There is usually information in what someone doesn't say. Long time readers may have noticed that I have never reviewed one of the most popular business books of all time - "Good to Great." Call me a heretic, but I'm not a fan of it. It's one of the best selling business books ever, but I think there is too much fluff, and I think the research team made a huge mistake when compiling it.
Before I go into detail, let me say that I think Jim Collins is a bright guy and I admire what he attempted to do with the book. His major mistake is a very common one - one that rarely gets noticed. I will also say that there is still value in reading the book. There are some good ideas inside (like the "stop doing" list), but I'm sick and tired of people taking it as gospel. I've read too many things like this:
This nearly 300-page book is packed with leading edge thinking, clear examples, and data to support the conclusions. It is a challenge to all business leaders to exhibit the discipline required to move their companies from Good To Great.
That, and the fact that the sales seem to be driven as much by churches as by businesspeople, is what finally made me write this post. (The point there being that it has sold more than other business books in part because it had a secondary market). "Good to Great" might encourage you and give you some good ideas, but it isn't a panacea to creating great organizations.
I read "Good to Great" in 2004 and lumped it together with most other business books. It was ok and there were a handful of sentences I underlined to go back to for inspiration, but it didn't impress me the way some books do. One day I happened to be chatting with someone that had worked with one of the good-to-great companies during the supposed transformation, and this person said the company was all screwed up inside. So that got me thinking…is "Good to Great" sound research?
I picked up the book and re-read it. A couple of things struck me.
The Corporate Barnum Effect
First of all, the good-to-great principles are true in the same way a horoscope is true. They are fairly generic and thus we all apply them from our own viewpoint to make them true. I believe that some "Good to Great" readers that love the book may be suffering from the Barnum effect. The principles Collins proposes aren't bad ones, but they are ambiguous and open to interpretation, which in effect decreases their usefulness. For instance, Collins says good-to-great companies practice "First Who, Then What," which basically means "hire good people." I'm willing to bet no one read the book and said "Eureka! I've been hiring slimy weasels when I should have been hiring top performers. That is why we aren't a great company." My guess is that most people think their way of hiring or interviewing is the best way to get the "good people" and so they liked hearing Collins say this. They ignore the fact that after reading the chapter, you really don't have a better idea of how to do it.
Vague but Appealing BS
Level5 leadership is vague. The only trait people seem to agree on is that level 5 leaders have humility. Humble leaders can be a good thing, but if Jim Collins can't even tell whether or not Jack Welch was a level 5, what chance do the rest of us have?
Q: Was Jack Welch a Level 5?
A: His report card does not come in until [new CEO Jeff] Immelt exceeds him. If Immelt does not exceed him, then he has failed. Jack Welch did not make GE great. GE was already great. Every GE CEO has been to his era what Welch was to his, without exception. It takes 50 years to create a GE. Generations of leaders built it. Whether Welch was a Level 5 comes down to a question we don't know the answer to. Was Welch first and foremost ambitious for himself or for GE? Only he knows that.
Isn't Collins supposed to be the expert on Level5 leadership? Hasn't more been written about Jack Welch than about most other CEOs? And Collins can't tell? He's either being diplomatic and refusing to say "no, Welch wasn't" or Level 5 leadership is business jibber jabber. Since it is vague, it allows us all to see ourselves as Level 5 leaders because of the Lake Wobegon effect. So we read this book and we feel good, like it describes our leadership style (more Barnum effect too).
A Lack of Disconfirming Research
I've read all the notes in the book about how the research was done, and I think Collins and his team made a huge mistake. The good-to-great qualities, once determined, were never used to search for counterexamples. What I mean is that Collins and his team never said "are there any companies that have all of our good-to-great qualities that weren't good-to-great?". This is important, so let me explain.
Humans have a confirmation bias. We look for things that validate our preconceptions. But when you reach a conclusion you have to say "what would it take to prove this conclusion false?" The most popular example of this is this card test.
Collins' team looked at the companies that went from good to great and said "what do all these have in common?" They never went back and said "are there any companies that have these traits that did not make the leap from good to great?" And I understand why they didn't. Because these principles are vague and it would be hard to debate whether or not an unsuccessful company was doing these good-to-great things. You could always say a company is in the process and will soon be great. Or you could say so and so isn't a *real* level5 leader. I tried to find some examples, but I kept coming back to the same questions. How can you definitely say whether or not a company is following the good-to-great principles? You can't.
