3. Good to Great
Made leap from Good to Great and
sustained results for 15 years
Compared to selected set of
comparison companies that failed to
make the leap
4. Good to Great
Average cumulative stock returns
6.9 times the general market in the
fifteen years following the transition
5. Selection Criteria
Fifteen year cumulative stock
returns at or below the general
stock market
Transition point
Cumulative returns at least
three times the market over the
next fifteen years
7. Comparison Companies
Companies in
the same
industy
Same
opportunities
Similar
resources at
time of
transition
No leap from
Good to Great
8. Good to Great – Not Found
Larger than life celebrity leaders
No systemic pattern linking
specific forms of compensation
Strategy and time spent on
strategic planning
Technology had virtually no
effect
Mergers and acquisitions played
no role
9. Good to Great – Not Found
No celebration of transition –
most unaware of magnitude of
transformation
Not in great industries
11. “You can accomplish anything in life,
provided that you do not mind who
gets the credit.”
-Harry S. Truman
Darwin E. Smith (Kimberly-Clark)
Example of Leadership?
LEVEL 5 Leadership
12. Darwin Smith Characteristics
Humble
No airs of self-importance
Companionship among
plumbers and electricians
Never claimed her status
or executive celebrity
status
Execution – Coupled with
Humbleness
Smith : “ I never
stopped trying to be
qualified for the job”
13. Level 5 leaders channel their ego needs away from
themselves and into the larger goal of building a great
company. It’s not the Level 5 leaders have no ego or
self-interest. Indeed, they are incredibly ambitious
but their ambition is first and foremost for the
institution, not themselves.
Humility + Will = Level 5 Leadership
•Demonstrates Modesty
•Quiet, calm determination
•Relies on inspired standards
and not charisma to motivate
•Looks out the window, not the
mirror
+
•Creates results
•Does whatever it takes for the
best long term results
•Builds and Endures a great
company
•Never blames other people
Level 5 Leadership
14. Comparison
Companies
Set successors up for
failure
“Biggest Dog” Syndrome
“I” – Stanley Gault
I could lead the change
I wrote the twelve
objectives
I saved the 260 lbs
Good-To-
Great
We
Shy
Gracious
Mild-mannered
Understanding
Lucky
16. Good-To-Great
Companies
Level 4 Leader
First What
Set a vision for where to drive
the bus. Develop a road map
for driving the bus
Then Who
Enlist a crew of highly capable
“helpers” to make the vision
happen.
Comparison
Companies
Level 5 Leader
First Who
Get the right people on the bus.
Build a superior executive
team.
Then What
Once you have the right people
in place, figure out the best
path to greatness
17. The three practical disciplines for
being rigorous in people decisions:
When in doubt, don’t hire-keep
looking.
When you know you need to
make a people change, act.
Put you best people on your
biggest opportunities, not your
biggest problems.
19. Confront the Brutal Facts
Jim Collins’ “Good to Great
Companies” were able to confront
the brutal facts but never lose
faith by :
Applying Brutal Facts to their decision
making ( “Facts are Better than Dreams”)
Creating a climate where the truth is
heard
Keeping Faith even amid the brutal facts
20. Apply the Brutal Facts to Decision
Making
Good to Great Companies face brutal
facts and apply those facts to
decisions
Example:
Kroger grocery stores faced the brutal
fact that consumers in the last half of
the 20th century preferred upscale
grocery stores with more choices. They
changed their entire model to suit the
customer even though it meant costly
updates to almost 100% of their stores.
21. Create a Climate Where the Truth
is Heard
Lead with questions, not
answers
Create Dialogue, not Coercion
Conduct Autopsies, without
Blame
Build Red Flag mechanisms so
that information cannot be
ignored
22. Keep the Faith (Amid the Brutal
Facts)
The Stockdale Paradox
Retain Faith that
you will prevail in
the end,
regardless of the
difficulties
AND
at the
same
time
Confront the
brutal facts of
your current
reality,
whatever they
may be
24. Are you a Hedgehog or a Fox?
“The fox knows
many things
while the
hedgehog knows
one big thing.”
A company’s
“one big thing” is
called the
hedgehog
concept.
25. The Hedgehog Concept
Within The Three Circles
You must work within the 3
Circles
1. What Can you Be the
Best in the world at?
2. What Drives your
Economic Engine?
3. What are you most
Passionate About?
26. Circle 1 – Best in the
world
Pinpoint the 1 thing
that you CAN be
the best in the
World at
Important to remember:
You do not actually have to
be the best at it.
It doesn’t even have to be
something you’re doing
now.
What you are
deeply
passionate
about
What drives
your
economic
engine
What you
can be the
best in the
world at
27. Within the Three Circles
Circle 2 – Passion
Pinpoint what you
are deeply
passionate about.
“When Gillette executives made the
choice to build sophisticated,
relatively expensive shaving systems
rather than fight the low-margin
battle with disposables, they did so
in large part because they just
couldn’t get excited about cheap
disposable razors”
Jim Collins, Good to
Great, pg 109
28. Within the Three Circles
Circle 3 – Drive your Economic Engine
Find the one
factor (profit per
x) that makes the
most economic
impact.
