How could an almost unknown company, like Walgreens, outperform some of the best-led companies in the world, such as Intel, General Electric and Coca-cola in terms of stock market return? How did Circuit City, a firm close to bankruptcy, generate cumulative stock return 22 times better than market-beating companies like Wal-Mart, HP? How has the value of $1 invested in a company with $1 million loss per day multiplied 64 times in 15 years beating the general market by 6 times? Jim Collins, author of the best-selling business book Good to Great, has spent five years to answer these questions.
In his first book Built to Last Jim Collins delineates the habits of the century-old companies. The book Built to Last spotlights the practices employed for becoming 'great to visionary' companies. But most of the companies, in general, are not great and thus the book's subject is not applicable to them. As a result, Jim Collins started another five-year research project to explore the blueprint for the ways to become 'good to great' on the part of average companies. Good to Great is, in fact, the prequel, not the sequel, of Built to Last.
In a nutshell, Good to Great is a book essentially about discipline. It is a sequence of three types of discipline --- disciplined people, disciplined thought and disciplined action.
Collins views the hierarchy of leadership as the highly capable individual, the contributing team member, the competing manager, the effective leader and, finally, the level 5 executive. The level 5 leaders are beyond effective leaders. They embody the paradoxical combination of personal humility and professional will. They display a compelling modesty, and they are often self-effacing and understated. But they have a fierce resolve, fanatical drive and work-manlike diligence. They are, according to Collins, "resolved to do whatever it takes to make the company great, no matter how big or hard the decisions."
To illustrate the concept, Collins introduces a level 5 leader to readers. He is named Darwin E. Smith, mild-mannered, meek and soft; but he has the ferocious resolve to make the boldest decision for his paper company, Kimberly-Clarke. The decision he takes is to sell the mill and throw all the proceeds into consumer business. After 25 years, these steps provide an amazingly high dividend and Kimberly-Clarke outperforms P & G in the six of eight product categories.
After dealing with these traits of leadership, Collins comes to the next segment of disciplined people --- choosing right people on the bus (and wrong people off the bus) --- and then figures out the destination of the vehicle. Collins writes, "Whether someone is the 'right person' has more to do with character traits and innate capabilities than with specific knowledge, background, or skills." Unlike 'good to great' companies, other firms comprise a talented leader who alone sets the vision and then materialises it with thousands of assisting people, not leaders. And, history shows when this talented leader leaves the company, it fails.
In terms of disciplined thought, the 'good to great' companies always start with an honest and diligent effort to determine the realities of the situation - the brutal facts of reality. They, according to Collins, "create a culture wherein people have a tremendous opportunity to be heard and, ultimately, for the truth to be heard." As they get the self-motivated right people, they do not waste their time and energy to motivate them. Rather they create a culture where right people cannot be 'de-motivated' because one of the primary ways to de-motivate people is to ignore the brutal facts of reality. Charismatic leadership in many companies can be a liability because it deters people from bringing the real situation to the leaders.
'Hedgehog Concept' defines another class of disciplined thought. When companies finally make the transition, they build upon the preparation practices and focus on their efforts. The Hedgehog Concept sits at the centre of three intersecting circles --- what the company can be best in the world at? What drives its economic engine? And what the company is deeply passionate about? To illustrate the Hedgehog Concept at work in business, Collins points to Walgreens. This drugstore has altered its measurement for economic success by shifting its focus from profit per store to profit per customer-visit, because the management had the insight that winning loyal customers was about more than being a chain store and having a brand name. Being the most convenient drugstore was the company's differentiator and what it could be best at in the world. This focus elaborates on all the aspects of Walgreens' strategy, from determining the street intersections for store locations to choosing products that best serve their customers.
After getting disciplined people into the bus and then completing the disciplined thought process, finally 'good to great' companies go for disciplined action. To do this, first they create a culture of discipline which requires people to adhere to a consistent system and at the same time gives people freedom and responsibility within the system. And, then, they use technology as an accelerator of the momentum, not as a creator of it. They become pioneers in the application of carefully selected technologies.
Good to Great is a business classic and its observations are equally applicable to individual and organisational developments. One can apply the principle of level 5 leadership and the hedgehog concept to one's personal leadership development programme. The total package of ideas in this landmark book can easily be put to practice in organisational settings in order to make a business entity sustainable and effective.
The author works at Islami Bank Bangladesh Limited.
arif.du.mds@gmail.com
The views expressed in the article are the writer's own and not necessarily of the organisation he represents.
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