Can a good company become a great company?

This question answered by Jim Collins and his research team. In Good to Great, Collins and his team identified and studied businesses that diverged from normal path and went to become great. Great in this book is defined as companies which had average stock market returns over 15 years, and then an exceptional growth of more than three times the average market return over the following 15 years.

growth of great companies

So what can we learn from this book? Jim Collins breaks them into the following points:

Disciplined People

Level 5 Leadership

The 5 levels of leadership

Leaders who combine the pursuit of greatness with personal humility. Jim Collins describes them as the following: “Level 5 leaders channel their ego needs away from themselves and into the larger goal of building a great company. It’s not that Level 5 leaders have no ego or self-interest. Indeed, they are incredibly ambitious— but their ambition is first and foremost for the institution, not themselves.”

Who… then What

First, get the right people. Later, decide what to do.

Disciplined Thought

Confront the brutal facts

Have the discipline to look for the most brutal facts of the situation of your company. In the words of Collins: “The moment a leader allows himself to become the primary reality people worry about, rather than reality being the primary reality, you have a recipe for mediocrity, or worse. This is one of the key reasons why less charismatic leaders often produce better long-term results than their more charismatic counterparts.”

Hedgehog Concept

Your sweet-spot is at the intersection of what you are passionate about, what you can be the best in the world at, and what creates value.

Disciplined action

Culture of discipline

Create a culture of discipline. “When you have disciplined people, you don’t need hierarchy. When you have disciplined thought, you don’t need bureaucracy. When you have disciplined action, you don’t need excessive controls. When you combine a culture of discipline with an ethic of entrepreneurship, you get the magical alchemy of great performance.”

Technology accelerators

Technology can accelerate your transition to greatness, but it will not be the cause of it. This also applies to tech companies.

Flywheel

Becoming great is the accumulation of many events, it doesn’t happen quickly nor is it obvious that it’s going on. This principal is also true with great people. Check out my summary on Outliers.

Conclusion

I loved Good to Great. The reason being is that the book took a scientific approach, unlike the many business books where they don’t justification their theories with any data. Also, most of the principles can be applied in your day to day life. I strongly recommend this book.

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