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Jim Collins defined what it takes to be a great company, vs. a merely good company. His overall prescription for ""good to great"" is an effective approach to strategic management. The good-to-great approach --

  • disciplined people --
    • Level 5 leadership
    • focusing first on 'who', not 'what' -- The right people, following the right disciplines, will make an organization great. These are the people who will develop and execute the plans to achieve greatness. Strategy development does not precede getting the right people to carry it out. The right people develop, own, and achieve the right strategy. This is the principle of ""first who, not what"". The rigor and discipline of getting and keeping the right people requires not compromising, acting to insure the people are the right ones, insuring the best people get the biggest opportunities, not the biggest problems.
  • disciplined thought --
    • confronting the brutal facts - insuring that facts rule over emotions, traditions, notions, etc. There is what Collins call the Stockdale Paradox in confronting facts -- 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.
    • Create a climate where the truth is heard --
      1. Lead with questions, not answers
      2. Engage in dialog and debate, not coercion
      3. Conduct autopsies without blame
      4. Build ""red flag"" mechanisms - to turn information that is critical to competitive advantage into information that cannot be ignored.
  • the Hedgehog concept -- continually focusing on defining, refining, and acting within the intersection of what you are passionate about, what you can make money at, and what you can be best in the world at
  • disciplined action --
    • culture of discipline
    • technology accelerators - technology follows from everything else, it is an enabler, an accelerator of momentum. Pioneered technology must be pioneered with the Hedgehog Concept.

    flywheel concept - the three disciplines listed above are exercised through continually cycling through the process of asking questions, dialogue and debate, executing decisions, and performing autopsies and analysis, in pursuit of and refining the Hedgehog concept and its application to the business enterprise. This process is conducted by ""The Council"" - made up of the lead executive, five to twelve people with mutual respect, deep business knowledge, an ongoing commitment to the process and meeting as often as weekly but at least quarterly.

    Momentum builds from the ongoing cycle of steps forward that are consistent with the Hedgehog Concept, accumulation of visible results, and people energized by visible results, which builds momentum to take the next steps forward.

    being right -- Collins frames up the notion that business leaders can in fact learn to ""be right"", that by being right they can create a ""great"" organization as opposed to a merely ""good"" organization, and that being ""great"" is no more difficult than being good, and in fact, may be easier. A deconstruction of being right looks something like --

    • ""If you have Level 5 leaders
    • who get the right people on the bus,
    • if you confront the brutal facts of reality,
    • if you create a climate where the truth is heard,
    • and work within the three circles of the Hedgehog Concept,
    • if you frame all decisions in the context of a crystalline Hedgehog Concept,
    • if you act from understanding, not bravado -
    • if you have a Council with a cyclical management process involving the key strategic thinkers in the business that asks questions, dialogues & debates, provide executive decisions, and performs autopsies and analysis in order to define the strategic focus and stick to the strategic focus
    • if you act from understanding, not bravado
    • if you stop doing the wrong things
    • if you do all these things, then you are likely to be right on the big decisions.""

    Definition of a good-to-great company --

    • 15 years of cumulative total stock returns 3x the general market beating market returns (actual was 6.9x for the 11 Fortune 500 companies that met this criteria) after a transition point.
    • The transition point had to be preceded by a cumulative stock return of no better than 1.25x the market for the 15 years preceding the transition point.
    • This pattern must hold true when comparing the company vs. its industry as well as vs. the general market.
    • Latest transition point, 1985.
    • Several other considerations made to insure a bona fide transition from ""Good"" to ""Great"" performance.
    • 11 companies met this criteria from the Fortune 500 from 1965 - 1995

    The good-to-great companies --

    • Abbott - 1974
    • Circuit City - 1982
    • Fannie Mae - 1984
    • Gillette - 1980
    • Kimberly-Clark - 1972
    • Kroger - 1973
    • Nucor - 1975
    • Philip Morris - 1964
    • Pitney Bowes - 1973
    • Walgreens - 1975
    • Wells Fargo - 1983

    Source: Jim Collins, Good To Great, Harper Business, 2001 and