Good to Great – How Great Is That?

I’ve heard a lot of good things about Good to Great, Jim Collins’ hyper-best-seller that was first published in 2001.

Today, finally, I read it.

I liked the first sentence: “Good is the enemy of great.” In fact, I first wrote about this subject in ETR in 2002. And I have written about it several times since then. Here’s a quote from my 2002 essay:

“In the real world, getting from good to great requires extraordinary effort. It demands more time than you want, more energy than you have, and more cooperation than any normal person can be expected to contribute.

“That’s if you want high standards. If you are willing to settle for ‘good,’ things can be much easier.”

You’ve got to like a guy who thinks the way you do. You’ve got to admire his intelligence. Praise his perspicacity.

And so I do. There is nothing I read in Good to Great that disturbed or rankled me. Nothing that seemed misguided or wrongheaded. I checked the book jacket to get an idea of what Jim Collins looks like. Salt and pepper hair. Dark eyes. A strong jaw. The spitting image of a smart, successful guy. The blurb beneath his photo said he used to teach at Stanford University Graduate School, where he received the Distinguished Teaching Award. Those are serious credentials. Most impressively, his last book on business, Built to Last, has sold more than a million copies.

Jim Collins is the type of business writer I am eager to learn from. He has an academic perspective – i.e., his knowledge comes mostly from research, not experience. But he has impeccable academic credentials. I have the feeling I can trust his data and the conclusions he draws from them.

I liked the second sentence of Good to Great too: “And that is one of the key reasons why we have so little that becomes great.”

I know exactly what he means. I have made that same point many times in past ETR essays. It is very difficult to become great at anything if you are comfortable with good. Good is chopped sirloin. Great is Kobe beef. Good is my IBM computer. Great is my wife’s Mac.

Good – or very good – is what 99 percent of the men and women who play professional sports are. Great are Michael Jordan and Tiger Woods.

Statistically speaking, it’s impossible for a lot of people to be great. But too many people just don’t try.

Built to Last was a profile of great companies, companies that – as Bill Mehan, managing director of the San Francisco office of McKinsey & Company, told the author – “had parents like David Packard and George Merck, who shaped the character of greatness from early on.”

“But what about the vast majority of companies that wake up partway through life and realize that they’re good but not great?” Mehan asked. “What can you say to them?”

That was the objective of Good to Great. Collins worked for five years to try to come up with a good answer to that question. What he and his researchers did was study the history of companies “that made the leap from good results to great results and sustained those results for at least 15 years.” They compared those results to companies that had failed to make the leap or, if they did, failed to sustain it.

Companies that went from good to great had the following seven characteristics:

1. They had quiet, self-effacing leaders. People who had a “paradoxical blend” of humility and professional will. They were more like Lincoln and Socrates, Collins argued, than Patton or Caesar.
2. These leaders placed the highest priority on surrounding themselves with great people. Rather than focus on vision or strategy, they spent most of their time trying to “put the right people on the bus and get the wrong people off the bus.”
3. They embraced the “Stockdale paradox” – that you must accept and confront the worst facts of your situation while maintaining an unwavering faith that you can overcome them.
4. They found something they could do better than any other company in the world. Even if it meant abandoning their core concept and moving on to something else, they maintained that lofty standard.
5. They developed a corporate culture where employees were so committed to the company’s core values that disciplinary rules were not necessary.
6. They used technology to support their core values, not as the driving force of the business.
7. The process they used to make improvements was incremental, not revolutionary. It resembled “relentlessly pushing a giant heavy flywheel in one direction, turn upon turn, building momentum until a point of breakthrough and beyond.”

Those are very good suggestions, suggestions that any big business would do well to study.

But I would caution ETR readers about accepting them as gospel. ETR is about starting and running small businesses, not large, public corporations. Some of the rules that apply very nicely to Fortune 500 companies don’t make sense for us. For one thing, we don’t measure success by the price of the company’s stock, as Jim Collins does. We measure success according to cash flow and profits. That makes a huge difference. And there are others.

The challenge for the small businessperson is not going from good to great. It’s starting with nothing and turning it into something. Most entrepreneurs believe their product ideas are great, or they wouldn’t risk so much time and money pursuing them. But the truth is, those early ideas are never great to start with because they are new and untested. The secret to making a small business work is action, and action begins by being satisfied with good.

In my latest best-seller, Ready, Fire, Aim, I put it this way:

“Ready, Fire, Aim means what it says. When you have an idea that has the potential to grow your business, test it as soon as it is ready. Don’t fiddle with it, trying to get it perfect. You can make adjustments later, after you know the idea is working.”

Small business is the backbone and the future of American enterprise. According the U.S. Small Business Administration (SBA), small businesses account for 97 percent of the new jobs that come to the market every year, and account for about 99 percent of all the companies in operation today. Small businesses are also key drivers of economic growth in the U.S., according to a 2007 SBA report, accounting for half of the private, non-farm gross domestic product.

The entrepreneur who succeeds at starting a small business is a hero in my book. And the small-business owner who takes his business from nothing and grows it to $500 million in annual revenues (where it becomes a big business, according to many experts) is equally deserving of our greatest praise.

If you are an entrepreneur or want to be, I recommend you read Good to Great and take from it every useful lesson you can. In particular, I recommend that you effectuate these important lessons that Collins uncovered in his research:

• Nothing is more important than hiring and nurturing superstars. You need good employees to keep the cogs moving, but you need superstars to carry your company to the next level. When it comes to key executives in your company, don’t settle for good. Go for great.
• You can’t attract good people unless you are honest about your company’s problems and positive that you can overcome them. Nobody wants to work for a business that is doomed. And everybody, even superstars, takes their clues from the boss. So deal with reality, but – as Winston Churchill said – “Never give in, never give in… never, never, never!”
• Embrace the process of making incremental improvements. At all times and in all feasible ways, work on making the relationship you have with your customers better and better.

Those are all good rules for entrepreneurs. But not all of the “characteristics” Collins identified in companies that went from good to great are characteristic of most of the successful entrepreneurs I’ve known over the years. Being humble, for example. There are humble men among them, but most of them range from mildly abrasive to downright antisocial.

I can understand how Collins came to his conclusions. The companies he studied were all big companies. Most big companies are run not by the people who started them but by professional executives who were brought in when the entrepreneurs realized they didn’t have the talent or the patience to run a large corporation.

I talk about this in Ready, Fire, Aim. It begins as early as Stage Three (when the company has revenues of $10 million to $50 million) and is fully in effect by Stage Four ($50 million to $100 million). The companies that Collins studied were well into Stage Four, most of them producing revenues in excess of $500 million.

If this interests you, get a copy of Ready, Fire, Aim. Among other things, you’ll learn why the main skill a start-up entrepreneur must have is the ability to make a sale.

You’ll also learn the Five Magic Wands of Business Genius – additional skills you must master to grow your business and make it successful:

1. Coming up with new and useful product ideas
2. Selling those products profitably
3. Managing processes and procedures effectively
4. Finding great employees (superstars) to do the work
5. Motivating employees, optimizing procedures, and rapidly rolling out products and promotions

In short, I loved Good to Great and would recommend it to anyone in business. But if you are just starting out – or if your business is smaller than $500 million – add Ready, Fire, Aim to your reading list.

[Ed. Note: Do you have Ready, Fire, Aim yet? If you have a business or are planning to start one, this New York Times, Business Week, and Wall Street Journal best-seller is for you. Get it here.] [Ed. Note: Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]