Good To Great – The Journey ! CONFRONT THE BRUTAL FACTS HEDGEHOG CONCEPT LEVEL 5 LEADERSHIP DISCIPLINED PEOPLE FIRST WHO… THEN WHAT DISCIPLINED THOUGHT CULTURE OF DISCIPLINE DISCIPLINED ACTION TECHNOLOGY ACCELERATORS BUILD UP... BREAKTHROUGH!

Good to Great – The Journey Good is the enemy of Great! The good to great companies did not focus principally on what to do to become great; they focused equally on what not to do and what to stop doing. Under the right conditions, the problems of commitment, alignment, motivation, and change largely melt away. The Foundation:Disciplined People, Disciplined Thought, and Disciplined Action The Concept: Flywheel Effect Building Block 1: Level 5 Leadership Building Block 2: First Who..then what Building Block 3: Confront the Brutal Facts Building Block 4: The Hedgehog Concept – Simplicity within the three circles Building Block 5: A culture of Discipline Building Block 6: Technology Accelerators

CONFRONT THE BRUTAL FACTS HEDGEHOG CONCEPT LEVEL 5 LEADERSHIP DISCIPLINED PEOPLE FIRST WHO… THEN WHAT DISCIPLINED THOUGHT CULTURE OF DISCIPLINE DISCIPLINED ACTION TECHNOLOGY ACCELERATORS BUILD UP... BREAKTHROUGH! Good To Great !

LEVEL 5 Leadership  Level 5 Leaders channel their ego needs away from themselves and into the larger goal of building a great company.  They are incredibly ambitious – but their ambition is first and foremost for the institution, not themselves.  They are modest and willful, humble and fearless  They are fanatically driven, infected with an incurable need to produce sustained results.  They are resolved to do whatever it takes to make company great, no matter how big or hard the decisions.  They display a workmanlike diligence – more plow horse than show horse  The key elements of great leaders are simple and straightforward; the ability to strip away noise and clutter and just focus on few things that would have greatest impact. Level 5 leaders exist all around us, many people have the potential to evolve into level 5! LEADERSHIP HIERARCHY

Summary : The Two Sides of Level 5 Leadership

CONFRONT THE BRUTAL FACTS HEDGEHOG CONCEPT LEVEL 5 LEADERSHIP DISCIPLINED PEOPLE FIRST WHO… THEN WHAT DISCIPLINED THOUGHT CULTURE OF DISCIPLINE DISCIPLINED ACTION TECHNOLOGY ACCELERATORS BUILD UP... BREAKTHROUGH! Good To Great !

 The right people don’t need to be tightly managed or fired up; they will be self-motivated by the inner drive to produce the best results and to be part of creating something great.  The right people will do everything within their power to build a great company, they simply cannot imagine settling for anything less. Their moral code requires building excellence for its own sake. “I don’t where we should take this company, but I do know that with the right people, asking the right questions, all engaging in vigorous debate, we will find a way to make this company great” Wells Fargo “The guys never agreed on anything and they would argue about everything, and they would kill each other and involve everyone, high and low, talented people. But when they had to make a decision, the decision would emerge. This made Phillip Morris. They were always in search of the best answer. In the end everybody stood behind the decision. All the debates were for the common good of the company, not own interests” Phillip Morris “They Enjoyed each other’s company and actually looked forward to meetings; their experience went beyond mutual respect, to lasting comradeship” Kimberly-Clark. First Who…. then What:

How to be Rigorous, not ruthless: Practical Discipline #1: When in doubt, don’t hire – keep looking. Those who built great companies understand that the ultimate throttle on growth for any Great company is not markets, or technology, or competition, or products. It is one thing above all others: the ability to get and keep enough of the right people. Practical Discipline#2: When you know you need to make a people change, act The moment you feel the need to tightly manage someone, you have made a hiring mistake. The best people don’t need to be managed. They need to be guided, taught, led – Yes. Not tightly managed! All the time and energy we spend on that person siphons energy away from developing & working with the right people. Letting the wrong people hang around is unfair to all the right people, as they inevitably find themselves compensating for the inadequacies of the wrong people. Two key questions: 1. “would you hire the person again?” 2.“If the person came and told you that they are leaving, would you be terribly disappointed or secretly relieved?” Practical Discipline #3: Put your best people on your biggest opportunities not your biggest problems. First Who…. then What:

CONFRONT THE BRUTAL FACTS HEDGEHOG CONCEPT LEVEL 5 LEADERSHIP DISCIPLINED PEOPLE FIRST WHO… THEN WHAT DISCIPLINED THOUGHT CULTURE OF DISCIPLINE DISCIPLINED ACTION TECHNOLOGY ACCELERATORS BUILD UP... BREAKTHROUGH! Good To Great !

