7 Lessons from Jim Collins' “Good to Great”

Jim Collins books, where do I start? They are some of my favorite management books of all time. He should read them, especially if he is a CEO who wants to grow his business. They are too important to ignore. Start with “Good to Great.” This seminal book had a profound influence on me. To say it transformed my way of thinking is an understatement.

I first read it when it was published in 2001 and shortly after finishing my MBA. There I was, as the new CEO of a start-up, Rackspace UK, facing challenges and looking for tools. Good to Great” was the basis of all of this. The gems Jim Collins shared proved useful during my time as CEO at Rackspace, as well as at IT Lab and Peer 1. They now form the basis of my coaching practice.

I have read “Good to Great” and its sequel “Great By Choice” countless times, most recently at Christmas. It's good to go back to the source, especially since some of the theories are often reinterpreted or given a certain spin by others. Care must be taken not to lose the original detail and definition, such as when photocopying an image over and over again until it fades. I was struck again by your key themes because I think they are very relevant to the journey our customers are on. Or where they want to be.

If there was any criticism of “Good to Great” when it was first published, it was that this longitudinal study of what made companies “great” focused on the largest organizations. In response, Collins went off and wrote “Great by Choice,” in which he looked at smaller companies that, as they grew, decided to be great. The fascinating thing is that he concluded that there was little difference when he compared and contrasted larger companies with smaller ones. All companies, from good to great, shared the same characteristics.

So what were those characteristics? And what are the main lessons of “Good to Great”?

In “Good to Great,” Jim Collins describes how he debated with his research team about the nature of leadership in good and great companies. There was something about him that was different. Ultimately, they settled on the traits of humility and the drive to do the right thing for the good of the company, not their own. Collins defined the different levels, with Level 5 leadership at the top.

In my experience, Collins hit the nail on the head. Of the CEOs I coach, the most successful ones share a complete lack of arrogance. They are humble people, who understand that they do not know everything. And, without fail, they are driven to do the right thing by their employees, shareholders and customers.

Just this morning I was speaking with a client who demonstrated level 5 leadership. Yes, his business model was succeeding and growth was rapid. But for him, the greatest reward was the opportunity to change more lives. He viewed his business as a vehicle to do this for his employees and clients. When I think back to my time as CEO of Peer 1, the same thing happens to me. The figures were magnificent. We went from zero to £30m in five years. But my satisfaction came from the profound changes we made in the lives of the people who came to work with us. Where did this take them? Our business was a slingshot for many people, propelling them to bigger and better things. I get goosebumps just thinking about it. I am very proud of this personal impact.

For me, this is the most important of all the lessons of “Good To Great.” If you take nothing else, this is what you should always remember. Nothing is more important to a company than the talent it employs, what Jim Collins calls “getting the right people on the bus.”

I talk about this a lot in my coaching sessions. But when I reread “Good to Great” over Christmas, I realized I need to do it even more. In fact, I need to be almost manic to find the right people. Maybe I haven't been tough enough on some of my clients. I know from experience how difficult it is to do the work necessary to get an executive team of A-players. When I look back at my Rackspace and Peer 1 days, we certainly had some of the right people on the bus. But we never got close to the magic target of 80-90% A players. And that was despite the rigorous recruitment systems we introduced (at Rackspace, we joked that it was harder to get a job with us than it was to get into Oxford. It's great see that they still use this analogy in the United States saying that it is more difficult to get into Harvard).

So this year I will focus even more on this. We will use Patrick Lencioni's Working Genius tool along with Gallup's strengths, with the goal of providing executive teams and business leaders with the vocabulary necessary to have difficult conversations and hold each other accountable. We will work on trust and productive conflict. People need to learn these things through experience. That's where the value of OKRs comes in. I help clients create a cultural and behavioral framework and then use OKRs to create a performance measurement. It's when these two things intersect that you find your A players.

In “Good to Great,” Jim Collins points out that you need the right people on the bus before you know where you want it to go. So it is essential. I have worked with clients who said they wanted to make this transition but found it too difficult. They were not prepared to replace their colleagues or move them to other roles. But if you don't, you'll end up with the wrong culture. Your B players will set the standards of behavior and you will build your company around them. You need A players to set the tone.

Jim Collins describes the experience of James Stockdale—the highest-ranking American prisoner of war in the Vietnam War—in “Good to Great,” calling it “Stockdale's Paradox.”

