The Book in Three Sentences
In this summary of Good to Great, you’ll learn how good, mediocre, and bad companies can achieve enduring greatness. With this book, Jim Collins aimed to identify the distinguishing features that distinguish a company from good to great. To define that, the author studied companies that sustained great results for over fifteen years.
Chapter 1: Good Is the Enemy of Great
Few of the things we make ever become great. It’s so easy to settle for good that no one takes the time and effort to achieve greatness. In this sense, good is the enemy of great. Truly great companies start that way. Good companies, on the other hand, often remain good but never get to great. The author argues that companies can become great, but they must follow a specific framework to achieve this goal.
Chapter 2: Level 5 Leadership
In business, there’s a pyramid-style graphic known as the level 5 hierarchy. At the top of the pyramid, we have the level 5 executive, a person who’s able to achieve greatness thanks to a combination of humility and professional will. The goal of these people isn’t to feed their own ego, but to build a great company. Level 5 leaders are modest and willful. This means they don’t let ego get in the way of their ambition, which serves a larger cause.
Concerned leaders (he uses the term to refer to those concerned with their reputation) often fail to achieve true greatness. Great leaders don’t talk about themselves but others, and they often attribute their success to luck. This means they credit external factors when things go well and they take responsibility when things don’t go so well.
Chapter 3: First Who… Then What
The first step to take a company from good to great is finding the right people. Before figuring out the direction in which you want your company to go, you need two things: finding the right people and getting rid of the wrong people.
No company can become great if only the leader is talented because that makes the rest of the team a series of helpers. If the leader ever leaves, the company fails. The author refers to this model as the “genius with a thousand helpers”. The right people will always do the right thing and achieve the best possible results. In other words, the right people are your most important asset when transforming a company from good to great.
Good to great companies are rigorous but not ruthless. This means they have high standards and they won’t accept anything but the best. They follow three disciplines:
- When in doubt, don’t hire: keep looking for people to hire if you have to
- When you know you need to make a people change, act: if someone’s unfit for the job, do something about it. To determine that, ask yourself if you’d hire that person again and if you’d be disappointed should they leave.
- Put your best people on your biggest opportunities, not your biggest problem.
Chapter 4: Confront the Brutal Facts (Yet Never Lose Faith)
Great companies must deal with facts that might be hard to accept. Once a company accepts the brutal facts, the rise to the top is often remarkably simple and straightforward. Don’t argue with the data. To achieve breakthrough results, take more good decisions than bad ones. Once you face the truth, the right decisions become self-evident. The brutal facts of reality refine the path to greatness.
Nothing demotivates people faster than holding out false hope because as soon as they meet reality, they’ll vanish. Leadership involves creating an environment where people confront brutal facts. This involves four practices:
- Lead with questions instead of answers.
- Engage in dialogue, not manipulation
- Talk about mistakes without blaming anyone
- Build “red flag” mechanisms (which means using information to anticipate problems). Also, let anyone voice their concerns without repercussions.
All good-to-great companies face a crisis at some point. The management team has to respond in two ways. First, they must accept the brutal facts of reality. Second, they must maintain a commitment to survive despite that harsh reality. If you think you’re going to survive without accepting reality, you won’t make it. The author calls this the Stockdale Paradox, which he named after the admiral who survived torture in the Vietnam War. After surviving hardship, you’ll return stronger because you’ll learn powerful lessons you can reuse whenever you see fit.
Chapter 5: The Hedgehog Concept (Simplicity Without/Within Three Circles)
In his essay, “The Hedgehog and the Fox”, Isaiah Berlin divided people into hedgehogs and foxes. Foxes know many things, but hedgehogs know one big thing. Despite his great intelligence, the fox can never catch the hedgehog. Foxes pursue many goals at the same time and lack a unifying vision. Hedgehogs, on the other hand, simplify the world by focusing on a singular concept that guides everything.
To make the biggest impact, focus on one thing. The greatest thinkers in the world (such as Einstein, Freud, Darwin, Marx, and Adam Smith) were able to articulate complex ideas simply. Once you identify the simple concept that guides everything, you have to apply it consistently. The author refers to this as the Hedgehog Concept, a simple concept that’s the result of understanding the intersection of three circles.
- What you can (and can’t be) the best in the world at: the path to greatness implies identifying what you can do much better than all the other organizations.
