Good to Great

1
Good to Great

• Book by Jim Collins

2
Good to Great

• Good is the enemy of great.
• Why is that true?

3
Companies Studied (15-year return compared to
general stock market)

• Abbott (3.98)
• Circuit City (18.5)
• Fannie Mae (7.56)
• Gillette (7.39)
• Kimberly-Clark (3.42)
• Kroger (4.17)
• Nucor (5.16)
• Philip Morris (7.06)
• Pitney Bowes (7.16)
• Walgreens (7.34)
• Wells Fargo (3.99)

• Upjohn
• Silo
• Great Western
• Warner-Lambert
• Scott Paper
• AP
• Bethlehem Steel
• R.J. Reynolds
• Addressograph
• Eckerd
• Bank of America

Unsustained Burroughs, Chrysler, Harris, Hasbro,
Rubbermaid, Teledyne
Kirk Wakefield
4
Lesson 1 Leadership
1

• Humility Will Level 5 leadership
• Modest, willful, humble, fearless
• Ego-driven, genius-types, may produce short-term
  positive results, but cannot sustain results
• 1highly capable 2 contributing team member, 3
  competent manager, 4 effective leader,
  5executive that builds enduring greatness thru
  personal humility professional

Kirk Wakefield
5
Leadership
1

• Professional Will
• Creates superb results, a clear catalyst in the
  transition from good to great
• Demonstrates an unwavering resolve to do whatever
  must be done to produce the best long-term
  results, no matter how difficult
• Sets the standard of building an enduring great
  company will settle for nothing less
• Looks in the mirror, not out the window, to
  apportion responsibility for poor results, never
  blaming other people, external factors, or bad
  luck

• Personal Humility
• Demonstrates a compelling modesty, shunning
  public adulation never boastful
• Acts with quiet, calm determination relies
  principally on inspired standards, not inspiring
  charisma to motivate
• Channels ambition into the company, not the self
  sets up successors for even greater success in
  the next generation
• Looks out the window, not in the mirror, to
  apportion credit for the success of the
  companyto other people, external factors, and
  good luck

Kirk Wakefield
6
Lesson 2 First whothen what.
2

• There are going to be times when we cant wait
  for somebody. Now, youre either on the bus or
  off the bus. (Ken Kesey, The Electric Kool-Aid
  Acid Test)
• What did the 11 successful companies find out?
• You dont first figure out where to drive the bus
  and then get people to take it there.
• No, first get the right people on the bus (and
  the wrong people off) and then figure out where
  to take the bus.

Kirk Wakefield
7
Why you get the right people on the bus first
2

1. If you begin with who rather than what you
   can more easily adapt to a changing world.
2. If you have the right folks on the bus, the
   problem on how to motivate manage people
   largely goes away.
3. If you have the wrong people, it doesnt matter
   whether you discover the right direction, you
   still wont have a great organization. Great
   vision without great people is irrelevant.

Kirk Wakefield
8
Level 5 thinkingon getting folks on/off the bus
2

• I dont know where we should take this
  commission, but I do now that if I start with the
  right people, ask them the right questions, and
  engage them in vigorous debate, well find a way
  to make this organization great.
• David Maxwell (CEO, Fannie Mae) made it
  absolutely clear that there would only be seats
  for A players who were willing to put forth an A
  effort, and if you werent up for it, you had
  better get off the bus, and get off now.

Kirk Wakefield
9
Rigorous, not ruthless
2

• To be rigorous means consistently applying
  exacting standards at all times and at all
  levels, especially in upper management. To be
  rigorous, not ruthless, means that the best
  people need not worry about their positions and
  can concentrate fully on their work.
• To let people languish in uncertainty for months
  or years when in the end they arent going to
  make it anywaythat is ruthless. To deal with it
  right up front and let people get on with their
  livesthat is rigorous.

Kirk Wakefield
10
How to be rigorous
2

• When in doubt, dont hirekeep looking.
• When you know you need to make a people
  changeact.
• The moment you feel the need to tightly manage
  someone, youve made a hiring mistake. The best
  people dont need to be managed. Guided, taught,
  ledyes. But not tightly managed.
• Waiting too long before acting is equally unfair
  to the people who need to get off the bus.
• How to know Would you hire the person again?
  Would you be relieved if they left the
  organization?
• Put your best people on your biggest
  opportunities not your biggest problems.
• Corollary When you decide to sell off your
  problems, dont sell of your best people. Make a
  place on the bus for the best people, and theyll
  be more likely to support changes in direction.

Kirk Wakefield
11
Discuss How do you need to be rigorous?
2

• When in doubt, dont hirekeep looking.
• When you know you need to make a people
  changeact.
• The moment you feel the need to tightly manage
  someone, youve made a hiring mistake. The best
  people dont need to be managed. Guided, taught,
  ledyes. But not tightly managed.
• Waiting too long before acting is equally unfair
  to the people who need to get off the bus.
• How to know Would you hire the person again?
  Would you be relieved if they left the
  organization?
• Put your best people on your biggest
  opportunities not your biggest problems.
• Corollary When you decide to sell off your
  problems, dont sell of your best people. Make a
  place on the bus for the best people, and theyll
  be more likely to support changes in direction.