Surivorship Bias
Somebody has to win. Somebody has to be the best. And being the winner does not always mean you have some skill. The belief that it does is called the survivorship bias, and it may apply to good-to-great. I really don't know. Were the good-to-great companies examples of survivorship bias? I'll be honest in that I don't fully understand how to analyze it or I would. (For years I have been nagged by the question of whether or not Warren Buffett is successful because of suvrivorship bias. I lean towards no, but I don't know how to prove it.) What I do know is that humans tend to conveniently make random demarcations in data to get the patterns and results that we want, when you are looking for something specific, it is amazingly easy to find data to support your preconceptions.
What They Don't Know
Collins also doesn't know what he doesn't know. In other words, maybe there were causes that he and his research team were not aware of. Perhaps executives at the good-to-great companies better understood the economics of their industry. Or maybe they were more financially saavy and understood how money flowed through the company and where their profit really came from. It is common for companies not to really understand these things fully. But Collins would have no way of uncovering that, and even if he did, who would write a book that encourages would-be business leaders to study up on the economics of their industry and better analyze cash flow statements? It wouldn't sell very well because that stuff is boring and hard.
The Tom Peters Criticism
Tom Peters has pointed out that Collins procedure may not have identified the companies most of us would consider great.
Point No. 2 is that companies that Jim calls great have performed well. I wouldn't deny that for a minute but they haven't led anybody anywhere. I don't give a damn whether Microsoft is around 50 years from now. Microsoft set the agenda in the world's most important industry at a critical period of time, and that to me is leadership, not the fact that you are able to stay alive until your beard is 200 feet long.
He has a good point. Has Collins really used the right criteria for greatness?
An alternate explanation
I would say that companies that most of the things Collins mentioned can be summed up by saying "good companies make good decisions." Hiring the right people? That describes a company that makes good hiring decisions. Confronting brutal facts? That is an important part of the process of making good decisions. Using technology the right way? Again, the result of good decision making. I would say that great companies don't have a list of platitudes to follow, as "Good to Great' would imply, but that they simply have good processes for making business-related decisions.
Lest you think I am the only person out there unimpressed by the book, check out Wharton's review of it.
Collins asks an interesting question. Unhappily, the methodology he used to formulate an answer is questionable and the answer is almost disappointing in its simplicity: Great companies become great by staying focused: focused on their products, their customers and their businesses. They aspire to higher levels of excellence, are never content to become complacent and are passionate about their products. They have leadership that is not ego-driven, and have organizational cultures that embrace constant change. That's the book.
And instead of sending me hatemail about how stupid I am for criticizing the world's greatest business book, you can criticize mine instead. I wrote the first chapter for the business book More Space. So go download it (click on an author's name) and mark it up. And while you are at it, download the chapters written by Lisa and by Marc. They have more practical value and immediate application to your work life than "Good to Great" ever will.
Rob, Kind of a tangent, but have you by chance been reading Science Friction?
Ethan,
Just because Tom Peters made up data doesn’t invalidate his criticism of Collins. You have to address the argument itself, even if you don’t like the person it is coming from. I think Peters has a valid argument, and nothing you said challenges that.
The strongest point against Collins work is the disconfirmation part. If there are companies out there that do all the good-to-great things but have medicore performance, that invalidates Collins work. He didn’t check for that.
And finally, notice I didn’t say MY chapter in Morespace had immediate and practical value, which is what I would have said if I was highly biased. Tell me this, how would you apply the good-to-great principles starting tomorrow? That is tough to do. But download Marc’s chapter and I’ll bet you could start applying his ideas before the end of the day.
Chad,
Nope, but I have read some of Shermer’s books in the past. And I pick up Skeptic magazine from time to time at the bookstore.
I’ve always thought Collins work was generic. He basically just picked companies that hide their flaws well from investors. It reminds me of the trash that was written about how great Enron was…before they came crashing down.
