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Good to Great

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Sahnila Enam-Varughese

on 1 August 2013

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Transcript of Good to Great

Good To Great
By Jim Collins
Presented by:
Sahnila Enam-Varughese
Patrick Farrell
Wendy Hutchinson
Ryan Pierce

Humility + Will = Level 5 Leader
Embodies a paradoxical mix of personal humility and professional will
Ambitious first and foremost for the company and not themselves
Sets up their successors for even greater success then themselves
First Who... Then What
First get the right people on the bus, then decide where to drive it.
There are three practical disciplines for being rigorous in people decisions:
When in doubt, don't hire.
When you need to make a people change, act.
Put your best people on your biggest opportunities, not your biggest problems.
The right people debate vigorously, yet unify behind decisions, regardless of parochial interests.
Stockdale Paradox
Retain faith that you will prevail
Confront the brutal facts of reality
Have a climate where the truth is heard
Start with questions
Engage in dialog
Conduct autopsies, without blame
Build red flag mechanisms
Level 5 Leadership
Clock Building, Not Time Telling
Company continues after they leave
Genius of AND
Humility AND Professional Will
Core Ideology
Purpose beyond their own success
Preserve the Core/Stimulate Progress
Relentless in progress towards results
Four key concepts from Build to Last
Clock Building, Not Time Telling
Genius AND
Core Ideology
Preserve the Core/Simulate Progress
Getting to "Built to Last"
Built to Last (BTL) was written before Good to Great (GTG) but is actually a sequel
GTG was written in response to an observation from Bill Meehan of McKinsey & Co.
The companies written about in BTL were always great.
The majority of companies are good companies, but how can they become great?
Good-to-great comes about by a cumulative process - step by step, action by action, decision by decision -
Crawl - Walk - Run
What are You Deeply Passionate About
Find out what you are passionate about
Values or Mission of Company
What Drives Your Economic Engine
Choose An Economic Denominator
Profit per x
Understanding of drivers of success
What can you be the Best in the World At
Face the Brutal Facts
Build an Understanding
Create a simple idea
Core Competency?
Abbott Labs
(And What You Cannot)
Hedgehog Concept
Hedgehog Development
No focus on growth
Average development time: 4 years
Only take opportunity that coincides
Faster decision making
First Who, Then What
Clock Building, Not Time Telling
First who, Not First What
Genius of AND
Right People On AND Wrong Off
Core Ideology
Fitting values is more important than skills
Preserve the Core/Stimulate Progress
Internal promotion
Clock Building, Not Time Telling
Climate where the truth is heard
Red flag mechanisms
Genius of AND
Stockdale Paradox
Core Ideology
Clarifies the values an organization truly holds as core vs. those it would like to hold core
Preserve the Core/Stimulate Progress
What must be done
Hedgehog Concept
Clock Building, Not Time Telling
Councils build the clock
Genius of AND
Understanding AND Simplicity
Core Ideology
Passion about core values
Preserve the Core/Stimulate Progress
Great goals are in the center of the circles
Culture of Discipline
Clock Building, Not Time Telling
Culture of Discipline, Not Disciplinarian
Genius of AND
Freedom AND Responsibility
Core Ideology
Culture keeps only those that hold the core values
Preserve the Core/Stimulate Progress
Gives more freedom to respond as they see best
Confronting the Brutal Facts
Technology Accelerators
Clock Building, Not Time Telling
Technology is the key part of the clock
Genius of AND
Shun fads AND pioneer application
Core Ideology
Technology is subservient to values
Preserve the Core/Stimulate Progress
Right technology accelerates flywheel
Flywheel, Not Doom Loop
Clock Building, Not Time Telling
Sustained building of momentum
Genius of AND
Evolutionary, incremental process AND revolutionary, dramatic results
Core Ideology
Doom loop = "Who are we? What do we stand for?"
Preserve the Core/Stimulate Progress
Consistency and cumulative building of momentum lead to conditions for instilling core values while stimulating change and progress
What did YOU get out of Good to Great?
Technology Accelerators
Case: Walgreens vs. drugstore.com
Technology as an Accelerator, Not a Creator of Momentum
The Technology Trap
Technology and the Fear of Being Left Behind
Case: Walgreens vs. drugstore.com
July 28, 1999 drugstore.com IPO
Within seconds of opening bell stock price multiplied threefold to $65 per share
Company: less than 500 employees and only started selling products 9 mo. ago
Dot-Com Era: Not "Built to Last" but a "Built to Flip" mentality
