GOOD TO GREAT

How and Why some good

Companies became great
Companies
The Good – To – Great Study
GOOD
RATIO OF CUMULATIVE CO
STOCK RETURNS TO
GENERAL MARKET

DIRE

1= MARKET BASE LINE

TRANSITION POINT
Fundamental Law No. 1 :
Good is the ENEMY of great.

Fundamental Law No. 2 :

Any Organisation or any individual can

substantially improve their stature and
performance , and even become great , if one
consciously moves in that direction.
Three Stages in the Journey from Good to
Great

Stage - 1 : Disciplined People.

Stage - 2 : Disciplined Thought.

Stage - 3 : Disciplined Action.

LEVEL 5 FIRST WHO… CONFRONT THE HEDGEHOG CULTURE OF TECHNOLOGY
LEADERSHIPTHEN WHAT BRUTAL FACTS CONCEPT DISCIPLINE ACCELERATORS

DISCIPLINED PEOPLE DISCIPLINED THOUGHT DISCIPLINED ACTION

Two Concepts in each stages of this
journey
LEVEL 5 LEADERSHIP A
DISCIPLINED PEOPLE FIRST WHO…THEN WHAT
B

CONFRONT THE BRUTAL FACTS C

DISCIPLINED THOUGHT
HEDGEHOG CONCEPT D

CULTURE OF DISCIPLINE E
DISCIPLINED ACTION
TECHNOLOGY ACCELERATORS F
Two WRAP-UP concepts of the entire
framework :

• 1. The Flywheel and the Doom Loop.

G

• 2. “Built to Last ” Concepts :

– For an enduring great Company. H

This captures the GESTALT of the entire

process of going from good to great.
CONCEPT - A

LEVEL 5 LEADERSHIP

You can accomplish anything in life ,

provided that you do not mind who
gets the credit.
 Level 5 Hierarchy

LEVEL LEVEL 5 EXECUTIVE

5
LEVEL EFFECTIVE LEADER
4
LEVEL COMPETENT MANAGER
3

LEVEL CONTRIBUTING TEAM MEMBER

2

LEVEL HIGHLY CAPABLE INDIVIDUAL

1
Two Sides of Level 5 Leadership
A . PROFESSIONAL WILL
• Creates superb results , a clear catalyst in the
transition from good to great.

• Demonstrates an unwavering resolve to do whatever

must be done to produce the best long term
results , no matter how difficult.

• Sets the standard of building an enduring great

company; will settle for nothing less .

• Looks in the mirror , not out the window , to

apportion responsibility for poor results , never
blaming other people , external factors or bad luck.
Two Sides of Level 5 Leadership
B. PERSONAL HUMILITY
• Demonstrates a compelling modesty , shunning
public adulation ; never boastful.

• Acts with quiet , calm determination ; relies

principally on inspired standards , not inspiring
charisma to motivate.

• Channels ambition into the company , not the self;

sets up successors for even greater success in
next generation.

• Looks out the window , not in the mirror , to

apportion credit for the success of the company –
to other people , external factors , and good luck.
Some Characteristics of Level 5
Leaders :

• They embody a paradoxical mix of

personal humility and professional will.
• They are ambitious , to be sure , but
ambitious first and foremost for the
Company and not for themselves.
• They set up their successors for even
greater success.
• They display a compelling modesty , are
self-effacing and understated.
Some Characteristics of Level 5
Leaders :
• Are financially driven , infected with
incurable need to produce sustained
RESULTS. They are resolved to do whatever
it takes to make the Company great , no
matter how big or hard the decisions.

• They display a workmanlike diligence ---

more plow horse than show horse.

• They attribute success to factors other

than themselves and take full personal
responsibility for failures.
Other Related Facts :

• Many people have the potential to

evolve into Level 5.

