Good to Great: Why Some Companies Make the Leap...and Others Don't

Good to Great: Why Some Companies Make the Leap...and Others Don't

by Jim Collins

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Overview

Good to Great: Why Some Companies Make the Leap...and Others Don't by Jim Collins

Destined to be the business publishing event of the year, or even the decade, this is the long awaited new book by the co-author of Built To Last. In it, Jim Collins shares his latest long-term research - and shows how even mediocre companies can become long-term world beaters.

Jim Collins has become a best-selling classic business author, with 590,000 copies sold to date, and has been translated into 17 languages.

Product Details

ISBN-13: 9780694526086
Publisher: HarperCollins Publishers
Publication date: 10/28/2001
Edition description: Abridged, 5 CDs
Sales rank: 292,899
Product dimensions: 0.00(w) x 0.00(h) x (d)

About the Author

Jim Collins is author or coauthor of six books that have sold in total more than ten million copies worldwide, including the bestsellers Good to Great, Built to Last, and How the Mighty Fall. Jim began his research and teaching career on the faculty at Stanford Graduate School of Business, where he received the Distinguished Teaching Award in 1992. He now operates a management laboratory in Boulder, Colorado, where he conducts research, teaches, and consults with executives from the corporate and social sectors.

Hometown:

Boulder, Colorado

Date of Birth:

January 25, 1958

Place of Birth:

Aurora, Colorado

Education:

B.S. in mathematical sciences, Stanford University, 1980; M.B.A., Stanford University, 1983

Read an Excerpt

Chapter One

Good is the Enemy of Great

That's what makes death so hard -- unsatisfied curiosity.

--Beryl Markham,
West with the Night

Good is the enemy of great.

And that is one of the key reasons why we have so little that becomes great.

We don't have great schools, principally because we have good schools. We don't have great government, principally because we have good government. Few people attain great lives, in large part because it is just so easy to settle for a good life. The vast majority of companies never become great, precisely because the vast majority become quite good -- and that is their main problem.

This point became piercingly clear to me in 1996, when I was having dinner with a group of thought leaders gathered for a discussion about organizational performance. Bill Meehan, the managing director of the San Francisco office of McKinsey & Company, leaned over and casually confided, "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."

Curious, I asked him to explain.

"The companies you wrote about were, for the most part, always great," he said. "They never had to turn themselves from good companies into great companies. They had parents like David Packard and George Merck, who shaped the character of greatness from early on. But what about the vast majority of companies that wake up partway through life and realize that they're good, but not great?"

I now realize that Meehan was exaggerating for effect with his "useless" comment, but his essential observation was correct -- that truly great companies, for the most part, have always been great. And the vast majority of good companies remain just that -- good, but not great. Indeed, Meehan's comment proved to be an invaluable gift, as it planted the seed of a question that became the basis of this entire book -- namely, Can a good company become a great company and, if so, how? Or is the disease of "just being good" incurable?

Five years after that fateful dinner we can now say, without question, that good to great does happen, and we've learned much about the underlying variables that make it happen. Inspired by Bill Meehan's challenge, my research team and I embarked on a five-year research effort, a journey to explore the inner workings of good to great.

In essence, we identified companies that made the leap from good results to great results and sustained those results for at least fifteen years. We compared these companies to a carefully selected control group of comparison companies that failed to make the leap, or if they did, failed to sustain it. We then compared the good-to-great companies to the comparison companies to discover the essential and distinguishing factors at work.

The good-to-great examples that made the final cut into the study attained extraordinary results, averaging cumulative stock returns 6.9 times the general market in the fifteen years following their transition points. To put that in perspective, General Electric (considered by many to be the best-led company in America at the end of the twentieth century) outperformed the market by 2.8 times over the fifteen years 1985 to 2000. Furthermore, 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 a general market stock fund, your $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.

These are remarkable numbers, made all the more remarkable when you consider the fact that they came from companies that had previously been so utterly unremarkable. Consider just one case, Walgreens. For over forty years, Walgreens had bumped along as a very average company, more or less tracking the general market. Then in 1975, seemingly out of nowhere -- bang! -- Walgreens began to climb...and climb...and climb...and climb...and it just kept climbing. From December 31, 1975, to January 1, 2000, $1 invested in Walgreens beat $1 invested in technology superstar Intel by nearly two times, General Electric by nearly five times, Coca-Cola by nearly eight times, and the general stock market (including the NASDAQ stock run-up at the end of 1999) by over fifteen times.