30. Three practical disciplines for
being rigorous in people decisions:
When in doubt, don’t hire-keep
looking
When you know you need to make a
people change, act
Put you best people on your biggest
opportunities, not your biggest
problems
34. Build a culture around the idea of
freedom and responsibility, within a
framework.
Fill that culture with self-disciplined
people who are willing to go to
extreme lengths to fulfill their
responsibilities
Don’t confuse a culture of discipline
with a tyrannical disciplinarian
Adhere with great consistency to the
Hedgehog Concept. Equally important,
create a “stop doing list” and unplug
anything extraneous
Build a culture full of people who take disciplined
action within the three circles, fanatically
consistent with the Hedgehog Concept.
35. Good to Great Companies:
Build a consistent system with
clear constraints
Give people freedom and
responsibility within the
framework of that system
Hire self-disciplined people who
don’t need to be managed
Manage the system, not the
people
37. WHEREAS THE GOOD-TO-GREAT COMPANIES HAD LEVEL 5
LEADERS WHO BUILT AN ENDURING CULTURE OF DISCIPLINE,
THE UNSUSTAINED COMPARISONS HAD LEVEL 4 LEADERS
WHO PERSONALLY DISCIPLINED THE ORGANIZATION THROUGH
SHEER FORCE.
38. GOOD-TO-GREAT COMPANIES
At their best followed a simple
mantra:
“Anything that does not fit with our
Hedgehog Concept, we will not do.
We will not launch unrelated
businesses. We will not make
unrelated acquisitions. We will not
do unrelated joint ventures. If it
doesn’t fit, we don’t do it. Period.”
39. GOOD-TO-GREAT COMPANY
COMPARISON
COMPANIES THAT DID
NOT CONVERT WITH
THE CHANGING TRENDS
COMPANIES THAT DID
CONVERT WITH THE
CHANGING TRENDS
RESULT
A&P
(CLUNG TO VERSIONS OF
OLDER GROCERY STORES)
KROGER’S
(OVERTURNED ENTIRE CHAIN
TO SUPERSTORES)
KROGER’S STILL
EXISTS TODAY; A&P
CEASE TO EXISTS
ECKERD
(Acquired lumps of stores with
no unifying theme)
WALGREENS
(Adapted to concept of the
best, most convenient
drugstores, with high profit per
customer visit)
WALGREENS STILL
EXISTS TODAY;
ECKERD CEASE TO
EXISTS
BANK OF
AMERICA
(Adopted a weak general,
WELLS FARGO
(Adopted the practice of getting
the best people and building
them to be the best managers
WELLS FARGO STOCK
PAID FIVE TIMES
MORE THAN BANK OF
AMERICA
41. BASIC CONCEPT
WHEN USED RIGHT, TECHNOLOGY
BECOMES AN ACCELERATOR OF
MOMENTUM, NOT A CREATOR OF IT
GOOD-TO-GREAT COMPANIES NEVER
BEGAN THEIR TRANSACTIONS WITH
PIONEERING TECHNOLOGY, FOR THE
SIMPLE REASON THAT YOU CANNOT MAKE
GOOD USE OF TECHNOLOGY UNTIL YOU
KNOW WHICH TECHNOLOGIES ARE
RELEVANT
WHICH ARE THOSE? THOSE—AND ONLY
THOSE—THAT LINK DIRECTLY TO THE
THREE INTERSECTING CIRCLES OF THE
HEDGEHOG CONCEPT.
42. TECHNOLOGY- GREATNESS OR
DECLINE??
EVIDENCE FROM THE STUDY DOES NOT
SUPPORT THE IDEA THAT TECHNOLOGY
CHANGE PLAYS THE PRINCIPAL ROLE IN
THE DECLINE OF ONCE-GREAT
COMPANIES (OR THE PERPETUAL
MEDIOCRITY OF OTHERS).
CERTAINLY, TECHNOLOGY IS
IMPORTANT—YOU CAN’T REMAIN A
LAGGARD AND HOPE TO BE GREAT. BUT
TECHNOLOGY BY ITSELF IS NEVER A
PRIMARY CAUSE OF EITHER GREATNESS
OR DECLINE.
43. CRAWL
BEGIN EXPERIMENTING WITH
THE NEW CONCEPT. DO NOT BE
QUICK TO ACT AND MAKE HASTY
DECISIONS. MAKE SURE THAT
THE CONCEPT IS WITHIN THE
CONTEXT OF YOUR OWN
HEDGEHOG CONCEPT
44. WALK
FIND A WAY TO INTEGRATE THE
NEW CONCEPT INTO THE
EXISTING PRACTICE. MAKE
SURE TO STAY CALM, HAVE A
DELIBERATE PURSUIT OF
UNDERSTANDING, FOLLOWED BY
CALM, DELIBERATE STEPS
FORWARD
45. RUN
IMPLEMENT THE NEW CONCEPT
AND FIGURE OUT HOW TO APPLY
TECHNOLOGY TO A COHERENT
CONCEPT THAT REFLECTS
UNDERSTANDING OF THE THREE
CIRCLES
46. RUN, WALK, CRAWL??
ADAPT TO THIS CONCEPT ONLY
IF YOU DO NOT WANT TO BE
GREAT!!!..............
