Good To Great Chapter 9 “From Good To Great To Built To Last” Stephanie Lanter Ashley Campion Wes Kincaid Michael Riggen John Hutchens Nathan Frost Claudia Martinez

Good to Great Research How should we think about the ideas in Built to Last while doing the Good to Great research? Used direct comparison between companies. Identify the essential distinctions between great companies and good companies.

Four Conclusions Considering great companies from Built to Last, evidence shows that early leaders followed good to great frame work. Only difference is that they were in small entrepreneurs, early stage enterprises trying to set off the ground rather than CEOs trying to transform.

Four Conclusions Cont. See Good to Great as a prequel to Built to Last. Apply concepts in Good to Great to sustain results, as a start up or an established organization and then apply findings in Built to Last to go from great results to an enduring great company.

Four Conclusions Cont. Shift company from great results to an enduring great company, apply the central concept from Built to Last. Discover your core values and purpose and combine this with the dynamic of preserve the core stimulate progress.

Four Conclusions Cont. Tremendous resonance exists between the two studies. Good to Great answers a fundamental question raised, but not answered in Built to Last. What is the difference between a “good” BHAG and a “bad” BHAG.

Good To Great in the Early Stages of Built to Last Looking back on the BTL study, it appears that the enduring great companies did in fact go through a process of buildup to breakthrough, following the good-to-great framework through their formative years Ex: Wal-Mart Sam Walton build incrementally, step by step, turn by turn of the flywheel, until the Hedgehog Concept of large discounts marts became the natural step’s in the mid 1960 From 1970-2000 Wal-Mart exploded to 3,000 stores and reveues over $150 billion EX: The buildup-breakthrough flywheel pattern in the evolution Of wal-mart. Most people think that Sam Walton just exploded onto the scene with his visionary idea for rural discount retail stores, hitting breakthrough almost as a startup company. This perception couldn’t be further from the truth. He began in 1945 with a single dime store and didn’t open his second store till 7 years later. SLIDE It took walton a quarter of a century to grow from that single dime store to a chain of 38 stores

Buildup-Breakthrough Flywheel at Wal-Mart Wal-Mart was the classic case of buildup leading to a Hedgehog Concept, followed by breakthrough momentum in the flywheel After first bullet: The only difference is that Walton followed the model as an entrepreneur building a great company from the ground up rather than a CEO transforming an established company.

Good to Great in the Early Stages of Built to Last Hewlett-Packard Bill Hewlett and David Packard’s entire founding concept for HP was not what, but who- starting with each other In the first minutes of their first meeting on August 23, 1937, they began by stating that they would design, manufacture, and sell products in the electrical engineering fields, very broadly defined They stumbled around for months trying to come up with any ideas to get them out of the garage Yacht transmitters, medical devices, electronic bowling alley sensors, clock-drive for a telescope, and an electronic shock jiggle machine to help overweight people lose weight HP provides another example of the good to great ideas at work in the formative stages of a Built to last company. They had been best friends in graduate school and simply wanted to build a great company together that would attract other people with similar values and standards - they question of what to manufacture was yet to be determined…. ---it didn’t really matter what the company made in the early days, as long as it made a technical contribution that would help get HP to build a company together with other like-minded people. It was the ultimate first who..then what, startup.

The Ultimate “Who….then What” Startup After WWII they hired a group of people streaming out of government labs with nothing specific in mind to do Recall Packard’s Law-” No company can grow revenues consistently faster than its ability to get enough of the right people to implement that growth and still become a great company” HP lived and breathed this concept and obtained a surplus of great people whenever the opportunity presented itself As HP scaled up, they stayed true to the principle of “first Who” --even after revenues shrank

Good to Great in the Early Stages of Built to Last Hewlett and Packard were themselves Level 5 leaders, first as entrepreneurs and later as company builders Before Dave Packard’s death, Collins was able to meet with him He still lived in the same hours that he and his wife had built for themselves in 1957 His idea of a “good time” was to get some of his friends together and string some barbed wire Last- Jim Collins stated “The tiny kitchen, with its dated linoleum, and the simply furnished living room bespoke a man who needed no material symbols to proclaim “I’m a billionaire. I’m important. I’m successful.”

