The book was a bestseller, selling four million copies and going far beyond the traditional audience of business books. There is usually information in what someone doesn't say. Put your best people on biggest opportunities, not on biggest problems, 3. While I never have done the finer data-crunching, there is plenty of evidence around for whoever has an excellent memory to rely upon, or who dares to look back in time through data-details. They have never managed to surpass the $42 level over the period since, spanning thirteen years during which the share price sank as low as $13. The inconvenient truth, one that the investment industry is all too willing to swipe under the carpet, is that mediocre companies can only achieve sustainable, great returns for investors when they are carried by extraordinary tailwinds for their industry, or through a monopoly, by law or otherwise. His major mistake is a very common one – one that rarely gets noticed. And while you are at it, download the chapters written by Lisa and by Marc. Though, Collins asserts that most companies fail to make the transition from good to great. They aspire to higher levels of excellence, are never content to become complacent and are passionate about their products. The book was a bestseller, selling four million copies and going far beyond the traditional audience of business books. Within buildup and breakthrough Collins found successes in three broad stages likely to determine a company’s ability to achieve greatness: disciplined people, disciplined thought, and disciplined action. The past two decades have seen Australian companies losing most cosy market dominating positions, with negative consequences for shareholders. (For years I have been nagged by the question of whether or not Warren Buffett is successful because of suvrivorship bias. As is readily acknowledged throughout the study, great companies are not 100% safe from bad luck, negative impacts or unforeseen disasters, but they cope a lot better, and tend to always come out on top stronger. This is an important point to not miss. BP Editors So, if you haven’t read it before hopefully you will consider it (or learn “enough” from my abbreviated summary). Technology Accelerators (Process stage: Breakthrough; Phase: Disciplined Action). All Rights Reserved. But Collins would have no way of uncovering that, and even if he did, who would write a book that encourages would-be business leaders to study up on the economics of their industry and better analyze cash flow statements? This has always been the case, but even more so during times of low growth, shorter cycles, low inflation and the emergence of new technologies that challenge most mediocre and sub-par performing businesses. So we read this book and we feel good, like it describes our leadership style (more Barnum effect too). Plus the fact that Good To Great is available in bricks and mortar book stores around my neighbourhood. 4. Meanwhile, its competitor Eckerd, which was in a very similar position in the mid-1970’s – same size, same industry – faltered and faded away. Collins identifies eight common traits the “good to great” companies share. Confronting brutal facts? Why You’re Struggling to Lead. (Note: The Fortune 500 is not static in make-up but is regularly updated). The good-to-great qualities, once determined, were never used to search for counterexamples. Instant set-up). Long time readers may have noticed that I have never reviewed one of the most popular business books of all time – "Good to Great." Grantees are responsible for all upfront expenses. Not all companies are the same. Why some companies make the leap … and others don’t by US author/researcher Jim Collins. ‘Good is the enemy of Great’. Click to view our Glossary of Financial Terms, © FNArena 2020. Why some companies make the leap … and others don’t by US author/researcher Jim Collins. For those of you who have read the book; you know that my answer could have been tuned up a little, but it got me thinking… why did I recommend a book I haven’t read for four years? A culture of discipline requires people to strongly adhere to the defined hedgehog concepts but at the same time provides much needed freedom to take disciplined actions within that framework. The Best of RT tool finds the top reviewed films of all time in any genre, sorted by the Rotten Tomatoes Tomatometer Culture of Discipline (Process stage: Breakthrough; Phase: Disciplined Action). The true value of Collins’ research, in my view, is by spelling out the characteristics of the many not so great companies out there: hubris at the top, ill-timed and overly optimistic acquisitions, lack of structural investment, copy-cat strategy decisions, company boards filled with career yes-men, low quality products and services, holding on to yesterday’s glory,.. From 1976 to 2000, Walgreens beat the general stock market by over 15 times. They dropped all other metrics and focused exclusively on criteria that would lead to that singular, hedgehog-like goal. Truth to be told, I think many an investor would do him/herself one gigantic favour in buying this book and absorbing its content, including the finer details. For example: I am regularly informed by investors “I did relatively well” or “I achieved a satisfactory return” from, say, a stock like QBE Insurance. Point No. The transformation from good to great does not happen with a pioneering technology but by realising the right technology and becoming a pioneer in the application of that technology. What I mean is that Collins and his team never said "are there any companies that have all of our good-to-great qualities that weren't good-to-great?". If your interest is more geared towards running a great charity, Jim Collins published a companion book, Good to Great and the Social Sectors. It’s time for a book report. The most popular example of this is this card test. Mediocre peers