Building a business takes time — a ‘great business’ however requires a strategic vision & focus in the right areas. We review some of the systems from Good to Great and discover how companies can create ‘greatness’ in the process.
The process of establishing a business in Australia is relatively straightforward. The Australian startup ecosystem is fertile ground for innovators and entrepreneurs. Yet, there is a meaningful difference between a “good” company and a great one.
Great companies sustain high performance and growth, lead the market and are constantly evolving. Determining how to make the leap from good to great, however, is less obvious. Good to Great, the product of five years of research by author Jim Collins and an entire team of business analysts cover this transition with some famous examples.
The book studies three groups of US companies and identifies the systematic phases of growth that every business must pass through to achieve greatness. In this article, we’ll present ten key takeaways from the book that will help your company scale.
1. Good-to-Great Businesses Learn From One Another
If you’re running a “good” business, Good to Great recommends learning from great companies. The research team behind the book identified a series of “good-to-great” businesses that performed at or below average stock market performance for fifteen years. This is before suddenly switching to ‘greatness’ by achieving returns three times the average stock market performance standard for the next fifteen years.
The book’s research team assessed over 6,000 news articles and thousands of pages of executive interviews to establish a foundation for the system outlined in the book. Greatness, according to Collins and the team’s research results, is quantifiable and can be emulated.
If your business is not achieving greatness, it’s essential to look toward market leaders and determine what they are exactly doing that you aren’t. The Good to Great book provides business owners and startup founders with a number of live examples & evaluations of business that stood succesful across the test of time.
2. Find a “Hedgehog Concept”
Good to Great identifies strategy simplification as a key driver of business greatness. The most effective scaling and growth strategies, states Collins, are as simple as possible. Collins presents the hedgehog as a metaphor; the hedgehog follows a simple defensive strategy that has resulted in evolutionary success.
Good-to-great companies adopt a simplified strategy that the book refers to as the “Hedgehog Concept.” This concept is a fundamental strategy upon which all decisions and company policies can be based.
The book presents three questions that can be used to define a Hedgehog Concept :
- What can your business be the best in the world at?
- What is your business is passionate about?
- What is the fundamental economic indicator your business should focus on?
The Good to Great research team compares US-based pharmacies Walgreen and the Eckerd Pharmacy chain to illustrate the Hedgehog Concept. Walgreens, now the second-largest pharmacy chain in the US, operates with the simple strategy of delivering the most convenient pharmacy available with the highest customer profit per visit.
Eckerd, in contrast, lacked a fundamental Hedgehog concept. As a result, Eckerd’s growth & focus was sporadic and eventually ceased to exist as an independent company. Establishing a Hedgehog Concept provides businesses with a concrete framework to improve upon.
3. Good to Great Occurs Incrementally
Success, or greatness, doesn’t happen overnight — it occurs incrementally. Great companies may appear from an external perspective to grow in an explosive manner. Either way, such success is the result of a long-term incremental growth strategy.
Collins and his team advise businesses seeking greatness to work on smaller incremental steps toward growth, achieving minor improvements that cumulatively result in the switch from good to great. By remaining tightly focused on a Hedgehog Concept, a business follows a cycle of evolution and steady progress towards success.
4. Solutionism is Not Success
The book identifies technology as a key driver in the shift from good to great — but technology alone should not be the goal for any business or startup. Solutionism, or the development and integration of innovative technology for the sake of tech alone, can divert the path of business away from greatness.
Great companies use technology as a means to accelerate their momentum in the direction they wish to grow. The book highlights Walgreens as another example of efficiently applied technology. Walgreens adopted e-commerce strategies as an accessory to an existing business model. As opposed to creating an entirely new technology-based business model. Walgreens was able to out-compete e-commerce competitors such as Drugstore.com using this strategy.
5. Follow a “Level 5 Leadership” Model
Leadership is critical to the Good to Great system. The research behind the book indicates that every single good-to-great company possessed a “Level 5” leadership team during critical growth phases.
The book defines Level 5 leaders as leaders that are driven, tightly focused individuals. The most important difference between standard leadership & their style is a single-minded ambition on behalf of the company that the leader works for. Level 5 leaders are dedicated wholly toward results that improve a company.
The Good to Great Level 5 leadership model stipulates that Level 5 leadership not be ego-driven. Instead, leaders share credit for achievement across entire teams. They should make sure all employees and team members share the responsibility for all progress toward greatness.
6. Put the Right People in the Right Place
The foundation of greatness, according to Collins and his team, is “getting the right people on the bus”. The catalyst for greatness in any company begins with ensuring each position is filled by the person best suited to it.
Placing the correct individual in a role will generate results, even without a clear path to success. A business seeking to shift from good to great should focus less on how much they pay, and who they pay. Good-to-great companies never hire the wrong person. In practice, these companies always employ the right person — even if there isn’t a specific job for them yet.
7. To go from Good to Great Success Requires Brutal Honesty
Indulging in baseless optimism can cause a business to stagnate, preventing the shift from good to great. The book stresses the importance of confronting the brutal facts of business position and growth. Dedication and commitment in the face of adversity is a key driver of growth. But, a commitment to an inefficient growth strategy is a surefire way to remain average.
To achieve success, companies must confront ugly truths, according to Collins and his team. Companies must ignore aggressive competition or regulatory shifts that impede business. Alternatively, they must confront reality head-on while retaining faith in the success of their venture.
8. Create an Upfront Working Environment
Leading from the front and creating a focused working environment is essential to the success of a great business. No leader can lead effectively, however, if others hide unpleasant truths from them. The book pushes business leaders to take the role of a Socratic moderator in business meetings. By establishing an open environment in which reveal truthful opinions without fear of reprisal or criticism.
Level 5 leaders foster a communication process that ensures mistakes, when made, are studied carefully without assigning blame. Good-to-Great companies establish a red-flag mechanism that alert business leaders when critical business signals occur. It ensures executive leaders possess the same intelligence as the rest of their team.
To achieve greatness, business leaders must create an honest, pragmatic communication environment.
9. Establish a Culture of Self-Discipline
The Good to Great strategy promotes adherence to a Hedgehog concept. Regularity and discipline are the key factors that ensure a company can commit to their Hedgehog concept. This commitment needs to occur on all levels of a company — not just at the leadership level.
Needless to say, employees of good-to-great companies share a culture of self-discipline. Collectively, the team works toward a clearly-defined goal.
10. Simple Strategies and Decisive Execution Lead to Greatness
The core message of the book is that any company can make the shift from ‘good to great.’ First, a company must identify and pursue a single strategic concept. Second, it must ensure every individual within a company is working to the best of their capabilities makes this strategy work. Lastly, by assigning the best role for each staff, committed leaders that lead by example trickles down the devotion to each employee.
Good-to-great companies function as an example that other companies can use to make the same shift. Identifying what makes great companies so successful and employing the same techniques within a culture of rigorous self-discipline will transform any good company into a great one.
Scaling your company requires careful planning, focus and expert advisors. For detailed financial guidance and strategic support on building a great business, get in touch with Fullstack today.
