ࡱ> GIF@ ,jbjbqq  T&l<<<<8t <(}}}acccccc, ~}["}}}WWWW}aW@@}aWWs V@M Oܽ<<).5 MA 8W8MWJim Collins invested more than a decade of time into research on superior corporate performance. In Good to Great, he presents insights into the subject matter and asks some fundamental questions, Can good companies become great? And what are the distinguishing characteristics that cause a company to go from good to great? The book is a large-scale research project of companies that have transitioned from being considered good to being great companies. Collins and his research team studied over 1,400 Fortune companies and tracked their performance over a thirty-year period (1965-1995). They categorized the companies based on various performance metrics and derived guidelines for greatness which included: 1) Fifteen year cumulative stock return at or below market; 2) This was followed by a transition point; and 3) Cumulative returns at least three times the general market over the next fifteen years. The results revealed similar patterns and distinguishing characteristics amongst the good to great companies. Eleven companies were selected into the good to great category. Walgreens was among this elite group of companies that made this transition. With over 40 years of history, the company transitioned from being an average performer to being one of Wall Streets successes. Other good to great companies included Abbott Lab, Fannie Mae, Kimberly-Clark, Nucor Corp, Wells Fargo, Kroger Co., Circuit City, Gillette, Phillip Morris and Pitney Boes. Throughout the book, Collins outlined the timeless principles and characteristics of greatness that were apparent in these companies. According to Collins, his team did not start out with any preconceived notion of what to look for or what it takes to be great. Similarly, they did not have clear ideas on which companies would be chosen or what patterns would emerge from their research. The interpretation of the data was the result of continuous debate and analysis by Collins and his team. The following is a summary of key findings as outlined in the book: Level 5 leadership characteristics can be learned. Great leaders value the success of the company above all else. Great vision without great people is irrelevant. Great leaders confront the brutal facts and never lose faith to prevail. Technology should be used as an accelerator of change, not as the primary driver of it. Change does not happen overnight. Greatness follows a pattern of build up leading to breakthrough. Greatness is a conscious decision, not a product of circumstance. Collins described in detail the five levels of leadership. Level 1 Leaders are highly capable managers and have the required skills for the job. Level 2 Leaders are team players and work effectively with others in a group setting. Level 3 Leaders are competent managers who allocate resources effectively and efficiently. Level 4 Leaders have high standards and stimulate others to perform well. According to Collins, most CEOs peak at level 4. Level 5 Leaders blend characteristics of personal humility, consistency and professional will to achieve enduring greatness. Contrary to popular belief, the research showed that Level 5 CEOs are not the charismatic, ego-driven leaders that are often described in the media. Rather, Level 5 CEOs are characterized as shy, quiet and unassuming leaders who rise to the top after years of commitment. These leaders channel the attention away from them and focus on the larger goal of building the company. They are passionate about the company and their work and command great respect as effective leaders. Collins cited Darwin Smith of Kimberly Clark (Huggies/Kleenex brand) as an example. Smith was described as a farm boy, shy and modest during interviews. However, he had fierce resolve to do whatever was necessary to make the company great. In comparison, Al Dunlap of Scott Paper was proud in boasting his nickname as Rambo in pinstripes. According to Collins, great leaders understand the importance of having the right people on board while at the same time getting the wrong people off the bus. Collins emphasized that companies cannot succeed with the wrong executives on board, even if they had the right strategy. Furthermore, the success of any strategy is dependent upon having the right people to implement and execute it. Collins pointed to simple rules in picking the right people: 1) When in doubt, dont hire keep looking, 2) Letting the wrong people stick around is unfair to the right people and 3) Put your best people on your biggest opportunities, not your biggest problems. Collins cited Phillip Morris as an example of a company that had built upon opportunities. At the time, the company viewed the international market as its best opportunity. Even though, this market was only one percent of its business, the company put its number one executive on the job. The idea was to get the best people who would handle the changes as they went along. According to the research, great leaders confront the brutal facts and deal with the realities of change. These leaders lead with questions and encourage dialogue and debate. Collins cited A&P as an example of a company that did not confront some of the realities of change. A&P lost a large part of its market share because its leaders failed to confront the brutal facts. The company watched as consumer demands changed. Customers wanted bigger, nicer stores with more choices. A&P stuck with its traditional model and did not face this reality. On the other hand, Kroger Co. changed its business model to cater to its customers changing needs. As a result, Kroger Co. became a good to great company. According to Collins, great leaders never lose faith to prevail. He drew an analogy in a story titled the Stockdale Paradox. Collins told a story of a World War II general who survived prison camp despite being tortured for long periods of time. In enduring this traumatic experience, General Stockdale confronted three possible outcomes: 1) Lose hope and give up, 2) Stay the same and go back to normal after having gone through the experience or 3) Use the experience to become stronger. Collins affirmed that it is the principle behind the third outcome that drives greatness. Collins used a parable of the hedgehog and the fox to introduce the concept of the Three Circles. In the store, the hedgehog simply curled into a ball to show its spikes when confronted with danger. In essence, it was able to take a very complex experience and simplified it into a guiding principle. The Hedgehog Concept represents a basic understanding of what one can be the best at. Furthermore, the idea behind the concept is to focus on simple, organized guiding concepts, understand what one can be best at and use an economic denominator (i.e. profit per X) to measure results. The author referred to the following three circles as essential guidelines used in making decisions:  In describing the economic denominator, Collins cited the following examples: Walgreens built its stores in key areas to increase its profit per visit. Wells Fargo discovered that it was not competitive using profit per loan and deposit as a measure. Rather, the company focused on profit per employee. Similarly, Fanny Mae focused on profit per each risk level of mortgage, rather than profit per mortgage. Collins discussed the role of technology in the good to great companies. His research indicated that the good to great companies were primarily affected by corporate culture (80%) and less by technology (20%). The good to great companies viewed technology as an accelerator of change rather than a primary driver of change. For example, Walgreens pioneered the use of carefully selected technology, which allowed its store associates to communicate with one another. The technology improved inventory replenishment and process efficiency. This efficiency enabled Walgreens to become the best in its industry. According to Collins, there is no single action that triggers the transition from good to great. It is a cumulative process of continued improvement and sustained results. This point was depicted in the Flywheel Concept. Collins asserted, Greatness follows a pattern of build up, leading to breakthrough steps. It is this coherent, cumulative process of turning the flywheel that builds momentum and drives sustained results. Essentially, good companies implement their BHAGs (big, hairy, audacious goals) then turn the flywheel continuously for many years before the success elevates them to greatness. Collins added that a good BHAG usually takes 10 to 30 years of discipline to accomplish. In order to stay focused on BHAGs, companies established five-year plans and continually refined their operations based upon actual results. As the author pointed out, being great is a conscious decision. It requires consistency, commitment and recognition of greatness. Furthermore, Collins described, It might be statistically more rare to reach greatness but does not require more suffering than mediocrity. Hence, it does not take extra effort to be great. This book is a tremendous affirmation of the values that I truly aspire to mainly humility, selflessness, passion, hard work, resiliency and modesty. It is refreshing to see greatness portrayed in simple, noble terms. Often times, we are bombarded with images of Donald Trump and Lee Iacocca in the media as possessing the qualities of great leaders. This can be somewhat disheartening, as I do not aspire to be like Trump or Iacocca. I am very encouraged by the findings from Collins research and firmly believe that greatness is within reach. 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