Good to great

Jim Collins is one of our favorite business/ management authors. In Built to Last (1994), he revealed the distinguishing characteristics of great, enduring companies: core ideology, core purpose, and core values. In "Built to Flip" (2000), he presciently derided startup Internet companies founded only for the purpose of being sold off. Now, in his current Good to Great (2001), Collins asks and answers the primary business management question: how does an ordinary company become extraordinary?

It took the author and a team of 20 researchers 5 years of data collection and analysis to answer that question; this resulting book lays out the methodology and findings. First, criteria were established to define companies that went from "good" to "great": cumulative stock returns at or below the general market for 15 years, followed by cumulative returns at least 3 times over the general market for the next 15 years. Of the 1,435 companies that made the Fortune 500 between 1965 and 1995, only 11 qualified.

The group, surprisingly, is a dowdy lot: Abbott Laboratories, Circuit City Stores, Federal Home Loan Mortgage, Gillette, Kimberly-Clark, Kroger, Nucor, Philip Morris, Pitney Bowes, Walgreen, and Wells Fargo. For analytical purposes, Collins and his team evaluated these good-to-great companies against comparison companies those that were in the same industries but couldn't make the leap - and with unsustained comparison companies, those that made the shift but couldn't maintain their trajectories.

What distinguished the good-to-great companies? How did they make the shift? In contrast to most operating prescriptions for creating large-scale corporate change, they did not first name and embark upon a big "change program." They did not declare a "crisis" or foster a "revolution." They did not motivate employees through fear or reward. They didn't grow by acquisition or the use of leading-edge technology. Instead, writes Collins, a down-to-earth, pragmatic, committed-to-excellence process - a framework - kept each company, its leaders and its people on track for the long haul.

This framework is built, first, on capable, selfmotivated people; secondly, on an understanding of external market conditions and of the company's own standing therein; and thirdly, on a strategy that exploits and leverages the company's core strengths, but is flexible enough to change as conditions change. Simple, perhaps, but not easy...