Good to Great: A Conversation with Jim Collins
Take the Path to Greatness
How does one company become great while another is mired in mediocrity? And just what does it take to be great? Author Jim Collins looked at these questions and others in his second book, Good to Great. Collins recently sat down to talk with Information Outlook about the path to greatness, how a company can't really pinpoint the exact time it becomes great, and even how to make dinner conversation more interesting.
Information Outlook: You once said that Good to Great found you rather than you finding it. I am wondering how it captured your imagination?
Jim Collins: Well, Built to Last caught me off guard. I never would have predicted that it would have sold a million copies worldwide.
That produced a certain degree of pressure that came from all kinds of peoplepublishers, agents, and myselfwho felt we should try to capitalize on that success fairly quickly and do another book.
My wife Joanne made the observation that Built to Last went its deepest when there was a question I was really interested in answering and there was no pressure to answer the question. I just wanted to know the answer. That was what it takes to build a great company from the ground up and what separates great from good over the course of time. That question just appealed to me. So I answered it with Built to Last.
When I told her what I was going to write next and about all this pressure from all directions, she sat me down and said, "Don't pick another question. Wait until a question picks you." It was great advice. If you are going to do huge research projects, spend years on a book, and come up with answers that might stand the test of time, the question has to really grab you and force you to answer it.
I waited two years and the question finally appeared. One day at dinner a friend said, "We really loved Built to Last, but we feel that it is not a useful book."
"Well, that is interesting, having spent six years of my life on it," I answered.
"You found that companies have to get the genetics of greatness when they are young and small, and they must have great parenting," he said. "All the companies in Built to Last have guys like Walt Disney and David Packard and have great parenting from the ground up, but there were companies that were only good for most of their life and then became great."
I thought to myself, "Well, there have to be organizations and companies that went from being average or good to being great. I may not know who they are, but they have to exist."
And the essential question became: can that which is good ever become great and, if so, how?
IO: Now that this question picked you, how did you set out on your journey to understand this good to great transformation? Where did you look to understand this challenge?
JC: The first thing I had to decide was if this was an answerable question. There are some questions that are big and interesting questions, but they are unanswerable.
It doesn't matter what the answer is. What matters is that we find the answer. The one thing that is really important about our work is that we did not set out to say, "Let's see how culture applies in Good to Great or let's see how technology plays a role." There was never any of that. We never came in with any assumptions as to what the answers might be.
I think most management and business literature thinking is so deeply unsatisfying because it is ultimately circular. People are starting out with a specific point of view and then ending up with that same point of view. They think culture is important, and, lo and behold, they find culture is important.
We said, "Let's find companies that had at least 15 years of being truly average." We defined as if you put your money in that company, you have done no better than if you would have put your money in a mutual fund.
Then the company exploded from that mediocrity and beat the market by accumulative returns to an investor. You put a dollar in the company. You would be three times better off after 15 years than if you put that money into a mutual fund.
Why did we come up with three times? Well, it is basically a benchmark for what most people consider to be great performance. A company like GE (during the Jack Welsh era) falls just short of three times the market. It is basically about 2.8 times the market. We said you had to go from being an average performer to one that would be General Electric at its best over 15 years.
IO: You and your colleagues identified three broad stages of organizational change, including the presence to discipline people, the prevalence of discipline fought, and the commitment to discipline action. I am wondering about each of these stages and how this idea of the flywheel applies to this particular framework?
JC: There are three broad stages of development in going from good to great, and the sequencing is very important.
These companies didn't just jump into doing new things. They stopped doing more things than they started in many ways, but the things they stopped doing were far more important. The interesting thing is that most companies run around saying what they should do, but that is really stages two and three. We found that stage one is to discipline people. You do that first. It is all about getting the right people on the bus, the wrong people off the bus, and the right people in the right seats. You do that before you ever decide where to drive the bus.
In the second stage, the question is what you are going to do. If you got the right "who's," then what is the what? That breaks into two components. One component is having the discipline to confront the brutal facts of reality. It is having the unwavering faith that in the end you won't prevail, but that discipline to confront the brutal facts is one form of disciplined thought.
A second form of discipline from this is that all these companies got a very crystal concept that eventually guided them. We came to call it the "hedgehog concept." They got this simple concept that guided their actions from then on out. That came from disciplined thought.
