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.
All the above scenario give rise to a daunting curiosity that we don’t have great schools, great nations, great people, great governments and so on. This books explains beautifully what it takes a company or a person to become great. Obviously it is not one time game, you need to keep putting serious and disciplined efforts. Now, let’s discuss that what it takes to a company to transform itself in a great company
LEVEL 5 LEADERS
Once Harry S. Truman said that “you can accomplish anything in life, provided that you do not mind who gets the credit”. True because it perfectly defines the level 5 leadership i.e. a great mix of Humility and Modesty. Level 5 leaders channel their ego needs away from themselves and into the larger goal of building a great company. It’s not that level 5 leaders have no ego or self- interest. Indeed, they are incredibly ambitious- but their ambition is first and foremost for the institution, not themselves.
Level 5 Leader looks out the window to apportion credit to factors outside themselves when things go well (and if they cannot find a specific person or event to give credit to, they credit good luck). At the same time, they look in the mirror to apportion responsibility, never blaming bad luck when things go poorly. Level 5 leaders comes with great set of skills, like they demonstrates a compelling modesty, acts with quiet, calm determination; relied principally on inspired standards, not inspired charisma, to motivate. Also, they channel ambition into the company, not the self; sets up successors for even greater success in next generation.
Level 5 leaders never hesitated to take big decisions when it comes to company’s performance. For instance, even when Walgreen 3D was beating general market by 15 times, its CEO Charles S. Clark decided to sell the restaurant business in 5 years. Also, after joining Kimberley Clark, Darwin smith decided to sell all the paper mills and put all the proceedings In Consumer products.
FIRST WHO… THEN WHAT
All the above scenario give rise to a daunting curiosity that we don’t have great schools, great nations, great people, great governments and so on. This books explains beautifully what it takes a company or a person to become great. Obviously it is not one time game, you need to keep putting serious and disciplined efforts. Now, let’s discuss that what it takes to a company to transform itself in a great company
LEVEL 5 LEADERS
Once Harry S. Truman said that “you can accomplish anything in life, provided that you do not mind who gets the credit”. True because it perfectly defines the level 5 leadership i.e. a great mix of Humility and Modesty. Level 5 leaders channel their ego needs away from themselves and into the larger goal of building a great company. It’s not that level 5 leaders have no ego or self- interest. Indeed, they are incredibly ambitious- but their ambition is first and foremost for the institution, not themselves.
Level 5 Leader looks out the window to apportion credit to factors outside themselves when things go well (and if they cannot find a specific person or event to give credit to, they credit good luck). At the same time, they look in the mirror to apportion responsibility, never blaming bad luck when things go poorly. Level 5 leaders comes with great set of skills, like they demonstrates a compelling modesty, acts with quiet, calm determination; relied principally on inspired standards, not inspired charisma, to motivate. Also, they channel ambition into the company, not the self; sets up successors for even greater success in next generation.
Level 5 leaders never hesitated to take big decisions when it comes to company’s performance. For instance, even when Walgreen 3D was beating general market by 15 times, its CEO Charles S. Clark decided to sell the restaurant business in 5 years. Also, after joining Kimberley Clark, Darwin smith decided to sell all the paper mills and put all the proceedings In Consumer products.
FIRST WHO… THEN WHAT
There are going to be times when you can’t wait for somebody. Now you are either on the bus or off the bus. Here the main point is to first get the right people on the bus and 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.
Level 5 leaders first get right people on the bus and build a superior executive team. After that, once they have right people in the right place, they figure out best path to greatness. Also, compensation and incentives are important, but for very different reasons in good to great companies. The purpose of a compensation system should not be to get the right behaviour from the wrong people, but to get the right people on the bus in the first place and also keep them there.
Those who build great companies understand that 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. There is an important corollary to this discipline: when you decide to sell off your problems, don’t sell off your best people. For instance, when Kimberley Clark s sold the mills, Darwin smith made it clear: The company might be getting rid of its paper business, but it would keep its best people.
CONFRONT THE BRUTAL FACTS (YET NEVER LOSE FAITH)
Once Winston S. Churchill said, “There is no worse mistake in public leadership than to hold out false hopes soon to be swept away. There is nothing wrong with pursuing a vision for greatness. After all, the good-to-great companies also set out to create greatness. But, unlike the comparison companies, the good-to-great companies continually redefined the path to greatness with the brutal facts of reality.
Leadership is about vision. But leadership is equally about creating a climate where the truth is heard and the brutal facts confronted. There is a huge difference between the opportunity to “have your say” and the opportunity to be heard. Leading to good-to-great does not mean coming up with the answers and then motivating everyone to follow your messianic vision. It means having the humility to grasp the fact that you do not yet understand enough to have the answers and then to ask the questions that will lead to best possible insights.
