Good to Great Chapter 7:
Technology Accelerators
Group 5:
Laura Moore
Jeffri Vaughn
Grant Gerhardt
Patrick Kirkland
Chet Visser
Good to Great Chapter 7: Technology Accelerators
The Hedgehog
• In every good-to-great case it was never
just technology, but “The pioneering
application of carefully selected
technologies”
• “Technology-induced change is nothing
new. The real question is not, what is the
role of technology? Rather, the real
question is, how do good-to-great
organizations think differently about
technology?”
Drugstore.com VS. Walgreens
• Drugstore.com opened an internet pharmacy for
people to order their prescriptions online and have
them mailed to them.
• Walgreens stock price dropped 40% when
Drugstore.com challenged Walgreens.
• Walgreens was very quiet and simply said, “We’re a
crawl, walk, run company.”
• Drugstore.com did the opposite: ran first, then walked,
and crawled last as their value dropped and debt
grew.
• Walgreens ended up prospering during the “.com”
craze with their well planned strategy.
Good VS. Great
• Great companies (Hedgehogs) find ways to
use new technology for advancing their
business before anybody else, and make sure
it will work with extensive research.
– For Example: Kroger used barcode scanners for
speedier checkout and more efficient inventory. Later,
Wal-Mart would use JIT Inventory to keep inventory
costs low.
• Good companies (Foxes) implement new
technologies after they have been successfully
used by someone else.
– For Example: Everybody else soon followed Kroger
and their barcode scanners. Later, some followed
Wal-Mart’s JIT inventory system, but many have not
yet adopted this strategy.
Technology Accelerators in the
Good-to-Great Companies
• Abbot
– Computer technology to increase economic denominator
of profit per employee
• Circuit City
– Sophisticated point-of-sale and inventory-tracking
technologies
– Able to operate a geographically dispersed system with
great consistency
• Fannie Mae
– Sophisticated algorithms and computer analysis to more
accurately assess mortgage risk, thereby increasing
economic denominator of profit per risk level
– Increases access to home mortgages for lower-income
groups, linking to passion for democratizing home
ownership
Technology Accelerators in the
Good-to-Great Companies
• Gillette
– Sophisticated manufacturing technology for making billions
of high-tolerance products at low cost with fantastic
consistency
• Kimberly-Clark
– Manufacturing-process technology, especially in
nonwoven materials, to support their passionate pursuit of
product superiority
– Sophisticated R&D labs
• Kroger
– Computer and information technology to the continuous
modernization of superstores
– First to seriously experiment with scanners, which it linked
to the entire cash-flow cycle, thereby providing funds for
the massive store-revamping process
Technology Accelerators in the
Good-to-Great Companies
• Nucor
– Most advanced mini-mill steel manufacturing
technology
– Willing to make huge bets (up to 50% of
corporate net worth) on new technologies that
other viewed as risky, such as continuous thin
slab casting
Technology Accelerators in the
Good-to-Great Companies
• Philip Morris
– Both packaging and manufacturing
technologies
– Bet on technology to make flip-top boxes –
the fist packaging innovation in 20 years in
the industry
– First to use computer-based manufacturing
– Huge investment in manufacturing center to
experiment with, test, and refine advanced
manufacturing and quality techniques
Technology Accelerators in the
Good-to-Great Companies
• Pitney Bowes
– Advanced technology to the mailroom
– Mechanical postage meters
– Invested heavily in electrical, software,
communications, and Internet engineering for
the most sophisticated back-office machines
– Huge R&D investment to reinvent basic
postage meter technology in the 1980s
Technology Accelerators in the
Good-to-Great Companies
• Walgreens
– Satellite communications and computer
network technology, linked to its concept of
convenient corner drugstores, tailored to the
unique needs of specific demographics and
locations
– Big investment on a satellite system that links
all stores together, like one giant web of a
single corner pharmacy
– Led the rest of the industry by at least a
decade
Technology Accelerators in the
Good-to-Great Companies
• Wells Fargo
– Technologies that would increase economic
denominator of profit per employee
– Early leader in 24-hour banking by phone,
early adopter of ATMs, first to allow people to
buy and sell mutual funds at an ATM, pioneer
in Internet and electronic banking
– Pioneered sophisticated mathematics to
conduct better risk assessment in lending
Technology as an Accelerator, Not
a Creator, of Momentum
Fannie Mae
• Jim Johnson became CEO of Fannie Mae
and hired a consulting firm to conduct
technology audit
• Lead consultant, Bill Kelvie, used a fourlevel ranking
– Four is cutting edge
– One is stone age
• Fannie Mae ranked two
Technology as an Accelerator, Not