Core Ideology Having a guiding philosophy or core ideology No specific “right” set of core values Not what core values you have, but just that you have core values Build them into your organization They must be preserved over time Think Declaration of Independence

Core Ideology HP Technical Contribution Respect for the Individual Responsibility to community Profit is NOT the fundamental goal Radical and progressive in the 1950’s

Core Ideology Merck Developed and distributed drug to cure river blindness Afflicted people in remote areas of the Amazon Gave drug away free Not a charity organization Outperformed the market in profitability Does not think the only reason for business is to make money “medicine is for the patient…It’s not for the profit

Core Ideology Disney Passion for creative information Fanatic attention to detail Abhorrence of cynicism Preservation of “Disney Magic” Bring happiness to millions, especially kids

Core Ideology Disney – Classic case of preserve the core and stimulate progress Preserve Core Values Core Purpose Change Cultural and Operating Practices Specific Goals and Strategies

Core Ideology Preserve Change 1920’s: Cartoons Passion for creative information Fanatic attention to detail Abhorrence of cynicism Preservation of “Disney Magic” Bring happiness to millions, especially kids Change 1920’s: Cartoons 1930’s: Full length features 1950’s: TV 1960’s: Theme Parks 1980’s: International 1990’s: Cruise Line

Good Bhags, Bad Bhags Good to Great lays foundational framework for Built to Last Four key ideas are carried from Built to Last into Good to Great

Four Core Concepts 1) Clock building, not time telling Build around endurance and adapting through generations 2) Genius of AND Embrace both extremes – “A AND B”

Four Core Concepts 3) Core Ideology Instill core values and purpose 4) Preserve the Core/Stimulate Progress Save core ideology while stimulating change

Concepts in Good to Great: Level 5 Leadership Chapter Summary 5 Levels of Leadership, L5L are ambitious for company, not themselves L5L are fanatically driven and need to produced sustained results Windows and Mirrors attributing success and failure More plow horse than show horse 10 of 11 G2G CEOs came from within the company L5L attribute success to luck, not personal greatness Celebrity CEOs were more damaging than helpful

Concepts in Good to Great: Level 5 Leadership Clock Building, Not Time Telling: Level 5 leaders build company that can continues on without them Genius of AND: Personal humility AND professional will Core Ideology: Ambitious for company and what it stands for Preserve the Core/Stimulate Progress: Relentless in stimulating progress toward tangible results

Concepts in Good to Great: First Who…Then What Chapter Summary Right people on the bus and in the right seat and get the wrong people off the bus Must have discipline Comparison companies had genius with a thousand helpers G2G leaders were rigorous, not ruthless When in doubt, don’t hire If there needs to be a people change, act immediately Put your best people on your biggest opportunities

Concepts in Good to Great: First Who…Then What Clock Building, Not Time Telling: First who- clock building; first what- time telling Genius of AND: Get the right people on the bus and the wrong people off Core Ideology: First who gets people who fit the core values and purpose Preserve the Core/Stimulate Progress: First who means a bias for promoting within

Concepts in Good to Great: Confront the Brutal Facts Chapter Summary G2G companies successful because they confronted brutal facts of reality Right decisions often become self evident Create a climate where the truth is heard Dealt with adversity head-on and emerged stronger Charisma can be liability because it can deter people from seeing the truth Motivating people is a waste of time Stockdale Paradox: Faith that you will prevail regardless of difficulties

Concepts in Good to Great: Confront the Brutal Facts Clock Building, Not Time Telling: Climate where the truth is heard (especially red flag mechanisms) Genius of AND: Confront brutal facts AND retain faith Core Ideology: Confront brutal facts clarifies organization’s values Preserve the Core/Stimulate Progress: Brutal facts help focus where to stimulate progress

Concepts in Good to Great The Hedgehog Concept Chapter Summary (Simplicity within the three circles)

Concepts in Good to Great The Hedgehog Concept Clock building, Not Time Telling -The Council mechanism in consummate clock building Genius of AND -Deep understanding AND incredible understanding Core Ideology -The “what you are passionate about” circle overlaps nicely with core values and purpose. Only those values about which you are so passionate that you would never give them up qualify as truly core Preserve the Core/Stimulate Progress -Great BHAG’s sit right in the middle of the three circles

Concepts in Good to Great Culture Discipline Chapter Summary -Sustained great results depend upon building a culture full of self-disciplined people who take disciplined action, fanatically consistent with the three circles -Do not confuse a culture of discipline with a tyrant who disciplines -The single most important form of disciplines for sustained results is fanatical adherence to the Hedgehog Concept

