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Good to Great
Why Some Companies Make the Leap ... and Others Don't

by Jim Collins, 2001, HarperBusiness, hardcover, 300 pages, list US$ 27.50

This is perhaps the best business book in years. Jim Collins is co-author of the best-selling book, Built to Last.  I forecast this book to be even more successful.

In this and the prior book, Jim Collins leads his research team in surveying selected great companies to determine the factors in their success.  Eleven "good-to-great" companies were studied in this latest research, lasting five years.  Those included as good-to-great companies had:

• fifteen-year cumulative stock returns near or below the general stock market
• a transition point
• then cumulative returns at least three times the general market over the next fifteen years.

Collins insists that this book is about research findings and letting the data "speak for themselves."  There are some surprises, and he presents these up front.  Some examples:

• The companies were seldom glamorous or in glamorous industries: Abbott, Circuit City, Fannie Mae, Gillette, Kimberly-Clark, Kroger, Nucor, Philip Morris, Pitney Bowes, Walgeens, and Wells Fargo. (Some successful high tech companies may qualify in a future study, though these did not have sufficient history to be considered here).
• Celebrity leaders were found more often in unsuccessful "direct comparison" or "unsustained comparison" companies.  "Level 5 leaders display a compelling modesty, are self-effacing and understated."   Two-thirds of the direct comparison (unsuccessful) companies had chief executives with large personal egos.  The most important strategy of successful companies has been "getting the right people on the bus."
• The successful companies have a "culture of discipline," reducing the need for controls and motivational effort.  The breakthrough point was achieved by years of consistent work and never attributed to a single event or grand idea.
• Technology was applied deliberately and was never a primary cause of either greatness or decline.
• Each company evolved to a strong unifying focus that was the basis for its decisions: (a) What you can be the best in the world at; (b) What you are deeply passionate about; and (c) What drives your economic engine.

This last point resonated most strongly with me and several colleagues.  I recast this in a personal career context in the next tip.

Good to Great is superbly written.  The chapters are well organized and linked to a logo graphic.  Key points and "Unexpected Findings" conclude each chapter.  There are ample and entertaining anecdotes to support the conclusions. At the end, Collins compares this to the previous book, though he now believes Good to Great should be the first book and Built to Last is the proper sequel.

My major disappointed: Collins mostly ignores shareholder value.  Great returns is the basis for selection, though the interviews apparently missed capturing how companies think about shareholders. Can a company be great without delivering superior returns to shareholders?  I suspect that the eleven good-to-great companies indeed felt a strong obligation to perform for the owners of the company.  However, this was in a win-win context for employees, customers, supplies and other stakeholders also.   The final chapter, reconciling comparing the two books, provides some illumination:

• "The central concept from Built to Last: Discover your core values and purpose (core ideology) beyond just making money and combine this with the dynamic of preserve the core/stimulate progress." (p. 190; I moved the parentheses.)
  
• "Purpose AND profit" (p. 198)

Participative management and shared decision-making appear more commonplace in the good-to-great companies.  Excerpts from interviews frequently mention passionate arguments about company purpose and direction, less beuracracy, self-directed people, "freedom and responsibility."

If you only read one business management book this year, this would be a good choice.

—John Schuyler, January 2002.

Copyright © 2002 by John R. Schuyler. All rights reserved. Permission to copy with reproduction of this notice.