How on earth did a company with such a long history of being nothing special transform itself into an enterprise that outperformed some of the best-led organizations in the world? And why was Walgreens able to make the leap when other companies in the same industry with the same opportunities and similar resources, such as Eckerd, did not make the leap? This single case captures the essence of our quest.

This book is not about Walgreens per se, or any of the specific companies we studied. It is about the question -- Can a good company become a great company and, if so, how? -- and our search for timeless, universal answers that can be applied by any organization.

Our five-year quest yielded many insights, a number of them surprising and quite contrary to conventional wisdom, but one giant conclusion stands above the others: We believe that almost any organization can substantially improve its stature and performance, perhaps even become great, if it conscientiously applies the framework of ideas we've uncovered.

This book is dedicated to teaching what we've learned. The remainder of this introductory chapter tells the story of our journey, outlines our research method, and previews the key findings. In chapter 2, we launch headlong into the findings themselves, beginning with one of the most provocative of the whole study: Level 5 leadership.

Undaunted Curiosity

People often ask, "What motivates you to undertake these huge research projects?" It's a good question. The answer is, "Curiosity."...

Reading Group Guide

"In an ironic twist, I now see Good to Great not as a sequel to Built to Last, but more of a prequel. Good to Great is about how to turn a good organization into one that produces sustained great results. Built to Last is about how you take a company with great results and turn it into an enduring great company of iconic stature." --Jim Collins
An Introduction

Can good companies, mediocre companies, even bad companies achieve enduring greatness? And if so, what are the distinguishing characteristics that cause a company to go from good to great? Using tough benchmarks, Jim Collins and his research team embarked on a five-year pursuit to identify a set of elite companies that made the leap to great results. How great? These companies generated cumulative stock returns that beat the general stock market by an average of seven times in fifteen years, better than twice the results delivered by a composite index of the world's greatest companies, including Coca-Cola, Intel, General Electric, and Merck.

The research team contrasted the good-to-great companies with a carefully selected set of comparison companies that failed to make the leap from good to great. Why did one set of companies become truly great performers while the other set remained only good? After sifting through mountains of data and thousands of pages of interviews, Collins and his team discovered the key determinants of greatness -- why some companies make the leap and others don't.

The findings of the Good to Great study will surprise many readers and shed light on virtually every area of managementstudy and practice. "Some of the key concepts discerned in the study," comments Jim Collins, "fly in the face of our modern business culture and will, quite frankly, upset some people." Perhaps, but who can afford to ignore these findings?

Questions for Discussion
  • Collins states in the Introduction to the book, "I'd like to say we planned the timing, but we began this project in 1996 and had no idea that it would fit perfectly the zeitgeist of 2001. We got lucky." Do you believe that Collins and his team of researchers were simply "lucky"? Why or why not?

  • What do you think of the research methods employed by Collins and his team? Do you agree with the methods that they used? What would you have done differently?

  • One of the most crucial criteria set forth was the requirement for companies to have achieved success and maintained it for fifteen years. "We picked fifteen years because it would transcend one-hit wonders and lucky breaks (you can't just be lucky for fifteen years) and would exceed the average tenure of most chief executive officers (helping us to separate great companies from companies that just happened to have a single great leader)." Do you agree with this assessment? How would the results of the study have differed if this particular criteria had been altered?

  • The research team identified a series of steps that characterize good-to-great transitions: Level 5 Leadership, First Who…Then What, Confront the Brutal Facts, The Hedgehog Concept, A Culture of Discipline, Technology Accelerators, and The Flywheel and the Doom Loop. Which of these factors is the most crucial to a company's success? Do you think it is imperative for a successful company to have all of these factors?

  • Collins called Level 5 Leadership "one of the most provocative [steps] of the whole study." Do you agree? Of the CEOs profiled in the book, who do you think most exemplifies the qualities of Level 5 leadership? Explain why you chose this person.

  • Collins and his team "were surprised by the list" of good-to-great companies: Abbott, Circuit City, Fannie Mae, Gillette, Kimberly-Clark, Kroger, Nucor, Philip Morris, Putney Bowes, Walgreens, and Wells Fargo. Were you surprised by the companies that appeared on the list? Are there any companies that you expected to appear that were absent?

  • He also says that "this became the first of many surprises that led us to reevaluate our thinking about corporate greatness." The fact that they were surprised means that they went into the study with certain assumptions. What were those assumptions?

    Questions for Discussion about Both Books
  • The catalyst for Good to Great came about in part because a McKinsey partner remarked to Jim Collins that the companies written about in Built to Last "were, for the most part, always great. They never had to turn themselves from good companies into great companies… But what about the vast majority of companies that wake up and part way through life and realize that they're good, but not great?" What do you think of this statement? What is there to be learned from each of the books?