Concepts in Good to Great Culture Discipline Clock building, Not Time Telling -Operating with a sheer force of personality as a disciplinarian is time telling, building an enduring culture of discipline is clock telling Genius of AND -Freedom AND responsibility Core Ideology -Those who don’t share the values and standards of an organization are ejected Preserve the Core/Stimulate Progress -When you have a culture of discipline, you can give people more freedom to experiment and find their own best path to results

Concepts in Good to Great Technology Accelerators Chapter Summary -Good-to-great organizations avoid technology fads and bandwagons, yet they become pioneers in the application of carefully selected technologies -These companies used technology as an accelerator of momentum, not creator of it -How a company reacts to technological change is a good indicator of its inner drive for greatness versus mediocrity

Concepts in Good to Great Technology Accelerators Clock building, Not Time Telling -Technology accelerators are a key part of the clock Genius of AND -Shun technology fads AND pioneer the application of technology Core Ideology -Technology is subservient to core values, not the other way around Preserve the Core/Stimulate Progress -The right technologies accelerate momentum in the flywheel, toward the achievement of BHAG’s

Concepts in Good to Great Flywheel, Not Doom Loop Chapter Summary -No matter how dramatic the end result, the good-to-great transformations never happened in one fell swoop (there was no single defining action) -Sustainable transformations follow a predictable pattern of buildup and breakthrough -The comparison companies frequently tried to create a breakthrough with large, misguided acquisitions

Concepts in Good to Great Flywheel, Not Doom Loop Clock building, Not Time Telling -Creates the sustained building of momentum, and does not depend on the presence of a charismatic visionary to motivate people Genius of AND -Evolutionary, incremental process AND revolutionary, dramatic results Core Ideology - “Who are we? What do we stand for ?” Preserve the Core/Stimulate Progress -The consistency of the flywheel and the cumulative building of momentum to a point of breakthrough create the perfect conditions for instilling core values while stimulating change and progress

BHAGS BHAG Big Hairy Audacious Goal Serves as unifying focal point of effort Bad bhags are set with bravado, good bhags use understanding What you are deeply passionate about BHAG What you can be best In the world at What drives Your economic engine

BHAGS Boeing in mid-century was military only Later turned to civilian aircraft with adequate understanding of the situation Became leading commercial aviation company in the world

Two Studies Linked Together Three circles provide example of how the studies link Creating an enduring great company requires all concepts from both studies If any idea ever stops, you will slide backwards toward mediocrity

Why Greatness? Don’t need to build a big company in order to have a great company. No harder to build something great than to build something good. Statistically more rare to reach greatness, but it does not requiring more suffering than mediocrity.

Greatness of high school team Cross-Country team transformed from good (top twenty in state) to great (consistent contenders for the state championship, on both the boys’ and girls’ team). Why are we successful? We don’t work harder than other teams. Hedgehog Concept of the program – We run best at the end. Placed a coach at 2 mile mark to collect data as runners go past. This team collected place splits versus time splits. Coaches calculate not how fast runners go, but how many competitors they pass at then end of the race from 2 mile to the finish.

Greatness cont. The kids learn how to pace themselves, and race with confidence. “We run best at the end” This program will be built on the idea that running is fun, racing is fun, improving is fun, and winning is fun said the coach. - If not passionate about what we do, then go find something else. Let the kids see for themselves that they could beat anyone. Culture of discipline - commitment made not to the coaches, but to each other by the runners. - Players counted on each other by making sure got rest and wouldn’t let the team down.

Greatness cont. By winning it created spinning flywheel. People wanted to be a part of the team. More championships meant more kids would sign up, gene pool deepens, the team gets faster, which creates faster teams, and so forth and so on. Coaches didn’t work harder. They’re just focusing on the right things, and not the wrong things. Process not much harder from good to great. - adds more energy back into the pool than it takes out. If you’re doing something you care about, and you believe in, then it is impossible to imagine not trying to make it great.

Greatness cont. All that matters is that you do love it and that you do care about what you are doing. - Greatnesses is then created Get involved in something you care about and that you want to make the greatest it can be. - Leads to becoming a Level 5 leader. Knowing that you’ve had a hand in creating excellence that makes a contribution does your work and life move toward greatness.

Takeaways Four Conclusions Enduring great companies did in fact go through a process of buildup to breakthrough. Having a guiding philosophy or core ideology. Good and Bad Bhags Four Core Concepts Concepts in Good to Great: Level 5 Leadership

Takeaways First Who…Then What Confront the Brutal Facts The Hedgehog Concept Culture Discipline Technology Accelerators Two Studies Linked Together