Chapter 1Good Is the Enemy of Great

Team 2Shawn Buck Ashley BurnettWhitney Horton Kelly RiesterMickea Smith Sam Snelling Jennifer Shotts

Introduction The reason we do not have many GREAT

things in our society is because we settle for simply GOOD things.

Bill Meehan of Mckinsey & Company challenged Jim Collins by calling his previous book “useless.”

Introduction Collins began by identifying companies

who made the leap from good to great and sustained those results for 15 years.

The good to great examples average cumulative stock returns 6.9 times the general market following their transition points.

If you invested $1 in a mutual fund of a good to great company in 1969, by Jan. 1, 2000 it would have multiplied 471 times, compared to the 56 in the general market.

Phase 1 21 people in teams of 4-6.

First, the company had to demonstrate the good to great pattern independent of its industry.

Finding companies that went from good to great. 15 year cumulative stock returns at or below the genre stack

market, punctuated y a transition point, then cumulative returns at least three times the market over the next 15 yrs.

Such companies as: Boeing, Coca-Cola, GE, Hewlett-Packard, Intel, Johnson & Johnson, Motorola, Pepsi, Procter & Gamble, Wal-Mart, Walt Disney Companies beat the market by only 2.5 times over the yrs. 1985-

2000. Fannie Mae beat GE and Coco-Cola, Walgreens beat Intel.

It is possible to turn good into great in the most unlikely of

Phase 1

Company

Results from transition point to 15 yrs. Beyond Transition Point Year - Year

Abbott 3.98 times the market 1974-1989

Circuit City 18.50 times the market 1982-1997

Fannie Mae 7.56 times the market 1984-1999

Gillette 7.39 times the market 1980-1995

Kimberly-Clark 3.42 times the market 1972-1987

Kroger 4.17 times the market 1973-1988

Nucor 5.16 times the market 1975-1990

Philip Morris 7.06 times the market 1964-1979

Pitney Bowes 7.16 times the market 1973-1988

Walgreens 7.34 times the market 1975-1990

Wells Fargo 3.99 times the market 1983-1998

Phase 2: Compared to What?

The crucial question is: “What did the good to great companies share in common that distinguished them from the comparison companies?”

•In comparing, you want to look at the similarities but you want to find what made the company great.

•In the Chapter Collins gives the Comparison of an Olympic gold metal winner. He says that you may think that a coach can make a Gold metal winner, but if you look at the whole Olympic team they all have coaches. So why did they not win the gold?

•What made Michael Phelps win 8 gold medals and not his team mates?

Phase 2: Compared to What? In the research, Collins and his group selected

two sets of comparison companies

1. “Direct Comparison”: Companies within the same industry, with the same opportunities, and resources. But these companies were not considered “Great”

2. “Unsustained Comparison”: Companies that made a short term jump from good-to-Great but not for 15 years or longer.

This study included 28 Companies Total

Good-to-Great Companies

AbbotCircuit CityFannie Mae

GilletteKimberly-Clark

KrogerNucor

Philip MorrisPitney Bowes

WalgreensWells Fargo

Unsustained ComparisonsBurroughsChrysler

HarrisHasbro

RubbermaidTeledyne

Direct ComparisonsUpjohn

SiloGreat Western

Warner-LambertScott Paper

A&PBethlehem Steel

R.J ReynoldsAddressograph

EckerdBank of America

Phase 3: Inside the Black Box

Totals: 10.5 people years thousands of articles and interview transcripts millions of bytes of computer data

Essentially, the team sought to build a theory from the ground up, which could identify ways of building and sustaining greatness.

“The dogs that did not bark” were ways in which stereotypical ideas of successful companies were not portrayed in the 11 good to great companies.

Lessons learned from the Dogs Research found:

I. Celebrity leaders had a negative correlation on the good to great companies.

II. There is no evidence of extravagant long term strategies amongst G2G companies.

III. G2G companies pay no attention to motivating and managing their people.

IV. G2G companies are not always in high profile, profitable industries. Greatness is a matter of conscious choice rather than shier luck.

Lesson learned: I. Alan McNally: Is there

ever any news articles praising or condemning the actions of this man?

II. The companies had simple, well defined strategies which lead to sustained profits.

III. With the success of the company, comes job security and an internal motivation.

IV. Kimberly-Clark? Abbott? Pitney Bowes?

Phase 4: Chaos to Concept

DataAnalysesDebates“Dogs that did not bark”

End result – Organized compilation of findings

Goal:

Process: •Developing ideas•Testing the ideas against data•Revising ideas that did not stand up to the data•Building a framework of the ideas that worked cohesively with the data•Comparing this framework to evidence•Rebuilding the framework with new ideas•Repeat until desired result was achieved The end result are the concepts explored in later chapters of this book

Preview of chapter context

Level 5 leadership These leaders are not high-profile and do not have big personalities.

First who…then what Instead of setting a new vision or strategy, they first got the right people

Confront the brutal facts All of the good to great companies found that they had to call the Stockdale paradox.

The hedgehog concept( simplicity within the three circles) Transcending the curse of competence is require when going from good to great companies.

Preview of chapter context

A culture of discipline All companies have culture and some companies have discipline.

Technology accelerators Technology is never a cause of a decline or greatness in a company.

The flywheel and the doom loop The transformation never happens all at once.

From good to great to built to lastGood to great is a prequel of built to last. Good to great concepts sustain great results +built to last concepts = enduring great company.

Conclusion Search for timeless physics “There’s nothing new under the sun” Not about old or new economy Applying timeless principles Science behind creating great organizations of any type

A human problem

Key Ideas1. Good is the enemy of great.2. There’s no need for a famous CEO,

innovative technology, or a solid industry to launch or become a great company.

3. Engineering may change, but the human aspects will endure.