This book by Jim Collins is an easy read. I picked it up just before a trip and couldn't put it down. So I took it on the plane and read through 1/3 of it by the time the 7 hours flight is over.
This book struck a chord with me as I am living through the lifecycle of a maturing start-up company. I can recall examples of each point that Collins made in his book from my experience. Things that we done right, and mistakes that we made. At the end of his book, he actually bring this book, which is about going from good to great for a matured company, together with his first book, build to last, which is about new companies. He said that the principles apply nevertheless. And my own personal experience would agree.
With this type of book one can always argue that the author is just writing up common sense ideas. Of course, but common sense is hard to find sometimes. What Collins did is to study companies that made a dramatic transition. Looking at companies commulative stock returns, compare with the market and direct comparison companies, Collins identify companies that, at some transition point, resulted in great performances compare with all others. Specifically, at least three times the market performance over fifteen years.
What I have here are some notes from the keypoints in the book for myself. You really need to read the entire book to understand what this is all about !
Level 5 Leadership
These are the five progressive levels of leadership:
- Level 5: Level 5 Executive
Builds enduring greatness through a paradoxical blend of personal humility and professional will
- Level 4: Effective Leader
Catalyzes commitment to and vigours pursuit of a clear and compelling vision, stimulating higher performance standards
- Level 3: Competent Manager
Organizes people and resources towards the effective and efficient pursuit of predetermined objectives
- Level 2: Contributing Team Member
Contributes individual capabilities to the achievement of group objectives and worked effectively with others in a group settings
- Level 1: Highly Capable Individual
Makes productive contributions through talent, knowledge skills, and good work habits.
Humility + Will = Level 5 Leadership
To achive level 5 leadership skills, one must combine personal humility and professional will:
Creates superb results, a clear catalyst in the transition from good to great.
Demonstrates a compelling modesty, shunning public adulation; never boastful.
Demonstrates an unwavering resolve to do whatever must be done to produce the best long-term results, no matter how difficult.
Acts with quiet, calm determination; relies principally on inspired standards, not inspiring charisma, to motivate.
Sets the standard of building an enduring great company; will settle for nothing less.
Channels ambition into the company, not the self; sets up successors for even greater success in the next generation.
Looks into the mirror, not out the window, to apportion responsibility for poor results, never blaming other people, external factors, or bad luck.
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.
First Who, then What
Collins' point is:
"...not just about assembling the right team - that's nothing new. The main point is to first get the right people on the bus (and the wrong people off the bus) before you figure out where to drive it. The second key point is the degree of sheer rigor needed in people decisions in order to take a company from good to great."
The purpose of compensation is not to keep "motivating" the right behaviors from the wrong people, but to get and keep the right people in the first place.
great vision without great people is irrelevent
- I live by this one: When in doubt, don't hire - keep looking. (Corollary: A company should limit its growth based on its ability to attract enough of the right people.)
- When you know you need to make a people change, act. (Corollary: First be sure you don't simply have someone in the wrong seat.)
- Put your best people on your biggest opportunities, not your biggest problems. (Corollary: If you sell off your problems, don't sell off your best people.)
Confront the Brutal Facts
The Stockdale Paradox
Retrain 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.
- Lead with questions, not answers
- Engage in dialogue and debate, not coercion.
- Conduct autopsies, without blame.
- Build red flag mechanisms that turn information into information that cannot be ignored.
The Hedgehog Concept (Simplicity within the three circles)
The triumph of understanding over bravado -- requires a deep understanding of three intersecting circles translated into a simple, crystalline concept -- the hedgehog concept.
The three circles are:
- What you can be the best in the world at
- What drives your economic engine
- What you are deeply passionate about
A hedgehog concept is not a goal to be the best, a strategy to be the best, an intention to be the best, a plan to be the best. It is an understanding of what you can be the best at.
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?
A Culture of Discipline
Build a culture full of self-disciplined people who take disciplined action, fanatically consistent with the three circles, the hedgehog concept.
Freedom and responsibility within a framework -- build a consistent system with clear constraints, but give people freedom and responsibility within the framework of that system. Hire self-disciplined people who don't need to be managed, and manage the system, not the people.
Bureaucratic culture arises to compensate for incompetence and lack of discipline, which arise from having the wrong people on the bug in the first place.
Discipline means fanatical adherence to the Hedgehog Concept and the willingness to shun opportunities that fall outside the three circles.
Technology is an accelerator of momentum, not a creator of it.
Flywheel and the Doom Loop
Sustainable transformations follow a predictable pattern of buildup and breakthrough. Like pushing on a giant, heavy flywheel, it takes a lot of effort to get the thing moving at all, but with persistent pushing in a consistent direction over a long period of time, the flywheel builds momentum, eventually hitting a point of breakthrough.