Ethan,
One pRoblem with writing is that tone doesn’t come across as well as it does when speaking. I was surprised to see your comments because I knew your views on business books. Sorry for the confusion.
I think that a lot of these criticsms can be applied to any research project, especially to a size that good to great took on. But I think the point of the research was to find some sort of common ground between companies who have out performed the market that distinguished them from their competitors. This, I think was accomplished. With any book, you have to take it as it is and try to apply general concepts to your more specific situation. There will never be a book that can be used as a guide for every company to say… “hire the right people” or “build a great corporate enviroment”. Every situation is unique, and the succesful will be the ones who can apply these general concepts to thier own situation.
http://www.brianbalfour.com
You are right (I think) Brian when you write that “the point of the research was to find some sort of common ground between companies who have out performed the market that distinguished them from their competitors. The key word is “distinguished.”
To do that you have to go back to the original sample (including those who did and who didn’t outperform) and ask “did anyone who didn’t outperform the market exhibit any of these good to great behaviors?” If you find one then you cannot reliably claim a cause and effect link between the behavior and outperforming the market. I like what I read in Good to Great. But I was troubled by the claims of scientific method.
But maybe I am missing something…
Thanks
As a Business and People resource I have made it my business to study Good to Great and to attempt to prove or disprove it. In my pragmatic approach to helping companies I have a hard and fast rule: An idea or principle must succeed or fail based on it’s merits, not on any predesposed opinion. In short I see more failure in business because of “lip-service” or “program of the week” methodology.
It’s vital that if we are going to invest in an idea, we understand it fully and then try it with the intent of succeeding. Then if it fails, it was a bad idea, and we didn’t “help” it fail.
(Hint: most reasoned ideas, not all, succeed with this methodology.)
GTG is long on philosophy and short of methodology. But then it is a research narrative NOT a how-to book. I am helping companies to ID and implement methodology, and by doing so, will prove or disprove it’s principles. My results are saying the book is on to something. Something great.
We shouldn’t throw the baby out with the bath-water.
I read the review for and against Good to Great- as a clinical psychologist and consulting organizational psychologist for business owners I was impressed with the level of ‘Fashion Power’ that exists in the consulting world. THe fashionable flavor of the day truly exists. Just like the history of clinical psychology it seems that the field of business as a topic is going through the psychobabble phase, Hopefully there are a few great business psychologists who can help narrow the path to more scientific findings. Collins research methodology would have been thrown out of any good/ great doctoral program.
I read the review for and against Good to Great- as a clinical psychologist and consulting organizational psychologist for business owners I was impressed with the level of ‘Fashion Power’ that exists in the consulting world. The fashionable flavor of the day truly exists. Just like the history of clinical psychology it seems that the field of business as a topic is going through the psychobabble phase, Hopefully there are a few great business psychologists who can help narrow the path to more scientific findings. Collins research methodology would have been thrown out of any good/ great doctoral program.
Excellent reviews. I’m glad I happened by this site.
This blog has made me even more interested inthe book. I’m picking upa copy today. My church is teaching its’ principles to all active ministry members. I’ll let you know what (if any) changes I discover!
I happened to read a good critic in the site. I am here in Sri Lanka view the book like this. There are a few critics.
1. The book says “Right People need not be motivated and they are self motivated”. This is applicable to senior officers in the Asian countries as I feel, but all other junior staff at lower level should definitely be motivated to get the job done. The reason for this is because most of the junior officers in Public and Private Sector earn just below or at the level of exactly sufficiaent for cost of living. So, they are all unhappy about their salary. So, in order to make them doing the job constantly, they have to be motivated always at least by non - monetory modes.
2. Collins says “RIGHT PEOPLE ON THE BUS” but he never talks about the details of right people whether they are born, they can be made or how they can be identified. Every company employs right people in the best possible way they can, but it is only later you really realize whether they are in fact RIGHT or WRONG.Any body can say it is the RIGHT PEOPLE, RIGHT STRATEGY, RIGHT DECISIONS but no body could spell it out the source of this accurately.
3. The statement “YOU SHOULD NOT DEMOTIVATE ANY BODY” is very critical. This statement is very important and I fully endorse that but if there are opinion leaders who try to play double game with the organization, they should be expelled in no time.Collins has missed that part. You should show no humility to these people.
