Collins’ first book, Built to Last, describes the characteristics of companies whose founders built them in such a way that they became, and remained, great. This leaves unanswered the question, “can my mediocre company become great”. Good to Great is written to specifically address this question. The book is taken from observations of about eleven pairs of companies; each pair was composed of initially mediocre companies, one of which rose to greatness, one of which did not.

Collins divides the process of becoming great into three main principles: first management (i.e. the CEO or board) must exclusively hire upper management of high caliber and with the right personality. The current business climate generally feels that dynamic leaders will build a good company. However, Collins found that while dynamic leaders often generate strong profits, they concentrate the decision making within themselves, so that when they leave, the company becomes directionless and sinks back to mediocrity. Instead, the evidence suggests that the leaders who will build a great company are usually humble, with little ego, but dedicated to building a team that will settle for nothing less than a great solution. Similarly, they usually desire that their employees are very efficient, but well compensated and have a good work environment.

Once extremely capable people are directing the company, attention should next be focused on determining in what area the company can be a world leader, their so-called “hedgehog concept”. This might not be in the company’s core competency, if, for example, a competitor already occupies this position and it is not realistically feasible to join or dislodge them. It will probably take several years to develop, require many intense meetings, and will involve some scary decisions.

Finally, diligence must be exercised in pursuing only that which fits within the area of expertise. At this point, the company begins gathering momentum, which continues to build as it finds new pieces of its arena to develop.

Collins finds that these three principles must be followed if the company is to remain great. If management does not train its successors properly or does not pick quality successors, or if it begins diversifying outside its hedgehog concept it will lose its greatness.

Good to Great is a very enlightening book. It is much more practical than Built to Last, as it explains how one achieves this kind of company. These principles are not limited to companies, although only companies are discussed, but are obviously applicable to any organization. Collins also provides a very clear way to evaluate management and after reading his book, it becomes obvious that many investment writers of the invest-only-in-greatness school struggled to express these principles in their stock selection. Good to Great is clear, cogent, with excellent corporate illustrations. Regardless of your fields or interests, everyone should read this book.
Review: 10
Excellent examples, well written, and with compelling ideas