Kirk Wakefield
12
Lesson 3 Confront the Brutal FactsYet never
lose faith
3

• Two choices confront brutal facts and change or
  stick head in sand
• Kroger and APsuperstores vs. low prices
• You have to be number one or two in each market
  or you have to exit.
• You absolutely cannot make a series of good
  decisions without first confronting the brutal
  facts.

Kirk Wakefield
13
Confront the Brutal FactsYet never lose faith
3

• Your job is to turn over rocks and look at the
  squiggly things, even if what you see can scare
  you!
• Some organizations (Bank of America) have
  climates where managers will not even make a
  comment until they know how the boss felt.
• The moment a leader allows himself to become the
  primary reality people worry about, rather than
  reality being the primary reality, you have a
  recipe for mediocrity, or worse.

Kirk Wakefield
14
How to confront the Brutal FactsYet never lose
faith
3

• Lead with questions, not answers
• Put more questions to board members than they put
  to you
• Raise questions for one reason only to gain
  understanding (not manipulation)
• Engage in dialogue and debate, not coercion.
• Good-to-great companies have a penchant for
  intense dialogue
• Conduct autopsies, without blame.
• No finger-pointing.
• Build red-flag mechanisms.
• Good-to-great companies dont have better
  information, necessarily. The key is turning
  information into info that cant be ignored.
• Red cards in meetings folks hold it up to deal
  with real issues
• Short-pay allow customers to circle items on
  invoice they dont want to pay due to bad service
• Attitude We will never give up. We will never
  capitulate. It might take a long time, but we
  will find a way to prevail.

Kirk Wakefield
15
How do you need to confront the Brutal Facts?Yet
never lose faith
3

• Lead with questions, not answers
• Put more questions to board members than they put
  to you
• Raise questions for one reason only to gain
  understanding (not manipulation)
• Engage in dialogue and debate, not coercion.
• Good-to-great companies have a penchant for
  intense dialogue
• Conduct autopsies, without blame.
• No finger-pointing.
• Build red-flag mechanisms.
• Good-to-great companies dont have better
  information, necessarily. The key is turning
  information into info that cant be ignored.
• Red cards in meetings folks hold it up to deal
  with real issues
• Short-pay allow customers to circle items on
  invoice they dont want to pay due to bad service
• Attitude We will never give up. We will never
  capitulate. It might take a long time, but we
  will find a way to prevail.

Kirk Wakefield
16
The Stockdale Paradox
3

• Research by the Intl Committee for the Study of
  Victimization found that those facing serious
  adversity generally fall into one of three
  categories
• Those who were permanently dispirited by the
  event
• Those who got their life back to normal
• Those who used the experience as a defining event
  that made them stronger.

Kirk Wakefield
17
The Stockdale Paradox
3

• Jim Stockdale stoically accepted the brutal facts
  of reality while maintaining an unwavering faith
  in the endgamethat he would prevail despite the
  brutal facts.
• Who didnt make it out? The optimists.
• Those who think it will all be a quick fix and
  everyone will be out by Christmas are the ones
  that lose heart and fail.

Kirk Wakefield
18
Lesson 4 The Hedgehog Concept
4

• The fox knows many things, but the hedgehog
  knows one big thing.
• Foxes pursue many ends at the same time and see
  the world in all its complexity. They are
  scattered or diffused, moving on many levels.
• Hedgehogs simplify a complex world into a single
  organizing idea, a basic principle or concept
  that unifies and guides everything.
• For a hedgehog, anything that does not somehow
  relate to the hedgehog idea holds no relevance.

Kirk Wakefield
19
The Hedgehog Concept
4

• Examples
• Walgreens the best, most convenient drugstores,
  with high profit per customer visit (viz., also
  Starbucks)
• Wells Fargo running a bank like a business, with
  a focus on the Western U.S.
• Strategy, per se did not distinguish the
  good-to-great companies from the comparison
  companies. Both sets had strategic plans, and
  there is no evidence that the good-to-great
  companies invested more time/energy in strategy
  development long-range planning.
• ?All the G2G companies attained a very simple
  concept that they used as a frame of reference
  for all their decisions.
• ?A Hedgehog Concept is a simple, crystalline
  concept that flows from deep understanding about
  the intersection of the following three circles

Kirk Wakefield
20
Developing The Hedgehog Concept
4

• What can you be the best in the world at (and,
  equally important, what you cannot be the best in
  the world at)
• What you can be the best at might not even be
  something in which you are currently engaged.
• What drives your economic engine?
• Must discover the single denominator (profit per
  X ) that has the greatest impact on your
  economics/budgeting.
• What are you deeply passionate about?
• What do you have a genetic or God-given talent to
  do?
• What are you well-paid to do?
• What do you enjoy doing that you absolutely love
  to do, enjoying the actual process for its own
  sake?

