Book Review for 2/3/02 by Bruce Berger
Title: “Good To Great: Why Some Companies Make the Leap…and Others Don’t”
Author: Jim Collins
Length: 300 pages (91 pages of appendices)
Price: $27.50 (hardcover)
Reading Time: 6-8 hours
Reading Rating: 9 (1 = very difficult; 10 = very easy)
Overall Rating: 4 (1 = average; 4 = outstanding)
What do Abbott Labs, Circuit City, Fannie Mae, Gillette, Kimberly-Clark, Kroger,
Nucor, Philip Morris, Pitney Bowes, Walgreens, and Wells Fargo have in common? Out
of 1,435 companies listed in the “Fortune 500” since the rankings first appeared in 1965,
these elite eleven made the leap from being good to great.
But wait, what about GE, McDonalds, Coca Cola, Bank of America, Intel, HewlettPackard, P&G, Merck or even Warren Buffett’s Berkshire Hathaway? Nope, they
couldn’t make the cut! Good, perhaps even very good companies, but not GREAT.
For example, GE outperformed the market 2.8 times during its best 15-year run from
1985 to 2000. All eleven good-to-great companies averaged a whopping 7 times the
market performance during their 15-year transition period. From December 31, 1975 to
Jan. 1, 2000, $1 invested in Walgreens beat $1 invested in Intel by nearly 2 times, GE by
nearly 5 times, Coca Cola by nearly 8 times and the general stock market including the
NASDAQ run of the ‘90s by over 15 times. From 1982 to 1997 Circuit City beat the
market by nearly 19 times!
Just who is the arbiter of greatness? In this case it’s none other than Jim Collins, coauthor
of the preeminent national business bestseller, “Built To Last: Successful Habits of
Visionary Companies,” and his team of 20 researchers.
They spent five years and 15,000 hours reading and coding 5,979 articles, books, case
studies, industry analyses, annual reports, proxy statements and analyst reports. They
conducted an extensive financial spreadsheet analysis for each company, examining
income and balance sheets for 980 combined years of data. They tracked down and
interviewed 84 members of senior management, CEOs, and directors who were in office
during the transition period to greatness resulting in 2000 transcribed pages. Along the
way, they created 384 million bytes of computer data.
The findings of their prodigious research effort are hardly revolutionary but, quips
Collins, “fly in the face of our modern business culture and will, frankly, upset some
people.” They include:
--- Level Five Leaders are humble, reserved, self-effacing.
--- First Who …Then What. Get the right people on board, then figure out where to go.
--- Confront the Brutal Facts (Yet Never Lose Faith) is aptly named the Stockdale
Paradox after Vietnam prisoner of war Adm. Jim Stockdale who endured eight years of
torture at the Hanoi Hilton.
--- The Hedgehog Concept is by far the most critical key to achieving greatness. Each
company crystallized their very core existence and it became their mantra.
--- A Culture of Discipline If it doesn’t fit the Hedgehog Concept (e.g. acquisitions,
ventures), they don’t do it. Period.
--- Technology alone cannot make a company great. It has to be linked to and applied
within the Hedgehog Concept.
--- The Flywheel and the Doom Loop are metaphors for demonstrating how great
companies start out slowly and methodically yet eventually reach the sustained
momentum needed for breakthrough results.
Finally, a how-to change management book based on empirical evidence. What we
learned is not cutting edge new-age management or leadership magic. Rather, this book
confirms a simple maxim: any organization can be great if it has the right people
adhering to the right core belief in a very disciplined manner. Just look to Level Five
Leaders such as John Wooden, Abraham Lincoln, or Cork Walgreen.
Bruce D. Berger is a visiting professor of law in the marketing and business law
department in the College of Business at Western Carolina University. He also has
consulting and law practices.