Facts are better than dreams  Breakthrough results come by a series of good decisions, diligently executed & accumulated one on top of another  Two distinctive forms of disciplined thought. First, infuse the entire process with the brutal facts of reality. Second, develop a simple, yet deeply insightful, frame of reference for all decisions.  When you start with an honest and diligent effort to determine the truth of the situation, the right decisions often become self-evident. “Leadership is about vision. But leadership is equally about creating a climate where the truth is heard and the brutal facts are confronted. There is a huge difference between the opportunity to have your say and the opportunity to be heard. Level 5 leaders understand this distinction, creating a culture wherein people have a tremendous opportunity to be heard and, ultimately, for the truth to be heard” Jim Collins “Leading from Good to Great does not mean coming up with the answers and then motivating everyone to follow the messianic vision. It means having the humility to grasp the fact that you do not yet understand enough to have the answers and then to ask the questions that will lead to the best possible insights” Jim Collins Confront the Brutal Facts (yet never loose faith)

Four Practices for creating a climate where the truth is heard 1.Lead with questions, not answers 2.Engage in dialogue and debate, not coercion 3.Conduct autopsies, without blame – need only to search for understanding and learning 4.Build “red flag” mechanisms – key lies not in better information, but in turning information into information that cannot be ignored  Key point to note when confronting brutal facts, is to have unwavering faith amid the brutal facts. Belief that we will come out stronger and more resilient. “We will never give up, it may take a long time, but we will find a way to prevail. Kimberly-Clarke Confront the Brutal Facts (yet never loose faith)

CONFRONT THE BRUTAL FACTS HEDGEHOG CONCEPT LEVEL 5 LEADERSHIP DISCIPLINED PEOPLE FIRST WHO… THEN WHAT DISCIPLINED THOUGHT CULTURE OF DISCIPLINE DISCIPLINED ACTION TECHNOLOGY ACCELERATORS BUILD UP... BREAKTHROUGH! Good To Great !

Hedgehog concept is a simple, crystalline concept that flows from deep understanding about the intersection of the following three circles 1.What you can be the best in the world: This standard goes far beyond just core competence. What you can be best in the world might not be something in which you are currently engaged. 2.What drives your economic engine: Attain piercing insight into how to most effectively generate sustained and robust cash flow and profitability. 3.What you are deeply passionate about: Focus on activities that ignite your passion. The idea here is not to ignite passion but to discover what makes you passionate. The Hedgehog Concept – Simplicity within the Three Circles It doesn’t matter how complex the world, a hedgehog reduces all challenges and dilemmas to simple – indeed almost simplistic – ideas.

Key points of the Hedgehog Concept: While it has crystalline clarity and elegant simplicity once you have it, getting the concept can be devilishly difficult and takes time. We must recognize that getting a hedgehog concept is an inherently iterative process, not an event. The essence of the process is to get the right people engaged in vigorous dialogue and debate, infused with brutal facts and guided by questions formed by the three circles.  All good to great companies attained a very simple concept that they used as a frame of reference for all their decisions, and this understanding coincided with breakthrough results.  Most Crucial point of Hedgehog concept: It 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. This distinction is crucial. Understanding what your organization truly has the potential to be the very best at and sticking to it. The Hedgehog Concept – Simplicity within the Three Circles

Characteristics of the Council The council exists as a device to gain understanding about important issues facing the organization The council is assembled & used by leading executive and usually consists of 5 to 12 people Each council member has the ability to argue and debate in search of understanding, not from the egoistic need to win a point or protect a parochial interest Each council member retains the respect of every other council member, without exception Council members come from a range of perspectives, but each member has a deep knowledge about some aspect of the organization and/or the environment in which it operates The council includes key members of the management team but is not limited to members of the management team, nor is every executive automatically a member The council is the standing body, not an ad hoc committee assembled for a specific project The council meets periodically, as much as once a week or as infrequently as once per quarter “To accelerate the process of getting a Hedgehog Concept, the frequency of going around the full cycle in a given period of time should increase.”