Kirk Wakefield
21
The Hedgehog Concept
4

• You can be passionate about all you want, but if
  you cant be the best at it or if it doesnt make
  economic sense, then you might have a lot of fun,
  but you wont get great results.
• If we cant be the best at it, then why are we
  doing it at all?
• A Hedgehog Concept is not a goal to be the best,
  a strategy to be the best, an intention to be the
  best, a plan to be the best. It is an
  understanding of what you can be the best at.

Kirk Wakefield
22
Develop your Hedgehog Concept!
4

• What can you be the best in the world at (and,
  equally important, what you cannot be the best in
  the world at)
• What you can be the best at might not even be
  something in which you are currently engaged.
• What drives your economic engine?
• Must discover the single denominator (profit per
  X ) that has the greatest impact on your
  economics/budgeting.
• What are you deeply passionate about?
• What do you have a genetic or God-given talent to
  do?
• What are you well-paid to do?
• What do you enjoy doing that you absolutely love
  to do, enjoying the actual process for its own
  sake?
• A Hedgehog Concept is not a goal to be the best,
  a strategy to be the best, an intention to be the
  best, a plan to be the best. It is an
  understanding of what you can be the best at.

Kirk Wakefield
23
A few hedgehog facts
4

• Growth is not a Hedgehog Concept
• You cant just go off-site for 2 days and come
  back with it
• On average, it took 4 years for G2G companies to
  clarify theirs
• It is an inherently iterative process
• Useful mechanism is a Council that consistently
  meets to review the 3 aspects of the Hedgehog
  Concept (and they should get/read the book!)

Kirk Wakefield
24
An interesting note on bureaucracy

• Most companies build their bureaucratic rules to
  manage the small percentage of wrong people on
  the bus, which in turn drives away the right
  people on the bus, which increases the need for
  more bureaucracy to compensate for incompetence
  and lack of discipline, which then further drives
  the right people away and

Kirk Wakefield
25
Lesson 5 The Flywheel and the Doom Loop
5

• G2G comes about by a cumulative processstep by
  step, action by action, decision by decision,
  turn by turn of the flywheelthat adds up to
  sustained and spectacular results.
• Media attention often comes to G2G organizations
  after years of slow build-up and then
  break-through.

Kirk Wakefield
26
Flywheel Doomloop
5

• Flywheel transitions look like dramaticm
  revolutionary breakthroughs from the outside
  (when the wheel is fully turning).
• From the inside they feel completely different,
  more like an organic development process.

Kirk Wakefield
27
Flywheel Doomloop
5

• Egg sitting there.
• No one pays attention.
• Egg cracks open.
• Out jumps chick.
• Media
• The transformation of Egg to Chicken!
• The remarkable revolution of the Egg!
• Stunning turnaround at Egg!

Kirk Wakefield
28
Flywheel Doomloop
5

• The point?
• G2G companies had no name for their
  transformations. There was no launch event, no
  tag line, no programmatic feel whatsoever.
• There was no miracle moment.

Kirk Wakefield
29
Flywheel
5

• UCLA won 10 NCAA championships and 61 games in a
  row.
• How many years did Wooden coach UCLA before the
  1st championship?
• 15

Kirk Wakefield
30
Flywheel
5

• Point to tangible accomplishmentshowever
  incremental at firstand show how these steps fit
  into the context of an overall working concept.
• Step forward, consistent with hedgehog concept
• Accumulate visible results
• People line up, energized by results
• Flywheel momentum builds

Kirk Wakefield
31
Doomloop
5

• Instead of a quiet, deliberate process of
  figuring out what needed to be done and then
  simply doing it, the comparison companies
  frequently launched new programsoften with great
  fanfare and hoopla aimed at motivating the
  troopsonly to see the programs fail to produce
  sustained results.
• They sought the single defining action, the grand
  program, the one killer innovation, the miracle
  moment that would allow them to skip the arduous
  buildup stage and jump right to breakthrough.
• Guess what happened

Kirk Wakefield
32
Two popular doomloops to avoid
5

• Misguided use of acquisitionsmaking deals for
  the sake of making deals.
• When the going gets tough, we go shopping!
• G2G companies did acquisitions after the Hedgehog
  Concept and after the flywheel had significant
  momentum.
• Acquisitions are accelerators not creators of
  flywheel momentum.
• Leaders who stop the flywheelleaders who step
  in, stop an already spinning flywheel, and throw
  the organization in entirely different direction.

Kirk Wakefield
33
Whats the diff between flywheel doom loop
organizations?

• (in)consistency
• (non)confrontal
• (un)disciplined
• (un)motivated (self)
• (talk)results

Kirk Wakefield