T EAM 2 C AITLIN C LARK S TEPHEN M ASSIMI W ILL M AYRATH K ATIE T REVINO M ATT V ANTANKHAH

Chapter 1: Good is the Enemy of Great  Overview While Jim Collins was presenting his first book, Bill Meehan, the managing director of the San Francisco office of McKinsey & Company, said, ○ “You know, Jim, we love Built to Last around here. You and your coauthor did a very fine job on the research and writing. Unfortunately, it’s useless.” This was the spark of curiosity that began five years of research and resulted in Good to Great

Chapter 1: Good is the Enemy of Great, continued  Overview The five-year research effort yielded many insights, but one conclusion stands out above the others ○ Most any organization can substantially improve its stature and performance, perhaps even become great, if it conscientiously applies the framework of ideas we’ve uncovered

Chapter 1: Good is the Enemy of Great, continued  Phases of Research Phase 1—The Search ○ First task was to find companies that showed the good-to-great pattern ○ Table 1, page 7 Phase 2—Compared to What? ○ Direct comparisons and Unsustained comparisons Phase 3—Inside the Black Box Phase 4—Chaos to Concept ○ The Flywheel captures the gestalt of the entire process of going from good to great

Chapter 1: Good is the Enemy of Great, continued  The Black Box Research Phase ○ Systematically coded all materials into categories, conducted interviews, and initiated a wide range of analyses Good Results What’s Inside the B LACK B OX ? Great Results

Chapter 1: Good is the Enemy of Great, continued D ISCIPLINED P EOPLE D ISCIPLINED T HOUGHT D ISCIPLINED A CTION C ULTURE OF D ISCIPLIN E F IRST W HO.. T HEN W HAT L EVEL 5 L EADERS HIP T ECHNOLOGY A CCELERATOR S C ONFRONT THE B RUTAL F ACTS H EDGEHO G C ONCEPT B UILDUP … B REAKTHROUG H ! THE FLYWHEEL

Chapter 2: Level 5 Leadership  Every good-to-great company has a Level 5 leader in its transition year  A Level 5 leader An individual who blends extreme personal humility with intense professional will Self-effacing individuals who displayed the fierce resolve to do whatever it takes to make the company great Their ambition is first and foremost for the institution, not themselves

Chapter 2: Level 5 Leadership, continued Level 5 Hierarchy, page 20 Level 5 Level 4 Level 3 Level 2 Level 1 L EVEL 5 E XECUTIVE Builds an enduring greatness through a paradoxical blend of personal humility and professional will E FFECTIVE L EADER Catalyzes commitment to and vigorous pursuit of a clear and compelling vision, stimulating higher performance standards C OMPETENT M ANAGER Organizes people and resources toward the effective and efficient pursuit of predetermined objectives C ONTRIBUTING T EAM M EMBER Contributes individual capabilities to the achievement of group objectives and works effectively with others in a group setting H IGHLY C APABLE I NDIVIDUAL Makes productive contributions through talent, knowledge, skills, and good work habits

Chapter 2: Level 5 Leadership, continued  Humility + Will = Level 5 Gillette-Colman Mockler  Ambition for the Company, Setting Up Successors for Success Fannie Mae—David Maxwell to Jim Johnson  Modesty—good-to-great leaders do not talk about themselves but about the company and contributions of other executives Darwin Smith and Scott Paper

Chapter 2: Level 5 Leadership, continued  Unwavering Resolve…To Do what Must Be Done Abbott Laboratories: George Cain  The Window and the Mirror Level 5 leaders look out the window to give credit to factors other than themselves and look in the mirror to apportion responsibility, never blaming bad luck  Level 5 Leaders are rare because it’s hard for a Board of Directors not not hire an ego-driven, larger-than-life leader and the personal ambition that drives people to the top stands in the way of the humility required by a Level 5 leader

Chapter 3: First Who…Then What  Good-to-great companies first got the right people on the bus and the wrong people off the bus before figuring out where they were going to drive it Wells Fargo  Not a “Genius With a Thousand Helpers” Level 4 leader—first what, then who  It’s who you pay, not how you pay them No executive compensation pattern acts as a key lever in taking the company from good to great Compensation should only serve the purpose of getting the right people on the bus and keeping them there

Chapter 3: First Who…Then What, continued  The RIGHT people are your most important asset  Rigorous, Not Ruthless Applying exacting standards at all times and at all levels The best people need not worry about their positions and can concentrate fully on their jobs Example: Wells Fargo acquiring Crocker Bank

