Good To Great

Each piece of the system reinforces the other parts of the system to form an integrated whole that is much more powerful than the sum of the parts. It is only through consistency over time, through multiple generations, that you get maximum results.

INTRODUCTION

• The Hedgehog Concept
• The Flywheel
• The Pyramid of Leadership
• The Stockdale Paradox
• And more

KEY TAKEAWAYS

• Good is the enemy of great. And that is one of the key reasons why we have so little that becomes great.
• The vast majority of companies never become great, precisely because the vast majority become quite good —and that is their main problem.
• "dogs that did not bark." In the Sherlock Holmes classic "The Adventure of Silver Blaze," Holmes identified "the curious incident of the dog in the night-time" as the key clue. It turns out that the dog did nothing in the nighttime and that, according to Holmes, was the curious incident, which led him to the conclusion that the prime suspect must have been someone who knew the dog well.
• Level 5 Leadership. Self-effacing, quiet, reserved, even shy-these leaders are a paradoxical blend of personal humility and professional will. p. 13
• First Who ... Then What. We expected that good-to-great leaders would begin by setting a new vision and strategy. We found instead that they first got the right people on the bus, the wrong people off the bus, and the right people in the right seats— and then they figured out where to drive it. p. 13
• Confront the Brutal Facts (Yet Never Lose Faith). Every good-to-great company embraced what we came to call the Stockdale Paradox: 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, whatever they might be. p. 13
• The Hedgehog Concept (Simplicity within the Three Circles). the curse of competence. Just because something is your core business — just because you've been doing it for years or perhaps even decades —does not necessarily mean you can be the best in the world at it. And 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. It must be replaced with a simple concept that reflects deep understanding of three intersecting circles. p. 13
• A Culture of Discipline. All companies have a culture, some companies have discipline, but few companies have a culture of discipline. When you have disciplined people, you don't need hierarchy. When you have disciplined thought, you don't need bureaucracy. When you have disciplined action, you don't need excessive controls. When you combine a culture of discipline with an ethic of entrepreneurship, you get the magical alchemy of great performance. p. 13
• Technology Accelerators. Good-to-great companies think differently about the role of technology. They never use technology as the primary means of igniting a transformation. Yet, paradoxically, they are pioneers in the application of carefully selected technologies. p. 13
• Yes, the world is changing, and will continue to do so. But that does not mean we should stop the search for timeless principles.

You can accomplish anything in life, provided that you do not mind who gets the credit. - Harry S. Truman

• In retirement, Smith reflected on his exceptional performance, saying simply, "I never stopped trying to become qualified for the job."
• a classic example of what we came to call a Level 5 leader-an individual who blends extreme personal humility with intense professional will. […] fully developed Level 5 leaders embody all five layers of the pyramid.
• Level 5 leaders want to see the company even more successful in the next generation, comfortable with the idea that most people won't even know that the roots of that success trace back to their efforts.
• It is very important to grasp that Level 5 leadership is not just about humility and modesty. It is equally about ferocious resolve, an almost stoic determination to do whatever needs to be done to make the company great. Level 5 leaders are fanatically driven, infected with an incurable need to produce results.
• 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.
• First, if you begin with "who," rather than "what," you can more easily adapt to a changing world. Second, if you have the right people on the bus, the problem of how to motivate and manage people largely goes away. Third, if you have the wrong people, it doesn't matter whether you discover the right direction; you still won't have a great company. Great vision without great people is irrelevant.
• They hired outstanding people whenever and wherever they found them, often without any specific job in mind. "That's how you build the future, " he said. "If I'm not smart enough to see the changes that are coming, they will. And they'll be flexible enough to deal with them.'
• Like a professional sports team, only the best made the annual cut, regardless of position or tenure. To let people languish in uncertainty for months or years, stealing precious time in their lives that they could use to move on to something else, when in the end they aren't going to make it anyway —that would be ruthless. To deal with it right up front and let people get on with their lives that is rigorous.
• Packard's Law: If your growth rate in revenues consistently outpaces your growth rate in people, you simply will not —indeed cannot-build a great company.
• the ultimate throttle on growth for any great company is not markets, or technology, or competition, or products. It is one thing above all others: the ability to get and keep enough of the right people.
• Practical Discipline #2: When you know you need to make a people change, act. The moment you feel the need to tightly manage someone, you've made a hiring mistake. The best people don't need to be managed. Guided, taught, led-yes. Letting the wrong people hang around is unfair to all the right people, as they inevitably find themselves compensating for the inadequacies of the wrong people. Worse, it can drive away the best people.
• Practical Discipline #3: Put your best people on your biggest opportunities, not your biggest problems. The good-to-great companies made a habit of putting their best people on their best opportunities, not their biggest problems. The comparison companies had a penchant for doing just the opposite, failing to grasp the fact that managing your problems can only make you good, whereas building your opportunities is the only way to become great. p. 58

