CHAPTER 1:GOOD IS THE ENEMY

OF GREAT

CYNTHIA, BEN, PEYTON, RUSSELL

From Good to Great

Introduction

Vast majority of companies never become great-because most of them are quite good and they remain that

Is the disease of being “good” incurable?Journey to explore the inner workings of good

to great

Companies that made leap:

From good results to great results and sustained those results for at least fifteen years

Averaging stock returns of 6.9 compared to GE 2.8

471 increase compared to 56 increaseSee pages 2 and 4

Phase 1: The Search

First found companies that showed the good-to-great pattern 15-yr cumulative stock returns at or below the general

stock market Transition point Cumulative returns at at least three times the market

over the next 15 yrs Pattern must be independent of the industry it was in This ruled out lucky breaks 6 mo “death march of financial analysis” looking for

such companies

Phase 1 Continued

Found 11 companies that showed good-to-great characteristics

Many of these companies were surprising Showed that it was possible to go from good

to great in the most unlikely of situationsList on page 7

Phase 2: Compared to What?

Contrasted good-to-great companies to comparison companies

What did the good-to-great companies share in common that distinguished them from the comparison companies?

Direct comparisons Companies in the same industry with same opportunities

and similar resources at the time of the transition that did NOT show the good-to-great transition

Unsustained comparisons Companies that made a short-term shift from good to great

but failed to maintain the trajectory

Phase 2 cont.

Study set of 28 companies 11 good-to-great companies 11 direct comparisons 6 unsustained comparisons

Phase 3: Inside the Black Box

Each step of research was like installing another light bulb to shed light on the inner workings of the good-to-great process

Collected and coded articlesInterviewed most of the good-to-great

executives who held key positions during the transition periods

Initiated wide range of quantitative and qualitative analyses

Total of 10.5 people years of effort

Phase 3 cont.

Weekly team debates Present each of the 28 companies then debate about

“what it all means”Built a theory from the ground up directly

from the evidenceAsked “what is different?”

Phase 3 cont.

Studied what they didn’t find: Celebrity leaders negatively correlated with taking a

company from good to great No systematic pattern linking specific forms of

executive compensation to the process of going good to great

Strategy did not separate the good-to-great companies from comparison companies

Good-to-great companies did not focus principally on what to do to become great, but focused on what NOT to do and what to STOP doing

Phase 3 cont.

Technology and technology-driven change has nothing to do with transformation from good-to-great

Mergers and acquisitions play no role in transformation

Good-to-great companies paid little attention to managing change

Good-to-great companies has no name, tag line, launch event or such to signify their transformations

Good-to-great companies were not in “great” industries-no company was sitting in an industry that was about to turn great

Phase 4: Chaos to Concept

Took lump of unorganized information, saw patterns, and extracted order from the mess

Every primary concept in the final framework showed up as a change variable in 100% of the good-to-great company and less than 30% of the comparison companies during the pivotal years

Phase 4 cont.

8 Stages of a company going from good to great: Level 5 Leadership:

Self-effacing, quiet, reserved leaders that are a paradoxical blend of personal humility and professional will

First Who … Then What? : First got the right people, got rid of wrong people, put them in

place, then went into action Confront the Brutal Facts (Yet Never Lose Faith):

Embraced the Stockdale Paradox• Maintain unwavering faith with discipline to confront the most brutal

facts of your current reality The Hedgehog Concept (Simplicity within the Three Circles)

If you cannot be the best in the world at your core business then your core business absolutely cannot form the basis of a great company

Phase 4 cont.

A Culture of Discipline If you have disciplined people you do not need hierarchies,

bureaucracy, or excessive controls Combine this discipline with entrepreneurship

Technology Accelerators Pioneers of carefully selected technologies

The Flywheel and the Doom Loop Process of good-to-great transformation resembled

relentlessly pushing against a giant heavy flywheel, building momentum until a point of breakthrough

From Good to Great to Built to Last Requires core values and purpose beyond just making

money combined with the key dynamic of preserve the core/stimulate progress

The Timeless “Physics” of Good to Great

Specific application will change, but certain immutable laws of organized human performance will endure (the physics will endure)

This book is about how you take a good organization and turn it into one that produces sustained great results using whatever definition of results best applies to your organization

“The best students are those who never quite believe their professors.”

But, “One aught not to reject the date merely because one does not like what the data implies.”

TAKEAWAYS

Phase 1: Searched for companies that had a cumulative returns of 3x’s the market and sustained these returns for 15 years

Phase 2: Produced direct comparisons and unsustained comparisons and ended with 28 companies to study

Phase 3: Collected information, had team debates, found surprising correlations

Phase 4: Took random information and found patterns within the information producing the 8 stages of going from good to great

The concepts in this book are basically timeless and can be applied across industries and organizations (not just those in the business setting