need luck, lots of it, as well as lots of help and assistance. It is important to assemble a team of great people first and then decide on the strategy or vision for the company to make it great. This was exactly the opposite in case of leaders of ‘good’ or failed organisations. Again, the result of good decision making. But to become the most convenient drugstore, they’d need to position themselves in prime real estate: corner stores in city centers and busy intersections. Another example: Examine the strange story of two drugstores, Walgreens and Eckerd. It indicates the ability to send an email. Collins asks an interesting question. Or maybe they were more financially saavy and understood how money flowed through the company and where their profit really came from. The great companies do not start with what technology to use but start what technology fits best to our defined hedgehog concept. Good To Great. My guess is that most people think their way of hiring or interviewing is the best way to get the "good people" and so they liked hearing Collins say this. These are not idly-piddly, teeny-weenie, micro-cap exploration companies with no revenues and nothing to sell. Only when the companies indulge on things that they are really passionate about, they can produce results that exceed expectations. I wouldn't deny that for a minute but they haven't led anybody anywhere. The belief that it does is called the survivorship bias, and it may apply to good-to-great. My personal point of interest is when Australian companies venture offshore. Here are 10 examples from real businesses. In accordance with Section 38 of Public Act 15-1, all grant recipients will be required to have a 10-year temporary lien placed on the site by the State of Connecticut. This is why buying “cheaply” and laggard “value” stocks has performed so poorly as an investment strategy over the past seven years. Lists of current TV series and award winners to help you figure out what to watch now. “Consider the contrast between Abbott Laboratories and Upjohn,” he says, referring to two drug companies. It’s easy to succeed when your broader industry is doing well. These are all ASX Top20 members in 2020; household names that feature in many investment portfolios and are broadly considered as “must have” backbone portfolio constituents by many, both retail and professional investors. (I mean, other than deluding myself into thinking I am doing well when the market in general mirrored the QBE share price in the exact opposite direction.). Unhappily, the methodology he used to formulate an answer is questionable and the answer is almost disappointing in its simplicity: Great companies become great by staying focused: focused on their products, their customers and their businesses. He's either being diplomatic and refusing to say "no, Welch wasn't" or Level 5 leadership is business jibber jabber. AMP shares were once priced above $20 ($1.35 today). BP Editors But if Walgreens judged profit per store, then the company would be incentivized to put stores in cheaper locations. Great companies are like hedgehogs, Collins found: they discover what they can do best, and they stick to it. [2], Holt and Cameron state the book provides a "generic business recipe" that ignores "particular strategic opportunities and challenges. Why some companies make the leap … and others don’t by Jim Collins, Random House Business Books, 300 pages, ISBN 9780712676090. Vague but Appealing BS The last part of the three circles is having a deep understanding of what you are passionate about. There are 3 practical ways: When you know you need to make a people change, act ! In a similar fashion, the lists of stocks I have selected over the past decade have seen some changes, mostly from companies disappearing because circumstances change, or because my initial assessment wasn’t as robust. He was tortured more than 20 times over the span of his 8-year imprisonment, during which he endured no release date and no certainty that he’d ever see his family again. For instance, Collins says good-to-great companies practice "First Who, Then What," which basically means "hire good people." Collins used a large team of researchers who studied "6,000 articles, generated more than 2,000 pages of interview transcripts and created 384 megabytes of computer data in a five-year project".[2]. It is important that the organisations not only know what they can be best in the world at but also know what they cannot be best in the world at. He further states that investing in the portfolio of the 11 companies covered by the book, in the year of 2001, would actually result in underperforming the S&P 500. In conclusion, the research showed that all the Good to Great transformation happened with the consistent application of all the mentioned phases. Collins also doesn't know what he doesn't know. This book was originally published in 2001 and has sold more than three million copies since. It is a known fact that the right team is needed to achieve the success but what is even more important is to build the right team even before you know what and which path to take towards greatness and hence it is ‘first who..then what’. I've been hiring slimy weasels when I should have been hiring top performers. The transformation from good to great does not happen with a pioneering technology but by realising the right technology and becoming a pioneer in the application of that technology. Research has shown that leaders who have brought the ‘Good to Great’ transformation are not the one’s who are charismatic or big personalities but are rather quiet, shy, deliberate. Collins finds eleven examples of "great companies" and comparators, similar in industry-type and opportunity, but which failed to achieve the good-to-great growth shown in the great companies: Collins includes 6 examples of companies that did not sustain their change to greatness.