Excellent article, I read the book recently and - like you - even if I was paid to mark interesting passages I would still be ’skint’. ‘Don’t do lists’ is probably the single most inspired piece of advice. Apart from that, it was an awful lot of words to point out a very few truisms. Which was a shame considering the obvious effort that went into the book - but then effort isn’t always enough!
Hi,
I agree there is too much room for criticism but if thought carefully the author might have not told “HOW” for everything like “how to get the best people” but yes he tells the important facts-
and thats unquestionably a good thing.
1. Be a hedgehog 2. get the rite people blah blah.
I believe its a good read and deserves appreciation. If you apply these to your life or your company you will definitely improve
I liked it. It is relatively general but I think there are a lot of people in business who a) don’t face facts and b) expect things to happen overnight. If you read even a single line in a book that makes you think more positively or effectively about a situation then that’s a good result.
In hindsight, Good to Great research team was in the same quandary as the Olympics or the Tour de France. Specifically, doping. In hindsight, we may also need to admit that fraud may be an explanation for the sudden rise in corporate success in some (not all) cases. With respect to Fannie Mae for example: “On December 18, 2006, U.S. regulators filed 101 civil charges against chief executive Franklin Raines; chief financial officer J. Timothy Howard; and the former controller Leanne G. Spencer. The three are accused of manipulating Fannie Mae earnings to maximize their bonuses. The lawsuit seeks to recoup more than $115 million in bonus payments, collectively accrued by the trio from 1998–2004, and about $100 million in penalties for their involvement in the accounting scandal.” –http://en.wikipedia.org/wiki/Fannie_Mae
probably with the benefit of hindsight, we can say that at least one of the 15 good to great companies has not performed well in last 6-7 years, look at circuit city stock in the last 6 years , going by the book, the company should never have had those management problems and turnover which it had in the last 6-7 years and should have the right people when the management which took it to the top in its sector left the company, its stock had the largest % decline YTD in 2007 in S&P 500
what books do you recommend if you don’t buy “Good to Great”
First of all I must say that I have read the Good to Great book and I think that the original review may bother on a little bit of some unconscious feeling I wouldnt like to call envy
I totally agree with Owen. The points in the Good to Great book may seem very general, however you’ll be amazed that not many people understand “general” concepts like that things dont happen overnight or the importance of facing facts. This is even more so when these concepts are viewed in the context of various peculiar business circumstances. For me (for example) I must say it provided deeper insight into those issues and others especially as relate to my business. I dont think it is possible to come up with a step by step guide to becoming a great company that will fit every industry and business (and if in doubt, disprove me). Therefore I think that if we agree there was any value at all, and that the book was widely read, then we should give it up to Jim collins and his crew for doing a great job and contributing however “insignificant” to the development of humanity (…..even if we think we can do better)
It’s really good to read all your reviews. More opinions means more food for thoughts.
I am currently reading the book and I started the second chapter yesterday (First Who Then What).
I come from a really technical background, but careers evolve and I am just not interested in spending my life reading specs and coding anymore.
So anyway, I started reading about business with a capital b really recently. GTG would be my first business book. I am disappointed to learn that this is the most famous/sold business book. I hate following masses, that makes me feel less human, more like cattle…
But I guess I had to start somewhere huh? So I read the first chapter and I read while frowning! Level 5? WTH? So if I am not I’m screwed? Oh no, I am not he explains… but the author categorizes things a little bit too much for my liking, going back to the feeling of belonging to a cattle.
I’m still not convinced at the end of chapter one. I feel like the same thing is said over and over again, but I can’t really formulate why/how I don’t like it.
But here is the thing though. I like the examples. They make me laugh most of the time because I get to know stuff that I did not.
One thing for sure, this book opens my eyes and makes me think. On the level 5 thing I could not help it but scan thru all the people at my job and try to match the Level 5 tag on them… it was kind of funny!
All in all I think what’s important is that you care about what you’re doing and you always accept criticism and keep criticizing things yourself… that applies to reading this book.
I don’t think we can say that the book is good or not good. In the format, it follows a very scientific approach with hypothesis and data, a team, interviews, etc.