• Generally the good – to – great CEO’s

come from within the Company.
CONCEPT B : GETTING THE RIGHT
PEOPLE.
Concept - B

First Who……. Then What

• The “Who” questions are :
• Do we have the right people?
• Are the right people compensated properly?
• Is the right team in place?

• The “What” questions are :

• Vision of the Company
• Strategy
• Organisation Structure
• Tactics etc.
 LEVEL 5 + A “GENIUS WITH A
MANAGEMENT TEAM THOUSAND HELPERS”
( Good-to-Great Companies ) ( Comparison Companies)

Level 5 leader Level 4 leader

FIRST WHO FIRST WHAT

Get the right people Set a vision for where
On the bus. Build a superior To drive the bus. Develop
Executive team. a roadmap for driving the bus.

THEN WHAT THEN WHO

Once you have the right Enlist a crew of highly
people in place , figure out the capable “helpers”
best path to greatness. to make the vision happen.
 Principle : “ People come before
Strategy ”

Old Adage :
People are the most important asset of a
Company.

Right ? wrong !

The RIGHT people are the most important asset

How do we identify the Right people ?

On the basis of fundamental/ inherent

attributes rather than learnable /
teachable qualities.
Desirable Attributes :

• Character
• Work ethics
• Intelligence
• Dedication to fulfilling commitments.
• Values
Learnable Attributes :

• Educational Background
• Practical Skills
• Specialised Knowledge.
• Work Experience.
 IMPLEMENTING PEOPLE DECISIONS

Discipline 1 : Rigorous , Not

Ruthless
To be ruthless :
Hacking and cutting and wantonly firing people
without any thoughtful consideration.

To be rigorous :
Consistently applying the same exacting standards
at all times – difficult or good times – and for all
levels , especially in upper management.
Some Points :

• A HIGH degree of rigor is needed in PEOPLE

DECISIONS in order to take a Company from
good to great.
• On Compensation :
– There is no evidence of a systematic pattern
linking executive compensation to the process of
going from good to great. Compensation is not a
KEY LEVER in this respect.

– The purpose of a compensation system should not

be to get the right behavior from the wrong
people. It is to get the right people on the bus
and to keep them there.
 Some Points :

• Two types of “ Team Models”

– Leader with the right team of equals.
– Genius with a thousand helpers.
The latter model works only as long as the leader is in
position.

• When in doubt , do not hire – keep looking.

• Those who built great companies understand that the

ultimate throttle on growth for any company is not markets ,
or technology , or competition , or products. It is the one thing
above all others : the ability to get and keep enough of the
right people.
 Some Points :

• A Company should limit its growth based on its ability to

attract enough of the right people.

• When you know you need to make a people change , ACT.

• Put your best people on your biggest opportunities , not your

biggest problems.

• Good – to – great management teams consist of people who

debate vigorously in search of the best answers , yet who
unify behind decisions , regardless of self-interests.
 THANK YOU

FOR

PATIENT HEARING
DISCIPLINED THOUGHT
 CONCEPT- C :

Confront the Brutal Facts .

“ There is no worse mistake in public

leadership than to hold out false hopes soon
to be swept away . ”

- Winston S. Churchill
 G
ENE
R
KROGER , A & P AND THE MARKET MARK
Cumulative value of $ 1 Invested $3

1959-1973

0
KOGER
KROGER , A & P AND THE MARKET
$198.47
Cumulative value of $ 1 Invested
1973-1998
0

0 GENERALM
RS.
 Some Fundamental Rules :

• Facts are better than dreams.

– In driving towards a vision, facts must always be kept in view .
– Let a Company ‘s Strategies and Tactics be modulated by facts rather
than by our visions.

• Charisma may cause filtration of facts, unless conscious efforts are made.

• Create a climate where the truth is heard.

– Create a culture wherein people have a tremomdous opportunity to be
heard and ultimately for the truth to be heard.
– Lead with Questions , not Answers.

