In his book “Good to great”, Jim COLLINS presents his results of a 5-year study on what differentiates 11 excellent companies from their direct and indirect competitors. I share some of his findings in this article.
Former Stanford business professor Jim COLLINS now runs his own management research lab where he conducts large-scale research projects. He has brought together twenty people over a period of five years to carry out a considerable study. Their conclusions are both well-founded and interesting.
The subject of the research reported in his book “Good to great” can be summarized as follows: Can a good company become excellent and if so, how?
Criteria that must be met by a company to be considered as excellent are both
- cumulative equity earnings that had not exceeded the market for 15 years and
- a transition point followed by cumulative earnings that were at least three times the market for the next 15 years.
Why 15 years? Because that is, according to the team, a duration that transcends the odds and ends, and exceeds the average duration of most CEO positions. The choice of 3x market value comes from the fact that it exceeds the results of the most widely recognized large companies.
Here are some of the conclusions put forward by Jim COLLINS and his team.
1. Level 5 leadership
Jim COLLINS and his team define 5 levels of leadership:
- Level 1: highly capable individual
- Level 2: active team member
- Level 3: competent leader
- Level 4: effective leader
- Level 5: great leader
All excellent companies were characterized by a Level 5 leader who demonstrated sustained excellence. This is due to a subtle combination of personal humility and professional drive.
Let’s quote as examples Colman MOCKLER, CEO of Gillette from 1975 to 1991, and Abraham LINCOLN.
A key point of these leaders is that they also knew how to put in place successors capable of perpetuating success. In contrast, in the comparison companies, three out of four leaders installed weak and/or failed successors.
2. First who and then what
One might think that the first step toward excellence would be to give the company a new direction, vision and strategy, and then engage the staff to buy into it.
The study showed exactly the opposite.
These Level 5 leaders did not calculate the trajectory of their bus before putting the necessary crew on and the unnecessary staff off.
Selection criteria are obviously critical, and one will refer to the criteria of a level 5 leader to identify a team that resonates with them.
3. The STOCKDALE paradox
Vice admiral James STOCKDALE was the highest ranking American officer in the Hanoi Hilton prison camp during the Vietnam War. He was tortured on more than two dozen occasions during his 8 years of captivity. Nevertheless, he did his best to ensure that many of the prisoners survived while fighting a war against his captors’ attempts to use the prisoners for propaganda purposes.
When Jim COLLINS asked him simply, “Who couldn’t? (survive), he replied, “Oh, that’s easy. The optimists. The optimists were the first to say they would get out of camp before Christmas. But Christmas came and went. Then Easter. But Easter would pass. Then Thanksgiving, then Christmas again. And they would die of despair.” He went on to say, “This is a very important lesson. You must never confuse your faith in a happy ending with the self-imposed discipline of facing the hardest aspects of your present reality, whatever they may be.”
In summary, excellent companies have all demonstrated the ability to remain
- confident in their ability to succeed, no matter what the difficulties, and at the same time,
- to face the most brutal reality, whatever it may be.
4. A culture of discipline
The research shows that bureaucratic cultures actually compensate for the incompetence and lack of discipline that comes from inadequate recruitment. Selecting the right staff who are capable of self-discipline in effect makes a stifling bureaucracy unnecessary.
A culture of discipleship nevertheless implies a certain duality: adherence to a coherent system while allowing freedom of maneuver and responsibility within the limits of the system.
Jim COLLINS finally insists on the fact that we must not confuse the culture of discipline (functional) with disciplinary tyranny (destructive).
5. Technology enablers
Excellent companies think about technology differently than mediocre companies. They use it as a gas pedal, not as an impetus.
None of the excellent companies started their transformation with cutting-edge technology. Yet they all knew how to exploit it in an innovative way that resonates with their hedgehog concept, which I will discuss in a future article.
Excellent companies respond to technological change with thoughtfulness and creativity. Mediocre ones react with frenzy, driven by the fear of being left behind. Eighty percent of excellent leaders surveyed did not even list technology as one of the top 5 drivers of their transformation.
If you would like to know how the Systemic Resonance Model can help you transform your business towards excellence, I would be happy to discuss it with you at your best convenience.