The report was never to be taken as a bible, the truth, the science about it all, etc.
If you really hate it and you can say how/why, then the book wins!
Do you catch my drift?
one of the books i would recommend would be the undercover economist by tim harford, awesome simplicty in expanining the concepts and great wit
Is it not the intent to make us think? If nothing else from reading the book, and reading the blog and these comments, the one thing it has done is address something we have not looked at before ‘in general terms’. Which is where it is needed the most.
Good leaders, great leaders, people who’s goal is a balance between the reality of having to work and the humanity of having to work in environments know there is no set answer and daily objectives have to be balanced with employee motivations.
It is a good book if you want to think about something differently. It is not if you are looking for a fool proof plan to become ‘perfect for business leadership’.
Which in and of itself is redefined every decade.
Great review. The CEO of our start up company handed out copies of this book to every employee and said if you like working here you will like this book. I read it last night and was disappointed. I couldn’t put my finger on exactly why, but your review made things clearer. In trying to find specifics of how we can improve this book only makes the tasks of specifying goals more elusive. I will tell our CEO that I will be level 5, hedgehog, the who not what, rigorous not ruthless, etc.. but in practical/real terms it is meaningless. And, I have no additional help in being more productive, effective, and happier. THANKS again for a great review. I am excited to read your book next.
I think it helps to have some experiences to compare against the book. If nothing else, the content is provocative in providing a framework of internal analysis and questioning. Every company will have a unique “how” with respect to applying the findings of the book. Any attempt to do a “My Research vs His Research” is at best narrowminded, and at worst self-serving. If you don’t see how the presentation of the material applies to your circumstances then 1.) It’s a semantic non-fit, or 2.) you’re not in a position to make the determination (i.e. my line managers don’t have the same visibility that I have into the inner-workings of the company in many instances.)
Even though I am a fan of the book, you make excellent points Rob.
From the Survivorship Bias principle (only the victors write and therefore make the history) to Tom Peters’assessment that a company’s existence over the long term doesn’t reflect the importance of their impact at a particular point in history and therefore is not a true reflection of their “greatness” makes perfect sense.
The problem Rob is that we tend to look for absolutes in a world in which absolutes are far and few between. In fact, even the very definition of an absolute is subject to debate.
With this understanding, I believe that the critical element of this debate is governed by the lens through which one views any book - Collins’ book included.
Specifically, I approach (or at least I try to) all research with a balance of both healthy sceptism and unbridled openess governed only by a single precept, “does it challenge me to think outside of the framework with which I am most familiar and comfortable!”
As a professional author and speaker, I start each and every conference and seminar by making the following statement to my audience; “do not just take my word for what I am telling you. Challenge me and the findings I present! If the principles that I am advocating are valid, then they will stand the test of both scrutiny and time.”
I conclude this opening oratory with a reference to the aforementioned statement by indicating that “my seminars can only be considered a success if it causes you to think outside of the framework of that with which you are most familiar and comfortable. You may not change your long held beliefs or opinions, but at least you will challenge their veracity.”
And in the end Rob, isn’t this what it is all about in terms of why and how we write?
“Good to Great,” taken from the point of view of a few years’ distance, starts to look kind of fishy. The recent performance of Fannie Mae not only skirting the edge of collapse, but possibly threatening to do so to the entire nation’s economy, sure doesn’t sound like a success story to me. Gillette, of course, did sell out to Proctor and Gamble, and in the process, threw 6000 people in Massachusetts out of work. Maybe they gave those people a copy of “Good to Great” in their severance package. Circuit City is also tottering on the brink, and has had to undergo the very restructuring that the book warns against.
There’ probably other similar facts regarding the other “Good to Great” companies in the book. Obviously, something is wrong here, and these companies are not weathering the storm.
I read g to g when it first came out. “Feel good” psychbabble was my opinion then. Have been interested enough, though, to follow up on the magic companies. Confirmed when Fannie Mae was noted to be dishonest in 2005, and then when Circuit City developed problems in 06 or 07, and the basis of the book, “right people on the bus” was destroyed this year by dishonesty of Fannie Mae. If this is where “level 5″ leaders take us, we don’t want to go there.
