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

by Jim Collins

Mediocrity results first and foremost from management failure, not t...

But technology’s role was as an accelerator of Bethlehem’s demise, not the cause of it. Again, it’s the same principle at work—technology as an accelerator, not a cause—only in this comparison case it is operating in reverse.

The evidence from our 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). Certainly, technology is important—you can’t remain a laggard and hope to be great. But technology by itself is never a primary cause of either greatness or decline.

Technology cannot turn a good enterprise into a great one, nor by itself prevent disaster.

History teaches this lesson repeatedly. Consider the United States debacle in Vietnam. The United States had the most technologically advanced fighting force the world has ever known. Super jet fighters. Helicopter gunships. Advanced weapons. Computers. Sophisticated communications. Miles of high-tech border sensors. Indeed, the reliance on technology created a false sense of invulnerability. The Americans lacked not technology, but a simple and coherent concept for the war, on which to attach that technology. It lurched back and forth across a variety of ineffective strategies, never getting the upper hand.

thoughtless reliance on technology is a liability, not an asset. Yes, when used right—when linked to a simple, clear, and coherent concept rooted in deep understanding—technology is an essential driver in accelerating forward momentum. But when used wrong—when grasped as an easy solution, without deep understanding of how it links to a clear and coherent concept—technology simply accelerates your own self-created demise.

“that our technology finding is just a special case of disciplined action, and it belongs in the previous chapter. Disciplined action means staying within the three circles, and that’s the essence of our technology finding.”

If you had the opportunity to sit down and read all 2,000+ pages of transcripts from the good-to-great interviews, you’d be struck by the utter absence of talk about “competitive strategy.” Yes, they did talk about strategy, and they did talk about performance, and they did talk about becoming the best, and they even talked about winning. But they never talked in reactionary terms and never defined their strategies principally in response to what others were doing. They talked in terms of what they were trying to create and how they were trying to improve relative to an absolute standard of excellence.

“We’re just never satisfied. We can be delighted, but never satisfied.”36

Those who built the good-to-great companies weren’t motivated by fear. They weren’t driven by fear of what they didn’t understand. They weren’t driven by fear of looking like a chump. They weren’t driven by fear of watching others hit it big while they didn’t. They weren’t driven by the fear of being hammered by the competition.

No, those who turn good into great are 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.

Never was there a better example of this difference than during the technology bubble of the late 1990s, which happened to take place right smack in the middle of the research on good to great. It served as an almost perfect stage to watch the difference between great and good play itself out, as the great ones responded like Walgreens—with calm equanimity and quiet deliberate steps forward—while the mediocre ones lurched about in fearful, frantic reaction.

No technology, no matter how amazing—not computers, not telecommunications, not robotics, not the Internet—can by itself ignite a shift from good to great. No technology can make you Level 5. No technology can turn the wrong people into the right people. No technology can instill the discipline to confront brutal facts of reality, nor can it instill unwavering faith. No technology can supplant the need for deep understanding of the three circles and the translation of that understanding into a simple Hedgehog Concept. No technology can create a culture of discipline. No technology can instill the simple inner belief that leaving unrealized potential on the table—letting something remain good when it can become great—is a secular sin.

Those that stay true to these fundamentals and maintain their balance, even in times of great change and disruption, will accumulate the momentum that creates breakthrough momentum. Those that do not, those that fall into reactionary lurching about, will spiral downward or remain mediocre. This is the big-picture difference between great and good, the gestalt of the whole study captured in the metaphor of the flywheel versus the doom loop. And it is to that overarching contrast that we now turn.

Good-to-great organizations think differently about technology and technological change than mediocre ones. Good-to-great organizations avoid technology fads and bandwagons, yet they become pioneers in the application of carefully selected technologies. The key question about any technology is, 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 you can settle for parity or ignore it entirely.

The good-to-great companies used technology as an accelerator of momentum, not a creator of it. None of the good-to-great companies began their transformations with pioneering technology, yet they all became pioneers in the application of technology once they grasped how it fit with their three circles and after they hit breakthrough.

How a company reacts to technological change is a good indicator of its inner drive for greatness versus mediocrity. Great companies respond with thoughtfulness and creativity, driven by a compulsion to turn unrealized potential into results; mediocre companies react and lurch about, motivated by fear of being left behind.

technological change is the principal cause in the decline of once-great companies (or the perpetual mediocrity of others) is not supported by the evidence.

technology by itself is never a primary root cause of either greatness or decline.

