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Good to Great Why Some Companies Make the Leap and Others Don’t

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The Obstacle:

The seminal management study of the 1990s, Built to Last, demonstrated how successful businesses endure over time and how sustained long-term performance can be built into an organization’s DNA from the start.

But what about a business that lacks stellar DNA? How may good, medium, or even disastrous businesses become truly outstanding over time?

The Study:

Jim Collins wrestled with this thought for many years. Exist organizations that resist gravity and transform long-term inferiority into long-term superiority? If so, what traits unify all outstanding companies and make them stand out from the competition?

The Guiding Principles:

Collins and his research team found a group of outstanding businesses that made the transition to great performance and maintained those results for at least fifteen years using strict benchmarks. Fantastic, really? After making the leap, the good-to-great companies produced cumulative stock returns that outperformed the general stock market by an average of seven times over a period of fifteen years, outperforming by more than twice the performance of an index made up of the best-in-class businesses, such as Coca-Cola, Intel, General Electric, and Merck.

The Comparisons:

The research team compared the good-to-great businesses with a narrowly chosen group of comparative businesses that were unable to make the transition from good to fantastic. What was altered? Why did one group of businesses excel while the other group do just somewhat well?

The team spent five years reviewing the history of each of the twenty-eight participating companies. Collins and his team identified the essential factors that determine brilliance, explaining why some businesses succeed while others fail after going through mountains of data and countless pages of interviews.

Key ideas in this book include:

  • Finding a straightforward “Hedgehog concept” creates a clear path to follow.
  • Good-to-great organizations may teach others how to make the same leap.
  • Success is the result of numerous little, directional inroads.
  • New technology should not be seen as a goal in and of itself, but rather as an accelerator toward a goal.
  • Successful changes from good to outstanding are driven by Level 5 leaders.
  • The basis of greatness is the right people at the right places.
  • Confronting the unpleasant facts while maintaining faith is a requirement for success.
  • Leaders must foster a climate in which the unflinching realities are revealed.
  • Adherence to the straightforward Hedgehog principle requires a culture of strict self-discipline.

Jim Collins said that several of the study’s core ideas “fly in the face of our contemporary business culture and will, quite honestly, offend some individuals.” Maybe, but who can afford to dismiss these results?

About the Author:

Jim Collins is an author, lecturer, and consultant from the United States. He has taught at the Stanford Graduate School of Business and contributes often to Fortune, BusinessWeek, and Harvard Business Review.

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