Monday, May 31, 2010

"Good to Great" by Jim Collins

This book came out almost 10 years ago, but within its pages, are some of the most thought provoking results on Business Excellence. Actually, Excellence in general. The great thing about studying Public Companies is that we can study their freely available numbers, we can break down their acceleration of growth, and we can talk to their bosses and innovators.

And that's exactly what Jim Collins and his team of researchers did. They found a handful of companies that had huge sustained growth for 15 years and asked "What are they doing? How did they get here? Why are they so rare?"

What they found were a string of totally non-MBA answers. A few simple concepts and only 10 or 20 leaders in the country could hold themselves to. Wow.

First, the leaders: we know that leaders in business can be very loud, very cool, very power hungry and egotistic.But these types of characters were nowhere to be found in the study. What did the leaders of these great companies (like Nucor, Gillette, Wells Fargo) have in common, when it came to leadership?

Diligence, and Modesty. That's it.

If you can find a guy or girl who will work all day and all night, and will do whatever it takes to rigorously do the homework (on the competition, on new technology, when it comes to hiring, when it comes to expansion), who is modest to a fault, that's your future CEO.

And they discovered something remarkable about their compensation too: it doesn't make a difference.
All the nonsense and backdoor deals going on on Wall Street, and here's a group of the best companies in the last 15 years, according to Wall Street, and the compensation was not a motivating factor, and did not move the stock price up or down. So what was it then?

These old fashioned, hard working, modest guys just wanted their company (not themselves) to grow and be great. Part of that modesty the leaders were not going for glory but diligently, and rigorously, doing the hard things to promote the company, the group, the collective. And here's a crazy thought: if you really want your company to be great, you'll set it up so that it will continue to be great, even after you retire! How many retired CEO's do you know that lose sleep thinking about their old company?How many companies have you worked for, that you've worried about, long after you'd already left the job? That's real passion, loyalty, and care for the company. And it's rare.

There's another theme that really hit home for me, on a professional level and a personal level. They call it the Hedgehog concept based on an old parable of the Hedgehog: 


In the woods, the Fox is always trying to eat the Hedgehog, but never succeeds. He tries various tricks, pouncing in the day, pouncing at night, being slow, being fast, luring the Hedgehog, or a surprise attack, but he just fails and fails and fails. The Hedgehog, with none of the speed, agility, or aggression of the Fox, survives with one simple defense. Whenever it sees the Fox coming, it just rolls up into a ball with those spikes out. The Fox can do nothing when the spikes are out, so it eventually gives up and wanders off. The Fox goes hungry and the Hedgehog thrives.

How could such an weird looking creature be the basis for business and personal excellence? By sticking to one thing. Basically, the Fox can be compared to a company with tons of great technology, a bunch of different projects, and lots of resources. By bouncing around to different things, it never really focuses its energy on one thing. And why does that matter? Because it never gets to be the best in the world at one thing that way. And so you never hear about them.

As people, we can consider the Hedgehog an inspirational figure of sorts: it is born with this one talent, or trick. It exploits that talent every single day, and as a result it thrives. It doesn't aspire to be like the Fox in speed and agility, and even grace. It just plods along, and slowly but surely, becomes great at being...a Hedgehog. Think of a Comedian that works on this one set of jokes, for 15 years. For 15 years you never hear about the guy, and then suddenly, BOOM, he's everywhere. You start seeing clips on Youtube, you hear he has a new TV show and movie deal in the works, and your friend think he's the funniest thing on Earth. Thats how it happens. Not overnight, but a long, gradual, almost mundane process, of sticking to one great thing.

Back to business, we found that this is one of the hardest things for great companies to do: say no to trendy, cool, hot new projects that threaten to pull the company far away from their core excellence.
For example, in the book, the American Pharmacy Wal-Greens decided they wanted to be the most convenient pharmacy in the country. That was it. Once they had that idea, all decisions were easy. It meant doing some crazy things, (like closing a store, only to reopen a store a block away with better access from the main traffic routes, etc) but it got them all the answers. If you can prioritize, you can answer any question. And you can only prioritize if you have rigor and discipline.

The first two factors of the Hedgehog concept are Passion and 'Best in the World Focus.' The third and final factor is, at last, about money. After all, I didn't say these companies were the coolest in the US (a steel company and a drug company?), they were being highlighted because of their consistently excellent performance on the stock market.

The final factor was choosing a metric that defined how they measured excellence, and zeroing in on that target. These guys could aim to maximize profit per store, profit per employee, profit per country, profit per customer visit, anything they wanted. And each one had its own implications for future plans. The bottom line is this, the third factor is the way the company measures how well people are doing their jobs. Walgreens wanted to maximize profit per customer visit. That meant every time someone walked in the door, all the advertisers had done their jobs. Now it was time to see just how great the experience was to be in a Walgreens store. If it was great, profit would trend up. If it was confusing, noisy, over crowded, empty shelves, rude staff, the profit would trend down. It's that simple. By zeroing in on this one metric, Walgreens beat the market by a mile, year after year after year.

There's a ton in here, that I just couldn't get to. If you're into it, go pick it up, its a great read, lots of amazing anecdotes in here. Yes its a business book, and yes I've got some terrific ideas for my own job, but you can get a tremendous amount of personal insight as well. Here's food for thought : what one thing can I do, day in, day out, and eventually be the best in the world at?

3 comments:

zero said...

So, I always think you will be the future CEO one day~~

After reading your review, I began to think about my working attitude..I didn't like my current job, a little bit hate..it's trivial and non-challenge..actually no space to promote..maybe it's the turning point to change the attitude: i should do my best and the chance will come with it~~~i need time to train myself to be self-discipline and more efficient~~and how to deal with the relationships with colleagues and boss..ah..it's hard to me because i have just gotten in working for 10 months..I still can not handle it well..but thank you for your shares all the same..i think it may be useful~

BTW, the Hedgehog is so cute~~~XXOO~~i like all kinds of animals~~

Michael Robson said...

Ah this book really gave me lots of great new ideas, if you have any good 关系 with your boss, he might be very happy to discuss with you some ways which you think the company can do better.
Sounds crazy I know, but if you could talk to him, or even your manager, you might be surprised to find out, they are just trying to make the whole group better off, and you might be surprised to learn 'how they consider something a success'

In the book they talked about denominators (like A/B, C/D), which always had to do with profit... profit per customer, profit per week, profit per city, profit per office branch. You might be surprised to find out what your company's "profit per X" denominator actually is, and if you knew that, you might be able to change the way you work, to really impress them.

In fact, I bet even the fact that you asked such a question would impress them ;)

zero said...

ah~~that sounds great~~~love you soooo much~~i hope my new boss will appreciate me by this question~~haha~~