Across eighty-four interviews with good-to-great executives, fully 80 percent didn’t even mention technology as one of the top five factors in the transformation. This is true even in companies famous for their pioneering application of technology, such as Nucor.

“Crawl, walk, run” can be a very effective approach, even during times of rapid and radical technological change.

No matter how dramatic the end result, the good-to-great transformations never happened in one fell swoop. There was no single defining action, no grand program, no one killer innovation, no solitary lucky break, no wrenching revolution. Good to great comes about by a cumulative process—step by step, action by action, decision by decision, turn by turn of the flywheel—that adds up to sustained and spectacular results.

We’ve allowed the way transitions look from the outside to drive our perception of what they must feel like to those going through them on the inside. From the outside, they look like dramatic, almost revolutionary breakthroughs. But from the inside, they feel completely different, more like an organic development process.

It was a whole bunch of interlocking pieces that built one upon another.”

Rather, it was a quiet, deliberate process of figuring out what needed to be done to create the best future results and then simply taking those steps, one after the other, turn by turn of the flywheel.

“Our change was a major change, and yet in many respects simply a series of incremental changes—this is what made that change successful.

We did this in a nice stepwise way and there were always a lot of common denominators between what we had already mastered and what we were embarking on.”

but we didn’t convert fully to Circuit City superstores until about ten years later, after we’d refined the concept and built enough momentum to bet our whole future on it.”

“There was no one magical event, no one turning point. It was a combination of things. More of an evolution, though the end results were dramatic.”

“We didn’t talk so much of change. We recognized early on not so much that we needed to change, but that we needed to evolve, which recognizes that we’ve got to do things differently.

Year by year, Coach Wooden built the underlying foundations, developing a recruiting system, implementing a consistent philosophy, and refining the full-court-press style of play.

just don’t agree with those who say you can’t build an enduring great company because Wall Street won’t let you,” said David Maxwell of Fannie Mae. “We communicated with analysts, to educate them on what we were doing and where we were going. At first, a lot of people didn’t buy into that—you just have to accept that. But once we got through the dark days, we responded by doing better every single year.

The good-to-great companies were subject to the same short-term pressures from Wall Street as the comparison companies. Yet, unlike the comparison companies, they had the patience and discipline to follow the buildup-breakthrough flywheel model despite these pressures. And in the end, they attained extraordinary results by Wall Street’s own measure of success.

The key, we learned, is to harness the flywheel to manage these short-term pressures.

managing short-term pressures while systematically investing in the future.

They simply focused on accumulating results, often practicing the time-honored discipline of under-promising and overdelivering.

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 that will work. When you do this in such a way that people see and feel the buildup of momentum, they will line up with enthusiasm.

“The one about commitment, alignment, and how they managed change.”

We’ve got to understand how they overcame resistance to change and got people lined up.”

Clearly, the good-to-great companies did get incredible commitment and alignment—they artfully managed change—but they never really spent much time thinking about it. It was utterly transparent to them. We learned that under the right conditions, the problems of commitment, alignment, motivation, and change just melt away. They largely take care of themselves.

“We presented what we were doing in such a way that people saw our accomplishments,”

Positive feedback loop

“We tried to bring our plans to successful conclusion step by step, so that the mass of people would gain confidence from the successes, not just the words.”

The good-to-great companies tended not to publicly proclaim big goals at the outset.

When you let the flywheel do the talking, you don’t need to fervently communicate your goals. People can just extrapolate from the momentum of the flywheel for themselves:

As people decide among themselves to turn the fact of potential into the fact of results, the goal almost sets itself.

What do the right people want more than almost anything else? They want to be part of a winning team. They want to contribute to producing visible, tangible results. They want to feel the excitement of being involved in something that just flat-out works. When the right people see a simple plan born of confronting the brutal facts—a plan developed from understanding, not bravado—they are likely to say, “That’ll work. Count me in.”

When people begin to feel the magic of momentum—when they begin to see tangible results, when they can feel the flywheel beginning to build speed—that’s when the bulk of people line up to throw their shoulders against the wheel and push.

the misguided use of acquisitions and the selection of leaders who undid the work of previous generations.

drive for mergers and acquisitions comes less from sound reasoning and more from the fact that doing deals is a much more exciting way to spend your day than doing actual work.

Why did the good-to-great companies have a substantially higher success rate with acquisitions, especially major acquisitions? The key to their success was that their big acquisitions generally took place after development of the Hedgehog Concept and after the flywheel had built significant