newness.
Technology is an enabler of change, not the cause of it.
TECHNOLOGY –CASE STUDY
www.drugstore.com vs. Walgreen’s
In the Spring of 2000, Walgreen’s stock suffered from the
invasion of the dotcoms, losing 40 percent of its price in the
months leading up to the drugstore.com public offering.
Analyst downgraded Walgreen’s stock, and the pressure was on
Walgreen’s to react to the internet threat as nearly $15 billion in
the market value evaporated.
WALGREEN’S REACTION TO TECHNOLOGY
“Crawl, Walk, Run”.
Instead of reacting like chicken little to the external pressures
of the internet, Walgreen’s executives did something quite
unusual for the times. They decided to use their brains. They
decided to think!
Slow at first (crawl), Walgreen’s began experimenting with
a Web Site while engaging in intense internal debate about it’s
implications – all within the context of it’s own Hedgehog
“WALGREEN’S BEGINS TO WALK”
Walgreens began to find ways to tie the internet directly to it’s
sophisticated inventory-and-distribution model and ultimately –
its convenience concept.
Fill your prescription online, hop in your car and go to your local
Walgreen’s drive through, zoom past the window with hardly a
moments pause picking up your bottle of whatever.
“WALGREEN’S BEGINS TO RUN”
Walgreen’s bet big, launching an internet site as sophistacated
and well designed as most pure dot-coms.
From it’s low point in 1999 at the depths of the dot.com scare,
Walgreen’s stock price nearly doubled within a year.
And what about drugstore.com? Continuing to accumulate
massive losses, it announced a layoff to conserve cash.
Walgreen’s went from crawl, walk, to run while drugstore.com
went from run to walk to crawl.
First who – then
Confront the brutal