The Good-to-Great Transformation

Here are snippets that stuck out to me from the FastCompany article Good to Great by Jim Collins:

How Change Doesn’t Happen

Picture an egg. Day after day, it sits there. No one pays attention to it. No one notices it. Certainly no one takes a picture of it or puts it on the cover of a celebrity-focused business magazine. Then one day, the shell cracks and out jumps a chicken.

All of a sudden, the major magazines and newspapers jump on the story: “Stunning Turnaround at Egg!” and “The Chick Who Led the Breakthrough at Egg!” From the outside, the story always reads like an overnight sensation—as if the egg had suddenly and radically altered itself into a chicken.

Now picture the egg from the chicken’s point of view.

While the outside world was ignoring this seemingly dormant egg, the chicken within was evolving, growing, developing—changing. From the chicken’s point of view, the moment of breakthrough, of cracking the egg, was simply one more step in a long chain of steps that had led to that moment. Granted, it was a big step—but it was hardly the radical transformation that it looked like from the outside.

How Change Does Happen

Now picture a huge, heavy flywheel. It’s a massive, metal disk mounted horizontally on an axle. It’s about 100 feet in diameter, 10 feet thick, and it weighs about 25 tons. That flywheel is your company. Your job is to get that flywheel to move as fast as possible, because momentum—mass times velocity—is what will generate superior economic results over time.

Instead, you put your shoulder to the flywheel. That’s what Jim Herring, the leader who initiated the transformation of Kroger, told us. He stayed away from change programs and motivational stunts. He and his team began turning the flywheel gradually, consistently—building tangible evidence that their plans made sense and would deliver results.

“We presented what we were doing in such a way that people saw our accomplishments,”Herring says. “We tried to bring our plans to successful conclusions step by step, so that the mass of people would gain confidence from the successes, not just the words.”

Think about it for one minute. Why do most overhyped change programs ultimately fail? Because they lack accountability, they fail to achieve credibility, and they have no authenticity. It’s the opposite of the Flywheel Effect; it’s the Doom Loop.

Companies that fall into the Doom Loop genuinely want to effect change—but they lack the quiet discipline that produces the Flywheel Effect. Instead, they launch change programs with huge fanfare, hoping to “enlist the troops.

In contrast, why does the Flywheel Effect work? Because more than anything else, real people in real companies want to be part of a winning team. They want to contribute to producing real results. They want to feel the excitement and the satisfaction of being part of something that just flat-out works. When people begin to feel the magic of momentum—when they begin to see tangible results and can feel the flywheel start to build speed—that’s when they line up, throw their shoulders to the wheel, and push.

And that’s how change really happens.

Disciplined people: “Who” before “what”

You are a bus driver. The bus, your company, is at a standstill, and it’s your job to get it going. You have to decide where you’re going, how you’re going to get there, and who’s going with you.

Most people assume that great bus drivers (read: business leaders) immediately start the journey by announcing to the people on the bus where they’re going—by setting a new direction or by articulating a fresh corporate vision.

In fact, leaders of companies that go from good to great start not with “where” but with “who.” They start by getting the right people on the bus, the wrong people off the bus, and the right people in the right seats. And they stick with that discipline—first the people, then the direction—no matter how dire the circumstances.

To decide where to drive the bus before you have the right people on the bus, and the wrong people off the bus, is absolutely the wrong approach.

Maxwell told his management team that there would only be seats on the bus for A-level people who were willing to put out A-plus effort. He interviewed every member of the team. He told them all the same thing: It was going to be a tough ride, a very demanding trip. If they didn’t want to go, fine; just say so. Now’s the time to get off the bus, he said. No questions asked, no recriminations. In all, 14 of 26 executives got off the bus. They were replaced by some of the best, smartest, and hardest-working executives in the world of finance.

When it comes to getting started, good-to-great leaders understand three simple truths. First, if you begin with “who,” you can more easily adapt to a fast-changing world. If people get on your bus because of where they think it’s going, you’ll be in trouble when you get 10 miles down the road and discover that you need to change direction because the world has changed. But if people board the bus principally because of all the other great people on the bus, you’ll be much faster and smarter in responding to changing conditions. Second, if you have the right people on your bus, you don’t need to worry about motivating them. The right people are self-motivated: Nothing beats being part of a team that is expected to produce great results. And third, if you have the wrong people on the bus, nothing else matters. You may be headed in the right direction, but you still won’t achieve greatness. Great vision with mediocre people still produces mediocre results.

Disciplined thought: Fox or hedgehog?

Picture two animals: a fox and a hedgehog. Which are you? An ancient Greek parable distinguishes between foxes, which know many small things, and hedgehogs, which know one big thing. All good-to-great leaders, it turns out, are hedgehogs. They know how to simplify a complex world into a single, organizing idea—the kind of basic principle that unifies, organizes, and guides all decisions. That’s not to say hedgehogs are simplistic. Like great thinkers, who take complexities and boil them down into simple, yet profound, ideas (Adam Smith and the invisible hand, Darwin and evolution), leaders of good-to-great companies develop a Hedgehog Concept that is simple but that reflects penetrating insight and deep understanding.

What does it take to come up with a Hedgehog Concept for your company? Start by confronting the brutal facts. One good-to-great CEO began by asking, “Why have we sucked for 100 years?” That’s brutal—and it’s precisely the type of disciplined question necessary to ignite a transformation. The management climate during a leap from good to great is like a searing scientific debate—with smart, tough-minded people examining hard facts and debating what those facts mean. The point isn’t to win the debate, but rather to come up with the best answers—and, ultimately, to lock onto a Hedgehog Concept that works.