With countless business books lining the shelves of every bookstore in creation, I was skeptical this book would bring me an epiphany. Unfortunately I was correct. This is another boring tale of corporate gluttony we are encouraged to accept as great corporate leadership. Fannie Mae is on life support as is Circuit City. Walgreens can thank big pharma for much of their recent success. The author would have benefited from reviewing companies like Whole Foods. A successful company that incorporates sound business principles and leadership with social responsibility
Great dialogue about a book that has clearly influenced many people in the last 7+ years… I appreciated Rob’s mention of the lack of “disconfirming research”. Clearly, more work could be helpful if focused on the “what did we miss” topics. However, the lack of “disconfirming research” is not proof that Collins and his team were wrong in the principles they identified. Every one of the principles may in fact be valid. Further work might identify companies with the principles that failed… and we might learn what additional principle could be observed by careful scrutiny of the data. Thanks for all of your comments; I’ve enjoyed revisiting the principles in Collins’ book - which I DO consider when addressing strategy and tactical planning in both my business and personal life.
Raynor discusses the problems of survivorship bias in “Good To Great” in his book, “The Strategy Paradox: Why committing to success leads to failure ( and what to do about it)”. He points out that most of us would consider making market performance success, when it these were Collins’s comparison companies. His research may still suffer from some of the faults you mention but he does state a clearer thesis.
One of the problems of GTG and this review is that they don’t seem to take into account the changes that happen in a company on the path from GTG. Anyone who has been in a startup and travelled to greatness will have experienced the massive pressures that change a company as it grows. It is not often that a CEO or management team will even want to be there for every bit of the journey. The route also includes other influences - social, marital, health to mention a few - there are so many factors that change the rules on the way. To expect one book, or one research project to be able to find a single ‘optimal’ pathway that fits. It doesn’t compute. Listen to opinions, learn, discuss and form your own subjective opinions; apply them in your business and hope you have what it takes!
My company is eating this “Good to Great” nonsense hook, line, and sinker. It’s disgusting how they use it as a tool to get rid of truly great people. Level 5 my a$$. It’s all about who is in power, and how they are going to get more by using lackies and @ss kissers to get them there.
I won’t give the name of my company, but it is fashioned after a fruit…
We are practicing Brutal Truth here, so something must have stuck. While the methodology of G2G can be disputed, as any other research, the principles are still applicable. Why are we not attacking the MBA management programs offered at the universities, they do the same thing.
If you want a decent book to read, consider Black Swan.
There’s a comprehensive criticism along your lines in the excellent book “The Halo Effect” by Phil Rosenzweig - recommended reading for anyone wanting to cut through the BS of management theories.
Ian
It will be interesting to see how many of the GTG examples in the book fall by the wayside during the current ‘down turn’. So far both Fannie Mae and Circuit City have fallen, even though Fannie Mae has been resurrected from the dead. I suppose it just goes to show that what looks great from one direction can look a lot different from other angles?
K
I like this review. Thank you.
For those of you who have read Jeremy Hope’s books, the same critism go for his books, not really a how to approach to actually doing it.
For me, I love both Jim Collins books and many other business books, but often they lack a how to part. Most of the time they give hope but little else.
Clive Woodward applied the principles of the book to the England Rugby team…. they won the world cup!
There’s a fact for you Rob! don’t hide from the facts remember. If a book can be responsible for such a great achievement you cannot doubt that it delivers.. it already has.
By the way Clive Woodward openly promotes this book.
Critical Reviews are needed. Thanks for using your time to uncover some of the generalities of Good to Great. However, I gained important insights into my own company and found the book fascinating. I will continue to recommend Good to Great wholeheartedly……
Jared Lyda
http://www.fireandmotionblog.com
Although I read and got great value from ‘Good to Great’ I understand that not every book appeals nor has value for every person (I don’t put much value in Jane Austen nor Harry Potter yet I can appreciate that others get value from them).
Becuase ‘Good to Great’ has helped my company and the English Rugby team doesn’t mean it will help everyone. It’s refreshing to read an assessment of the book that focuses on measurable facts, not just opinions.