THE STOCKDALE PARADOX
The name refers to Admiral Jim Stockdale, who was the highest ranking United States military officer in the “Hanoi Hilton” prisoner-of-war camp during the height of the Vietnam war. Tortured over twenty times during his eight-year imprisonment from 1965 to 1973, Stockdale live out war without any prisoner’s rights, no set release date, and no certainty as to whether he would even survive to see his family again. In an interview with Jim Collins he Said, “I never lost faith in the end of the story, he said when Jim asked him, “I never doubted not only that I would get out, but also that I would prevail in the end and turn the experience into the defining event of my life, which, in retrospect, I would not trade.”
HEDGEHOG CONCEPT (SIMPLICITY WITHIN THREE CIRCLES)
A Hedgehog concept is not the 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. There is difference between “Core business” and “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 can’t be the best in the world at your core business, then your core business cannot be the basis for Hedgehog concept.
Each good-to-great company built a fabulous economic engine, regardless of the industry. They were able to do this because they attained profound insights into their economics. Think about it in terms of following question: If you could pick one and only one ratio let’s say profit per employee, - to systematically increase over time, what employee would have the greatest and most sustainable on your economic engine?
Good-to –great companies did not say, “okay, folks, let’s get passionate about what we do.” Sensibly, they went the other way entirely: We should only do those things that we can get passionate about. Kimberley-Clark executives made the shift to paper-based consumer products in large part because they could get more passionate about them. As one Executive put it, the traditional paper products are okay, “but they just don’t have the charisma to a diaper.”
GETTING THE HEDGEHOG CONCEPT AN ITERATIVE PROCESS
A CULTURE OF DISCIPLINE
The Good to Great companies built a consistent system with clear constraints, but they also gave people freedom and responsibility within the framework of that system. They hired self-Discilined people who didn’t need to be managed, and then managed the system, not the people.
Whereas the good-to-great companies had level 5 leaders who built an enduring Culture of Discipline, the unsustained comparisons had level 4 leaders who personally disciplined the organization through sheer force.
Culture of discipline should not only be limited to people i.e. it takes discipline to say “No, thank you” to big oppourtunities. The fact that something is a “once-in-a-lifetime opportunity” is irrelevant if it doesn’t fit within the three circles. Also, in a good-to-great transformation , budgeting is a discipline to decide which arenas should be fully funded and which should not be funded at all. In other words, the budget process is not about figuring how much each activity gets, but about determining which activities best support the Hedgehog concept and should be fully strengthened and which should be eliminated fully.
TECHNOLOGY ACCELERATORS
On july 28,1999, Drugstore.com- one of the first internet pharmacies- sold shares of its stock to the public. Within seconds of opening bell, the stock multiplied nearly threefold to $65 per share. Four weeks later, the stock closed ashigh as $69, creating a market valuation of over $3.5 billion. Yet technology-induced change is nothing new. The real question is not, What is the role of the technology? Rather, the real Question is, how how do Good-to-Great organizations think differently about technology?
Those who turn good into great are motivated be a deep creative urge and an inner compulsion for sheer unadulterated excellence for its own sake. Those who build and perpetuate mediocrity, in contrast, are motivated more by the fear of being left behind.
THE FLYWHEEL AND THE DOM LOOP
Here’s what important. We have allowed the way transitions look from the outside to drive our perception of what they must feel like to those going through them on the inside. From the Outside, they look like dramatic, almost revolutionary breakthroughs. But from the inside, they feel completely different, more like an oraganic development process. The good-to-great companies had no name for their tarnsforamtions. There was no launch event, no tag line, no programmatic feel whatsoever.
Clearly, the good-to-great companies did get incredible commitment and alignment they artfully managed change- but they never really spent much time thinking about it. When you let the flywheel do the talking, you don’t need to fervently communicate your goals
THE DOOM LOOP
Why companies found themselves in Doom loop? Because instead of a quiet, deliberate process of figuring out what needed to be done and then simply doing it, the comparison companies frequently launched new programs- often with great fanfare and Hoopla aimed at “motivating the troops”_ only to see the programs fail to produce the sustained results.
Other reasons for Doom Loop are Misguided use of acquisitions, leaders who stop the flywheel etc.
SUGGESTIONS
Level 5 leaders first get right people on the bus and build a superior executive team. After that, once they have right people in the right place, they figure out best path to greatness. Also, compensation and incentives are important, but for very different reasons in good to great companies. The purpose of a compensation system should not be to get the right behaviour from the wrong people, but to get the right people on the bus in the first place and also keep them there.
Those who build great companies understand that 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. There is an important corollary to this discipline: when you decide to sell off your problems, don’t sell off your best people. For instance, when Kimberley Clark s sold the mills, Darwin smith made it clear: The company might be getting rid of its paper business, but it would keep its best people.
CONFRONT THE BRUTAL FACTS (YET NEVER LOSE FAITH)
Once Winston S. Churchill said, “There is no worse mistake in public leadership than to hold out false hopes soon to be swept away. There is nothing wrong with pursuing a vision for greatness. After all, the good-to-great companies also set out to create greatness. But, unlike the comparison companies, the good-to-great companies continually redefined the path to greatness with the brutal facts of reality.
