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Rating: 5
A Powerful Antidote for the Quarterly Profit Trap

In times of economy downturn and falling quarterly profit, reducing workforce and defaulting inventories seem to be a quick answer to restore corporate health. Unfortunately, they often destroy the weak foundations on which many corporations are built today. The advices and rescue efforts from management gurus often fail to work. This leads one to wonder if there are better solutions. And there are. According to Mr. Collins and his research team, companies who make the leap from good to great can survive and even prosper during tough times.

The research findings are so simple that one may find them hard to swallow. But that's precisely the point. One of the most powerful formula in the world is not a complex integral but a simple equation: E=MC2.

I think the findings are best represented as a framework for businesses to operate. They enable business owners and managers to analyze both the financial and humanistic aspects of their business. Making money is important but we all know it's not the only reason why we are in business. Passion, customer values, social contribution, etc. are some additional forces. This book helps to link them together and allow the organization to make the transformation from good to great.

What is lacking is specific techiques to practice the framework/principles. However, there are plenty of books and management gurus out there who can help. It will be up to the readers to select and use what work for them. This book is not an answer for all but only for those who want to become great!

Rating: 5
Achieving and continuing spectacular business success

In 1994, Jim Collins and Jerry Porras wrote one of the most successful management books of the last decade: Built to Last. Collins and Porras had studied 18 visionairy companies, many of which had existed for 60 years or more. These companies had a strong focus on values and people and great ability to to learn and exchange knowledge. They gave less priority to maximalizing shareholder value but paradoxically outperformed the market enormously. In a conversation with Jim Collins, McKinsey director Bill Meehan said he, too, loved the book, but added: "Unfortunately, it's useless". He explained why. The companies featured in Built to Last had always been great companies. But because most companies are just good (not great) they are not interested in a book which shows how to stay great (Built to Last) but in a book that shows how to become great. The matter inspired Collins. He built a research team of 15 people and started a 5 year study.

The team tried to identify companies that had jumped from good to great and had managed to continue their great growth for at least 15 years. They found 11 of these (Abbott, Circuit City, Fannie Mae, Gilette, Kimberly-Clark, Kroger, Nucor, Philip Morris, Pitney Bowes, Walgreens, Wells Fargo). These good-to-great companies (GTG's) outperformed the market by a factor 6.9 in the 15 year period of the analysis! (General Electric outperformed the market 'only' by a factor 2.8 between 1985 and 2000).

The study focused on the question: what did the GTG's have in common that distinguished them from comparable companies in comparable circumstances? The GTG's were compared with two sets of other companies: 1) the direct-comparisons: companies within the same sector and in comparable circumstances, 2) the unsustained comparisons: companies that had had a breakthrough but that had not been able to continue their success. Collins intended to, from the ground up, build a theory which could explain the successful transformation of the GTG's.

As it turned out, all of the GTG's had a period of build up, preparation (often lasting many years) before the breakthrough moment. Three phases could be identified:

PHASE 1: DISCIPLINED PEOPLE
1. LEVEL 5 LEADERSHIP: contrary to the expectation, leaders of the GTG's turned out to be quiet, self effacing and even shy. At the same time, however, they were very determined. Mostly, they were leaders that came from within the company and that have remained unknown to the greater public.

2. FIRST WHO...THEN WHAT: also contrary to what you might expect was that GTG's first got the right people on the bus and the wrong people off and only then focused on strategic direction and vision.

PHASE 2: DISCIPLINED THOUGHT
3. CONFRONT THE BRUTAL FACTS (..BUT NEVER LOSE HOPE). Characteristic was a combination of realism and hope.
4. THE HEDGEHOG CONCEPT (SIMPLICITY IN THREE CIRCLES): just like a hedgehog, the GTG's seemed to have a very simple but effective success formula: all of the activities of the company had to lie within the intersection of the following three circles: 1) what can we become best in the world at? 2) what are we passionate about? 3) what can we make money with?

PHASE 3: DISCIPLINED ACTION
5. CULTURE OF DISCIPLINE: the GTG's turned out to have a culture of discipline that made hierarchy and bureaucracy largely superfluous.
6. TECHNOLOGY ACCELERATORS: none of the GTG's had technology as a cause of the success, but technology did play the role of accelerator of the success.

Collins rather convincingly demonstrates the validity of this model. All of the GTG's showed these practices throughout the 15 year period, while none of the direct comparisons did. The unsustained comparisons showed some of these practises often right until the moment of their decline.

Looking at the share price development of the GTG's, you might expect that there has been a clear marking point of the transformation because their share price stays rather flat at first (for many years) and then just suddenly takes off and keeps on going up. An important finding of the team was, however, that there were nó special change programs, and nó breakthrough decisions or products. On the contrary, the process evolved very fluently. To eplain, Collins uses the metaphor of the flying wheel. When you start to turn this wheel it goes heavily and moves slowly. But by continuously keeping on turning the wheel, it starts to build momentum and then, just suddenly, a point is reached at which the wheel turns at great speed without you having to turn it any harder than at first. Is this the practice of many companies? Not at all! The reality of many companies is nót consistently following a chosen path but rather swinging from one hype to another.

I think this research evokes one principal issue. That the concept 'great' is operationalized in a financial way is easily understood from a practical standpoint. This criterion is clear and rather easily obtained and makes it easy to compare the companies scientifically. But is 'great' the best word to describe spectacular financial success? Does their financial success necessarily make GTG's 'great'? Wouldn't that be like saying that Bill Gates en Silvio Berlusconi are great people while implying Martin Luther King and Mother Theresa are not?

But, having said that, demonstrating how companies achieve and continue spectacular financial success, in itself, is extremely interesting and valuable. This is a terrific book that, I think, has the quality to equal or perhaps even surpass the success of Built to Last. Unlike most management books (which contain creative but highly speculative ideas), the message of this book is based on well-designed research and mindful interpretation of results that is explained and justified terrifically. Despite this thoroughness, the book remains a pleasant read. A pity that the book does not offer some more practical suggestions to help readers get started. I think that would have made it even better.

Rating: 5
Study on Critical Factors for Organisational Greatness

Collins' curiosity and clear study brings to light some of those factors that contribute to greatness. These findings are grounded within individual, teachable 'points of view' which are easily applied to large organisations and applicable to small busness as well.
Collins puts his findings in clear accessable language. Including the finding that is responsible for the title... That good is the enemy of great.
I highly recommend this book/CD to leaders that are enaged with designing futures and those that work with them. It is core reading for key teams. It has made a significant difference in being able to articulate powerful conversations with teams about that which is tacit and critical to success. Giving common language and principles to engage with. A great study book for learning teams.