Then, once you have that hedgehog conceptthat simple directionyou can then turn to stage three, which is disciplined action. You are always asking questions, but the real action is to drive things that come after stage one and two. Stage three is about building a culture of discipline, harnessing technology accelerators to your hedgehog concept, and putting those together in a very disciplined way.
Wrapping around all of this is this idea of how it feels as you are going through it. The best way I can sum it up is through a conversation I had with Charles "Cork" Walgren, the chief executive of Walgren. Walgreen is a company that broke out in 1975, after 40 years of being average.
As I was talking to Walgreen, I said, "Can you put your finger on the moment when the leap from good to great happened? Is there a key transition point that you can identify? If so, when?"
After thinking about my question for a minute, he said, "Well, I would say that was probably sometime between 1971 and 1980." That is a really profound statement when you think about it. It is like turning this giant flywheel. You are pushing on the giant piece of metal to make it go faster and faster over time. If you push really hard early on, you make very little progress. But if you keep pushing in a consistent direction that ultimately ties back to the hedgehog concept, you will eventually build more and more momentum in the flywheel.
Some turns may be big pushes and some may be small pushes. The key is the accumulation of the pushes over time. If I ask you when the flywheel made its transition to break through rotation, you wouldn't be able to tell me because of this cumulative process.
IO: You do say that it is important for organizations to get the "who" right before they get the "what" right. Most organizations want to do it the other way around. Why is it important to get the "who" before the "what"?
JC: Most companies will talk about the importance of getting their people and the importance of building the right team and all of that.
No level five leader walks in and says, "I know." Every level five walks in and says, "I don't know what to do, but if I can figure out the right 'who's,'then with those 'who's,' we will find the right 'what.' That is number one."
What happens if you do the "what" first rather than the "who" and you get 10 miles down the road and you have to change the direction of the bus? Well, if you have got everybody on the bus, what do you do when the bus needs to change direction? You have got a problem.
But suppose you've got everybody on the bus because of who else is on the bus? Well, that change is a lot easier because everybody looks at each other and says, "Fine with me. I didn't get on the bus because of where it was going. I got on the bus because of who else is on this bus."
There is one other piece of that, though. Companies talk a lot about having the right people. What they don't do is exercise extraordinary rigor. At a management team level, every single member must have the capacity to be the best in the industry at what they do. If they don't have that capacity, they must be thrown up the ladder.
IO: As I understand it, the hedgehog concept is the clearest and simplest expression of how an organization is going to create value. If that is correct, then why do you think that is so important in the move towards greatness?
JC: Think about a great scientist. What does a great scientist do? You think of Einstein or Charles Darwin or Freud or Adam Smith. What all of these great thinkers had in common was an understanding of how the world worked. They simplified the universe.
Now, why was it simple? Well, it was simple on two dimensions. It was simple because it reflected such a peak understanding that you could get to simplicity. And in most cases the essential insight was right.
Now, what does that mean about the hedgehog concept? Well, we found in the good to great companies that they all had a very simple concept about the way their universe would work.
The good to great companies were like the great scientists. They got such a deep understanding that it produced simplicity. There are a lot of simple ideas filled up with physics, but they have no reflection of the way the world really works. These leaders got a profound understanding that ultimately was very simple and right.
Fannie Mae is my favorite example of this. They grasped the idea that it is all about managing with risk rather than managing mortgages. As a result, they used to sell insurance on the risk spread, which means they made money no matter what the interest rates are. That was a completely revolutionary way of thinking about their business. That is the essence. That is what the hedgehog concept is all about.
IO: I wanted ask you about the three circles. It was so intuitive and elegant to think about the overlap of these three very core ideas. Could you talk a bit about that?
JC: Our first observation was the simplicity of these ideas and how they were right.
Then we went back and asked, "Is there any pattern across them? Is there any deeper understanding rather than having a simple idea that is right?" As we pulled at it and made sense of it, we came to see that there were three basic dimensions that cut across all of them. The hedgehog concept seemed to always have these three dimensions.
One, it had deep understanding of what you could do better than any other company in the world. And if they couldn't be the best in the world at it, they shouldn't do it.
The second dimension is a very deep understanding of the essence of what drives your economics. Every company got some clear single economic ratioprofit per X. Then they figured out which X best drove its economics.
The third thing was a deep understanding of what really makes it passionate. They put those three together and said anything that they are not passionate about, can't be the best in the world at, and that doesn't fit with what really drives their economics, they don't do.