Chapter 3: First Who…Then What, continued  How to be Rigorous When in doubt, don’t hire—keep looking When you know you need to make a people change, act Put your best people on your biggest opportunities, not your biggest problems  Great Lives

Chapter 3: First Who…Then What  Industry Analysis The RIGHT people are key assets Can allow for your company to compete in: ○ Research and Development

Chapter 4: Confront the Brutal Facts (Yet Never Lose Faith)  A&P vs. Kroger In the 1970s, both Kroger and A&P were relatively old and established companies ○ Kroger confronted the brutal facts that the industry was changing, but A&P didn’t A&P tried to continue doing things the tried and true way

Chapter 4: Confront the Brutal Facts (Yet Never Lose Faith), continued  Facts Are Better Than Dreams When you honestly and diligently determine the truth of your situation, the right decisions tend to present themselves Pursuing greatness requires a constant redefining of the path to greatness with the brutal facts of reality Charisma can be as much a liability as an asset ○ Because of a strong personality, people may filter brutal facts Example: Bank of America—managers wouldn’t make a comment until they knew how the CEO felt -It is possible to overcome charisma as a liability without conscious attention

Chapter 4: Confront the Brutal Facts (Yet Never Lose Faith), continued  A Climate Where the Truth is Heard Leadership is about creating a climate where the truth is heard and the brutal facts are confronted Creating this truth climate involves 4 steps: ○ Lead with questions, not answers ○ Engage in dialogue and debate, not coercion ○ Conduct autopsies, without blame ○ Build “red flag” mechanisms

Chapter 4: Confront the Brutal Facts (Yet Never Lose Faith), continued  A Climate Where the Truth is Heard, continued Step 1: Lead with questions, not answers ○ Good-to-great leaders don’t necessarily need to have all the answers ○ Good-to-great leaders need to be able to ask the questions that will lead to the best possible insights

Chapter 4: Confront the Brutal Facts (Yet Never Lose Faith), continued A Climate Where the Truth is Heard, continued –Step 2: Engage in dialogue and debate, not coercion Good-to-great companies didn’t just “let people have their say” so that they would “buy in” to what the company wanted Instead they engaged in intense dialogue to search for the best answers

Chapter 4: Confront the Brutal Facts (Yet Never Lose Faith), continued A Climate Where the Truth is Heard, continued –Step 3: Conduct autopsies, without blame This helps to create a climate where the truth is heard IF the right people are on the bus there is no reason to assign blame, only to search for understanding and learning

Chapter 4: Confront the Brutal Facts (Yet Never Lose Faith), continued A Climate Where the Truth is Heard, continued –Step 4: Build “red flag” mechanisms Good-to-great companies had the same information as comparison companies Good-to-great companies turned information into information that couldn’t be ignored

Chapter 4: Confront the Brutal Facts (Yet Never Lose Faith), continued  The Stockdale Paradox Named for Admiral Jim Stockdale Retain faith that you will prevail in the end, regardless of the difficulties. AND at the same time, Confront the most brutal facts of your current reality, whatever they might be.

Chapter 5: The Hedgehog Concept (Simplicity within the Three Circles)  The Hedgehog Concept Hedgehogs simplify a complex world into a single organizing idea Their basic principle or concept unifies and guides everything

Chapter 5: The Hedgehog Concept (Simplicity within the Three Circles), continued  The Three Circles Good-to-great companies founded their strategies on deep understanding of three key dimensions— the three circles Good-to-great companies took their understanding and formed a simple, clear concept that guided all their efforts

Chapter 5: The Hedgehog Concept (Simplicity within the Three Circles), continued  The Three Circles What you can be the best in the world at What you are deeply passionate about What drives your economic engine Not “Let’s get passionate about what we’re doing.” Instead, “Let’s do things we’re passionate about.”

