Good to Great

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Good to Great

• Why Some Companies Make the Leap...
• and Others Dont

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GOOD IS THE ENEMY OF GREAT

• Thats what makes death so hard
• unsatisfied curiosity.
• Beryl Markham

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GOOD IS THE ENEMY OF GREAT

• Can a good company become a great company, and
  if so, how?
  
• ... almost any organization can substantially
  improve its stature and performance, perhaps even
  become great, if it conscientiously applies the
  framework of ideas that have been uncovered in
  this study.

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GOOD TO GREAT
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The Dynamics of Greatness
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Level 5 Leadership
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Level 5 Leadership

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

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Level 5 Hierarchy
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Level 5 Hierarchy

• Level 5 Executive
• Builds enduring greatness through a
  paradoxical blend of personal humility and
  professional will.

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Level 5 Hierarchy

• Effective Leader
• Catalyzes commitment to and vigorous pursuit
  of a clear and compelling vision, stimulating
  higher performance standards.

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Level 5 Hierarchy

• Competent Manager
• Organizes people and resources toward the
  effective and efficient pursuit of predetermined
  objectives.

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Level 5 Hierarchy

• Contributing Team Member
• Contributes individual capabilities to the
  achievement of group objectives and works
  effectively with others in a group setting.

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Level 5 Hierarchy

• Highly Capable Individual
• Makes productive contributions through talent,
  knowledge, skills, and good working habits.

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Level 5 Leadership

• Level 5 leaders channel their ego needs away
  from themselves and into the larger goal of
  building a great company. Its not that Level 5
  leaders have no ego or self-interest. Indeed,
  they are incredibly amtitious but their
  ambition is first and foremost for the
  institution, not themselves.

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Level 5 Leadership

• HUMILITY WILL

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Level 5 Leadership

• Personal Humility
• Demonstrates a compelling modesty, shunning
  public adulation newer boastful.
  
• Acts with quiet, calm determination relies
  principally on inspired standards, not inspiring
  charisma, to motivate.
  

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Level 5 Leadership

• Personal Humility
• Channels ambition into the company, not the
  self sets up successors for even greater success
  in the next generation.
  
• Looks out the window, not in the mirror, to
  apportion credit for the success of the company
  to other people, external factors, and good
  luck.

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Level 5 Leadership

• Professional Will
• Creates superb results, a clear catalyst in
  the transition from good to great.
  
• Demonstrates an unwavering resolve to do
  whatever must be done to produce the best
  longterm results, no matter how difficult.

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Level 5 Leadership

• Professional Will
• Sets the standard of building and enduring
  great company will settle for nothing less.
  
• Looks in the mirror, not out the window, to
  apportion responsibility for poor results, newer
  blaming other people, external factors, or bad
  luck.

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Level 5 Leadership

• The great irony is that the animus and
  personal ambition that often drive people to
  positions of power stand at odds with the
  humility required for Level 5 leadership. When
  you combine that irony with the fact that boards
  of directors frequently operate under the false
  belief that they need to hire a larger-than-life,
  egocentric leader to make an organization great,
  you can quickly see why Level 5 leaders rarely
  appear at the top of our institutions.

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Level 5 Leadership

• KEY POINTS
• Every good-to-great company had Level 5
  leadership during the pivotal transition years.
  
• Level 5 leaders embody a paradoxical mix of
  personal humility and professional will.
  
• Level 5 leaders are ambitious for the
  company!

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Level 5 Leadership

• KEY POINTS
• Level 5 leaders set up their successors for
  even greater success in the next generation,
  whereas egocentric Level 4 leaders often set up
  their successors for failure.

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Level 5 Leadership

• KEY POINTS
• Level 5 leaders display a compelling modesty,
  are self-effacing and understated. In contrast,
  two thirds of the comparison companies had
  leaders with gargantuan personal egos that
  contributed to the demise or continued mediocrity
  of the company.

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Level 5 Leadership

• KEY POINTS
• Level 5 leaders are fanatically driven,
  infected with an incurable need to produce
  sustainded results. They are resolved to do
  whatever it takes to make the company great, no
  matter how big or hard the decisions.

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Level 5 Leadership

• KEY POINTS
• Level 5 leaders display a workmanlike
  diligence more plow horse than show horse.
  
