I recently read the book “Good To Great” by Jim Collins. It’s a seminal work based on over 5 years of research by Collins and his team unpacking the question “What makes good companies GREAT?”. In 1996, when Collins and his team began the journey into this question, they identified only 10 companies who met the definition of “great”, specifically defined by the following criteria:
- Demonstrated Financial Performance: The company had to show a track record of solid financial results, outperforming industry peers over a long period of time. This performance was measured based on specific financial indicators, such as revenue growth and return on invested capital.
- Sustained Performance: The company had to sustain its exceptional performance for at least 15 years, demonstrating consistency and longevity in its success.
- Transition from Good to Great: The company had to undergo a significant transformation, transitioning from being a good company to becoming truly great. This transformation involved a leap in performance, leading to a substantial increase in market share, profitability, and overall success.
- Market Outperformance: The company had to significantly outperform its competitors and the overall market during its period of sustained performance. This outperformance was measured by factors such as stock returns, market share growth, and customer satisfaction.
So what does make a good company great? And are these principles still relevant today, 20 years on? More importantly (to me): are these principles relevant in the context of a startup? This is the question that intrigues me the most. Let’s go🚀
The 8 Variables/ Principles That Take Companies From “Good” To “Great”…
🚀Level 5 Leadership
What it is:
The most successful companies had leaders who embodied a unique combination of humility and fierce resolve. Level 5 leaders are focused on the success of the organization rather than their personal ego and ambition.
Why it’s great:
In today’s day and age we often associate success with extroverted characteristics. The people who say “look at me” and “look at what I’ve achieved” are inevitably the people we see. So the natural assumption is that extroverted, super confident people are the ones who end up in leadership positions.
The principle of ‘level 5 leadership’ is awesome because it stands against the grain of conventional knowledge and it creates a different narrative around what it means to be successful. The leaders analysed within Good To Great were all humble, service-driven people. The culture they created was not one of intense hierarchy, C-suite benefits and corner offices, it was one of teamwork, of shared burden and of discipline.
SIDE NOTE: As an introvert, this is seriously encouraging. My introverted qualities are not a disadvantage to my ambition. What a relief.
🚀 The Hedgehog Concept
What it is:
Great companies understand their core competencies and focus on activities that align with their passion, economic drivers, and ability to excel. They have a clear understanding of what they can be the best at and pursue it relentlessly.
Why it’s great:
The Hedgehog concept basically requires you to ask three questions:
- What am I passionate about?
- What is my economic driver?
- What can I be the best in the world at?
The Hedgehog concept is a guiding force within any organisation – big or small. While large organisations may have an advantage in terms of greater capacity, data and experience to look at what has worked for them historically, or what is working currently, startups have a different type of advantage in that they aren’t bogged down by bureaucracy and “tradition” when it comes to asking the question of “what are we really good at?”.
It can be a helpful concept that encompasses the idea of “finding your niche”. As a startup – even just as a freelancer seeking clients – you want to answer the questions of who you’re helping, how you’re helping them and how your solution is unique. With both the Hedgehog Concept and that of niching down, it’s about finding your lane and creating depth as opposed to breadth in relation to your offering.
The Hedgehog Concept serves as a north star for the business. When thinking about long term plans, strategy and product launches, we are called to ask whether this new product/idea fits within the framework of our Hedgehog Concept. Is it something we can be the best at? Will it serve our economic driver? And are we passionate about it? If yes, go for it…
🚀 First Who, Then What
What it is:
Great companies prioritize getting the right people on board and then figuring out the direction. They understand that having the right people in key positions is crucial for long-term success and are willing to make tough people decisions when necessary.
Why it’s great:
We are taught the importance of strategy, planning, goals, vision and “getting everyone aligned”. When you’re still figuring out your Hedgehog Concept and finding product/service-market fit, it can be really difficult to build out the processes, structures and “strategy” without more data. Just a note on internal capacity – if anyone has been involved in the startup world, you know it can be super scrappy, reactive, lean… (Like you’ve got one person writing copy, running ads, writing emails, managing socials, finding new clients, onboarding wholesalers… raise your hand if you feel seen🙋🏻♀️). When you have limited resources, sometime you just have to throw yourself into the business and into the mud… and the big plans and systems come later.
The saving grace in this situation is having the right people on board. The Good To Great research showed that vision and amazing strategy WASN’T the differentiating factor. People were. With the right people, you can grow, adapt and figure out the path forward. So hopefully this knowledge gives you as much peace as it gave me. (We are in the process of building our team, so getting the right people is essential to me!)