There is no worse mistake in public leadership than to hold out false hopes soon to be swept away. - Winston S. Churchill

• The good-to-great companies displayed two distinctive forms of disciplined thought. The first, and the topic of this chapter, is that they infused the entire process with the brutal facts of reality. (The second, which we will discuss in the next chapter, is that they developed a simple, yet deeply insightful, frame of reference for all decisions.) And even if all decisions do not become self-evident, one thing is certain: You absolutely cannot make a series of good decisions without first confronting the brutal facts.
• Yes, leadership is about vision. But leadership is equally about creating a climate where the truth is heard and the brutal facts confronted. There's a huge difference between the opportunity to "have your say" and the opportunity to be heard. The good-to-great leaders understood this distinction, creating a culture wherein people had a tremendous opportunity to be heard and, ultimately, for the truth to be heard.
• Lead with questions, not answers. "So, what's on your mind?" "Can you tell me about that?" "Can you help me understand?" "What should we be worried about?"
• On the one hand, they stoically accepted the brutal facts of reality. On the other hand, they maintained an unwavering faith in the endgame, and a commitment to prevail as a great company despite the brutal facts. We came to call this duality the Stockdale Paradox.
• "The fox knows many things, but the hedgehog knows one big thing."
• Foxes pursue many ends at the same time and see the world in all its complexity. They are "scattered or diffused, moving on many levels," says Berlin, never integrating their thinking into one overall concept or unifying vision. Hedgehogs, on the other hand, simplify a complex world into a single organizing idea, a basic principle or concept that unifies and guides everything. It doesn't matter how complex the world, a hedgehog reduces all challenges and dilemmas to simple indeed almost simplistic hedgehog ideas. […] they have a piercing insight that allows them to see through complexity and discern underlying patterns. Hedgehogs see what is essential, and ignore the rest.
• all the good-to-great companies attained a very simple concept that they used as a frame of reference for all their decisions, and this understanding coincided with breakthrough results.
• The world is filled with failed companies that had simple but wrong ideas.
• A Hedgehog Concept is a simple, crystalline concept that flows from deep understanding about the intersection of the following three circles:
1. What you can be the best in the world at (and, equally important, what you cannot be the best in the world at).
2. What drives your economic engine.
3. What you are deeply passionate about. The good-to-great companies focused on those activities that ignited their passion.
• If you make a lot of money doing things at which you could never be the best, you'll only build a successful company, not a great one. If you become the best at something, you'll never remain on top if you don't have intrinsic passion for what you are doing. Finally, you can be passionate all you want, but if you can't be the best at it or it doesn't make economic sense, then you might have a lot of fun, but you won't produce great results.
• "What we did was so simple, and we kept it simple. It was so straightforward and obvious that it sounds almost ridiculous to talk about it.
• Every company would like to be the best at something, but few actually understand — with piercing insight and egoless clarity — what they actually have the potential to be the best at and, just as important, what they cannot be the best at.
• the difference between a "core business" and a Hedgehog Concept. Just because something is your core business-just because you've been doing it for years or perhaps even decades-does not necessarily mean that you can be the best in the world at it. And if you cannot be the best in the world at your core business, then your core business cannot form the basis of your Hedgehog Concept
• a single "economic denominator." Think about it in terms of the following question: If you could pick one and only one ratio —profit per x (or, in the social sector, cash flow per x) —to systematically increase over time, what x would have the greatest and most sustainable impact on your economic engine?
• Simple, insightful, unobvious — and right.
• The only way to remain great is to keep applying the fundamental principles that made you great.
• First, the comparison companies never asked the right questions, the questions prompted by the three circles. Second, they set their goals and strategies more from bravado than from understanding
• Nowhere is this more evident than in the comparison companies' mindless pursuit of growth: Over two thirds of the comparison companies displayed an obsession with growth without the benefit of a Hedgehog Concept
• It took about four years on average for the good-to-great companies to clarify their Hedgehog Concepts. […] getting a Hedgehog Concept is an inherently iterative process, not an event.
• When asked, "How do we accelerate the process of getting a Hedgehog Concept?" I would respond: "Increase the number of times you go around that full cycle in a given period of time."
• Lack of planning, lack of accounting, lack of systems, and lack of hiring constraints create friction.
• Next we have disciplined thought. You need the discipline to confront the brutal facts of reality, while retaining resolute faith that you can and will create a path to greatness. Most importantly, you need the discipline to persist in the search for understanding until you get your Hedgehog Concept. Finally, we have disciplined action, the primary subject of this chapter. The comparison companies often tried to jump right to disciplined action. But disciplined action without self-disciplined people is impossible to sustain, and disciplined action without disciplined thought is a recipe for disaster. Indeed, discipline by itself will not produce great results. […] the point is to first get self-disciplined people who engage in very rigorous thinking, who then take disciplined action within the framework of a consistent system designed around the Hedgehog Concept.
• Much of the answer to the question of "good to great" lies in the discipline to do whatever it takes to become the best within carefully selected arenas and then to seek continual improvement from there. It's really just that simple. And it's really just that difficult.
• discipline is essential for great results, but disciplined action without disciplined understanding of the three circles cannot produce sustained great results.
• Few companies have the discipline to discover their Hedgehog Concept, much less the discipline to build consistently within it. They fail to grasp a simple paradox: The more an organization has the discipline to stay within its three circles, the more it will have attractive opportunities for growth. Indeed, a great company is much more likely to die of indigestion from too much opportunity than starvation from too little. The challenge becomes not opportunity creation, but opportunity selection
• Do you have a "to do" list? Do you also have a "stop doing" list? Most of us lead busy but undisciplined lives. We have ever-expanding "to do" lists, trying to build momentum by doing, doing, doing — and doing more. And it rarely works. Those who built the good-to-great companies, however, made as much use of "stop doing" lists as "to do" lists. They displayed a remarkable discipline to unplug all sorts of extraneous junk.
• good-to-great companies, they displayed remarkable courage to channel their resources into only one or a few arenas. Once they understood their three circles, they rarely hedged their bets. They all had the guts to make huge investments, once they understood their Hedgehog Concept.
• The most effective investment strategy is a highly undiversified portfolio when you are right.

