GOOD IS THE ENEMY OF GREAT
Team 2
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Jim Collins – Author
“You know, Jim, we love Built to Last around here.
You and your coauthor did a very fine job on the
research and writing. Unfortunately, it’s useless.”
– Bill Meehan
Curious, he obviously wanted an explanation. Bill
went on to explain that the companies written
about in Jim’s previous book were, for the most
part, always great. They never had to turn
themselves from good companies into great
ones.
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Can a good company become a great
company and, if so, how?
A vast majority of good companies remain
just that – good, but not great.
So began the journey….
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People often asked Jim, “What motivates you
to undertake these huge research projects?”
◦ His reply was: “Curiosity. It’s deeply satisfying to
climb into the boat, like Lewis and Clark, and head
West saying, “We don’t know what we’ll find when
we get there, but we’ll be sure to let you know
when we get back.””
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21 people (teams of 4-6 at a time)
5 years
“We identified companies that made the leap
from good results to great results and
sustained those results for at least 15 years.”
◦ Most companies never achieve greatness.
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If you invested $1 in a mutual fund of the
good-to-great companies in 1965, holding
each company at the general market rate until
the date of transition, and simultaneously
invested $1 in the good-to-great fund taken
out on January 1, 2000, would have
multiplied 471 times, compared to a 56 fold
increase in the market.
Performance over fifteen years
Three times the market
Leader in the industry
Should something other than returns
be used?
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Cut 1 Fortune rankings
1965,1975,1985,1995
Cut 2 University of Chicago Center for
Research in Security Prices.
Cut 3 Continuous growth
Cut 4 Companies not industries that made a
transition
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Fannie Mae beat GE and Coca-Cola
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Walgreens beat Intel
Company
Times the market
time frame
Abbott
3.98
1974-1989
Circuit City
18.5
1982-1997
Fannie Mae
7.56
1984-1999
Gillette
7.39
1980-1995
Kimberly-Clark
3.42
1972-1987
Kroger
4.17
1973-1988
Nucor
5.16
1975-1990
Philip Morris
7.06
1964-1979
Pitney Bowes
7.16
1973-1988
Walgreens
7.34
1975-1990
Wells Fargo
3.99
1983-1998
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Clock ticking for Circuit City's survival
Bankrupt electronics seller says it has until
next week to reach deal with 'potential'
buyers for its business or else it may have
to start liquidating.(cnn money 1/9/2009)
Fannie Mae
Bail out
Comparison
- Contrasting good-to-great companies to a
carefully selected set of “comparison companies.
Crucial Question
- What did the good-to-great companies share in
common?
OR
-What did the good-to-great companies share in
common that distinguished them from the
comparison companies?
Selected two sets of comparison companies.
Set 1 – Consisted of “direct comparisons” – companies
that were in the same industry as the good-to-great
companies with the same opportunities and similar
resources at the time of transition, but showed no leap
from good to great.
The teams performed a systematic and methodical
collection and scoring of all obvious comparison
candidates for each good-to-great company, using the
following six criteria.
1. Business Fit: Had similar products and services as
the good-to-great company.
2. Size Fit: Was the same basic size as the good-to
great company.
3. Age Fit: Was founded in the same era as the goodto-great companies.
4. Stock Chart Fit: The cumulative stock returns to
market chart of the comparison candidate roughly
tracks the pattern of the good-to-great company until
the point of transition.
5. Conservative Test: At the time of transition, the
comparison candidate was more successful than the
good-to-great company – larger and more profitable
with a stronger market position and reputation.
6. Face Validity: Takes into account two different factors: First,
the comparison candidate is in a similar line of business at the
time of selection into the study. Second, the comparison
candidate is less successful than the good-to-great company at
the time of selection into the study.
Face validity and conservative test work together.
Conservative test ensures that the comparison company was
stronger than good-to-great company at the year of the goodto-great company’s transition and face validity ensures the
comparison company was weaker that the good-to-great
company at the time of selection into the study.
Companies scored on scale of 1 – 4.
Unsustained comparison were companies that made a
short-term shift from good-to-great but failed to
maintain the trajectory-to address the question of
sustainability.
After all of this the team came up with twenty-eight
companies: eleven good-to great, eleven direct
comparison, and six unsustained comparisons.
