Lessons from companies who made the transition from good to great
Great companies, in terms of sales, revenue, and stock returns are easy to identify. Every once in a while a company will jump up, seemingly out of the blue, and captivate the business world, only to crash and burn or return to average after a short time. A few companies, however, have been able to make a transition from good/average (or even below average) to great. This book is an analysis of 11 companies that made this transition and goes into detail about the things that each company did or had in common when they made the jump.
Not your average business book
I don’t read many books on business, sales, or marketing. It’s not really an area of interest for me. But this book came highly recommended from someone so I thought I’d give it a try. I’m glad I did, because while I’m not interested in becoming a corporate executive, there are quite a few lessons that you can draw out of this book that are applicable to just about everyone.
In case you’re wondering what benchmarks the author and his research team used to define a good to great company, this is it: a company who performed roughly at average on their stock market price for at least 10 years, followed by 15 years of sustained growth that resulted in posting returns 3 times greater than those in their industry and in the general market. Pretty hard standards and parameters to reach, which is why only 11 companies met them out of the thousands available.
Important note: This book was written in 1999 and published in 2000, so the data is from the decades leading up to the year 2000. Keep that in mind while reading.
Themes/Topics
The Hedgehog Concept – a simple, clear concept that flows from a deep understanding of the way the following three areas intersect:
- What can you be the best in the world at?
- What drives your economic engine?
- What are you deeply passionate about?
In other words, think about what you can truly be the best at in your area, region, niche. Conversely, think about what you cannot be the best at and use both of these as a discerning guide to direct your company (and your career). Figure out what you can do to provide for your financial needs. Last, but not least, think about what you’re passionate about. It’s difficult to stay focused and be successful in a business or career if you don’t care about what you’re doing. Where these things intersect/overlap is the sweet spot of the Hedgehog concept. Stick with this and brush off the rest.
Level 5 Leadership – interestingly, the top level leadership showed similar characteristics in the good to great companies. There seems to be a collection of personality traits that makes for a very successful leader, though these traits are quite different than the image most of us have of what a successful CEO looks like. Here’s a list of those traits and comparisons.
- Humble – willing to accept personal responsibility for the company’s failures and also quick to give credit to the team for any successes. Team>me. Compelling modesty.
- Quiet, hardworking, obsessively focused and dedicated – leads by example
- Operates by the “Stockdale paradox” – consistent faith that they will succeed (optimism) while still wanting to face the brutal facts of reality (realistic).
- Consistent and steady, but willing to embrace change if it can help fulfill the long term goals. Not interested in fads and/or technology, unless the technology can help them focus on their goals/Hedgehog Concept.
- Not just “get the right people on the bus” but “get the right people in the right positions on the bus” mentality.
- “First who, then what” – find the best people to hire, then find the best fit for those people. No compromises in that regard. Trim out those who aren’t the right people immediately.
- Seek quiet understanding, not bravado. Charismatic leaders often are level 4 and why companies often can’t sustain success, because it’s all about the leader, not the culture of the company.
- Fanatically driven by the need to produce results. Not afraid to make hard decisions.
- Don’t let their egos get in the way – Humble and fearless – they don’t need to be the Alpha male or biggest dog in the company. Their leadership style often cuts against the grain of the belief that larger than life CEOs are what’s needed to transform companies.
- Usually come from within the company – understand the culture but also understand what isn’t working and what needs to change to become great.
Importance of Discipline – great companies have a culture of discipline built in. Some leaders are able to instill discipline through a heavy-handed, tyrannical approach, but that is unsustainable and usually backfires eventually. To build a culture of discipline requires a deep understanding that if you have the right people in the right positions on the bus, then you don’t need to resort to the common external motivation methods that many companies use. Great companies (and leaders) avoid bureaucracy and hierarchy and instead create a culture of discipline. Internally motivated people don’t need to be “managed” and meetings become far less important or necessary. Creativity suffers under heavy management and so does productivity. Self-disciplined employees don’t need micromanaging, they run from it.
Recommendation
This was a bit longer of a review than I normally do, but I thought it was important to show that the lessons in this book are more than just “how to increase your corporate earnings.” Many of the ideas and lessons can be applied on a personal level – how to be a good leader, how to have a meaningful career, how to make the most out of life. In the end, it was because of these factors that I decided to include Good to Great in this blog and give it the “recommended” stamp of approval.
You can find the book on Amazon here.