Most men would rather die, than think. Many do. - Bertrand Russel

• technology becomes an accelerator of momentum, not a creator of it
• Mediocrity results first and foremost from management failure, not technological failure.
• When the right people see a simple plan born of confronting the brutal facts —a plan developed from understanding, not bravado - they are likely to say, "That'll work. Count me in."
• THE DOOM LOOP - They sought the single defining action, the grand program, the one killer innovation, the miracle moment that would allow them to skip the arduous buildup stage and jump right to breakthrough. They would push the flywheel in one direction, then stop, change course, and throw it in a new direction —and then they would stop, change course, and throw it into yet another direction. After years of lurching back and forth, the comparison companies failed to build sustained momentum and fell instead into what we came to call the doom loop.
• big acquisitions generally took place after development of the Hedgehog Concept and after the flywheel had built significant momentum. They used acquisitions as an accelerator of flywheel momentum, not a creator of it.
• They never learned the simple truth that, while you can buy your way to growth, you absolutely cannot buy your way to greatness.
• Each piece of the system reinforces the other parts of the system to form an integrated whole that is much more powerful than the sum of the parts. It is only through consistency over time, through multiple generations, that you get maximum results.
• four of the key ideas from Built to Last. To briefly review, those four key ideas are:
• Clock Building, Not Time Telling - Build an organization that can endure and adapt through multiple generations of leaders and multiple product life cycles; the exact opposite of being built around a single great leader or a single great idea.
• Genius of AND - Embrace both extremes on a number of dimensions at the same time. Instead of choosing A OR B, figure out how to have A AND B— purpose AND profit, continuity AND change, freedom AND responsibility, etc.
• Core Ideology - Instill core values (essential and enduring tenets) and core purpose (fundamental reason for being beyond just making money) as principles to guide decisions and inspire people throughout the organization over a long period of time.
• Preserve the Core/Stimulate Progress - Preserve the core ideology as an anchor point while stimulating change, improvement, innovation, and renewal in everything else. Change practices and strategies while holding core values and purpose fixed. Set and achieve BHAGs consistent with the core ideology.
• it is much easier to become great than to remain great.
• Indeed, the point of this entire book is not that we should "add" these findings to what we are already doing and make ourselves even more overworked. No, the point is to realize that much of what we're doing is at best a waste of energy. If we organized the majority of our work time around applying these principles, and pretty much ignored or stopped doing everything else, our lives would be simpler and our results vastly improved.
• He was referring to the Hedgehog Concept of the program, captured in the simple statement: We run best at the end. We run best at the end of workouts. We run best at the end of races. And we run best at the end of the season, when it counts the most. Everything is geared to this simple idea, and the coaching staff knows how to create this effect better than any other team in the state. For example, they place a coach at the 2-mile mark (of a 3.1-mile race) to collect data as the runners go past. But unlike most teams, which collect time splits (minutes-per-mile running pace), this team collects place splits (what place the runners are in as they go by). Then the coaches calculate not how fast the runners go, but how many competitors they pass at the end of the race, from mile 2 to the finish.The kids learn how to pace themselves, and race with confidence: "We run best at the end," they think at the end of a hard race. Of equal importance is what they don't waste energy on. p.
• the real question is not, "Why greatness?" but "What work makes you feel compelled to try to create greatness?" If you have to ask the question, "Why should we try to make it great? Isn't success enough?" then you're probably engaged in the wrong line of work. Perhaps your quest to be part of building something great will not fall in your business life. But find it somewhere.
• you might even gain that deepest of all satisfactions: knowing that your short time here on this earth has been well spent, and that it mattered.

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