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

By Jim Collins
Reviewed by Scott Dickens

Why do some companies have continuing, sustained growth in excess of those companies around them? What is it that makes them different? Is it charismatic leadership? Right place, right time? Unique

This is the question that Jim Collins attempts to answer in Good to Great.

He and a team of 20 researchers spent five years and more than 15,000 man-hours researching the question, Why Some Companies Make the Leap, Good to Great…and Others Don’t. They reviewed thousands of books, articles, and annual reports; conducted financial analyses on records that totaled 980 years of combined business records. They interviewed 84 senior executives and board members, scrutinized the personal and professional records of 56 of the CEOs, and researched the executive compensation plans. They analyzed the patterns in layoffs, how media exposure affected the financial results, and finally, how technology was used and its effect, if any, on the financial performance of the companies. The team researched every aspect that could be quantified, codified, analyzed or compared.

The study begins with 1435 Fortune 500 Companies and narrows that list to 11 that made the transition from good-to-great companies: Abbott Laboratories, Circuit City, Fannie Mae, Gillette Co., Kimberly-Clark Corp., the Kroger Co., Nucor Corp., Philip Morris Cos. Inc., Pitney Bowes Inc., Walgreens, and Wells Fargo.

These are companies that stood out as being different from their direct competition. Their successes were due to intrinsic differences in the way they were led, managed, directed, and run; not to a unique product or industry, and not due to market timing or media hype. This book shows you objectively what it was that made these companies’ financial returns 3.4 to 18 times better than stock market averages for 15 years. And, it tells you how to apply these findings to your business:

Level 5 Leadership: Moving from good to great starts with leadership, with the will and drive to succeed, not on a personal level, but a will for the company to succeed. This is not about a leader with charisma, or one having a vision of where the company is going, it is about a leader “who blends extreme personal humility with intense professional will.”

First Who… Then What: Next find the right people to manage and run the business.

Confront the Brutal Facts: Then, look at the facts objectively. What are your core competencies?

Hedgehog Concept: Then take action based on being the best at what you can be the best at.

Culture of Discipline: Implement the resulting plan rigorously, with discipline and focus.

Good to Great is a textbook on how to run a successful organization. It includes extensive appendices detailing the methodologies of the research and comprehensive notes and references. It is a must-read for anyone building or leading a business or group, large or small. It challenges a lot of the current hype about what makes a company successful. From the charismatic CEO, to the hype of IT, or merger mania, none of these contributed to the success of these eleven companies.

I do find that it ignores the underlying value of what is being sold; in fact, the author recognizes this, and discusses the inclusion of Philip Morris Cos. Inc. and its core product, tobacco.

A comprehensive research project, well written and entertaining to read, Good to Great is a worthy successor to, and in the tradition of, Built to Last.

Hardcover, 300 pages, $27.50; HarperCollins Publishers, Inc. (2001).