Chapter 5: The Hedgehog Concept (Simplicity within the Three Circles), continued  Hedgehog Concept The Hedgehog Concept is an understanding of what you can be the best at, not what you want to be the best at ○ Also, an understanding of what you cannot be the best at Just because something is your core business doesn’t mean you can be the best in the world at it ○ Does not matter how long you’ve been doing it If you cannot be the best in the world at something, then it cannot be your Hedgehog Concept Doing what you are good at can only make you good ○ Focusing on what you can be the best at can potentially make you great

Chapter 5: The Hedgehog Concept (Simplicity within the Three Circles), continued  The Council A useful mechanism for moving the process of finding your Hedgehog Concept along Consists of a group of the right people, asking questions guided by the three circles debating those questions, making decisions, and analyzing those decisions ○ All steps guided by the three circles ○ All steps repeated over and over

Chapter 6: A Culture of Discipline  Few successful start-ups become great companies, in large part because they respond to growth and success in the wrong way To help with problems, professional managers are hired—often are able to “rein in the mess” but they also kill the entrepreneurial spirit  A preferable alternative exists: Avoid bureaucracy and hierarchy and instead create a culture of discipline When you put these two complementary forces together—a culture of discipline with an ethic of entrepreneurship—you get a magical alchemy of superior performance

Chapter 6: A Culture of Discipline, continued  The Good-to-Great Matrix of Creative Discipline, page 122 Hierarchical Organization Start-Up Organization Bureaucratic Organization Great Organization High Low High Culture of Discipline Ethic of Entrepreneurship

Chapter 6: A Culture of Discipline, continued  The main points of this chapter come down to one central idea: Build a culture full of people who take disciplined action within the three circles, fanatically consistent with the Hedgehog Concept  Four important ideas: Build a culture around the idea of freedom and responsibility, within a framework Fill that culture with self-disciplined people who are willing to go to extreme lengths to fulfill their responsibility. They will “rinse their cottage cheese.” Don’t confuse a culture of discipline with a tyrannical disciplinarian Adhere with great consistency to the Hedgehog Concept, exercising an almost religious focus on the intersection of the three circles. Also, create a “stop doing list.”

Chapter 6: A Culture of Discipline, continued  Freedom (and Responsibility) Within A Framework The good-to-great companies built a consistent system with clear constraints, but they also gave people freedom and responsibility within the framework of that system ○ Hired self-disciplined people who didn’t need to be managed, and then managed the system, not the people

Chapter 6: A Culture of Discipline, continued  Freedom (and Responsibility) Within A Framework, continued A culture of discipline begins with disciplined people, followed by disciplined thought, and finally disciplined action The order is important ○ Disciplined action without self-disciplined people is impossible to sustain, and disciplined action without disciplined thought is a recipe for disaster The point is to get self-disciplined people who engage in very rigorous thinking who then take disciplined action within the framework of a consistent system designed around the Hedgehog Concept

Chapter 6: A Culture of Discipline, continued  Rinsing Your Cottage Cheese Much of the answer to the question of “good to great” lies in the discipline to do whatever it takes to become the best within carefully selected arenas and then to seek continual improvement from there Everyone would like to be the best, but most organizations lack the discipline to figure out with egoless clarity what they can be the best at and the will do to whatever it takes to turn that potential into reality ○ They lack the discipline to “rinse their cottage cheese”

Chapter 6: A Culture of Discipline, continued  A Culture, Not A Tyrant Discovered that unsustained comparisons showed themselves to be just as disciplined as the good-to-great companies Important difference: Good-to-great companies had Level 5 leaders who built an enduring culture of discipline, but the unsustained comparisons had Level 4 leaders who personally disciplined the organization through sheer force.

Chapter 6: A Culture of Discipline, continued  A Culture, Not A Tyrant, continued A pattern in every unsustained comparison: ○ A spectacular rise under a tyrannical disciplinarian, followed by an equally spectacular decline when the disciplinarian stepped away, leaving behind no enduring culture of discipline, or when the disciplinarian himself became undisciplined and strayed wantonly outside the three circles

Chapter 6: A Culture of Discipline, continued  Fanatical Adherence to the Hedgehog Concept The good-to-great companies at their best followed a simple mantra: “Anything that does not fit within our Hedgehog Concept, we will not do.” A lack of discipline to stay within the three circles was a key factor in the demise of nearly all the comparison companies; all either ○ Lacked the discipline to understand its three circles; or, ○ Lacked the discipline to stay within the three circles

Chapter 6: A Culture of Discipline, continued  Fanatical Adherence to the Hedgehog Concept, continued Few companies have the discipline to discover their Hedgehog Concept, much less to build consistently within it ○ Fail to grasp a simple paradox: The more an organization has the discipline to stay within its three circles, the more it will have attractive opportunities for growth A great company is much more likely to die from too much opportunity than starvation from too little The challenge becomes not opportunity creation, but opportunity selection

