Good to Great, Part Two

I've already introduced, in an earlier posting, the new book by Jim Collins, Good to Great. Having taken issue with a couple of his points in that context, let me reiterate here how much I like the book. I think it's well researched, clearly thought through, and compellingly written. Collins wanted to isolate the factors that could take a company from a decent level of performance, financially, to an excellent level of sustainably high returns, well above market average. And he succeeded in defining a cluster of concepts that can contribute mightily to any company's future success. The simple central concept of the book is a threefold one: Disiplined people engaging in disciplined thought and disciplined action tend to elevate their ventures. The book's content is then spinning out what this amounted to in the companies studied.

As I mentioned last time, the first ingredient for a "good to great" process, according to Collins, is a certain kind of leadership, one embodying both personal humility and a determined will to get things done. The second ingredient is getting the right people on board. One of the virtues of Collins' book is his realization of the importance of the human factor. The third ingredient for the making of a "good to great" process is a two-fold mindset on the part of all the people involved that Collins refers to as "The Stockdale Paradox," in honor of former POW, Admiral James Stockdale, whose life and thought has embodied it. This mindset involves a strong unshakeable faith that we will prevail, along with an unflinching ability to look the most brutal negative realities in the eye. In other words, the confidence success takes is never to be purchased at the price of self-delusion. Wise confidence is rooted in truth - an ability to appraise our circumstances truthfully, and a true belief in our ability to create better circumstances. Collins says "...every good to great comapny faced significant adversity along the way to greatness..." and the adds:

"In every case the management team responded with a powerful psychological duality. On the one hand, they stoically accepted the brutal facts of reality. On the other hand, they maintained an unwavering faith in the endgame, and a commitment to prevail as a great company despite the brutal facts." (83)

Collins hammers on the point that good to great leaders create a climate where people are not afraid to learn the truth, communicate it, and face it. I loved seeing this emphasis on the importance of truth - the ability to get it and the ability to face it. As readers of this website may realize, my own conviction (conveyed in the book If Aristotle Ran General Motors) is that the four transcendental values of Truth, Beauty, Goodness, and Unity are the only secure foundations for sustainable success. They must be respected and nurtured by any enterprise that aspires to long term excellence. It's nice to have see this philosophical commitment born out in the facts researched by Collins and company.

The fourth ingredient in any movement from good to great, according to Collins, is what he calls "The Hedgehog Concept." This strange term, taken from a famous essay by philosopher Isaiah Berlin, who himself took over an old parable about a fox and a hedgehog to contrast two very different approaches to life. The fox, according to the parable, and to Berlin, knows many things. The hedgehog knows only one. The fox has many ways of chasing, attacking, and defeating his prey. The poor simple hedgehog has only one form of defense, but it's completely effective, and defeats even the wily, multi-talented fox. To put very simply the Collins version of the Berlin version of the parable, the fox loves diversity and complexity, dynamism and difference. The hedgehog loves simplicity and consistency. And that wins in the end.

Collins argues that the good to great companies were organizations that found a "hedgehog concept" and built everything on it, working consistently with in the intersection of three circles, and we each need to do the same:

Circle One: What can you be best in the world at?
Circle Two: What drives your economic engine?
Circle Three: What are you deeply passionate about?

Where these three circles intersect is your Hedgehog Concept, the path you should follow and stick to. According to Collins, it's the hedgehogs who change the world. "Freud and the unconscious, Darwin and natural selection, Marx and the class struggle, Einstein and relativity, Adam Smith and the division of labor - they were all hedgehogs. They took a complex world and simplified it." (91) What's your way of simplifying things? What's your organizing concept? Our job, Collins makes clear, is to discover the answer to that question and then live the answer, focused on what we can bring the world. Companies that try to do too many things, organizations that make acquisitions all over the place in industries they don't really know, chasing empire building and growth for its own sake, are often glamorus foxes, but don't find their way to building and sustaining the sort of greatness Collins is profiling.

Know thyself! Be true to yourself! Not new advice, but words of wisdom we do well to heed. And it's advice we need to be reminded of now and then.

Ingredient five in the good to great formula: Use technology, don't chase it or depend on it as the main cause of success.

Ingredient six: "The Flywheel and the Doom Loop." Without going into the metaphorical detail, the point Collins wants to make here is that the journey from good to great tends to consist in a slow, steady, consistent process, resulting ultimately in a breakthrough, rather than in some incredible flash of brilliance. The process of looking for one major leap after another, running after one management or business gimmick after the next, is the "doom loop" that demoralizes people and makes ultimate success of the right sort much less likely.

Whether you like the lingo or not, whether flywheels, doom loops, hedgehog concepts, or all the other coinages in the Collins book resonate, or just seem strange, the ideas are for the most part very good ones, and well expressed. Anyone who wants to go from good to great must take them very seriously and act along their lines. I'm glad to see such a perspicacious business book on the shelf.

Come back next week for more discoveries!

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