Tuesday, September 4, 2007

"Good to Great" To "Built to Last"

“Good is the enemy of great”, is what the first line of the book states. The book analyses 15 “Good to great companies” which had phenomenal results, some due to shrewd strategies, some due to innovative products and some due to changing consumer needs. There is another set of 15 companies called “comparison companies” which are compared with the “good to great companies” on several parameters.

The beauty lies in the way the author compares the two sets of companies based on different parameters like the average tenure of CEO, the number of mergers and acquisitions done by the company, the kind of industries they were in and the growth rate offered by the industry. Most of the readers might try to search for a common thread between those 15 companies to know what led to the greatness of those firms. But instead of following that route, I feel what Jim Collins have tried to convey is, there are different routes to achieve greatness and a company need not imitate other firms in pursuit of greatness.

The core ideology of the book lies in the flywheel concept illustrated below. The key points that the author discusses are: -
- Level 5 leadership
- First Who Then What
- Confront the brutal facts
- Hedgehog concept
- Culture of discipline
- Technology accelerates

The classic example of Level 5 leadership is of the legendary CEO of Gillette, Colman Mocklar who formulated great strategies for the company and saved it from the corporate raiders like Revlon. The takeover bid initiated by Ronald Perelman, CEO of Revlon itself can become a classic case study for the MBA coursework.

The author also places great emphasis on the right people employed by the company at the right position during the critical juncture of the company’s evolution. He reiterates

the point that it’s not just the people but the right people who make the critical difference to the company.

The evolution of the company happens sequentially as shown in the figure above but the quantum leap for the company comes only after the basics are in place. The analogy of Winston Churchill setting up the statistical department for the British Government during the Second World War fits beautifully for the firms as well. These analogies used by the author makes the concepts self-explanatory.

The most important concept that deserves special mention is the “Hedgehog Concept”. The hedgehog is a genetic mix-up between a porcupine and a small armadillo which can take any of the two shapes and always manages to beat the fox by taking one of the forms. The hedgehog concept emphasizes the important concept and ignores the mundane ones. Freud and the unconscious, Darwin and natural selection, Marx and class struggle, Einstein and relativity, Adam Smith and division of labor are all hedgehogs.

Transition from good to great requires a clear and deep understanding of the three intersecting circles translated into a simple, crystalline concept (the hedgehog concept). The figure below illustrates the three circles of the hedgehog concept.

The book “Good to Great” was published after “Built to Last”, but when you complete reading both the books, you realize that “Built to Last” actually fits to become a sequel of “Good to Great”. Built to last, talks about how companies achieve iconic status after achieving the greatness. There are several examples of those iconic companies (3M, Walt Disney, HP, Sony etc) without which it is difficult to imagine specially an American society. They have altered the way people live, think and feel. How many companies can claim that one out of every 8 American employees have worked in that company? How many companies can assert that they have brought happiness to the lives of maximum number of people in the world? How many companies can master the concept “Small is beautiful”?

And that’s exactly what comprise the spirit of the iconic corporations of all times. They moved beyond the sole motive of profit and altered the lives across generations.

To understand these changes and impact, try reading both the books. Definitely “MUST MUST READ” for all lovers of business……….!!!!

Rajeev Jain
(Batch of 2008)


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