The managers must have humility to grasp the fact that

they may not know enough to have all the answers and
then to ask the questions that will lead to the best
possible insights.
 Some Fundamental Rules :
Engage in dialogue and debate, not coercion.
•

The Good-to-Greate Companies did not use discussion as

a SHAM process to let people “have their say” so that they
could “buy in” to a predetermined decision. The process
should be like a scientific debate, with people engaged in
a search for the best answers.

Conduct autopsies without blame .

• Conduct autopsies without blame .
When you do this ,you go a logway towards a climate where the truth is heard.
– You should keep searching only for understanding and hearing.
 Some Fundamental Rules :

• Build “red flag” mechanisms.

The Good-to-Great Companies did not have more or better information

than the companies .They had the approach/tendency to turn
information into facts that cannot be ignored. The “red flag” is a
practical and useful tool in this regard.

• Unwavering faith amid the brutal facts.

After confronting the brutal facts, the Good-to-Great
companies became stronger and more resilient, not weaker and more
dispirited.
 Some Fundamental Rules :

There is a sense of exhilaration that come in facing

HEAD-ON the hard truths and saying," We will never
give up. we will never capitulate. It may take a long
time, but we will find a way to prevail”

Three categories of People who suffered serious

adversity and survived.

1.Those who were permanently dispirited by the event.

2. Those who got their life back to normal.

3. Those who used the experience as a defining event

that made them stronger.
 The stockdate paradox

Retain faith that Confronts the most

you will prevail AND at the
brutal facts of your
in the end, same time
current reality,
regardless of whatever they
the difficulties might be.

The contrast between the REALIST and the OPTIMIST.

Confront the Brutal Facts

- Yet never lose faith.
KEY POINTS:

1. All the good-to great companies began the

process of finding a path to greatness by
confronting the brutal reality.

2. When you start with an honest and diligent

effort to determine the truth of your situation
the right decisions after become self-evident.
KEY POINTS:

3. It is impossible to make good decisions without

infusing the entire process with an honest
confrontation of the brutal facts.
4. A primary tasks in every company/dept. create
a culture wherein people have a tremendous
opportunity to be heard and ultimately, for the
truth to be heard.
KEY POINTS:

5. Ignoring the brutal facts of reality will

result in demotivating people.

6. Leadership begins with getting people to

confront the brutal facts and to act on
this implications.
DISCIPLINED THOUGHT
CONCEPT- D :

THE HEDGEHOG CONCEPT .

Or

Simplicity within the Three circles of Business

Model.
Are you a Hedgehog or Fox ?
Foxes are crafty, cunning creatures
that know many thing yet lack consistenc
MAJOR DIFFERENCE
Hedgehogs know only one Big thing.

FOXES:
a) Pursue many goals at the same
time.
b) See the world in all its
complexity.
c) Move on many levels.
TWO TYPES OF PEOPLE

HEDGEHOGS:
a) Simplify a complex world into one
simple organizing idea.
b) Create a basic principle or concept
that unifies and guides the
business.
“The essence of profound insight is SIMPLICITY”
c) See what is essential in a big
picture and ignore the rest.
Three Circles of the Hedgehog
Concept:
1. The key is to UNDERSTAND what your
organisation CAN be the best in world at and
equally important what it cannot be the best at –
not what it “wants” to be the best at.

2. The Hedgehog Concept is NOT is goal, or strategy

or even an intention.

- IT IS AN UNDERSTANDING.

Corollary:
If you cannot be best in the world at your core
business, then
your core business cannot form the basis of your HC.
 Drivers of Economic Engine:

Search for one single denominator (preferably)

that has the single greatest impact on company
Performances.

This could be on of these:

– Profit per tonne

– Profit per employee

– Cash flow per customer etc.

We should identify this for TRL.

Additional Points:

a) It took four years on an average for the

good-to-great companies to get a
Hedgehog Concept.
b) You do not need to be in a great identity
to produce mistained great results.

No matter how bad the industry, every

good-to-great company figured out how to
produce truly superior economic returns.