IF YOU’RE GOING TO LEND ANY CREDENCE TO THIS REVIEW, PLEASE READ THIS FIRST:
Sad, angry little reviewer… You’ve missed the points, and are stretching for contrarian perspectives. You lost me at the Barnum Effect, though I did continue to read your whole review. When you try to pick apart the First Who Then What concept, you’re oversimplifying and missing the point. Yes, the concept is make good hires. However, this isn’t a suggestion to the readers. This is what those companies who succeeded DID. Collins is merely telling us the themes that these businesses had in common, not telling us what people should do. If this reviewer has ANY experience in corporate America, he surely knows that a huge number of businesses DON’T place enough emphasis on hiring decisions, and work from the opposite angles. It is very common for businesses to decide WHAT they want to do first, then try to fit the people in. Collins is merely explaining that ALL of these Good to Great companies did the opposite. They brought in great people, then decided what they should do with all this talent.
SECOND MAJOR POINT: The Lack of Disconfirming Research. OF COURSE THERE’S NO DATA ON THIS!!! What did the reviewer expect, that somehow Collins’s team would somehow be able to review the THOUSANDS of other businesses out there over a period of MANY YEARS? Again, if this reviewer had any foundation in reality, he wouldn’t have included this statement. Surely, it would be an unending labor to try research EVERY ASPECT of this book in reverse. How do you identify whether or not the other FEW THOUSAND businesses operated from a First Who Then What principle? Or if those THOUSANDS OF BUSINESSES used a Hedgehog concept overtime?
This reviewer is clearly biased and grasping at straws here. Please don’t use this review to make a conclusion about the value of this book. Collins NEVER asserts that he is writing a roadmap for all businesses. The point of the book was to identify key concepts that some of the very best businesses have in common. What you do with that information is up to you.
The fact that there is such a lot of posting on this review highlights the fact that the book hits the spot. Yes there are generalisations (that was the aim to find the common themes). Yes good companies go bad and yes its a good read - take from it what you will.
Well spoken, Jason and Phil D.
GTG is not a formula, it’s a report. For anyone who is trying to go from Nothing to Good and, perhaps, GTG one day there are a number of things in the book that are notable and can be encouraging when you find that you are already on that path. There are also some good examples of ‘how it can be done’ but it is not ‘the’ recipe for success. Just observation of what happened in the time frame. We can all see that some of the Great have developed massive cracks or fallen completely. Perhaps a follow up in current conditions would be interesting reading.
Wow, apparently nothing is actually real ever, and every single idea in the world is flawed. Is there any idea that is immune from criticism? They proved their ideas in context and we spend incredible intellectual energy talking about the ideas outside of the context they were presented in. Crazy. We nitpick every aspect of everything and dissect it. Anything based on hardcore research like this is true in a certain context and that’s the wisdom that is imparted in the book no one pays any respect to.
I am an educator and our new principal is now suggesting that we read this book. I have just started it and am not quite seeing the connection yet. When did education turn into a business?
Jane
Education is about getting results, just as business is about getting results. The principles of humble, determined leadership; having the right people on the team; etc. can all be applied to any organisation: not just business.
That’s a really interesting insight about “hiring good people.” Just what are good people?
Hiring today is in really dismal shape. There’s this erroneous belief that if you were a “good person” (whatever that is) in one company, you’ll be good in all others. Consequently, if you didn’t succeed in your past companies, then you will consistently fail in all companies afterwards.
When you look at some of these proven performers with big company names in their background, some actually have the benefit of being at the right place at the right time. Those who hire them for subsequent jobs believe, well if you created a browser and revolutionized the world at age 25, everything you touch will turn to gold.
The part that is sorely lacking in track “hiring good people” is this. If you as a hiring manager, HR representative or peer manager deemed that somebody wasn’t good, were you right? Did you look to see where that reject candidate landed, and did that person go ahead and destroy your competitor because they were bad? No, hiring managers the world over can cry that talented people are so hard to find and nobody challenges them on it. Have employers cry that enough, and the world believes it, unless you stop to think that not all the laid off people of 2009 are losers (even if they worked for Bear Stearns and Lehman Brothers.)
The real problem in hiring is this. Hiring focuses way too much on what you have done. Hiring now more than ever needs to focus on what you can do. People who were good in one company can fail. People who were bad in another can succeed in another. Some “good people” are indeed really good, they just never had the bosses and environments to demonstrate they were good.
