Going from Good to Great – How Companies Achieve Greatness

We live in a VUCA world, and yet there are companies that, despite the volatility, uncertainty, complexity and ambiguity, there are companies that continue to thrive – that go from good to great.

Jim Collins is one of the top business and management thinkers of our time, with a number of best-sellers to his name, including Built to Last, Good to Great, Great by Choice and his newest in the series, BE 2.0 (Beyond Entrepreneurship 2.0). Each built on the previous one:

• Built to Last exploring what set 18 visionary companies apart from their peers (many of the world’s largest corporations),
• Good to Great looking at 11 companies (of 1435 he studied across 40 years of performance) and showing how the moved from good to being great,
• Great by Choice then went deeper, examining no less than 20 400 companies to find their 10X ones – those that had spectacular results compared with stock market and their industry for 15 years, that managed exceptional performance during difficult times, and that made it to the top of their industry despite a shaky position at the beginning. The book looks at the (only) 7 companies that met these criteria.
• BE 2.0 is described as “a roadmap for entrepreneurs and leaders of SMEs who want to build enduring great companies” and covers leadership strategy and achieving consistent tactical excellence, among other things.

So, what can we learn from these books about companies that achieve greatness?

In Built to Last, Collins found that culture is a key factor, and although many companies claim to value culture, executive compensation demonstrates that in many cases leadership values their own pockets above the less visible team members and, therefore, sound culture. It is also clear that these success story companies have a core ideology that drives the business and lives through its products and employees to drive culture, constant improvement, and progress through BHAGs (big hairy audacious goals).

Their culture is such that they encourage experimentation as a key factor in driving progress, with this accountability culture also encouraged strong development of people so they produced a continual stream of high-calibre leaders in the organisation, providing for well-planned succession paths. Essentially, these companies did not just talk about their ideals and values, but lived them throughout the business – so new employees quickly found they needed to fit in and thrive, or leave.

Good to Great adds to the lessons from the previous book by showing how firms become great. In analysing the companies, he was looking for those that successfully moved from average (or below-average) stock market performance to those that generated cumulative returns of at least 3x the market average for 15, or more, years, and also comparing them with their industry peers and those companies that moved to great performance but slid back again after a short time.

Collins boiled down the five years of research into a number of distinct areas on which these great companies focused. The first of these is what he called “the hedgehog concept” – great companies have found, and focus on, a simple strategy around their core value proposition that is defensible (just as the hedgehog curls into a spiky almost-impenetrable ball to deter predators).

This strategy is around 3 questions – what the company can be best in the world at, what it can be passionate about and what key economic indicator it concentrates on. By avoiding distractions and “new “bright shiny objects”, and having a sharp focus, companies rise to the top of their field. Although these 3 questions sound simple, it can take several years to really hone your hedgehog concept.

Having done so, ensuring the business has the best people throughout the organisation is key: from leadership (Collins describes these as Level 5 Leaders) right through the company. This means not only having a powerful culture of accountability throughout, but also taking care when hiring to ensure you have people that will fit the culture and encouraging those who are not great fits in the business to find somewhere more suitable.

Part of this culture of accountability, of course, is ensuring that the environment is such that harsh facts and difficult issues can be aired without hesitation, and that the reality of a situation is confronted head-on, and without losing faith in the overall goal – all have to have the discipline to keep to the overarching hedgehog concept.

And, of course, all must recognise that success comes from many small incremental improvements and movements towards the goal, with tools such as technology being recognised as just that – tools that can help reach the final goal, rather than being goals in their own right.

This all really builds on what Collins found in the visionary companies in Built to Last – the absolute focus on their core ideology and their BHAGs, with great people throughout and a strong culture developing of a steady stream of leaders who are not afraid to experiment as a part of the company’s evolution towards the goal.