a Creator, of Momentum
Fannie Mae
• Kelvie was hired to move the company ahead
• When Kelvie came to Fannie Mae in 1990, the
company lagged about 10 years behind Wall
Street in the use of technology
• Over the next five years, Kelvie took Fannie Mae
from a two to a 3.8 on the four-point ranking
• Created over 300 computer applications
– Sophisticated analytical programs to control the $600
billion mortgage portfolio
– Online data warehouses covering 60 million
properties and streamlined workflows
– Reduced paper and clerical effort
Technology as an Accelerator, Not
a Creator, of Momentum
Fannie Mae
• “We moved technology out of the back office
and harnessed it to transform every part of
the business. We created an expert system
that lowers the cost of becoming a home
owner. Lenders using our technology
reduced the loan-approval time from 30 days
to 30 minutes and lowered the associated
costs by over $1,000 per loan.” – Kelvie
• The system has saved home buyers nearly
$4 billion
Technology as an Accelerator, Not
a Creator, of Momentum
Fannie Mae
• Fannie Mae transition began in 1981, yet the company
lagged behind in the application of technology until the
early 1990s
• Technology became of prime importance to Fannie
Mae AFTER it discovered its Hedgehog Concept and
AFTER it reached breakthrough
• Technology was a key part of what Fannie Mae
leaders called “the second wind” of the transformation
and acted as an accelerating factor
• Same pattern holds for Kroger, Gillette, Walgreens,
and all the good-to-great companies
– Pioneering application of technology usually came late in
the transition and never at the start
Technology as an Accelerator, Not
a Creator, of Momentum
• When used right, technology becomes an
ACCELERATOR of momentum, not a creator
of it
• The good-to-great companies never began
their transitions with pioneering technology,
for the simple reason that you cannot make
use of technology until you know which
technologies are relevant
– Relevant technologies are those that link directly
to the three intersecting circles of the Hedgehog
Concept
Technology as an Accelerator, Not
a Creator, of Momentum
• To make technology productive in a
transformation from good to great, ask the
following questions:
– Does the technology fit directly with your
Hedgehog Concept?
• Yes: You need to become a pioneer in the application
of that technology
• No: Ask another question
– Do you need this technology at all?
• Yes: All you need is parity, don’t need the most
advanced technology to be a great company
• No: The technology is irrelevant and can be ignored
Technology as an Accelerator, Not
a Creator, of Momentum
Good-to-Great Companies
• Good-to-great companies remained disciplined within the
frame of their Hedgehog Concept
• Their relationship to technology is no different from their
relationship to any other category of decisions
– Disciplined people, who engage in disciplined thought, and who
then take disciplined action
• If a technology doesn’t fit squarely within their three circles,
they ignore it
• Once they understand which technologies are relevant,
they become fanatical and creative in the application of
those technologies
Technology as an Accelerator, Not
a Creator, of Momentum
Comparison Companies
• In comparison companies, only three
cases of pioneering in the application of
technology
– Chrysler: Computer-aided design
– Harris: Electronics applied to printing
– Rubbermaid: Advanced manufacturing
Technology as an Accelerator, Not
a Creator, of Momentum
Comparison Companies
• Demonstrates that technology alone
cannot create sustained great results
– Chrysler made superb use of advanced
computer-aided and other design
technologies but failed to link those
technologies to a consistent Hedgehog
Concept
– No advanced technology by itself could save
the company from massive downturn
Technology as an Accelerator, Not
a Creator, of Momentum
• Technology without a clear Hedgehog
Concept, and without the discipline to stay
within the three circles, cannot make a
company great
Technology Trap
• The 20th Century’s theme: Technology
– In the 20th Century we saw some of the most
earthshaking advances in technology
• Ex. Aviation, Cars, Electricity, Computers, Nuclear
Energy
– This theme is proven by Time’s Choice of
Albert Einstein as Man of the Century and Jeff
Bezos of Amazon.com as the 1999 Man of the
Year
• Master’s Forum Seminars
– For 15 years had one constant theme “Technology,
Change, and the connection between the two”
• The reason is that “people do not always know what they do
not know.” They are always afraid of some previously
unknown technology cropping up and hurting them.
– What do good-to-great executives think of
technology?
• It is a tool that accelerates success, not one that produces
success
• It is neither a main factor in your success nor your decline
• 80% of the good-to-great executives
interviewed by the author did not even
mention technology as one of the top five
factors in the transition.