Good-to-Great
Companies
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Abbot
Circuit City
Fannie Mae
Gillette
Kimberly-Clark
Kroger
Nucor
Philip Morris
Pitney Bowes
Walgreens
Wells Fargo
Direct Comparisons
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Upjohn
Silo
Great Western
Warner-Lambert
Scott Paper
A&P
Bethlehem Steel
R.J. Reynolds
Addressograph
Eckerd
Bank of America
Unsustained Comparisons
Burroughs
Harris
Rubbermaid
Chrysler
Hasbro
Teledyne
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Collected articles on 28 companies, dating
back 50+ years
Coded material into categories (600 articles)
◦ Strategy, leadership, technology, etc.
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Conducted interviews with good-to-great
executives (2000 pages)
The total project consumed people years of
effort.
Held Weekly Debates over each of the 28
companies to draw conclusions and ask
questions to “what it all means”
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Built the theory from the ground up, not to test
or prove any theory.
Noticed the case that “dogs that DID NOT bark”
which is the opposite of what we expect
Examples of Key facts noticed between good to
great companies
◦ Celebrity CEO’s are negative, but happens 6x more
often. Most Good CEO’s come from Inside the company.
◦ Executive compensation means nothing & does not drive
performance.
◦ There is no evidence that good-to-great companies
spent more time on strategy.
◦ Good-to-great companies focused on what NOT to do
and what to STOP doing to become great, instead of
what to do
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More examples….
◦ Good-to-great companies focused on what NOT to do
and what to STOP doing to become great, instead of
what to do
◦ Technology has nothing to do with the transformation of
good to great (it can help but not cause)
◦ Mergers play no role. 2 wrongs never make 1 right.
◦ Good-to-Great companies paid NO attention to
managing change, motivating people, and creating
alignment. These problems solve themselves in
transition.
◦ These companies did not set up a process for
transformation, but focused on the results. It all became
clear in the end.
◦ You don’t have to be a great industry to begin with.
(Many were actually terrible) It is a matter of conscious
choice.
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What was required to go from all the data,
analyses, debates, and “dogs that did not
bark” to the final findings in this book?
◦ “The best answer I can give is that is was an
iterative process of looping back and forth,
developing ideas and testing them against the data,
revising the ideas, building a framework, seeing it
break under the weight of evidence, and rebuilding
it yet again.
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That process was repeated over and over,
until everything was a coherent framework of
concepts.
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He reiterates many times that the concepts in
the final framework of this book “were not my
opinions!” While he cannot extract his own
psychology and biases entirely, each and
every finding in the book met a rigorous
standard before the research teams deemed
it significant.
◦ Every primary concept in the final framework
showed up as a change variable in 100% of the
good-to-great companies and in less than 30% of
the comparison companies during pivotal years.
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Concept used to describe the break through
when these companies transitioned from
good to great.
◦ Think of the transformation as a process of
buildup followed by breakthrough, broken into
three broad stages: disciplined people,
disciplined thought, and disciplined action.
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The leaders that take companies from good
to great do not share the personalities of high
profile leaders
Instead they are self effacing, quiet, reserved
and sometimes even shy
They are a blend of personal humility and
professional will
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Good-to-great leaders do not set a new
vision and strategy first
Instead they get the right people on the
“bus”, the wrong people off the “bus”, and
then the right people in the right seats
After this is accomplished then they figure
out where to “drive it”
“Most importantly, people are not the most
important asset, the right people are”
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“You must maintain unwavering faith that you
can and will prevail in the end, regardless of
the difficulties, AND at the same time have
the discipline to confront the most brutal
facts of your current reality.”
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To go from good-to-great requires
transcending the curse of competence
Just because something is a core business
doesn’t mean that you can be the best at it.
If you cant be the best at the core business,
then it cant be the foundation for a great
company
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All companies have a culture, some have
discipline, but few have culture of discipline:
◦ When there is disciplined people, you don’t need
hierarchy
◦ Disciplined thought, you don’t need bureaucracy
◦ Disciplined action, you don’t need excessive
controls
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Combine culture of discipline with
entrepreneurship you get a great
performance
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Good-to-great companies use technology as
the primary means of igniting transformation
However, they are pioneers in the application
of “carefully selected technologies”
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Good to great concepts + sustained great
results + built to last concepts = enduring
great company
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While the world economy is constantly
changing, the principles involving good to
great companies never changes.
For example: During the early 1980’s the
banking industry was completely transformed
in about 3 years. One company applied the
principles of good to great and produced
great results making them one of the
strongest banks in the United States. The
bank was Wells Fargo.
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Good is the enemy of great.
What is systematically different between the
“good” and the “great” companies?
Leaders are more like Lincoln and Socrates
than Patton or Caesar.
 Any questions?