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Good to GreatWHY SOME COMPANIES MAKE THE LEAP…AND OTHERS DON’T
FARZIN FARDISS, PARS SAMAN BOARD MEMBER, [email protected]
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Agenda→ What are considered good and great companies
→ What’s inside the black box?
→ Level 5 Leadership
→ First Who….Then What
→ Confront the Brutal Facts
→ Hedgehog Concept
→ A Culture of Discipline
→ Technology Accelerators
→ Flywheel
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Good to Great
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“Good is the enemy of great.”-JIM COLLINS
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“Can a good company become Great?”
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YesAny organization can become
great if it consistently applies the concepts and ideas that will be presented in this presentation.
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Before we begin, what is considered a Great company
General Market
Great companies have returns that are at least
3 times the general market
1
2
3
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What are some of the good companies out
there?
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All of these companies only broke the general market by 2.5 times
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What are the great companies?
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Good to Great Cases
Company Results from Transition point to 15 years beyond transition point
T‐year to T‐year +15
Circuit City 18.5 times the market 1982‐1997
Fannie May 7.56 times the market 1984‐1999
Gillette 7.39 times the market 1980‐1995
Walgreens 7.34 times the market 1975‐1990
Pitney Bowes 7.16 times the market 1973‐1988
Philip Morris 7.06 times the market 1964‐1979
Nucor 5.16 times the market 1975‐1990
Kroger 4.17 times the market 1973‐1988
Wells Fargo 3.99 times the market 1983‐1998
Abbot 3.98 times the market 1974‐1989
Kimberly‐Clark 3.42 times the market 1972‐1987
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Comparison Companies
Comparisons companies are those companies that had the same opportunities, similar resources and in the same industry as the good-to-great companies, but never made the leap from good to great.
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Great companies vs. Comparison Companies
Good‐to Great Companies Direct Comparisons
Abbot UpjohnCircuit City SiloFannie May Great Western
Gillette Warner‐LambertKimberly‐Clark Scott Paper
Kroger A&PNucor Bethlehem Steel
Philip Morris R.J. ReynoldsPitney Bowes Addressograph
Walgreens EckerdWells Fargo Bank of America
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Unsustained comparisons
Unsustained comparisons are those companies that have made the leap from good-to-great, but failed to sustain the progress.
Unsustained ComparisonsBurroughsChryslerHarrisHasbro
RubbermaidTeledyne
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How did this Great companies transition from Good to Great?
What did these companies do that made them great?
Good Results
Great Results
What’s inside the Black Box?
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So What’s in the Black Box?
What’s inside the Black Box?
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Buildup
THIS
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Simplified version of Mr. Collins framework
Disciplined Action Disciplined Action
Culture of Discipline Technology Accelerators
Disciplined Thought Disciplined Thought Confront The Brutal Facts Hedgehog Concept
Disciplined People Disciplined People
Level 5 Leadership First Who….Then What
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But this isn’t any ordinary leadership, It’s Level 5 Leadership.
Level 5 Leadership
So what is Level 5 Leadership?
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Level 5 Leadership
Level 5: Builds enduring greatness
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What are the traits of a Level 5 Leader?
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Level 5 Leaders set their company up for success after they leave, by
finding a successor that will succeed.
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Level 5 leaders are very modest.
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Level 5 leaders are fanatically driven to produce results.
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Almost all Level 5 Leaders came from within the company.
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Level 5 leaders always take the blame, and always give away the
credit to their subordinates.
Level 5 Leader
Gives Credit
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Level 5 Leadership Formula
HUMILITY
WILLPOWER+
LEVEL 5=
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We just went over WHO Level 5 Leaders are. The rest of the
process of transitioning from good to great shows what they DO.
Level 5 Leadership
Disciplined ActionDisciplined People
Confront the Brutal Facts
Hedgehog Concept
Culture of Discipline
Technology Accelerators
Disciplined Thought
First Who…Then
What
Buildup
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First Who…Then WhatThe second aspect in Collin’s framework needed for a company to breakthrough from good to great is having the right people, in the right location.
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First Who…Then What
Collins uses a bus analogy to describe what he and the team found.
Bad PeopleGood People
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Collins states that it is important to begin with “who”, instead of “what
First Who…Then What
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If the people jump on the bus because of where it is going, and ten miles down the road you change direction, then
there will be a problem.
First Who…Then What
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If the people are on the bus because of who else is on the bus, then it’s much
easier to change direction.”
First Who…Then What
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The problem of motivation and management goes away when you have the right people on the bus.
First Who…Then What
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“great vision without great people is irrelevant”
First Who…Then What
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Now that the Level 5 Leaders have the disciplined people, they now need the discipline thought
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Confront the Brutal FactsThe third aspect in Collin’s framework needed for a company to breakthrough from good to great is to confronted the brutal facts of reality.
