Good to Great

1. Level 5 Leadership: Humility and Professional Will

Level 5 leaders channel their ego needs away from themselves and into the larger goal of building a great company.

Paradoxical blend. Level 5 leaders combine personal humility with intense professional will. They are ambitious for their company, not themselves, and attribute success to factors outside themselves while taking responsibility for poor results.

Key characteristics. These leaders:

• Display a compelling modesty, shunning public adulation
• Act with quiet, calm determination; rely principally on inspired standards, not charisma
• Channel ambition into the company, not the self
• Look in the mirror, not out the window, to apportion responsibility for poor results

Contrast with comparison companies. Unlike the often charismatic, celebrity leaders of comparison companies, Level 5 leaders are more like Lincoln than Patton – more dedicated to organizational success than personal glory.

2. First Who, Then What: Get the Right People on the Bus

The executives who ignited the transformations from good to great did not first figure out where to drive the bus and then get people to take it there. No, they first got the right people on the bus (and the wrong people off the bus) and then figured out where to drive it.

People over strategy. Good-to-great companies focused on getting the right people in key positions before determining their strategy or vision. This approach provides flexibility in a changing world and reduces the need for motivation and management.

Key principles:

• When in doubt, don't hire – keep looking
• When you know you need to make a people change, act
• Put your best people on your biggest opportunities, not your biggest problems

Rigorous, not ruthless. While strict in their people decisions, good-to-great companies were not cruel. They created a culture where the right people thrived and the wrong people chose to leave of their own accord.

3. Confront the Brutal Facts: The Stockdale Paradox

You must retain faith that you will prevail in the end, regardless of the difficulties AND at the same time confront the most brutal facts of your current reality, whatever they might be.

Unwavering faith amid harsh realities. Good-to-great companies maintained absolute faith that they would prevail while simultaneously confronting the brutal facts of their current situation. This paradox, named after Admiral James Stockdale, allowed them to make tough decisions without losing hope.

Creating a climate of truth:

• Lead with questions, not answers
• Engage in dialogue and debate, not coercion
• Conduct autopsies without blame
• Build "red flag" mechanisms that turn information into information that cannot be ignored

Contrast with comparison companies. While good-to-great companies confronted reality, comparison companies often fell into denial, nostalgia for the past, or blame.

4. The Hedgehog Concept: Simplicity in Three Circles

To go from good to great requires transcending the curse of competence. It requires the discipline to say, "Just because we are good at it—just because we're making money and generating growth—doesn't necessarily mean we can become the best at it."

Simplicity within three circles. The Hedgehog Concept is the intersection of three circles:

1. What you can be the best in the world at
2. What drives your economic engine
3. What you are deeply passionate about

Rigorous thinking process. Developing a Hedgehog Concept is not a one-time event but an iterative process involving intense dialogue and debate. It often takes years to crystallize.

Examples:

• Walgreens: Be the best, most convenient drugstores with high profit per customer visit
• Wells Fargo: Be the best at running a bank like a business, focused on the western United States
• Kimberly-Clark: Be the best at paper-based consumer products

5. Culture of Discipline: Freedom within a Framework

Sustained great results depend upon building a culture full of self-disciplined people who take disciplined action, fanatically consistent with the three circles.

Disciplined people, thought, and action. Good-to-great companies build a consistent system with clear constraints, but give people freedom and responsibility within that framework. They hire self-disciplined people who don't need to be managed, then manage the system, not the people.

Key aspects:

• Rinsing cottage cheese: Fanatical attention to detail
• Freedom and responsibility within a framework
• Adherence to the Hedgehog Concept
• A "stop doing" list is as important as a "to do" list

Contrast with comparison companies. While good-to-great companies had freedom with responsibility, comparison companies alternated between freedom and tight control, never finding the right balance.

6. Technology Accelerators: Thoughtful Application

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?

Accelerator, not creator. Good-to-great companies use technology as an accelerator of momentum, not a creator of it. They avoid technology fads and bandwagons, yet become pioneers in the application of carefully selected technologies.

Key principles:

• Technology must fit with the Hedgehog Concept
• If used right, technology becomes an accelerator of momentum, not a creator of it
• Good-to-great companies think differently about technology

Examples:

• Nucor: Pioneered the application of mini-mill technology
• Walgreens: Early adopter of satellite communication for pharmacy operations

7. The Flywheel Effect: Consistent Push Creates Momentum

Good to great comes about by a cumulative process—step by step, action by action, decision by decision, turn by turn of the flywheel—that adds up to sustained and spectacular results.

Momentum through consistent effort. The transformation from good to great is not a single defining action, grand program, or miracle moment. It's a process of pushing a giant, heavy flywheel that builds momentum over time.

Key aspects:

• No single defining moment or "breakthrough"
• Flywheel effect creates alignment and deep engagement
• Media often only notices once the flywheel is turning fast

Contrast with the doom loop. Comparison companies often fall into a doom loop of reactive change, lurching back and forth without consistency, never gaining momentum.

8. Clock Building, Not Time Telling: Enduring Greatness

Having a great idea or being a charismatic visionary leader is "time telling"; building a company that can prosper far beyond the presence of any single leader and through multiple product life cycles is "clock building."

Building enduring companies. Good-to-great companies focus on building the organizational capabilities that will endure beyond any single product, market cycle, or charismatic leader.

Key aspects:

• Focus on building the organization, not just delivering results
• Develop a cadre of leaders who can continue the legacy
• Create systems and cultures that perpetuate success

Examples:

• Hewlett-Packard: Built on a foundation of technical contribution and respect for the individual
• 3M: Fostered a culture of innovation that transcended any single product

9. Preserve the Core / Stimulate Progress: Balancing Continuity and Change

Enduring great companies preserve their core values and purpose while their business strategies and operating practices endlessly adapt to a changing world.

Dynamic conservatism. Good-to-great companies maintain unwavering commitment to core values and purpose while continuously adapting strategies and practices to a changing world.

Key elements:

• Core ideology: Fundamental reason for being beyond just making money
• BHAGs (Big Hairy Audacious Goals): Ambitious long-term objectives
• Experimentation and evolution within the framework of core ideology

Examples:

• Johnson & Johnson: Credo guides decisions through changing times
• Walt Disney: Consistent focus on wholesome family entertainment while innovating in delivery methods

10. Good to Great to Built to Last: A Comprehensive Framework

To go from good to great requires transcending the curse of competence.

Integrated approach. The Good to Great concepts lay the groundwork for building an enduring great company, while Built to Last concepts elevate the company to iconic status.

Key stages:

1. Disciplined People (Level 5 Leadership, First Who...Then What)
2. Disciplined Thought (Confront the Brutal Facts, Hedgehog Concept)
3. Disciplined Action (Culture of Discipline, Technology Accelerators)
4. Building to Last (Clock Building, Preserve the Core / Stimulate Progress)

Application beyond business. These concepts can apply to any organization or individual seeking to move from good to great, whether in business, non-profit, or personal life.

Last updated: July 24, 2024