🚀 Confront the Brutal Facts
What it is:
Successful companies confront the brutal facts of their current reality and are willing to face the truth, even if it is uncomfortable. They use these facts as a basis for making informed decisions and charting a path forward.
Why it’s great:
Drop the ego, honey.
In a world where subjective perspectives can cloud the notion of “facts,” it is crucial to examine data and face the reality of our current situation. This principle applies not only to business but also to personal life. By accepting the truths of our struggles and hardships, we can make informed decisions and chart a path forward, ultimately leading to personal and professional growth.
I listened to a podcast the other day where the speaker mentioned this difference between internal and external locus of control. People with an external locus of control believe that life happens to them, compared to an internal locus of control, by which people believe that they are in control of their own circumstances. Having an internal locus control is empowering. Having an external locus of control is undermining and playing the victim. The reason I’m mentioning this is because when I heard this, I immediately thought of the Good To Great concept of confronting the brutal facts. This requires honesty, humility and is the first step to combatting any kind of victimhood and empowering yourself (or your organisation) to action!
🚀 The Stockdale Paradox
What it is:
Great companies confront the brutal facts of their situation while maintaining an unwavering faith in the ultimate success of their vision. They strike a balance between realism and optimism, staying resilient even in challenging times.
Why it’s great:
It’s not just about facing the brutal facts. The call to action is to remain optimistic, despite the circumstances. There’s no way you can move through of a shitty situation without a dose of optimism. It’s not about fooling yourself, but it is about building resilience to deal with the challenges of business – and life!
🚀 The Flywheel Effect
What it is:
Great companies build momentum through consistent efforts and small wins over time. The cumulative effect of these efforts creates a flywheel effect that propels the organization to greatness.
Why it’s great:
Finding success, let alone sustainable success, is bloody difficult! We are bombarded with “overnight successes” left, right and centre. But what the “overnight successes” – and successes in general – fail to portray is the work and consistency that is put in for months and years to reach a point where the cumulative effort catapults an individual or organisation to success.
We don’t see the hard slog, the late nights, the change in direction, the failed pursuits that are all part and parcel of being in business. So it can be easy to define success as a result, rather than understanding that it a journey fraught with failure – but that failure, slog etc is a necessary stepping stone! So don’t underestimate the cumulative impact of hundreds of tiny actions taken to bring your Hedgehog Concept to life.
🚀 Culture of Discipline:
What it is:
Companies that make the leap from good to great have a culture of discipline. They have a clear set of values and expectations, and they ensure that these are followed consistently throughout the organization.
Why it’s great:
This culture of discipline is essential if you want to build the momentum necessary to create the Flywheel Effect. It includes the discipline to do what needs to be done and to stop doing that which does not serve your Hedgehog Concept.
In the startup world, there are a lot of people with big ideas and vision, but the reality is that amazing businesses are only taken from the intangible to the tangible with really hard work and discipline. Even these e-commerce bros who promise to teach you to “make 6 figures in less than three months from the comfort of the beach whilst sipping cocktails” know this. They sell promises, but they KNOW that the only customers who will truly get this result are the individuals who are prepared to work for it! And fair enough! What is success worth without hard work, right?
🚀 Technology Accelerators, Not Drivers
What it is:
Great companies use technology as an accelerator, not a driver, of their success. They understand that technology alone cannot create greatness, but it can amplify and accelerate their existing capabilities.
Why it’s great:
Technology always gets everyone in a bit of a panic. There’s so much out the to utilise, it’s like where do we even start? It can be tempting to place a lot of weight on technological trends because of the emphasis we see in the media. Technology for the sake of it is never a good idea. It needs to be used to fuel, amplify and accelerate what you’re already doing, NOT as an isolated driver. If your tech stack is pulling you away from you Hedgehog Concept, cut it in half.
The other interesting thing is that Collins and his research team found that NONE of the technology leaders of the time remained relevant a few years on. It was more the second and third movers who became the big house-name brands we know today. So chill out. Bide your time. Make the clever move… (Is what I’m telling myself😌).
Ok folks, that’s all for now. If you would like to watch this in video format – probably poorly delivered and to be watched at 2x speed, just to manage your expectations – check out my latest Youtube vid!
Pingback: 3 Things I Wish I’d Known When I Was 20: Some Hard Truths – Emily Farrell's Blog