Stockdale was locked up for a long, long time – more than eight years. At that time, many of his fellow prisoners lost the will to live. They were the optimists. Those who said, we'll go out for Christmas or Easter or his next birthday and finally they ran out of hope. Instead, Stockdale lived day by day, accepting the brutal reality of his situation. But he never lost faith that he would come out alive and that it would become the defining event of his life.

There are obvious parallels with the reality of COVID 19 and the impact of the pandemic. We all have to face the brutal facts. Early on, our client Etch UK restructured its business and went on the offensive, finding new opportunities. On the other hand, other similar companies went on strike and closed for months. They are still nowhere near back to where they were.

Despite the circumstances you are going through, if you have a clear BHAG, you can stick to that mission. Trust that you will reach your destination, but accept what life throws at you. Organizations often deny what is happening around them. Looking back, I can see that most of my time at Peer 1, we were in denial about the impact of the cloud on our business, or more specifically AWS. Maybe we would have been in a different place if we had faced this.

What lights your fire? What could your business be the best in the world for? And what makes you money: your profit per x? These are the three circles of the “Hedgehog Concept.” According to Jim Collins, where they intersect is where you will find your BHAG or mission. Going through this process forces you to think: who is my client and what is their problem? And it forces you to define your sandbox. It is a powerful thing.

This is all good in theory, but when I ask my clients what they could be the best in the world at, I am often met with blank faces. And what's worse, they laugh! Often, they are selling many things to many different customers. Finding one to focus on is difficult. The discussion can take many turns. Likewise, when I ask them what they are passionate about, a common response is, “Eh, nothing” (huge palm!). If your team struggles to be passionate or care about something, they may not be the right people. This is important. They have to evangelize your mission.

When teams manage to apply the hedgehog concept correctly, they are transformed. For example, our client, Excelsior Multi Academy Trust. Their BHAG is to be world famous for innovation in education. This has transformed the way job ads are written, which has transformed the volume of resumes they receive, which has transformed the quality of the teachers they hire. They are starting to have an impact on the wider educational scene in Birmingham. He is an absolute joy for me, as his coach. “It is inspiring to witness how people take the framework I offer and use it with such impact.”

Clarifying the curd is the expression Jim Collins uses to describe the importance of a culture of discipline in “Good to Great.” A strange use of words until you understand that it refers to the athlete David Scott. During the stretch in which Scott won six Ironman triathlons, he would rinse the cottage cheese off of him to get rid of any excess oil. Whether it helped or not, this small action showed Scott's disciplined thinking, disciplined action, focus, and commitment to being the best.

This smacks of an obsession with marginal gains – the 1% that will make the difference in performance. A constant drive to be the best. Make steady progress toward a goal. This can only come from a culture of discipline and constant, almost restless curiosity.

I cringe when I discuss business books with a potential client and they tell me they don't read. I don't know where to go next. This shows me a lack of determination or discipline. There is always time to read and improve your knowledge. Where would I be without Jim Collins, Verne Harnish, Patrick Lencioni? Who would have given me the framework upon which I have built my teams' success? Going back to level 5 leadership, there is no doubt that there is a link between humility and reading. The most successful CEOs have the discipline to read at least 12 books a year. It's the reason we run our book club here at Foundry Farm.

According to Jim Collins, companies from good to great think differently about technology. They avoid fads and instead focus solely on technology that can accelerate momentum in the hedgehog concept.

In older research, McKinsey found that 17 to 20% of companies that do IT projects well go on to invest in more IT. But the opposite is also true: if there is a history of failures, this discourages companies from continuing to invest in IT, leading to divergence over time. Digital transformation is difficult, without a doubt. But it's not impossible. If your company is failing in IT, you have to change your people, or your suppliers, or the tools you are using. But don't stop investing. You can bet that one or more of your competitors will be using the technology well.

The transformation does not occur suddenly. There is no single great action, no decisive innovation, no miraculous moment. Instead, as Jim Collins describes in “Good to Great,” it's more like relentlessly pushing a gigantic, heavy flywheel. Turn by turn, little by little you gain momentum until, finally, it starts to turn on its own.

I often discuss this idea with new clients and suggest they look for flywheels in their business. This sums up what I do for a living. Discover the flywheel of your business model. Yes, they have a plan that contains their numerical hopes and dreams. But to get there, they need a model that starts spinning on its own. The vision, the core customer, the culture, the innovation… once properly calibrated, everything interrelates to build the momentum you need to grow.