Key Points

• “Level 5 Leaders” - leaders who have both “personal humility” and “professional will”. These are not rock-star leaders whose companies go into decline when they move on. They are diligent and hard working - more bite than bark. Celebrity leaders often work for a time, but appear to be damaging in the long run, because they don’t create sustained results.

• Get the right people on the bus - that has to happen before the “what” decisions are taken. That can change if you have the right people, but the wrong people will certainly make the enterprise fail.

• You must always be willing to “confront the brutal facts”. Don’t ignore reality in favor of what your hopes reflect it to become. Only by having accurate information can you achieve success.

• The “Hedgehog concept” means having a simple, extremely clear concept of what their business is. That business is something they can

  1. Make money at
  2. Be passionate about, and
  3. Be the best in the world at These are also known as “The Three Circles”

• A culture of self-discipline is critical, because it creates an environment where people work within a defined system, and yet, because the confines of the system are known, gives them more freedom to act within that system.

• Technology is an accelerator, not an agent of change. Good companies use it to execute better, but it won’t save a mediocre company.

• “The Flywheel” refers to the idea of momentum - keep pushing in one direction and you’ll build up a lot of it that will help you to overcome obstacles. Momentum is built a little bit at a time - it’s not a dramatic, revolutionary change, but constant, diligent work.

Summary

The idea that sparked this book was to answer questions about how good companies might become great companies, and how they went about doing so.

Methodology

The study looks at companies from 1965 to 1995, looking for those that, for 15 years, either tracked or underperformed the stock market, followed by a transition, and subsequently returning at least 3 times the stock market for at least 15 years. The goal was to eliminate “flash in the pan” success from the results. Further filtering was performed in order to ensure that companies also outperformed their industries, so as not to include spurious results showing entire industries that grew by leaps and bounds in a given period. Eleven companies were located that matched these criteria, and were studied in depth, and compared to competitors in their fields

The companies studied were:

• Abbot Laboratories
• Circuit City
• Fannie Mae
• Gillette
• Kimberly-Clark
• Kroger
• Nucor
• Philip Morris
• Pitney Bowes
• Walgreens
• Wells Fargo

Level 5 Leaders

All the companies studied had what Collins describes as “Level 5 Leaders”. Despite sounding like something from a space-alien worshiping cult, what the term refers to is an individual who is very humble on a personal level, but who possesses a great deal of drive and desire to succeed, where “success” is not personal, but defined by creating something great that will outlast their time at the helm. These are people with an unwavering will and commitment to do what is necessary to drive their organization to the top. Most of the good to great executives discussed luck as an important factor in their success [and perhaps cynical readers of The Black Swan will agree with that assessment more than the factors Collins cites - davidw]. Level 5 leaders, are, in any case, the kind of people who do not point to themselves as the cause for an organization’s success. The chapter closes with a discussion of whether Level 5 Leaders are born, or made, with the conclusion that many people probably have the kernel of abilities and attitude necessary to attain that status.

Notes

Interestingly, CEO salaries don’t seem to be a major factor in terms of their correlation with “good to great” companies.

Links

http://www.jimcollins.com/

Detailed criticism of the book: Why “Good to Great” Isn’t Very Good