Great by Choice built on what was learnt in the first two books by delving deeply into the seven 10X companies Collins found from his initial selection of more than 20 000. As we’ve seen from the previous two books, focus and self-discipline at all levels are key – the focus on the goals and the self-discipline to keep pushing even when things are really tough.

But these 10X companies take things a bit further – they’re almost paranoid about preparing for the worst and ensuring they can ride it out. They’re obsessively vigilant with a deep understanding of their markets and industry, watching their environment closely for potential hazards: legislation or financial conditions changes (we’ve all seen a number of these in the past 2-3 years), or new potential rivals whether from traditional sources or new approaches. And this means having cash available – lots of it, with an average of cash to assets up to ten times higher than their competitors.

This focus on goals and their vigilance doesn’t mean they’re not innovative, nor bold, though. Innovation is encouraged, but it needs to be evidence-based and be able to move them closer to their overall goals. And, of course, it needs to fit in with the company’s overall culture of having clear processes and procedures in place that support the disciplined, consistent and steady move to those goals. It’s really not about luck or fortunate circumstance (all of these companies had experienced good luck and/or a fortunate event), but how they responded through a combination of hard work, ambition, discipline and preparedness (having the ability to take advantage of this).

The last book in this series, BE 2.0 (Beyond Entrepreneurship 2.0) is almost a “how to” for entrepreneurs that want to take their relatively small business to big places. Unsurprisingly, the rules for doing so are drawn from what we see in the previous books.

First and foremost, it’s about having great people – the right people in all the key roles, at least, and more beyond. People with commitment to themselves and the company, and who don’t just see their role as a job, but are committed to improving themselves, their team and the business as a whole. Accountability at all levels, therefore, rather than just responsibility.

But, as Collins says, ultimately the leadership sets the business up to succeed or fail. It’s those Level 5 leaders who possess authenticity, decisiveness, focus, communication skills, people skills with a personal touch, and who are forward-thinking, rather than dwelling on the past.

And being able to focus on the vision / BHAG / hedgehog with a strong sense of self-discipline is the third element of success. Having clarity about, and a commitment to, the values, purpose and overall mission enables leaders to work with their OKR framework to ensure things stay on track.

Of course, central to this is having a good strategy – one that will enable you to reach your goals. Good strategy is uncomplicated, realistic and streamlined. It’s about taking you to those big hairy audacious goals, and not settling for less, while also ensuring you can protect yourself from threats that will come along, so more than simply an attacking strategy. And, just as the strong self-discipline mentioned in the previous point means being open and flexible, not just rigid as many people see discipline, so strategy needs to be flexible too, and able to adapt as circumstances change.

Adaptability is key – circumstances change, technology advances, legislation brings new hurdles, and so on. So, an ability to innovate is essential, and having a culture that encourages this is key: encouraging experimentation at all levels by testing new ideas (and abandoning those that don’t work out), giving people ownership over their ideas and achievements, rewarding creative contributions. It’s about being able to think like your customers and continuously enhance their experience, and being open to all ideas, too, trying to work out ways they could work, rather than not. And when those lucky events come along, being able to capitalise on them – so having the resources and the adaptability to do so.

But underlining all these rules for success is one core rule – that of hard work. Your culture needs to be one of commitment and accountability, sticking to the deadlines and results expected in your OKR framework. Break the BHAG into smaller, achievable steps with milestones so people aren’t overwhelmed, then make people accountable for their part in achieving these by empowering them to do their best work. There really are no shortcuts to sustainable success, to becoming great.

Being successful takes hard work – we really are living in a VUCA (Volatility, Uncertainty, Complexity, Ambiguity) world, especially now, which makes the market even tougher to navigate. But with the best people, a strong culture, a clear vision and a great strategy your business can achieve incredible results: it really can become great!

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I work with successful owner-led businesses to enhance their growth, profitability, cash flow and business value.

If you’d like to have a conversation about your business, vision, strategy, culture, or any business challenges or concerns, book a free 30-minute call with me here. I’d be delighted to talk with you.

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