I usually teach the three circles on a personal level. Suppose you were looking for your own hedgehog conceptfor your work life to go from good to great. Well, imagine you found work or constructed work that meets three tests.
One, you absolutely love to do it. Even though there is drudgery, you are really passionate about what you do. Two, you are genetically encoded to be really good at it. When you do it, there is this feeling you were born to do it. Third, you are doing something of economic value or of value to others.
IO: What is level five leadership? What does it take for someone who is developing his or her self as a leader to achieve this level of excellence?
JC: Level five leaders are the antithesis of what our culture thinks are the most effective leaders.
If you take a look at the types of leaders who have made these leaps happen, first of all, they were largely insiders. They were rarely outsiders. They were not charismatic. They were self-effacing people who kept themselves in the background.
If you want to think of the ultimate non-level five leaders, think of Lee Iacocca or Al Dunlap. Both of these leaders praised themselves as great heroes. They had great personalities. One viewed himself as Rambo. The other saw himself as the savior of the free world. Their egos were not only the size of a city block. They were the size of the city.
But these are the antithesis of the level five leaders. Level five leaders tend to be reasonably quiet, even if they have an intense personality. They tend to lead by standard rather than by personality and they are the types of people who are media-shy. They avoid attention. Most of the level fives in our study are unknown people.
Part of the signature of level fives is they are always thinking about what their ambition is for the company, the work, and ensuring the greatness of what they are building more than their stature, celebrity, and personality. That is not what drives them. That is what is so special about the level five.
IO: If someone is moving in the direction of becoming that kind of leader, what is the advice you would offer them?
JC: When you have some managerial executive responsibilities, you are confronted with times where one choice will feed your ego and your own ambition more than the other. You can step forth and take more credit or, if something goes badly, you can look for something outside yourself to blame.
The real question is do you make the choice that will feed your own ego and your ambition or do you make a different decision that might ultimately reflect a greater ambition for the organization?
Colman Mockler at Gillette faced one of those choice points. He was facing takeovers and threats to the company. From a personal ambition standpoint, he might have been better off if he would have just capitulated to the raiders, taken his millions of dollars, and retired. But his ambition was for Gillette to be a great company. So he stared down the takeovers.
He wasn't very concerned about how it reflected on him. He was concerned about how Gillette would turn out in the end. The irony is that Mockler died from a heart attack in office. Though he never got to retire and enjoy the fruits of his labor, he would not have changed the way he led his life. There will always be a question of whether something is fundamentally about you or what you are building. If you are a level five leader, you make the choice in favor of what you are building.
I would also recommend getting biographies of people who are truly level five and learning from them. One book to get is David McCullough's biography of Harry Truman because I think Truman was a level-five President. A second level-five biography to get is Abraham Lincoln's from Carl Sandberg. The third book to read is Katharine Graham's autobiography. It is her view of how she became a level-five leader, and she is one of the great level-five leaders in American history.
IO: One of the things I thought was interesting was the importance of luck. Can you say a word or two about that?
JC: Have you ever noticed that some people just seem to be a lot luckier than others? Why is that? I know somebody who was just blessed with stroke after stroke of incredible good work. You wonder how that happened.
What is interesting is level fives always look out the window to find something or someone other than themselves to kiss the blame of success on. But when things go badly, they never look out the window to blame anyone. They look in the mirror and assume full responsibility.
They also credit good luck. These people view themselves as lucky people, and they tend to acknowledge the role luck has played in their life. I think this is part of their essential humility. The reality is they worked hard and did all of those things, but when people really begin to look at a lot of things that happen in their life, many of them happened because of good luck.
What is interesting about the level fives is they are very aware of their starting point and how their starting points have been so helpful to them. The flip side of that is they also had bad luck that they don't talk about.
IO: When you collected this research, what surprised you the most about the way it developed?
JC: Some of the things that surprised me the most were the things that we expected to find but didn't. You would expect to find a big conscious effort to go from good to great. But there was none of that.
I think one of the biggest surprises for me was the question of how you get consistency and commitment and alignment with the changes that you are bringing about. But the folks who brought the companies from good to great never thought about managing change, never thought about commitment, alignment, and consistency. They didn't do that, but it was a natural result of everything they were doing. That surprised me a lot.
