Jim Collins starts by defining his 5 years of research, how they determined what good was, what great is and what factors were used to identify the companies that were in the study. This is not a book based on assumptions, this is the result of 5 years of research and the support and input from a group of associates and business leaders. It also is not based on a sampling of the great companies, it uses the entire set of businesses that fulfill the requirements of 15 years as a good company and 15 years consistently surpassing the market. Because of this long time frame there are surely other companies that are great, but they had to be clear on their requirements. It lends credibility to the assumptions they make about the findings on these companies.
Everything in this book and about these great companies revolves around the three circles. Knowing where your competencies, goals, and passions lay will take a company through to greatness. The basics of these three circles are:
1. What you can be the best in the world at and what you cannot be the best in the world at?Collins refers to these three circles throughout the book. I had to go back and listen to several chapters to find the definition of the three circles when I realized that I was going to need it to understand the concepts later on. This is one downfall of listening to a book, it is not easy or quick to scan for a specific word or concept.
2. What drives your economic engine?
3. What you are passionate about?
Leadership
Although the team originally felt that leadership was not going to be a factor and set out their research to overlook this aspect of business, it turned out the response to their inquiries often lead to great leadership. This book defines a type of leader that is always (100% of the time) found in great companies. They defined this leader as possessing "Level 5 Leadership" skills. If you are a business owner or key leader in a good business (like the CEO) you should check out the attributes of the "Level 5" leader. If you were hoping to take your company to the next tier you will need to have these leadership skills in the leader that will be driving the company forward.
First Who, Then What
This chapter is about the people in your company. In every case the right person in the right position is a key factor in the quality and quantity of output for the company. Collins states that "if you feel the requirement to manage someone then you probably need a change. Get the right people on the bus and the wrong people off." I think this clearly sums up the idea of having great associates working for your company.
Confront the Brutal Facts
The brutal facts of business are the truths that we sometimes find hard to look at like: the failures we must diagnose, the market changes that could kill our company, the leadership roles that take us in the wrong direction, and the industry shifts that make us less competitive. The brutal fact is we need to take a good hard look at what it is that affects our company, confront the change, and accept it. Only by accepting that we can no longer sell without specific registrations, keep employees to work on products that are obsolete, accept that studies show our product is not well accepted, tolerated or useful can we move on to doing what will be good for the company.
Collins goes on to spell out that we need leader that accept that they do not know everything and they should admit it. Asking for help and embracing the entrepreneurial spirit of the company will make it stronger and more resilient. The alternative is to force ideas of change creating a "recipe for mediocrity". The best three practices he describes to overcome this trap is to admit "I don't know", look for the best answers and "conduct an autopsy without blame". These three practices scream "Great Company" to me.
The Hedgehog Concept
Collins starts with a tale of the constant struggle between the fox and the hedgehog. It is like a fairy tale but it clearly demonstrates that you must have a deep understanding of your three circles to be able to live the truth of them. Collins shares numerous examples of good companies that missed the mark and never make it to great. He also gives examples of great companies loosing their focus and dropping from their pedestal. He describes how the absence of this concept within those companies was the core reason why they failed to excel or maintain their greatness.
A Culture of Discipline
Collins describes the lack of discipline to stick to the three circles as "the cancer of mediocrity". Bureaucracy being a symptom of incompetence, which drives away the right people forcing a company to attract and keep only the wrong people. As stated in the "First Who then What" chapter you have to "Get the right people on the bus and the wrong people off" if you want to create an environment where the company and the people can grow. To ensure superior performance create a culture of discipline that everyone will aspire to and nourish the "ethic of entrepreneurship".
Technology Accelerators
In this chapter the research is used to show over and over that technology is not the core reason a company succeeds to greatness. When CEO's were asked about technology use they would confess that it was often not even in the top three reasons why they felt they got to where they are. That said, all the great companies are technologically advanced, which showed that it is important but not a key reason.
When determining if technology was right for their companies the great companies would assess if it fit their hedgehog concept. If it did then they would find the most suitable product and way to implement, not necessarily the biggest and newest. If it did not match their hedgehog concept then they didn't implement the technology. They used technology as an accelerator of business not a key component, even when the technology was a key tool in parts of their products.
The Flywheel and The Doom Loop
In this chapter Collins gives us some great examples of a company that strayed way from the three circles and then came back. It is the dedication to the hedgehog concept and the three circles in everything the company does that allows the greatness to shine through. "The more an organization has the discipline to stay within its 3 circles the more it will attract opportunities for growth and contribution." It is just as important to know when to say "no" to an opportunity as it is to say "yes" to the right opportunity. Always focusing on the right opportunities will continue to bring the right opportunities in abundance.
Why be Great?
Finally Collins answers some questions about good to great posed to him. One of these questions asks "Why do I want to be great when I already have a good business". The question seems reasonable but the answer is revealing. What would you think if I were to tell you that Collins and his research group have proven that more effort is required to stay 'good' then to become 'great'? Why would you want to be 'good' when 'great' is easier. You'll have to read this one to understand why.
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