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

by Jim Collins
HarperCollins, 2002

As Jim Collins says, good is the enemy of great. Many of us achieve “good” in our organizational life, but what does it take to become great, the best. Collins and his research team spent five years analyzing this question within the context of Fortune 500 companies. They defined “great” as a company that could outperform the market by at least a factor of three for a period of at least 15 years. And merely being in a hot industry didn’t count—you had to outperform your industry as well. Using these strict criteria, he found only eleven (yes, eleven!) companies out of 500 that made the transition from good (stock prices moving generally along with or below the market as a whole) to great and sustained it for fifteen years.

The companies might surprise you: Walgreens drugstores, Kroger supermarkets, Wells Fargo Bank, Circuit City. Where’s Intel or Coca Cola? Well, if you invested a dollar in the general stock market in 1975, by the year 2000 you’d have $37. An investment in Coca Cola during that span would have produced $73, and Intel would have scored you $309. Walgreens, however, would have made you $562! In its fifteen year span of sustained growth, Circuit City’s stock price outperformed the stock market by a factor of 18! But who the companies are isn’t really the point. The research that Collins and his team conducted set out to understand why those eleven companies were different from their direct comparisons. What did those eleven do (that the others didn’t) that could explain their leap to greatness?

The results may surprise you. He has nine chapters, each covering a major finding from the research, but he organized them into three broad phases of the transformation process: disciplined people, disciplined thought, and disciplined action—in that order. Disciplined people are “Level 5” leaders who were a blend of personal humility and professional will. As Collins said, they were “more like Lincoln and Socrates than Patton or Caesar.” They also focused on building the right team—even before they set out a vision or strategy. Who is going to do it must be determined even before the “it” is decided on.

Disciplined thought included a strong commitment to the truth. The great companies were brutally honest about the realities they were facing (although they were also absolutely certain they would succeed in the end). Their visions and goals were lofty—yet rooted in a true understanding of their capabilities, not just bravado. Strategic decisions always fell within an area defined by (a) what they were passionate about, (b) what they could be the best in the world at, and (c) what really drives their economic engine. The companies that were good but could not sustain great results repeatedly strayed outside of these guidelines.

Disciplined action is simply the logical result of getting the right disciplined people who did the right disciplined thinking. The Great companies had a “culture of discipline” that adhered fanatically to the disciplined thought. Use of technology, for instance, was a key component of the success of the great companies, but it was always in the service of their core concepts, not as an end in itself. Collins also makes clear that disciplined action is not about a leader/tyrant who disciplines people. “Savior CEOs” who generate turnarounds by sheer force of will rarely get sustained results.

I recommend you read the whole book (and not just this summary), because the power of the book lies in the details. Reading the stories and understanding in more detail how these eleven companies made the leap will drive you right to the important questions, the tough calls, and the strategic decisions you face in your organization. You don’t have to be the leader of a Fortune 500 company to learn from this book. You don’t even have to be a for-profit company. Whatever you do, you have to decide whether or not you want to be great. As Collins says, being great does not require more effort than just being good. In fact, it is probably less work than building sustained mediocrity. But it does take discipline and, above all, clarity. This book stimulates the thinking you probably need to do to get a little more clear about the prospects for you (your organization, your division, etc.) becoming great.