CONFRONT THE BRUTAL FACTS HEDGEHOG CONCEPT LEVEL 5 LEADERSHIP DISCIPLINED PEOPLE FIRST WHO… THEN WHAT DISCIPLINED THOUGHT CULTURE OF DISCIPLINE DISCIPLINED ACTION TECHNOLOGY ACCELERATORS BUILD UP... BREAKTHROUGH! Good To Great !

 Companies engage investing in burgeoning bureaucracy and hierarchy to manage a small percentage of wrong people in the company. The “cancer” of mediocrity begins to grow in earnest.  The purpose of bureaucracy is to compensate for incompetence and lack of discipline – a problem that largely goes away if you have the right people in the first place.  Create a culture of discipline with an ethic of entrepreneurship – you get a magical alchemy of Superior performance and sustained results. Need to invent mechanisms that would drive the cultural change 1.Build a culture around the idea of freedom and responsibility, within a framework. 2.Fill the culture with self-disciplined people who are willing to go to extreme lengths to fulfill their responsibilities. 3.Don’t confuse a culture of discipline with a tyrannical disciplinarian system. 4.Create a “Stop doing list” and systematically unplug anything extraneous. Good to great companies manage the system, not the people. Have the discipline to do the right thing and, equally important, to stop doing the wrong things. The culture of Discipline

CONFRONT THE BRUTAL FACTS HEDGEHOG CONCEPT LEVEL 5 LEADERSHIP DISCIPLINED PEOPLE FIRST WHO… THEN WHAT DISCIPLINED THOUGHT CULTURE OF DISCIPLINE DISCIPLINED ACTION TECHNOLOGY ACCELERATORS BUILD UP... BREAKTHROUGH! Good To Great !

Technology Accelerators  Central point is, when used right, technology becomes an accelerator of momentum, not a creator of it.  Avoid technology fads and bandwagons, become pioneers in the application of carefully selected technologies.  Respond to technology change with thoughtfulness and creativity, driven by compulsion to turn unrealized potential into results.  “Crawl, Walk, Run” can be a very effective approach even during times of rapid and radical technological change.

The Flywheel Effect:  Good to Great transformation never happens in one swoop. The process resembles relentlessly pushing a giant heavy flywheel in one direction, turn upon turn, building momentum until a point of breakthrough and beyond. The Transformation of egg to chicken!  Simple truth: Tremendous power exists in the fact of continued improvement & the delivery of results Essence of the breakthrough process. Breakthrough will eventually happen. Starts with Level 5 Leaders, gravitating towards the flywheel model and leading with Capital R – Results Getting the right people on the bus, wrong people off the bus, and right people in the right seats Understanding the Stockdale paradox :”we are not going to breakthrough by X time, if we keep pushing in the right direction, we will eventually hit breakthrough. Process of confronting the brutal facts helps see the obvious, albeit difficult, steps that must be taken to turn the flywheel while keeping the faith in the end game Attain deep understanding about the three circles of hedgehog concept and begin to push in that direction. Have the discipline to make a series of good decisions – disciplined action, following from disciplined people who exercise disciplined thought.

The Doom Loop DISAPPOINTING RESULTS REACTION WITHOUT UNDERSTANDING NO BUILDUP; NO ACCUMULATED MOMENTUM NEW DIRECTION, PROGRAM LEADER, EVENT, FAD OR ACQUISITION

Good To Great – The Journey! CONFRONT THE BRUTAL FACTS HEDGEHOG CONCEPT LEVEL 5 LEADERSHIP DISCIPLINED PEOPLE FIRST WHO… THEN WHAT DISCIPLINED THOUGHT CULTURE OF DISCIPLINE DISCIPLINED ACTION TECHNOLOGY ACCELERATORS BUILD UP... BREAKTHROUGH!