• When technology was mentioned, it only
had a medium ranking.
– You cannot rely on technology to transition
your company from good to great. But, it
certainly can help you.
• Ken Iverson of Nucor was asked where he
would rate Technology among the five
factors that helped him transit from good
to great
– His answer: Not in the top five
• Real reason for success: The company’s
consistency, and their ability to project their
philosophies throughout the whole organization,
enabled by their lack of layers and bureaucracy
– Only 20% of Nucor’s success was based on
technology
Early Technology
• Throughout business and history, there
are countless examples of those who were
first with a technology or completely relied
on technology and fell behind or perished.
Examples
• Boeing and Dehavilland
– Dehavilland was the company that actually built the first jetliner,
the Comet, some 4 to 5 years prior to the first flight of the 707
– Dehavilland lost out in the end because of some teething
problems that resulted in 3 in-flight breakups of their Comet
jetliner
• USAF and USN During Vietnam
– Early 1960 Air combat doctrine stated guided missiles made
dogfighting obsolete
– All dogfight teaching was stopped and it was even forbidden to
be practiced
– Resulted in a nearly 1 to 1 kill ratio in aerial combat
– USN started Top Gun and USAF initiated a similar program, Red
Flag, to rectify this problem. Kill ratio improved to 5 to 1.
• Titanic
– Believed that new technology of watertight
compartments made the ship unsinkable, and
new wireless would keep them appraised of
ice situation
– Took on fewer than necessary life boats
– Barreled into the dark at nearly full speed in
poor ice spotting conditions
– Resulted in massive loss of life due to
reliance and over confidence on new and
untried technologies
Takeaways
• Never blindly rely on technology
• When technology is used correctly and linked to
simple, clear, and coherent concepts rooted in
deep understanding, technology will drive you
towards success
• When technology is not used correctly, it will
accelerate your demise
• Technology is never the primary cause of a
company’s demise. This responsibility usually
belongs to the executives and their management
techniques
Technology and the Fear of Being
Left Behind
• Technology is important, but as a subset
of discipline or perhaps the flywheel.
• “Why did the good-to-great companies
maintain such a balanced perspective on
technology, when most companies
become reactionary, lurching and running
about like Chicken Little, as we’re seeing
with the internet?”
– Chris Jones, Good to Great researcher
Strategy
• If you had the opportunity to sit down and
read all 2000+ pages of transcripts from
the good-to-great interviews, you’d be
struck by the utter absence of talk about
“competitive strategy.”
• They never talked in reactionary terms and
never defined their strategies principally in
response to what others were doing.
Strategy
• The good-to-great companies talked in
terms of what they were trying to create
and how they were trying to improve
relative to an absolute standard of
excellence.
• “We’re just never satisfied. We can be
delighted, but never satisfied.”
– Wayne Sanders, Kimberly-Clark
No Fear
• Those who built good-to-great companies
weren’t motivated by fear.
– Fear of what they didn’t understand.
– Fear of looking like a chump.
– Fear of watching others hit it big while they
didn’t.
– Fear of being hammered by the competition.
Technology Bubble
• Took place right smack in the middle of
the research on good to great.
• It served as a perfect stage to watch the
difference between great and good play
itself out, as the great ones responded like
Walgreens.
– Walgreens became great with calm
equanimity and quiet, deliberate steps
forward—while the mediocre ones lurched
about in fearful, frantic reaction.
The Big Point
• The big point of this chapter is not about
technology per se.
• No technology, no matter how amazing—
not computers, not telecommunications,
not the internet—can itself ignite a shift
from good to great.
• No technology can make you Level 5.
• No technology can turn the wrong people
into the right people.
The Big Point
• No technology can instill the discipline to
confront brutal facts of reality, nor can it instill
unwavering faith.
• No technology can supplant the need for deep
understanding of the three circles and the
translation of that understanding into a simple
Hedgehog Concept.
• No technology can create a culture of discipline.
• No technology can instill the simple inner belief
that leaving unrealized potential on the table—
letting something remain good when it can
become great—is a secular sin.
Conclusion
• Those that stay true to these fundamentals and
maintain their balance, even in times of great
change and disruption, will accumulate the
momentum that creates breakthrough
momentum.
• Those that do not, those that fall into reactionary
lurching about, will spiral downward or remain
mediocre.
• This is the big-picture difference between great
and good, the gist of the whole study captured in
the metaphor of the flywheel versus the doom
loop.