Chapter 6: A Culture of Discipline, continued  Start A “Stop Doing” List Those who built the good-to-great companies made as much use of “stop doing” lists as “to do” lists—they displayed a remarkable discipline to unplug all sorts of extraneous junk Good-to-great companies displayed remarkable courage to channel their resources into only one or a few arenas ○ The most effective investment strategy is a highly undiversified portfolio when you are right “Being right” means getting the Hedgehog Concept—it just isn’t that hard if you have all the pieces in place “Highly undiversified” means investing fully in those things that fit squarely within the three circles and getting rid of everything else

Chapter 7: Technology Accelerators  Technology and the Hedgehog Concept Technology-induced change is nothing new ○ The real quest is, “How do good-to-great organizations think differently about technology?” In every good-to-great case, there was technological sophistication through the pioneering application of carefully selected technologies ○ The table on page 150 discusses technologies used by each good-to-great company

Chapter 7: Technology Accelerators, continued  Technology as an Accelerator, Not a Creator, of Momentum When used right, technology becomes an accelerator of momentum, not a creator of it ○ The good-to-great companies never began their transitions with pioneering technology, for the simple reason that you cannot make good use of technologies are relevant Those that are relevant are only those that link directly to the three intersecting circles of the Hedgehog Concept

Chapter 7: Technology Accelerators, continued  Technology as an Accelerator, Not a Creator, of Momentum, continued To make technology productive in a transformation from good to great means asking the following questions ○ Does the technology fit directly with your Hedgehog Concept? If yes, then you need to become a pioneer in the application of that technology If no, then ask the second question ○ Do you need this technology at all? If yes, then all you need is parity If no, then the technology is irrelevant, and you can ignore it

Chapter 7: Technology Accelerators, continued  The Technology Trap The evidence from the study does not support the idea that technological change plays the principal role in the decline of once-great companies (or the perpetual mediocrity of others) Technology is important, but technology by itself is never a primary cause of either greatness or decline A basic truth: Technology cannot turn a good enterprise into a great one, nor by itself prevent disaster

Chapter 7: Technology Accelerators, continued  The Technology Trap, continued Thoughtless reliance on technology is a liability, not an asset When used right, technology is an essential driver in accelerating forward momentum When used wrong, technology simply accelerates your own self-created demise

Chapter 7: Technology Accelerators, continued  Technology and the Fear of Being Left Behind Those who built the good-to-great companies weren’t motivated by fear ○ They were motivated by a deep creative urge and an inner compulsion for sheer unadulterated excellence for its own sake Those who build and perpetuate mediocrity, in contrast, are motivated more by the fear of being left behind

Chapter 7: Technology Accelerators, continued  No technology, no matter how amazing, can by itself ignite a shift from good to great  Those that stay true to the fundamentals and maintain their balance, even in times of great change and disruption, will accumulate the momentum that creates breakthrough momentum

Chapter 8: The Flywheel and the Doom Loop  Buildup and Breakthrough The flywheel image captures the overall feel of what it was like inside companies as they went from good to great ○ Though it may look like a revolutionary event from the outside, the transformation occurs through a cumulative process—step by step, action by action, decision by decision, turn by turn The transition from good to great feels like an organic, natural process. There is no miracle moment.

Chapter 8: The Flywheel and the Doom Loop, continued  Not Just a Luxury of Circumstance Companies do not achieve breakthrough simply by luck ○ Good-to-great companies followed the flywheel model no matter how dire the short-term consequences The good-to-great companies were subject to the same short-term pressure as the comparison companies ○ The good-to-great companies had patience and discipline which ultimately led to extraordinary results by Wall Street’s own measure of success

Chapter 8: The Flywheel and the Doom Loop, continued  The “Flywheel Effect” The simple truth: Tremendous power exists in the fact of continued improvement and the delivery of results ○ Point to tangible accomplishments—however incremental at first—and show how these steps fit into the context of an overall concept When you let the flywheel do the talking, you don’t need to eagerly communicate your goals ○ People will feel and see the momentum, they will line up with enthusiasm, and they will strive to make it work

Chapter 8: The Flywheel and the Doom Loop, continued  The Doom Loop Instead of a quiet, deliberate process of figuring out what needed to be done and simply doing it, the comparison companies frequently launched new programs with hopes of extraordinary results only to see the programs fail to produced sustained results They would push the flywheel in one direction, stop, and completely change directions. Then they would repeat the process ○ Instead of building momentum, the companies fell into what is called the doom loop