Walgreens was a "crawl, walk, run company"
Stock suffer w/ invasion of dot-coms, lost over 40% of its price leading up to drugstore.com IPO
Technology as an Accelerator, Not a Creator of Momentum
Fannie Mae: transition began in 1981
Technology change came in the 90s "Second Wind"
Loan-approval time: decreased from 30 days to 30 minutes
Lowered costs associated with loans by $1,000 per loan
Supported concept to lower the cost of becoming a home owner
Good to Great companies never began their transitions with pioneering technology, because you cannot make good use of technology until you know what technologies are relevant.
What tech is relevant? Those that are directly linked to your Hedgehog concept.
The Technology Trap
TIME Magazine (1999)
"Person of the Century": Albert Einstein
"Person of the Year": Jeff Bezos of Amazon.com
Executives worried about new technology sneaking up on them (Masters Forum)
Surprisingly: 80% of Good to Great execs did not list tech as one of the top five factors in the transition
Of those that did, average for tech was fourth
Only two execs placed tech as number one reason
Technology and the Fear of Being Left Behind
Should we even include Technology as a Chapter?
Those who turn companies from good to great are motivated a deep creative urge for excellence for its own sake. Those who build and perpetuate mediocrity are more motivated by fear of being left behind.
Pitney Bowes: "I've always wanted to see PB as a great company. Let's just start there."
Kimberly-Clark: "We're never satisfied. We can be delighted but never satisfied."
What happened next?
Walgreens went from crawl to walk to run
Crawl: experimented with a Web site while debating how it would work within the company's Hedgehog Concept (customer convenience)
Walk: began to find ways to tie Internet to its inventory-and-distribution model and ultimately its convenience concept
Run: launched Internet site as sophisticated and well designed as most pure dot-coms
After hitting a low point in 1999, Walgreens stock price nearly doubled within a year
drugstore.com went from run to walk to crawl
Accumulated massive losses, instituted layoffs, by 2001 had lost nearly ALL of its initial value
What is the key takeaway?
Walgreens remained resolutely clear: Hedgehog concept would drive its use of technology, not the other way around
Must pioneer the application of carefully selected technologies
ex. Walgreens' use of Intercom in late 70s
ex. Kroger's application of bar code scanners to accelerate past A&P
Nucor vs. Bethlehem Steel
Media labeled Nucor as pioneer in new, advanced technologies in mini-mill steel manufacturing
Execs of Nucor did not place emphasis on tech and in interviews hardly talked about it
Bethlehem Steel faltered because of management failure, not technological failure
History of adversarial labor relations
Could have been given Nucor's tech and resources and still would not have produced the same results
NASCAR: Primary variable in winning is not the car, but rather the driver and his team
What is the key takeaway?
Technological change is never the primary factor in the decline of once great companies.
You cannot be laggard on tech and hope to be great, but tech itself is never a primary cause of either greatness or decline.
Technology can accelerate momentum or demise , but does not create either.
ex. Tech pioneers rarely prevail in the end
ex. Vietnam
A Culture of Discipline

Very few start-up companies become great in large part because they respond to growth and success the wrong way.

They begin to trip over their success - i.e. too many new customers, too many new orders, too many new products.

The company seeks to be more organized and hires MBAs and seasoned executives, and what was once an egalitarian environment gets replaced by a hierarchy.

Good to Great Matrix of Creative Discipline
Challenge: Instituting a culture of discipline without killing entrepreneurship.
Establishing a Culture of Discipline
Main point: “Build a culture full of people who take disciplined action within the three circles, fanatically consistent with the Hedgehog Concept”.

But how is this done?
Build a culture around the idea of freedom and responsibility, within a framework of a highly developed system.
(Airline Pilot Model)

Fill that culture with self-disciplined people who are willing to go to extreme lengths to fulfill their responsibilities.
(‘Rinsing your cottage cheese’/ Wells Fargo)

Don’t confuse a culture of discipline with a tyrannical disciplinarian.
(Chrysler and Lee Iacocca)

Adhere with great consistency to the hedgehog concept with a particular focus on intersection of the three circles.
(Pitney Bowes vs. R.J. Reynolds)
From Start-up to Great
"Cancer of Mediocrity"/ "Entrepreneurial Death Spiral"
Full transcript