P.S. If you want to hire good people, resumes are useless!
Dear Rob,
I was very happy reading your note about the “godd to great” book. In fact, there are very interesting points about which I never though about such as “A Lack of Disconfirming Research” or “The Corporate Barnum Effect”. There is a point we have in common: “The Tom Peters Criticism”. This is exactly what I was saying to my collegues: “he based all his study on he fact that the great companies, but if the stock exchange would be the universal way to define a great company, it will not fluctuate so much !”.
There is a point that he very important I think and that was not in your article: Jim Collins declare that things are like that and that it is proven, but how can you prove something with a sample of 11 companies???? How can you generalize and make rules for all the companies in the world with a sample of 11 companies???? Not very scientific ;o)
As you, I don’t say that Jim Collins is right or not, I just say that he can not affirm such things based on a so fragile basis…
Thanks for this very interesting article once again,
Estelle
To test Buffett’s reputation for survivorship bias [which I, too, have often wondered about]:
Among publicly traded US companies, what fraction of CEOs performed better in, say, the increase in book value of their companies during 1965 [when he took over BH] to 1974? How many during each of the subsequent 3 decades? (Suppose the average of those 4 numbers is 2% — I don’t really know, but it’s not rocket science to look up the numbers.) That gives you an estimate of general rarity, and it lets you state a concrete hypothesis to test:
Picking companies, or CEOs, at random each decade, you would get 4 such performances once in 6 million tries. (.02*.02*.02*.02) The question is, were there about 6 million people who led that collection of companies over that length of time? (Then one of them would certainly have been at least in Buffett’s league!) Or even 100,000?
If 2% (or less) is the right number, then the answer is almost certainly, “No, Buffett really is special.”
But if it’s 10%, then it’s a 1-in-10,000 chance, and there have probably been almost that number of CEOs, so the answer is probably, “No, he’s just an especially good example of a survivor: a good enough CEO, and young enough, and healthy enough, to stay in the game for a very long time.”
My guess (and it is only that!) is that 2% is closer to the mark. But the question is an empirical one, and it has an empirical (albeit statistical) answer.
FWIW, you could instead ask how likely it is that any randomly chosen S&P500 company would beat the S&P500 average, 34 times over those 40 years (or 38 over the last 44 years). The answer is 1 in a few million. But it’s not so clear whether BH should be considered in that way, especially in the early years (I vaguely recall a market value of $20M, which might let it outperform just for reasons of size, rather than CEO quality).
Interesting read of comments. I have owned a growing business for almost 30 years — and get motivated by ideas - and G2G did exactly that! We started applying the principles of G2G a few years ago and have soared at a time when most in our industry are hurting… was it the book alone? No… but the principles have value… if you and your team are passionate about what you do, if you do have the “right” people on the bus, if you focus on what you are “best” at… then things will change! As an entrepreneur, I am a sponge and thrive on ideas and philosophies that will excite… from books, lectures, discussions… learning as we go! It is interesting to read some of these comments as I never read trying to find fault, I read to learn and grow… and am grateful for being so very blessed!
To me, reading business books is somewhat similar to the act of going to church … you know the core principles but you need to listen and internalize the subtle nuances so that you truly stay on the right path.
Collins’ book addresses two of these subtleties in a way that I think is unique and is something for every person to apply to their business.
The point of deciding what “can” you be the best in the world at is a different way to look at your mission. He discusses the need to look at the market, and your talent, and passion, and understand that all of these factors have to work together. In many respects this is somewhat obvious, but I haven’t seen it put that way.
First who they what is something that every business “knows” but so few actually practice. Almost every single business works their staff as hard as possible until they are on the verge of quiting and then they hire some additional “help” to address the looming to do list that needs to be addressed yesterday. This is the process of first what then who. This leads organizations to make bad hires which is bad for both employer and employee. Google has not been around for dozens of years, but look at their hiring practices and their methodologies. They have set up campuses next to the three leading tech related universities in the US for the purpose of attracting talent first and then determining what to do with the talent.
There are holes in the research, but the general concepts will help most business people who are in the position of trying to “transform” their businesses.