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Confront the Brutal Facts
The Good to great companies would lead with questions, not answers.
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Confront the Brutal Facts
They would engage in dialogue and debate, not coercion.
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Confront the Brutal Facts
The Good to great companies would conduct autopsies, without blame.
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Stockdale Paradox
“Retain faith that you will prevail in the end, regardless of the difficulties, and at the same time confront the most brutal facts of your current reality,
whatever they might be.”
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Confront the Brutal FactsNow that the Good to Great companies know
the brutal facts, they need to conceptualize their ideas .
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Hedgehog ConceptThe fourth aspect in Collin’s framework needed for a company to breakthrough
from good to great is to understand what you can be the best at.
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Hedgehog Concept
The good-to-great companies transitioned from good to great because they took a
great, simple idea that had piercing insight, and consistently used that idea for all of
their decision making.
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But how did the Good to Great companies come up with these great, simple, ideas?
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What you are deeply Passionate
About
What you can be the best in the
world at
What drives your economic engine
HEDGEHOG CONCEPT
These great, simple, ideas came from the answers of three questions.
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Hedgehog Concept
Collins states that it took an average of four years for the good-to-great companies to
clarify their hedgehog concept.
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THE COUNCIL
THE COUNCIL
Ask Questions
Ask Questions
Dialogue and
Debate
Dialogue and
Debate
Executive DecisionsExecutive Decisions
Autopsies and
Analysis
Autopsies and
Analysis
A useful mechanism that Collins creates to help move the process along is called “The
Council”.
All aspects of The Council are guided with the three circles (hedgehog concept) in mind
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Now that the Good to Great companies have disciplined people and discipline thought,
it’s time for action
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Culture of Discipline
The fifth aspect in Collin’s framework needed for a company to breakthrough from good
to great is to have disciplined action within the three circles, fanatically
consistent with the hedgehog concept
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Culture of Discipline
The Good to Great companies build a culture around the idea of freedom and
responsibility, within a framework.
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Culture of Discipline
Fill the culture with self-disciplined people who are willing to go extreme lengths to
fulfill their responsibilities.
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Culture of Discipline
Adhere with great consistency to the hedgehog concept, exercising an almost religious focus on the intersection of the
three circles.
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Now that the Good to Great companies have all the components needed to transition
from good to great, the last item was how to approach and integrate new
technological advances into their hedgehog concept.
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Technology Accelerators
The sixth aspect in Collin’s framework needed for a company to breakthrough from good to great is to use only those
technologies that apply to the companies hedgehog concept.
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The executives of the good-to-great companies knew that without the clear
understanding of how new technology fits into a company’s hedgehog concept, technology became only a means of accelerating that companies own self
demise.
Technology Accelerators
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Now that everything for a company to breakthrough from good to great is in place,
the only thing to do is to wait, while fanatically applying the great, simple ideas
from the hedgehog concept.
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The last Concept in the framework is the flywheel. This takes all of the concepts put together, and provides the breakthrough.
Disciplined ActionDisciplined People Disciplined Thought
Buildup
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Following all of the six concepts within the framework will begin to push the wheels
momentum.
Flywheel
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Over time, the Wheel will begin to develop more and more momentum
Flywheel
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Until finally, the wheel will gather enough momentum, that a breakthrough will occur, and the company will finally transition from
good to great.
Flywheel
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Steps Forward, Consistent with
Hedgehog Concept
Steps Forward, Consistent with
Hedgehog Concept
Accumulation of Visible Results
Accumulation of Visible Results
People Line Up, Energized by Results
People Line Up, Energized by Results
Flywheel Builds Momentum
Flywheel Builds Momentum
Over time, as the wheel began to spin, the employees within those good-to-great
companies became more enthusiastic, and more motivated then before
This only made their resolve stronger and the wheel spin even faster. Collins came to call this the “flywheel effect”
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From Good to Great to Built to LastWhen Mr. Collins wrote this book Good to
Great, he asked himself “What should be the role of Built to Last in doing this study?
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Mr. Collins came up with these two connections between his two books.
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Established Company or Start-up
Established Company or Start-up
Good to Great Concepts
Good to Great Concepts
Sustained Great Results
Sustained Great Results Built to Last ConceptsBuilt to Last Concepts Enduring Great
CompaniesEnduring Great
Companies
The difference is that they used the framework at an early stage in their
company, trying to get it off the ground, as opposed to the CEOs in Good to Great, who used the frame work in companies that were
already established and grown.
The leaders in Built to Last used the same Good-to-Great framework to breakthrough.
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Mr. Collins. is very renowned in the world of business. Mr. Collins specializes in the
subjects of Company growth and sustainability. At the time when he wrote his book, Good to Great, Mr. Collins was a
professor at Stanford University’s Graduate school of Business.
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http://www.jimcollins.com/