Chapter 8: The Flywheel and the Doom Loop, continued  The Misguided Use of Acquisitions To understand the role of acquisitions in the process of going from good to great, Collins undertook a systematic qualitative and quantitative analysis of all acquisitions and divestitures of all the companies in his study The good-to-great companies had a substantially higher success rate with acquisitions because their big acquisitions took place after development of their Hedgehog Concept and after the flywheel had built significant momentum ○ They used acquisitions as an accelerator of flywheel momentum, not a creator of it

Chapter 8: The Flywheel and the Doom Loop, continued  Leaders Who Stop the Flywheel The other frequently observed doom loop pattern is that of new leaders who stepped in, stopped an already spinning flywheel, and threw it in a completely new direction When a company has a successful Hedgehog Concept and a spinning flywheel, there should be no reason to stop the momentum or change the direction ○ While some may believe they have a revolutionary new idea for the company, most companies find their flywheel coming to a grinding halt

Chapter 9: From Good to Great to Built to Last  An Overview of Built to Last When Collins began the Good to Great project, he confronted a dilemma: How should he think of the ideas in Built to Last while doing Good to Great research? Built to Last was a six-year research project in which he answered the question, “What does it take to start and build an enduring great company from the ground up?” ○ 18 total companies that had reached success were studied In the end, Collins made an important decision: to conduct the research for Good to Great as if Built to Last didn’t exist

Chapter 9: From Good to Great to Built to Last, continued  The Four Conclusions Considering the great companies from Built to Last, there is substantial evidence that their early leaders followed the good-to-great frameworks Collins sees Good to Great not as a sequel to Built to Last, but as a prequel To make the shift from a company with sustained results to a great company, apply the general concept from Built to Last: Discover core values and purpose and combine with the dynamic of preserving the core/stimulate progress Good to Great answers something brought up, but not answered, in Built to Last: “What is the difference between ‘good’ BHAG* and ‘bad’ BHAG?” *Big Hairy Audacious Goal

Chapter 9: From Good to Great to Built to Last, continued  Core Ideology: The Extra Dimension of Enduring Greatness Enduring great companies don’t exist only to deliver returns to shareholders ○ Profits and cash flows become “like blood and water to a healthy body”—they are essential, but they are not the point of life Instead, enduring great companies preserve their core values and purpose while their business strategies and operating practices endlessly adapt to a changing world This is the combination of “preserve the core and stimulate progress”

Chapter 9: From Good to Great to Built to Last, continued  The Four Key Ideas from Built to Last Clock Building, Not Time Telling ○ Build an organization that can endure and adapt through multiple generations of leaders and multiple product life cycles Genius of AND ○ Embrace both extremes on a number of dimensions at the same time ○ Instead of choosing A OR B, figure out how to have A AND B ○ Purpose AND Profit Core Ideology ○ Instill core values and core purpose as principles to guide decisions and inspire people throughout the organization over a long period of time Preserve the Core/Stimulate Progress ○ Preserve the core ideology as an anchor point while stimulating change, improvement, innovation and renewal in everything else

Chapter 9: From Good to Great to Built to Last, continued  Good BHAGs, Bad BHAGs, and other Conceptual Links The three circles of the BHAGs chart consist of ○ What you are deeply passionate about ○ What you can be the best in the world at ○ What drives your economic engine A BHAG serves as an unifying focal point of effort, galvanizing people and creating team spirit as people strive toward a finish line Bad BHAGs are set with bravado. Good BHAGs are set with understanding.

Chapter 9: From Good to Great to Built to Last, continued  Why Greatness? When asked, “Why achieve greatness? Why not just settle for success?” Collins offers two answers ○ It is no harder to build something great than to build something good. It may be statistically rarer to achieve greatness, but it does not require more suffering. ○ The search for meaning, or more precisely, the search for meaningful work. The real question is not, “Why greatness?” but “What work makes you feel compelled to try to create greatness?” ○ Collins claims that if one has to ask the question, “Why should we try to make it great? Isn’t success enough?” then they are probably engaged in the wrong line of work.

Chapter 9: From Good to Great to Built to Last, continued  Why Greatness?, continued The quest to build something great may not fall in your corporate life. It may be somewhere else. The point is to get involved in something you care so deeply about that you strive to make it the greatest it can be, not because of what results may yield, but just because it can be done When you do this, you will start to grow, inevitably, toward becoming a Level 5 leader