• Potential Level 5 leaders exist all around us,
  if we just know what to look for, and that many
  people have the potential to evolve into Level 5.

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Level 5 Leadership

• UNEXPECTED FINDINGS
• Celebrity leaders correlate negatively with
  going from good to great.
  
• Level 5 leaders attribute much of their
  success to good luck, rather than personal
  greatness.
  
• Level 5 leadership is empirical, not
  ideological, finding.

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First Who then What
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First Who then What

• Two possibilities
• 1. Level 5 Management Team
• 2. A Genius with a Thousand Helpers

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First Who then What
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First Who then What

• KEY POINTS
• The good-to-great leaders were rigorous, not
  ruthless, in people decisions. They did not rely
  on layoffs and restructuring as a primary
  strategy for improving performance.

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First Who then What

• KEY POINTS
• Good-to-great management teams consist of
  people who debate vigorously in search for the
  best answers, yet who unify behind decisions,
  regardless of parochial interests.

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First Who then What

• Rigorousness in people decisions
• When in doubt, dont hire keep looking.
• When you know you have to make a people change,
  act.
  
• Put your best people on your biggest
  opportunities, not your biggest problems.

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First Who then What

• UNEXPECTED FINDINGS
• No systematic pattern linking executive
  compensation to the shift from good to great.
  
• People are not your most important assett. The
  RIGHT people are.
  
• Whether someone is the right person has more
  to do with character traits and innate
  capabilities than with specific knowledge,
  background, or skills.

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Confront the Brutal Facts
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CONFRONT THE BRUTAL FACTS(Yet Never Lose Faith)

• Facts are better than dreams.
• A climate where the truth is heard.
• Unwavering faith amid the brutal facts.
• The Stockdale paradox

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Facts are better than dreams

• All good-to-great companies began the journey
  to greatness by confronting the brutal facts of
  their current reality.
  

• When you start with an honest and diligent
  effort to determine the truth of your situation,
  the right decisions often become self-evident.
  

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A climate where the truth is heard

• A primary task in taking a company from good
  to great is to create a culture wherein people
  have a tremendous opportunity to be heard and,
  ultimately, for the truth to be heard.

• Four basic practises
• Lead with questions, not answers.
• Engage in dialogue and debate, not coercion.
• Conduct autopsies, without blame.
• Build red flag mechanisms.

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Unwavering faith amid the brutal facts

• The good-to-great companies faced just as much
  adversity as the comparison companies, but
  responded to that adversity differently. They hit
  the realities of their situation head-on. As a
  result, they emerged from adversity even stronger.

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The Stockdale paradox

• Retain absolute faith that you can and 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.

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CONFRONT THE BRUTAL FACTS(Yet Never Lose Faith

• UNEXPECTED FINDINGS
• Charisma can be as much a liability as an
  asset
  
• Leadership does not begin just with a vision
• Spending time and trying to motivate people is
  a waste of effort

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Hedgehog Concept
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Hedgehog Concept
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Hedgehog Concept

• Understanding what you can (and cannot) be the
  best at
  
• Insight into your economic engine what is
  your denominator?
  
• Understanding your passion
• The triumph of understanding over bravado

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Getting the Hedgehog ConceptAn Iterative Process
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Hedgehog Concept

• KEY POINTS
• If you cannot be the best in the world in your
  core business, then your core business cannot
  form the basis of your Hedgehog Concept.
  
• The best in the world understanding is a
  much more severe standard than a core competence.

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Hedgehog Concept

• KEY POINTS
• Search for the one denominator that has the
  single greatest impact.
  
• Good-to-great companies set their goals and
  strategies based on understanding comparison
  companies set their goals and strategies based on
  bravado.

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Hedgehog Concept

• UNEXPECTED FINDINGS
• The good-to-great companies are more like
  hedgehogs simple, dowdy creatures that know
  one big thing and stick to it. The comparison
  companies are more like foxes crafty, cunning
  creatures that know many things yet lack
  consistency.

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Hedgehog Concept

• UNEXPECTED FINDINGS
• It took four years on average for the
  good-to-great companies to get a Hedgehog
  Concept.
  
• Strategy per se did not separate the
  good-to-great companies from the comparison
  companies.