You’ll know that you’re getting closer to your Hedgehog Concept when you align three intersecting circles that represent three pivotal questions: What can we be the best in the world at? (And equally important—what can we not be the best at?) What is the economic denominator that best drives our economic engine (profit or cash flow per “x”)? And what are our core people deeply passionate about? Answer those three questions honestly, facing the brutal facts without blinking, and you’ll begin to see your Hedgehog Concept emerge.

“Run it like a business” and “run it like you own it” became mantras; simplicity and focus made all the difference. With fanatical adherence to that simple idea, Wells Fargo made the leap from good results to superior results.

On average, it took four years for the good-to-great companies to crystallize their Hedgehog Concepts. It was an inherently iterative process—consisting of piercing questions, vigorous debate, resolute action, and autopsies without blame—a cycle repeated over and over by the right people, infused with the brutal facts, and guided by the three circles. This is the chicken inside the egg.

Disciplined action: The “stop doing” list

Take a look at your desk. If you’re like most hard-charging leaders, you’ve got a well-articulated to-do list. Now take another look: Where’s your stop-doing list? We’ve all been told that leaders make things happen—and that’s true: Pushing that flywheel takes a lot of concerted effort. But it’s also true that good-to-great leaders distinguish themselves by their unyielding discipline to stop doing anything and everything that doesn’t fit tightly within their Hedgehog Concept.

Now it begins

Our study of what it takes to turn good into great required five years—and 10.5 person-years—and amounted to our own flywheel effort. Looking back on our research, what’s most striking to me about our findings is the absence of a magic moment in any of the good-to-great companies—or in our own journey to understanding. The real path to greatness, it turns out, requires simplicity and diligence. It requires clarity, not instant illumination. It demands each of us to focus on what is vital—and to eliminate all of the extraneous distractions.

I’m also convinced that the good-to-great findings apply broadly—not just to CEOs but also to you and me in whatever work we’re engaged in, including the work of our own lives. For many people, the first question that occurs is, “But how do I persuade my CEO to get it?” My answer: Don’t worry about that. Focus instead on results—on subverting mediocrity by creating a Flywheel Effect within your own span of responsibility. So long as we can choose the people we want to put on our own minibus, each of us can create a pocket of greatness. Each of us can take our own area of work and influence and can concentrate on moving it from good to great. It doesn’t really matter whether all the CEOs get it. It only matters that you and I do. Now, it’s time to get to work.

Sidebar: Great answers to good questions

Fast Company: The CEOs who took their companies from good to great were largely anonymous. Is that an accident?

Jim Collins: There is a direct relationship between the absence of celebrity and the presence of good-to-great results. Why? First, when you have a celebrity, the company turns into “the one genius with 1,000 helpers.” It creates a sense that the whole thing is really about the CEO. At a deeper level, we found that for leaders to make something great, their ambition has to be for the greatness of the work and the company, rather than for themselves. That doesn’t mean that they don’t have an ego. It means that at each decision point—at each of the critical junctures when Choice A would favor their ego and Choice B would favor the company and the work—time and again the good-to-great leaders pick Choice B. Celebrity CEOs, at those same decision points, are more likely to favor self and ego over company and work.

FC: Like the anonymous CEOs, most of the good-to-great companies are unheralded. What does that tell us?

JC: The truth is, few people are working on the most glamorous things in the world. Most of them are doing real work—which means that most of the time they’re doing a heck of a lot of drudgery with only a few moments of excitement. The real work of the economy gets done by people who make cars, who sell real estate, and who run grocery stores or banks. One of the great findings of this study is that you can be in a great company and be doing it in steel, in drug stores, or in grocery stores. No one has the right to whine about their company, their industry, or the kind of business that they’re in—ever again.

FC: Let’s say that I’m not running a company. How do the good-to-great lessons apply to me?

JC: The basic message is this: Build your own flywheel. You can do it. You can start to build momentum in something for which you’ve got responsibility. You can build a great department. You can build a great church community. You can take every one of these ideas and apply them to your own work or your own life.

FC: What does your research suggest about the best way to respond to the current economic slowdown?

JC: If I were running a company today, I would have one priority above all others: to acquire as many of the best people as I could. I’d put off everything else to fill my bus. Because things are going to come back. My flywheel is going to start to turn. And the single biggest constraint on the success of my organization is the ability to get and to hang on to enough of the right people.

Next Steps…

I think a fantastic focus season for me would be to apply Jim’s core concepts to create a guiding framework for my ventures, including:

1. Level 5 Leadership
2. First Who, Then What
3. Confront The Brutal Facts
4. The Hedgehog Concept
5. BHAG (“Big Hairy Audacious Goal”)
6. The Flywheel
7. 20 Mile March
8. Preserve the Core/Stimulate Progress
9. Genius of the AND
10. Clock Building, Not Time Telling
11. Culture of Discipline
12. Fire Bullets, Then Cannonballs
13. Productive Paranoia
14. SMaC Recipe
15. Return on Luck
16. Five Stages of Decline

I’ll have to read the book in its entirety at some point - Good to Great: Why Some Companies Make the Leap…And Others Don’t. But I’ll focus on implementing some of the core concepts first. Education Through Action.