Phase 1 – The Search:
Find companies with the following basic pattern:
15 year cumulative stock returns at or below the general market, punctuated by a transistion point, cumulative returns at least 3x the market over the next 15 years. 15 because it exceeded a CEO tenure and 3x because it exceeded typical standards of “great” companies. Data points to Walgreens beating Intel as a “great” company.
Phase 2 – Compared to What?:
The crucial question being what did the “good to great” companies share in common that distinguishes them from the comparison companies. (ie What would distinguish a gold medal winner from one who had not won gold?) Companies selected fell into “good comparisions” or companies that had the same opportunities in the same industries as the “good to great companies” but had failed to make the leap, unsustained compairions, which are companies who showed for s time great results but had failed to sustain it, and finally those that managed to make the leap thus becoming “good to great”. There were 28 companies in total.
Phase 3 – Inside the Black Box:
Deep analysis of each case consisting of articles dating back more than 50 yrs. Coded all the info to strategy, technology, leadership, etc. Interviewed key execs who had key roles during the time of transistion. While also doing quantitative and qualitative research analysis looking at everything from acquisitions to exec compensation, from business strategy to corporate culture, from layoffs to leadership style, from financial ratios to management turnover. And then debated the meaning of all the data on a week to week schedule. Finding that the dogs that didn’t bark (ie Sherlock Holmes discovered a dog that didn’t bark meant that the intruder must have been someone who was well known by the dog.) was the key to what made a company great:
– Celebrity CEO’s actually have an adverse effect on the company as opposed to the believed reverse.
– The data doesn’t support executive compensation as a key driver to results.
– Strategy didn’t make a difference in the data either.
– Companies looked at over all strategy not one key concept of good to do.
– Technology can accelerate change but cannot cause transformation. (ie It’s a tool.)
– Mergers and Aquitions play no role in the good to great transformation.
– Good to great companies paid little attention to managing change, motivating people, or creating alignment. Under the right conditions, the problems of commitment, alignment, motivation, and change largely melt away.
– They were not aware at the time of the transformation that they were getting the results only in retrospect could they see it.
– In the end, greatness was not a function of cirsumstance. Rather, greatness, it turns out, is largely a matter of concious choice.
Phase 4 – Chaos to Concept:
It’s an iterative process of looping back and forth, developing ideas, and testing them against data, revisiting the ideas, buiilding a framework, seeing it break under the weight of evidence, and rebuilding it yet again. The process was repeated over and over again until everything hung together in a coherant framework of concepts. (similar to the design process) Set against a rigorous constraint the following framework was developed:
Level 5 Leadership:
Personal humility and professional will is at the core of the level 5 leader. Thus they are more like Socrates and Lincoln than Patton or Ceasar.
First Who… Then What:
The right people are the key to driving the vision. Get the right people on the bus then set the direction.
Confront Brutal Facts (Yet Never Lose Faith):
Must maintain unwavering faith that you can and will prevail in the end no matter the difficulties and at the same time have the discipline to confront the brutal facts of your current reatlity.
The Hedgehog Concept (Simplicity in 3 Circles):
A simple concept that reflects deep understanding of 3 intersecting circles (more to come).
A Culture of Discipline:
Disciplined people means you don’t need hierarchy. Disciplined thought, means you don’t need beauracracy. Disciplined action, means you don’t need excessive controls. Thus when you combine this culture of discipline with an ethic of entrepreneurship, you get the magical alchemy of great performance.
Pioneers in the application of technology…
Flywheel and Doom Loop:
No single concept made the change rather the procss resembled relentlessly pushing a giant heavy flywheel in one direction, turn upon turn, building momentum until a point of breakthrough and beyond.
From Good to Great to Built to Last:
Good to Great concepts to Sustained Great Results to Built to Last Concepts to Enduring Great Company
Timelessness of Good to Great:
(What can be learned from “Good to Great” and Six Sigma that can be applied to design to create a seamless process where business needs are met and value is added back to the consumer? How can this be applied to business systems, consulting, interactive systems, etc? The design process as well as the other two have very similar concepts where is the weaknesses? And how can they benefit each other? Emphasis on timeless nature.)