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Hedgehog Concept

• UNEXPECTED FINDINGS
• You absolutely do not need to be in a great
  industry to produce sustained great results. No
  matter how bad the industry, every good-to-great
  company figured out how to produce truly superior
  economic returns.

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Culture of Discipline
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Technology Accelerators
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The Flywheel Effect
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The Doom Loop
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The Flywheel and the Doom Loop

• There was no one magical event, no one turning
  point. It was a combination of things. More of an
  evolution, though the end results were
  dramatic.
• Fannie Mae

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The Flywheel and the Doom Loop

• We didnt really make a big conscious decision
  or launch a big program to initiate a major
  change or transition. Individually and
  collectively we were coming to conclusions about
  what we could do to dramatically inprove our
  performance.
• Gillette

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The Flywheel and the Doom Loop

• I dont think it was done as bluntly as it
  sounds. These things dont happen overnight. They
  grow. The ideas grow and mushroom and come into
  being.
• Kimberly-Clark

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The Flywheel and the Doom Loop

• We did not make a decision that this was what we
  stood for at any specific moment. It evolved
  through many agonizing arguments and fights. I am
  not sure that we knew exactly what we were
  fighting for until we looked back and said that
  we were fighting to establish who we were going
  to be.
• Nucor

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The Flywheel and the Doom Loop

• Signs That You are on
• the Flywheel
• - Follow a pattern of buildup leading to
  breakthrough.

• Signs That You are in the Doom Loop
• - Skip buildup and jump right to breakthrough.

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The Flywheel and the Doom Loop

• Signs That You are on
• the Flywheel
• - Reach breakthrough by an accumulation of steps,
  one after the other, turn by turn of the
  flywheel feels like an organic evolutionary
  process.

• Signs That You are in the Doom Loop
• - Implement big programs, radical change efforts,
  dramatic revolutions chronic restructuring
  always looking for a miracle moment or new
  saviour.

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The Flywheel and the Doom Loop

• Signs That You are on
• the Flywheel
• - Confront the brutal facts to see clearly what
  steps must be taken to build momentum.

• Signs That You are in the Doom Loop
• - Embrace fads and engage in management hoopla,
  rather than confront the brutal facts.

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The Flywheel and the Doom Loop

• Signs That You are on
• the Flywheel
• - Attain consistency with a clear Hedgehog
  Concept, resolutely staying within the three
  circles.

• Signs That You are in the Doom Loop
• - Demonstrate chronic inconsistency lurching
  back and forth and straying far outside of the
  three circles.

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The Flywheel and the Doom Loop

• Signs That You are on
• the Flywheel
• - Follow the pattern of disciplined people
  (first who), disciplined thought, disciplined
  action.

• Signs That You are in the Doom Loop
• - Jump right to action, without disciplined
  thought and without first getting the right
  people on the bus.

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The Flywheel and the Doom Loop

• Signs That You are on
• the Flywheel
• - Harness appropriate technologies to your
  Hedgehog Concept, to accelerate momentum.

• Signs That You are in the Doom Loop
• - Run about like Chicken Little in reaction to
  technology change, fearful of being left behind.

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The Flywheel and the Doom Loop

• Signs That You are on
• the Flywheel
• - Make major acquisitions after breakthrough (if
  at all) to accelerate momentum.

• Signs That You are in the Doom Loop
• - Make major acquisitions before breakthrough, in
  a doomed attempt to create momentum.

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The Flywheel and the Doom Loop

• Signs That You are on
• the Flywheel
• - Spend little energy trying to motivate or align
  people the momentum of the flywheel is
  infectious.

• Signs That You are in the Doom Loop
• - Spend a lot of energy trying to align and
  motivate people, rallying them around new visions.

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The Flywheel and the Doom Loop

• Signs That You are on
• the Flywheel
• - Let results do most of the talking.

• Signs That You are in the Doom Loop
• - Sell the future, to compensate for lack of
  results.

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The Flywheel and the Doom Loop

• Signs That You are on
• the Flywheel
• - Maintain consistency over time each generation
  builds on the work of previous generations the
  flywheel continues to build momentum

• Signs That You are in the Doom Loop
• - Demonstrate inconsistency over time each new
  leader brings a radical new path the flywheel
  grinds to a halt, and the doom loop begins anew.