“CRAWL, WALK, RUN”—A VERY
EFFECTIVE APPROACH EVEN
DURING TIMES OF RAPID AND
RADICAL TECHNOLOGICAL
CHANGE
50. Buildup to Breakthrough
Flywheel image is used to illustrate the
transformation from Good-to-Great
Each push builds momentum until point of
breakthrough
Fewer articles were written in the decade
leading to the point of transition than
decade after
Good to Great companies could not define
the moment of transformation
51. Not Just a Luxury of
Circumstance
Buildup-Breakthrough flywheel
model is not a luxury of
circumstance
Good-to-great companies faced the
same short term Wall Street
pressures as the comparison
companies
Good-to-great companies followed
the buildup-breakthrough model with
patience and discipline
Attainment of extraordinary results
by Wall Street standards is the end
result
52. The Flywheel Effect
Great power exist in continuous improvement and
delivery of results
Point to tangible accomplishments
Demonstrate how steps fit into the overall concept
that will work
People will come on board when they see
momentum building
The Flywheel effect
Alignment, commitment and managing change was
transparent to good-to-great companies
53. The Doom Loop
Comparison companies launched new programs with
hoopla to motivate employees
Sought the one defining moment to skip the buildup
stage and go straight to breakthrough
Failed to build sustained momentum
The Doom Loop
54. Misguided use of
Acquisitions
Misguided use of acquisitions
Good –to-great companies have
higher success rates with
acquisitions
Acquisitions used as accelerator of
flywheel momentum, not to create it
Comparison companies tried to go
directly to breakthrough using
acquisitions or mergers
New leaders who stopped or
changed the flywheel direction
55. The Flywheel as a
Wraparound
Consistency is the key to good-to-great
transformation
Everything in the book explores and describes the
pieces of buildup-to-breakthrough flywheel pattern
Level 5 leaders naturally gravitate to the flywheel
model
Get the right people on the bus, the wrong
people off the bus and the right people in the
right seats important in the early stages of buildup
56. The Flywheel a as
Wraparound
The Stockdale Paradox of
confronting the facts to see what
steps to take to turn the flywheel
Attain understanding of the three
circles of the Hedgehog Concept
The application of Technology tied
back to three circles
When each concept is applied,
breakthrough will happen
58. From Good to Great to Built to
Last
Evidence that early leaders of Built
to Last followed good-to-great
framework
Good to Great not a sequel but a
prequel to Built to Last
Apply central concept from Built to
Last to shift from company with
sustained great results to an
enduring great company
The ideas from each complement
and inform the ideas in the other
59. From Good to Great to Built to
Last
Core ideology preservation is a
central feature of enduring great
companies
Good to Great provides core idea for
moving the flywheel from buildup to
breakthrough
Built to Last outlines core ideas for
keeping a flywheel accelerating long
into the future
Each of the Good to Great findings
enables the four key ideas from Built
to Last
60. From Good to Great to Built to
Last
Clock Building not Time Telling, Genius
of AND, Core Ideology, Preserve the
Core/Stimulate Progress-BHAG
Powerful link in the connection of
BHAG and three circles of Hedgehog
Concept
Real question is not “Why Greatness”
Get involved in making something you
care about the greatest it could be
Life and work move toward greatness
when all pieces come together
62. Circuit City
1973: Wards was a hodge
podge of electronic and hi-fi
stores with no unifying concept
Alan Wurtzel created the Circuit
City concept
Beat market 22 times from
1982 to 2000
63. Circuit City
Wurtzel emphasized putting the
right people on the bus up and
down the line
Made best home delivery drivers
in the business – last contact
with customer
Required uniforms
Required them to have good
hygiene – shave, no BO
64. Circuit City: What Happened?
Lesson from Good to Great:
“If you successfully apply these
ideas but then stop using them,
you will slide backward from
great to good, or worse. The
only way to remain great is to
keep applying the fundamental
principles that made you great.”
65. Circuit City: What Happened?
Lost sight of their Hedgehog
Concept
Become the best at implementing
the “4S” model (service,
selection, savings, satisfaction)
applied to big-ticket consumer
sales
66. Circuit City: What Happened?
2007: Laid off thousands of its highest
paid, and most experienced sales clerks
(kicked the right people off the bus!)
Many went to major competitor Best Buy
after they were told they could reapply for
their jobs but at the new lower pay scale
Best Buy consistently ranked higher in
customer service scores in recent years
Miscalculated when they decided price was
the ultimate factor in customer’s choice of
electronic retailers
67. Circuit City: What Happened?
2009: Circuit City is in
bankruptcy and is being
liquidated!
