Chapter 1 “Good is the Enemy of the Great”
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Transcript of Chapter 1 “Good is the Enemy of the Great”
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Chapter 1“Good is the Enemy of the
Great”Team II
Josh Pavlik, Jennifer Rogas, Logan Reynolds, Corbin Ray, Marlee Armstrong, Amy Drake
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Good to Great◦ Prequel to “Built to Last”
Good is the Enemy of Great
4 Phases Level 5 Leadership Timeless Physics
Brief Overview
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Good-to-great pattern:◦ 15-year returns at or below market◦ Transition point◦ 15-year returns at least three times market
Other criteria:◦ Pattern independent of company’s industry
Should additional criteria be used with stock returns?
Phase I: The Search
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Cut 1- 1,435 companies◦ Fortune 500, 1965-1995
Cut 2- 126 companies◦ Used data from University of Chicago Center for Research
in Security Prices ◦ Selected companies that had above-average returns
preceded by average or below-average returns
Cut 3- 19 companies◦ Eliminated companies that did not follow exact good-to-
great pattern
Selection Process
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Cut 4- 11 companies◦ Eliminated companies that did not show transition
relative to industry
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AbbottCircuit CityFannie MaeGilletteKimberly-ClarkKroger
NucorPhilip MorrisPitney BowlesWalgreensWells Fargo
11 Good-to-Great Companies
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Good-to-Great VS Comparison Companies◦ Distinguishing Factors
Direct Comparison Companies◦ Same Industry/Opportunities◦ Similar Resources at Transition◦ No Leap from Good to Great
Unsustained Comparison Companies◦ Short Term shift Good-to-Great◦ Failed to Sustain
Phase II: Compared to What?
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Good-To-Great Companies Direct Comparison CompaniesAbbott
Circuit CityFannie Mae
GilletteKimberly-Clark
KrogerNucor
Philip MorrisPitney Bowes
WalgreensWells Fargo
UpjohnSilo
Great WesternWarner-Lambert
Scott PaperA&P
Bethlehem SteelR.J. Reynolds
AddressographEckerd
Bank of America
Entire Study Set
Unsustained Comparison CompaniesBurroughsChryslerHarrisHasbro
RubbermaidTeledyne
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The research compared good companies to great companies
Research was gathered through evidence of key data
Material was coded into categories Research included interviews of executives during
transformation Extensive analysis
Phase III Inside The Black Box
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The research included extensive analysis of◦ Acquisitions and mergers◦ Executive compensation◦ Business strategy◦ Corporate culture◦ Layoffs◦ Leadership and management styles◦ Financial ratios
Phase III Extensive Analysis
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10 to 11 great companies, CEO’s came from within the company
Executive compensation is a key component of transformation
Long range strategic planning has no direct correlation
Focus on what not to do and what to stop doing
Phase III Key Findings
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Technology advances transformation, it does not create it
Two mediocre companies cannot equal one great one
Commitment, leadership, and motivation flourish under the right circumstances
Most great transformations are made unaware Greatness is a matter of choice, not circumstance
Phase III Key Findings Cont’d
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Interactive Process of looping back and forth
◦ Developing Ideas◦ Testing them against the data◦ Revising the ideas◦ Building framework◦ Watching it break under the weight of evidence◦ Rebuilding it yet again
Phase IV: Chaos to Concept
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Process is repeated continually
Reach coherent framework of concepts
Every primary concept showed up as a change variable in 100% of the good to great companies.
Transformation Process: Disciplined People, Disciplined Thoughts, Disciplined Action
Phase IV: Chaos to Concept
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Transformation Process Stages:
◦ Disciplined People Leadership, First Who…Then What
◦ Disciplined Thoughts Confront Brutal Facts, Hedgehog Concept
◦ Disciplined Action Culture of Discipline, Technology Accelerators
Phase IV: Chaos to Concept
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What type of leaders take a good company to great?
Do not share the characteristics of high profile leaders
They are self-effacing, quiet, reserved, and even shy
A blend of personal humility and professional will
Level 5 Leadership
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How do good-to-great leaders begin the process to greatness?
Got the right people on the bus Took the wrong people off the bus Got the right people in the right seats Then figured out where to drive the bus
First Who… Then What
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Good-to-great companies embrace the Stockdale Paradox◦ 1. Maintain faith you will prevail◦ 2. Confront the brutal facts of reality
Stockdale Paradox
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Good-to-great companies rise above the curse of competence
Because something is your core business, does not mean you can be the best at it
If you can’t be the best at it, then it cannot be the basis of a great company
The Hedgehog Concept
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Good-to-great companies create a culture of discipline
If you have disciplined people, hierarchy is not needed
If you have disciplined thought, bureaucracy is not needed
If you have disciplined action, excessive controls are not needed
Culture of Discipline
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Good-to-great companies think differently about the role of technology
Use technology to ignite transformation Technology is not used as a primary cause
of greatness Pioneers in “carefully selected
technologies”
Technology Accelerators
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Jim Collins states that we should continually search for timeless principles that will remain true and relevant no matter how the world changes around us
Example: Wells Fargo
Timeless “Physics”
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It does not matter what kind of economy we are in to apply these timeless principles
Example: Apple and Steve Jobs
Economy
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Good being the enemy great is a human problem
Any type of organization can be transformed using timeless principles
Conclusion