GOOD TO GREAT by Jim Collins | Core Message

I recently read good to great by author Jim Collins Collins and his team spent a combined total of ten point five years researching 11 publicly traded companies that went from good to great each of the companies went from performing at or below the market average to at least three times above the market average over a 15 year period to prove that these 11 companies were doing something special Collins and his team compared each of the companies to companies in the same industry of a similar size who had similar access to resources but failed to outperform the market when contrasting the good to great companies with these comparison companies Collins and his team discovered that the good to great companies had mastered three concepts you can think of these three concepts like three mental models you can use to evaluate a company you invest in a company you work for or use to transition your own business from good to great the three concepts are the Hedgehog the bus and the level five leader the first way to assess if a company can go from good to great is to determine if that company has a hedgehog mentality an ancient Greek parable says the Fox knows many things but the Hedgehog knows one big thing when a hedgehog waddles down a familiar path to retrieve its lunch a fox tries to attack it in different ways and at different points along its route but every time the clever Fox thinks it's about to catch the Hedgehog off-guard the Hedgehog notices a fox rolls into a ball and becomes a sphere of sharp spikes the Fox insists on a new strategy every day while the Hedgehog relies on one tried-and-true strategy and the Hedgehog always wins good two great companies had the Hedgehog mentality they look to distill their business into a simple strategy a core concept a unifying vision the good agreed companies develop a hedgehog mentality by focusing on three circles the first circle represents what they can be the best ad and more importantly what they can't be the best ad in the book Collins explains that Wells Fargo a bank that outperformed the market by a multiple of four from 1980 three to 1998 accepted the truth that they couldn't be better than the rival Citicorp in global banking so Wells Fargo turned its attention to what it could be the best at running a bank like a business with a focus on the western United States by obsessively focusing on that single strategy Wells Fargo transformed from a mediocre Citicorp wannabe to one of the best performing banks in the world the second circle represents a company's economic engine more specifically how that company can generate more profit per X than any other company in the industry X can be customers of a certain demographic like new mothers living in Manhattan or a number of employees or a number of stores Wells Fargo discovered that they could restructure their bank to have more ATMs and fewer employees per branch so that they could generate more profit per employee than any other bank in the eighties and the last circle is passion all the good to great companies asked are we in this just for the money or are we passionate about our business while comparison companies merely develop products and services that they thought would make money good to great companies only invested in products and services they loved a big difference between Philip Morris a good a great company from 1964 to 1979 and other tobacco companies was executives at Philip Morris genuinely believed life was better with cigarettes despite the long-term health risks I Philip Morris vice chairman once said I love cigarettes it's one of those things that makes life really worth living every good - great transition occurred because the good great companies spent years discovering what they could be the best at and what they couldn't then develop their primary economic engine and only invested in products they were truly passionate about at the intersection of these three circles is what Collins calls a hedgehog concept every good great company simplified its business around their Hedgehog concept and had the discipline not to get distracted by business opportunities that didn't align with their Hedgehog concept the second question to ask to determine if a company can go from good to great is how does the company manage their bus more specifically who gets on the bus when do they get off the bus and where do people sit on when I say who gets on the bus I'm saying who is the company hire when Collins looked at comparison companies the companies that didn't go from good to great he found that the companies had the mentality of a genius with a thousand helpers they had brilliant leaders but a management team that simply took orders and were afraid to challenge their leader contrast that to good to grey companies who hired people with an entrepreneurial spirit people that didn't need to be managed or motivated the leaders of good to great companies didn't look for obedient people they looked for people with strong character and similar values that they could train to be exceptional leaders every good great company had a management team that could drive the bus at Wells Fargo every executive on their team during their great years later went on to become a CEO of a major company but oftentimes even gray companies can bring people onto the bus that aren't the right fit which begs the question when do people get off the bus in a good degree company Colin says good great companies show the following bipolar pattern at the top management level people either stayed on the bus for a long time or got off the bus in a hurry if you were hired by a good to great company your first few months would be crucial after a few months of working at the company management would ask themselves two questions would we hire this person again and if this person pulled us he or she was leaving to pursue a new exciting opportunity would we feel terribly disappointed or secretly relieved if you pass this test and got through the initial trial period a good degree company would be extremely loyal to you and you wouldn't need to worry about sweeping layoffs in the future six of the eleven good great companies didn't have a single layoff for over 30 years and four others reported only one or two layoffs rather than resorting to layoffs CEOs of good to great companies devoted a lot of their time to putting the right people in the right seats one CEO changed or moved thirty-eight of the top 50 people in his organization another CEO called it putting square pegs and square holes and round pegs in round holes which brings us to the last question regarding the bus where do people sit on the bus imagine a bus having two sections a front section and a rear section the front section is reserved for people who are pursuing the company's best opportunities for growth the rear section is reserved for people who resolve the company's biggest problems in every good to great company the front half of the bus is filled with the company's highest performers because a good degree company knows if you're just obsessed with solving problems you've just maintained the status quo but if you have the brightest minds on the biggest opportunities you're always one step ahead of the competition at Philip Morris it meant putting their best people on emerging market opportunities emerging markets seem like a bad assignment because these markets were full of challenges but Philip Morris's best people routinely transform these emerging markets into major profit engines for the company now the last and most important question to determine if the company can go from good to great is does the company have a level five leader every good leader advances through three levels first they become a skilled worker then they become a reliable teammate then they become an organized manager and at some point they're reached level four by becoming a visionary with a compelling message that people buy into but very few leaders reach level five level five is reserved for leaders with extreme humility and extreme resolve the prototypical level 5 leader is Abraham Lincoln Lincoln put his ego aside when he was elected president and surrounded himself with the best people even if those people adamantly disagreed with him when a member of his executive team called him a damn fool for wanting to go to war Lincoln said if he said I was a damn fool then I must be one for he is nearly always right and generally says what he means Lincoln was fast to admit when he was wrong but when Lincoln knew he was taking the right course of action his resolve was absolute his stubbornness is the primary reason slavery ended when it did all good two great leaders were Lincolnesque they were all level 5 leaders when Collins interviewed leaders of good two great companies they'd say things like I don't think I can take much credit we were blessed with marvelous people or there are plenty of people in this company who could do my job better than I do in the end but don't mistake a level 5 leaders humility for weakness as Colin says every level 5 leader had an almost stoic determination to do whatever needed to be done to make the company great one good great CEO of a family pharmaceutical company kicked family members off the board when he took over the company because that's what was needed to move the company forward level five leaders don't care about being popular they only care about doing what's best for the company in the end if you want to determine if a company can go from good to great first determine if they have a hedgehog mentality then study how they bring people on the bus when they take them off the bus and where they put the best people on the bus then lastly determine if they have a level five leader someone who is humble but has a ferocious resolve to make a company great that was the core message that I gathered from good to great by Jim Collins this is a business classic it's loaded with well researched and well explained business strategies I highly recommend it if you would like a one-page PDF summary of insights that I gather from this book just click the link below and I'd be happy to email to you if you already subscribe to the free productivity game email newsletter this PDF is sitting in your inbox if you like this video please share it and as always thanks for watching and have yourself a productive week

Channel: Productivity Game

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Id: B9pCV-cS5qU

Length: 9min 58sec (598 seconds)

Published: Fri Sep 06 2019