- How to create sustained profitability: achieve profound insights into the industry you belong to and use them to your advantage.
- What you’re passionate about: if you’re a passionate consumer of your own product, then you have a big advantage. Only do things you’re genuinely passionate about.
Once you identify a Hedgehog Concept, your world simplifies, and the decisions will be easier. It’s worth pointing out that this is an iterative process and not a single event.
Chapter 6: A Culture of Discipline
Taking responsibility for your actions is paramount when trying to create a good-to-great company. Likewise, having the discipline to say no to opportunities that fail the circle test is incredibly important. In other words, it’s all about creating a culture of discipline. What you don’t do is as important as what you do, so if something doesn’t qualify in the Hedgehog Concept, avoid it entirely.
This is all about following a strict system and not going outside it. The system is flexible. There’s freedom and responsibility as long as you remain within the framework of the system. In other words, the system has constraints, but within those constraints, people have the freedom and responsibility to do anything they want. Creating a culture of discipline requires three parts in a particular order: disciplined people (self-explanatory), discipline of thought (confronting reality and maintaining faith that you can create a path to greatness), and disciplined action. Lack of discipline takes companies to ruin.
Everyone has a “to-do” list, but few people have a “stop doing” list. “To-do” lists are often a reflection of undisciplined lives and a lack of constraint. By removing extraneous junk, you show discipline.
Chapter 7: Technology Accelerators
New technologies always threaten the archaic relics of the old economy. But the only companies that will prevail are those that think first and implement new technologies later. Embracing true new technologies that promise to change everything should take time, and companies should take calm and deliberate steps forward. There’s nothing revolutionary about the way a company operates with new technologies. As the author puts it, it should be “one more step in a continuous pattern”. Adapting new technologies should be a tool to accelerate momentum, not a reaction to falling behind. Technology without a Hedgehog Concept and without the discipline to stay within the three circles can’t create sustained great results.
Ultimately, technology can’t turn a good company into a great one. It’s not as important as the people who use it. Relying on technology can be a liability, not an asset. To make it the latter, you need a simple, clear, and coherent concept.
Chapter 8: The Flywheel and the Doom Loop
Some things get easier the more you do them. Working on the right things compounds to the point that the momentum you generate is unstoppable. The result might seem dramatic, but getting from good to great never happens in one decisive action. Good to great is a cumulative process that adds up, leading to spectacular results. There’s no such thing as overnight success. Success happens so gradually that there won’t be a miracle moment. Building positive momentum is what the author calls the flywheel effect.
When you look for a single defining action to improve everything, you end up changing course constantly because you never wait long enough to see results. The author refers to this as the doom loop. Momentum requires moving in the right direction. If you ever stop to change directions, that’s when you start a doom loop pattern. Good-to-great transformations require one thing: consistency.
Chapter 9: From Good to Great to Built to Last
In the book Built to Last, author Jim Collins tried to determine what made certain companies prevail over time. Good to Great offers a framework for companies to thrive. In other words, the book serves as a foundation to create built-to-last companies and serves as a form of prequel to Built to Last. Once your company sees great results, you want to turn it into an enduring company. For that, you need to identify your core values and make them explicit. Preserve the core ideology (your values), at the same time you stimulate progress.
Built to Last has four key ideas:
- Clock building, not time telling: build and organization that can adapt and endure, not around a single idea or leader.
- Genius of AND: when choosing between two options, figure out how to have both (not A or B, but A AND B).
- Core ideology: your core values (essential tenets) and core purpose (your reason to have a company)
- Preserve the Core/Stimulate progress: preserve the core ideology while stimulating change
Another important term from Built to Last is BHAGs (an acronym that means Big Hairy Audacious Goals). These are daunting goals that serve as a focal point of effort for everyone involved. To be clear, your goals shouldn’t be random; they should make sense within the context of the three circles.
Greatness is rare, but achieving it doesn’t mean more effort than building something good. If anything, it demands less work. Clarity simplifies everything, which means energy isn’t wasted. Once you identify what you should be working on, you should ignore everything else. As a result, your life will be simpler and your results will improve. In other words, what you don’t focus on is as important as what you do focus on. Anything other than the main thing is a distraction, and you should eliminate it.
Finally, to want to make something great, you must care about it deeply. If at any point you question why you’re doing something, that’s because you’re not passionate enough about it, and you must keep looking for something else. Once you find it, you’ll know.