  • Jim Collins said that Good to Great is a prequel to Built to Last. Do you see it this way? Do the two books work in tandem with one another?

  • In Good to Great, Wells Fargo is profiled as one of the "good-to-great" companies. In Built to Last, Wells Fargo is not one of the visionary companies but rather the comparison for visionary company American Express. Discuss the implications of this.

  • Collins states, "We believe that almost any organization can substantially improve its stature and performance, perhaps even become great, if it conscientiously applies the framework of ideas we've uncovered." Do you agree with this statement? Why or why not? In what instances do you think the concepts set forth in Good to Great and Built to Last would work best? In what instance do you think they would not be successful? Do you think the theories laid out in each of the books can be applied to any industry?

  • Which of the company success stories did you find the most surprising, and why?

  • Interviews

    Exclusive Author Essay
    In 1994, my life changed dramatically when Built to Last, the book I coauthored with Jerry Porras about what it takes to build enduring great companies, became a wholly unexpected bestseller. Oddly, I responded by going into a deep existential funk. After six years of immersion, I no longer had a big project to work on. It was like I'd returned from the Lewis and Clark expedition with no new outlet in which to channel my somewhat obsessive energies. I woke up every morning and wondered, What on earth am I going to do next? My anxiety only worsened as I felt pressure from all sides -- agents, publishers, pundits -- to "get on with the next one to capitalize on the first one."

    Fortunately, my wife, Joanne, pulled me out of the muck. "Don't pick another question just to do another book," she admonished. "Wait until a question picks you."

    It was great advice. And I began to wait...and wait...and wait. A month went by. Then six months. Then a year. Then nearly two years. I began to have a sinking feeling that I would never again have a worthy question that would capture my passion and imagination.

    But then at a dinner with people gathered to discuss organizational change and performance, a McKinsey partner leaned over his salad and said, "You know Jim, we love Built to Last around here. But unfortunately, it's useless."

    Useless? Six years of my life, useless?

    "The companies you wrote about were, for the most part, always great," he said. "They never had to turn themselves from good companies into great companies. They had parents like David Packard and George Merck, who shaped the character of greatness from early on. But what about the vast majority of companies that wake up partway through life and realize that they're good, but not great?"

    His observation proved to be an invaluable gift. It planted the seed of a question that became the basis of the next five years of my life, namely, Can a good company become a great company and, if so, how?

    The question of good to great captured me on a deep level as not just a business question but a human question. For the truth is, good is the enemy of great. And that is one of the key reasons why we have so little that becomes great. We don't have great schools, principally because we have good schools. We don't have great government, principally because we have good government. Few people attain great lives, in large part because it is just so easy to settle for a good life. And the vast majority of companies never become great, precisely because the vast majority become quite good -- and that is their main problem.

    Five years after that fateful dinner (and 20,000 hours of research time with my team), I can now say, without question, that good to great does happen, and we've learned much about the underlying variables that make it happen. Good to Great: Why Some Companies Make the Leap...and Others Don't is the culmination. And while I fully expect another bout with existential despair in the wake of publication, I wouldn't trade the journey for anything.

    If we have cracked the code on good to great, then we might see good schools become great schools, good government become great government, good companies become great companies and perhaps even a number of good lives become great lives. And that has made the effort worth every minute. (Jim Collins)

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    Good to Great 4.7 out of 5 based on 0 ratings. 6 reviews.
    Anonymous More than 1 year ago
    Great book on tape. Encouraging, inspiring, and motivating. Could not stop listening to it in the car. Bought the prequel-Built to Last- as well.
    jfn37 More than 1 year ago
    I listened to the CD's twice, worth the time and money.
    Anonymous More than 1 year ago
    I haven't completely finished this recording, but so far I've been very impressed with Mr. Collins. The insights into the "Good to Great" companies are very reveling. As someone who wishes to own his own business one day, I find the conclusions in "Good to Great" useful and applicable. I especially enjoy the chapter on leadership. I have just one question for Mr. Collins. Considering the recent decline of two of the "Good to Great" companies (Circuit City and Fannie Mae), would you have to adjust any of your findings?
    Anonymous More than 1 year ago
    Guest More than 1 year ago
    It is wonderful to have all this insight in CD form. I have listened to this CD several times in my car. Everytime I learn something new. Dr. Michael Beitler, Author of 'Strategic Organizational Change'
    Guest More than 1 year ago
    So good I'm buying more copys for all my managers to read.