Good to Great: Why Some Companies Make the Leap...And Others Don't

by Jim Collins

Good is the enemy of great. And that is one of the key reasons why we have so little that becomes great.

Five years after that fateful dinner we can now say, without question, that good to great does happen,

To quickly grasp the concept of the project, look at the chart on page 2.* In essence, we identified companies that made the leap from good results to great results and sustained those results for at least fifteen years. We compared these companies to a carefully selected control group of comparison companies that failed to make the leap, or if they did, failed to sustain it. We then compared the good-to-great companies to the comparison companies to discover the essential and distinguishing factors at work.

How on earth did a company with such a long history of being nothing special transform itself into an enterprise that outperformed some of the best-led organizations in the world? And why was Walgreens able to make the leap when other companies in the same industry with the same opportunities and similar resources, such as Eckerd, did not make the leap? This single case captures the essence of our quest.

This book is not about Walgreens per se, or any of the specific companies we studied. It is about the question–Can a good company become a great company and, if so, how?—and

People often ask, “What motivates you to undertake these huge research projects?” It’s a good question. The answer is, “Curiosity.”

What did the good-to-great companies share in common that distinguished them from the comparison companies?

It is important to understand that we developed all of the concepts in this book by making empirical deductions directly from the data.

In our study, what we didn’t find—dogs that we might have expected to bark but didn’t—turned out to be some of the best clues to the inner workings of good to great.

Larger-than-life, celebrity leaders who ride in from the outside are negatively correlated with taking a company from good to great.

We found no systematic pattern linking specific forms of executive compensation to the process of going from good to great. The idea that the structure of executive compensation is a key driver in corporate performance is simply not supported by the data.

Strategy per se did not separate the good-to-great companies from the comparison companies. Both sets of companies had well-defined strategies, and there is no evidence that the good-to-great companies spent more time on long-range strategic planning than the comparison companies.

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.

Technology and technology-driven change has virtually nothing to do with igniting a transformation from good to great. Technology can accelerate a transformation, but technology cannot cause a transformation.

Mergers and acquisitions play virtually no role in igniting a transformation from good to great; two big mediocrities joined to...

The good-to-great companies paid scant attention to managing change, motivating people, or creating alignment. Under the right conditions, the problems of commitment, align...

The good-to-great companies had no name, tag line, launch event, or program to signify their transformations. Indeed, some reported being unaware of the magnitude of the transformation at the time; only later, in retrospect, did it become clear. Yes, they produced a t...

The good-to-great companies were not, by and large, in great industries, and some were in terrible industries. In no case do we have a company that just happened to be sittin...

Greatness is not a function of circumstance. Greatness, it turns out, is largely a ma...

I wish to underscore again that the concepts in the final framework are not my “opinions.” While I cannot extract my own psychology and biases entirely from the research, each finding in the final framework met a rigorous standard before the research team would deem it significant. Every primary concept in the final framework showed up as a change variable in 100 percent of the good-to-great companies and in less than 30 percent of the comparison companies during the pivotal years. Any insight that failed this test did not make it into the book as a chapter-level concept.

Think of the transformation as a process of buildup followed by breakthrough, broken into three broad stages: disciplined people, disciplined thought, and disciplined action.

We expected that good-to-great leaders would begin by setting a new vision and strategy.

We found instead that they first got the right people on the bus, the wrong people off the bus, and the right people in the right seats—and then they figured out where to drive it.

The old adage “People are your most important asset” turns out to be wrong. People are not your most importa...

Every good-to-great company embraced what we came to call the Stockdale Paradox: You must maintain unwavering faith that you can and will prevail in the end, regardless of the difficulties, AND at the same time have the discipline to confront the most brutal facts of your current reality, whatever they might be.

To go from good to great requires transcending the curse of competence.

All companies have a culture, some companies have discipline, but few companies have a culture of discipline.

When you have disciplined people, you don’t need hierarchy. When you have disciplined thought, you don’t need bureaucracy. When you have disciplined action, you don’t need excessive controls. When you combine a culture of discipline with an ethic of entrepreneurship, you get the magical alchemy of great performance.

Good-to-great companies think differently about the role of technology. They never use technology as the primary means of igniting a transformation. Yet, paradoxically, they are pioneers in the application of carefully selected technologies. We learned that technology by itself is never a primary, root cause of either greatness or decline.

Those who launch revolutions, dramatic change programs, and wrenching restructurings will almost certainly fail to make the leap from good to great.

The truth is, there’s nothing new about being in a new economy. Those who faced the invention of electricity, the telephone, the automobile, the radio, or the transistor—did they feel it was any less of a new economy than we feel today? And in each rendition of the new economy, the best leaders have adhered to certain basic principles, with rigor and discipline.

I don’t primarily think of my work as about the study of business, nor do I see this as fundamentally a business book. Rather, I see my work as being about discovering what creates enduring great organizations of any type.

As one of my favorite professors once said, “The best students are those who never quite believe their professors.”

“One ought not to reject the data merely because one does not like what the data implies.”

So, like the general who burned the boats upon landing, leaving only one option (succeed or die), Smith announced the decision to sell the mills, in what one board member called the gutsiest move he’d ever seen a CEO make.

The business media called the move stupid and Wall Street analysts downgraded the stock.11 Smith never wavered. Twenty-five years later, Kimberly-Clark owned Scott Paper outright and beat Procter & Gamble in six of eight product categories.12 In retirement, Smith reflected on his exceptional performance, saying simply, “I never stopped trying to become qualified for the job.”

Darwin Smith stands as a classic example of what we came to call a Level 5 leader—an individual who blends extreme personal humility with intense professional will.

We were not looking for Level 5 leadership or anything like it. In fact, I gave the research team explicit instructions to downplay the role of top executives

“Ignore the executives.” But the research team kept pushing back, “No! There is something consistently unusual about them. We can’t ignore them.”

Finally—as should always be the case—the data won.

Given that Level 5 leadership cuts against the grain of conventional wisdom, especially the belief that we need larger-than-life saviors with big personalities to transform companies, it is important to note that Level 5 is an empirical finding, not an ideological one.

First, Mockler and his team staked the company’s future on huge investments in radically new and technologically advanced systems (later known as Sensor and Mach3).

Second, at the time of the takeover battle, Sensor promised significant future profits that were not reflected in the stock price because it was in secret development.

It wouldn’t have been an option within Colman Mockler’s value system to take the easy path and turn the company over to those who would milk it like a cow, destroying its potential to become great,

Setting Up Successors for Success

Level 5 leaders want to see the company even more successful in the next generation, comfortable with the idea that most people won’t even know that the roots of that success trace back to their efforts.

“I want to look out from my porch at one of the great companies in the world someday and be able to say, ‘I used to work there.’”

In over three quarters of the comparison companies, we found executives who set their successors up for failure or chose weak successors, or both.

Gault did not leave behind a company that would be great without him.

Gault’s successors found themselves struggling not only with a management void, but also with strategic voids that would eventually bring the company to its knees.