I think what surprised me was the quiet certitude that people had as they moved through, even when they might have not been clear about what to do. I think the thing that really stands out about it is that most of what we spend our time doing is really just sound and fury that signifies nothing. These folks didn't work any harder than the rest of us. I think that is probably the most surprising thing to me. It does not take more work to take something from good to great. It basically means to stop doing a whole lot of really stupid stuff and focus on a few key essentials.
IO: What if you are not a Fortune 500 company? What should this idea of greatness mean to you and how can you go about striving for it if you are a sole practitioner or one of a handful of people running an internal information center?
JC: The first thing is to become very clear in your own mind about what defines results. For example, these companies have the wonderful advantage of gauging their results because they are publicly traded. For whatever organization you operate, you have to define what results are.
For a university, it could be any number of things, including the extent to which your graduates make lasting contributions in given fields. In a church, it could be the number of lasting conversions to your religion.
The question is: are the results really the reflection of the purpose of the institution? Then you begin to assume that your current run rate of those results is only good. If so, what would be the level that would reflect that you were truly great?
IO: Why are you so passionate about teaching? Do you think it is what you were genetically encoded to do?
JC: I am genetically encoded for two things. One is to bring order out of chaos. I mean thinking about a chaotic world and being able to extract the three-circle concept and the level five leader idea. The second thing is to be able to do it in a way that impacts students and their lives.
I remember reading that there are two fundamental ways to change the world. One is through the sword and the other is through the pen. I remember deciding I would do it through the pen. By the pen, I mean changing the way things operate by climbing inside people's heads and fundamentally affecting, infecting, and changing the way their brain works. Then you have an impact on the world through your students.
IO: I think that most people have lost much of their curiosity over their educational professional lives. Do you think it is possible for us to recapture some of our natural curiosity, and, if so, how would you encourage or invite people to go about doing that?
JC: You are absolutely congruent on one key assumption that I hold, which is that curiosity is the natural state. It is a matter of removing all the junk that is on top of it.
I learned a long time ago from a great teacher of creativity at Stanford Business School that we are all created curious. That is our natural state, but the real process is one of removal. You don't add creativity. You remove stuff that gets in the way. You don't add curiosity. You remove stuff that gets in the way. So it is really a matter of how we get back to that natural state.
I would suggest a few practical things that help with that. One is to read this book by Rochelle Myers and Michael Ray called Creativity in Business. It is based on a course that was taught at Stanford Business School. It is really about going through life as a curious and creative person. It takes a bunch of Stanford MBAs and teaches them how to be creative.
There are also a few key things that you can continually work on. One is learning to ask questions that people may think are dumb. It's okay to ask those questions because that is where your curiosity begins.
The second thing is to learn to suppress that internal voice of judgment that is always speaking and banging around in our heads and saying, "Well, you should know the answer to that," or "That is a really stupid thing to be thinking about."
I am also a big believer in pursuing the learning areas that you are interested in. You cultivate your curiosity. The question then becomes, "How do I fit that into my life relative to the time constraints that I have." I have found a couple of things really useful.
One is books on tape. Books on tape have been great in expanding my mind and exploring curiosity. I walk around with a tape player in my pocket a lot. If you see me going through an airport, there is an 80-percent chance you will see an earplug in my right ear. There is a lot of dead time, driving to and from, emptying the dish washer, cleaning the cat box, taking out the garbage, folding my clothes, and walking around the block.
The key is to get good writing. Never listen to bad writing. Good writing will make you curious.
The second key is to translate a statement that a great teacher gave me. He did not set out to be an interesting person, he set out to be an interested person.
He was talking about the idea of going into any situation and being interested in that situation. The way I have found this particularly useful in cultivating the curiosity side of things is in social events. I find them pretty dreadful.
His advice makes dinner so much more interesting because I don't make conversation by saying things. I make conversation by asking questions, like finding out where people are from.
Once, I was going to give a talk to a bunch of businessmen who looked so incredibly boring that I thought I was going to shoot myself. So I started asking questions, and it turns out that one of the people at the table had been on the TWA jet that was hijacked by Palestinian guerrillas floating around the Middle East.
He was on that jet for eight days and he thought he was going to die. He is a beauty and barber supply traveling salesman from Wichita, KS. You wouldn't think this person would have much interesting to say, but I stumbled upon this thing. It was fascinating. I didn't want to go up and give my own talk. I just wanted to keep asking him questions.
RSS
Feedback form