Leadership is about vision. But leadership is equally about creating a climate where the truth is heard and the brutal facts confronted. There is a huge difference between the opportunity to “have your say” and the opportunity to be heard. Leading to good-to-great does not mean coming up with the answers and then motivating everyone to follow your messianic vision. It means having the humility to grasp the fact that you do not yet understand enough to have the answers and then to ask the questions that will lead to best possible insights.
THE STOCKDALE PARADOX
The name refers to Admiral Jim Stockdale, who was the highest ranking United States military officer in the “Hanoi Hilton” prisoner-of-war camp during the height of the Vietnam war. Tortured over twenty times during his eight-year imprisonment from 1965 to 1973, Stockdale live out war without any prisoner’s rights, no set release date, and no certainty as to whether he would even survive to see his family again. In an interview with Jim Collins he Said, “I never lost faith in the end of the story, he said when Jim asked him, “I never doubted not only that I would get out, but also that I would prevail in the end and turn the experience into the defining event of my life, which, in retrospect, I would not trade.”
HEDGEHOG CONCEPT (SIMPLICITY WITHIN THREE CIRCLES)
A Hedgehog concept is not the 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. There is difference between “Core business” and “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 can’t be the best in the world at your core business, then your core business cannot be the basis for Hedgehog concept.
Each good-to-great company built a fabulous economic engine, regardless of the industry. They were able to do this because they attained profound insights into their economics. Think about it in terms of following question: If you could pick one and only one ratio let’s say profit per employee, - to systematically increase over time, what employee would have the greatest and most sustainable on your economic engine?
Good-to –great companies did not say, “okay, folks, let’s get passionate about what we do.” Sensibly, they went the other way entirely: We should only do those things that we can get passionate about. Kimberley-Clark executives made the shift to paper-based consumer products in large part because they could get more passionate about them. As one Executive put it, the traditional paper products are okay, “but they just don’t have the charisma to a diaper.”
GETTING THE HEDGEHOG CONCEPT AN ITERATIVE PROCESS
A CULTURE OF DISCIPLINE
The Good to Great companies built a consistent system with clear constraints, but they also gave people freedom and responsibility within the framework of that system. They hired self-Discilined people who didn’t need to be managed, and then managed the system, not the people.
Whereas the good-to-great companies had level 5 leaders who built an enduring Culture of Discipline, the unsustained comparisons had level 4 leaders who personally disciplined the organization through sheer force.
Culture of discipline should not only be limited to people i.e. it takes discipline to say “No, thank you” to big oppourtunities. The fact that something is a “once-in-a-lifetime opportunity” is irrelevant if it doesn’t fit within the three circles. Also, in a good-to-great transformation , budgeting is a discipline to decide which arenas should be fully funded and which should not be funded at all. In other words, the budget process is not about figuring how much each activity gets, but about determining which activities best support the Hedgehog concept and should be fully strengthened and which should be eliminated fully.
TECHNOLOGY ACCELERATORS
On july 28,1999, Drugstore.com- one of the first internet pharmacies- sold shares of its stock to the public. Within seconds of opening bell, the stock multiplied nearly threefold to $65 per share. Four weeks later, the stock closed ashigh as $69, creating a market valuation of over $3.5 billion. Yet technology-induced change is nothing new. The real question is not, What is the role of the technology? Rather, the real Question is, how how do Good-to-Great organizations think differently about technology?
Those who turn good into great are motivated be a deep creative urge and an inner compulsion for sheer unadulterated excellence for its own sake. Those who build and perpetuate mediocrity, in contrast, are motivated more by the fear of being left behind.
THE FLYWHEEL AND THE DOM LOOP
Here’s what important. We have allowed the way transitions look from the outside to drive our perception of what they must feel like to those going through them on the inside. From the Outside, they look like dramatic, almost revolutionary breakthroughs. But from the inside, they feel completely different, more like an oraganic development process. The good-to-great companies had no name for their tarnsforamtions. There was no launch event, no tag line, no programmatic feel whatsoever.
Clearly, the good-to-great companies did get incredible commitment and alignment they artfully managed change- but they never really spent much time thinking about it. When you let the flywheel do the talking, you don’t need to fervently communicate your goals
THE DOOM LOOP
Why companies found themselves in Doom loop? Because instead of a quiet, deliberate process of figuring out what needed to be done and then simply doing it, the comparison companies frequently launched new programs- often with great fanfare and Hoopla aimed at “motivating the troops”_ only to see the programs fail to produce the sustained results.
Other reasons for Doom Loop are Misguided use of acquisitions, leaders who stop the flywheel etc.
SUGGESTIONS
- Jim Collins and his team started his research with 1500 companies and slowly narrowed it down to 11 Good-to-Great transformations but there is only one company i.e. Walgreens that satisfy the whole Good-to-great Transformation process. So saying that he founded 11 Good-to-Great companies is Questionable.
- Only quantitative Measures are used to define Good-to-Great companies i.e. a Good-to-Great must outperform the general market by several times in order to be great and less focus is put on the other subjective behavioural aspects of business.
[Abhishek Jangra is a student of M Com at the University of Delhi]
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