In this report you will find the book “The 7 Habits of Highly Effective People” apply to the book Good to great. How a company can go from being good to being great, and how the 7 Habits of effectiveness Stephen Covey proposed in his book are applied in seeking that achievement.
Can a good company become a great company and, if so, how? Or is the disease of “just being good” incurable?
Those two questions inspired Collins with a group of collaborators to perform a five-year research into the inner workings of good to great companies.
The project contained 4 phases:
1) The Search, they selected eleven good to great companies, that shared the same basic pattern (such as fifteen year cumulative stocks return t or below stock market, punctuated a transition point, then cumulative returns at least three times the market over the next fifteen year)
2) Compared to what?, they asked themselves what did the good to great companies share in common that distinguished them from the comparison companies? For that they divided the selection in two: direct companies (companies in the same market and opportunities but didn’t go from good to great) and unsustained companies (companies that shifted from good to great but didn’t maintain)
3) Inside the Black box, they collected data, made interviews and analyzed all the information. With the data in hand they began a weekly research-team debate, reading article, analysis, interviews, and the research coding. They made empirical deductions out from the data. They stepped into really interesting facts: celebrity leaders who ride in from the outside where negatively correlated with taking a company from good to great, the opposite happened with CEOs promoted from inside the company. They found no systematic pattern linking specific forms of executive compensation to the process of going from good to great. Strategy was not a differential key factor. Good to great companies putted their focus on what not to do and what to stop doing. Technology did not cause the transformations, in case it accelerated it. Merger and acquisitions played no role. They paid attention to managing change, motivating people, or creating alignment. Some reported to be unaware of the transformations at the time. The companies were not in great industries.
4) Chaos to concept, in order to develop the conclusions in the book they had to do an iterative process of looping back and forth, developing ideas and testing them against the data, revising the ideas, building a framework, etc. they went from chaos to concept.
Then the author gives an overview of the framework of concepts and a preview of what’s to come in the rest of the book:
*Level 5 Leadership: the good to great leaders “seamed to become from mars”. Self-acting, quiet, reserved, even shy, they are a paradoxical blend of personal humility and professional will.
*First Who… Then What: those leaders first got the right people on the bus, the wrong out, and the right on the right seats; then they figured on where to drive it.
*Confront the brutal facts (Yet never lose faith): Stockdale Paradox: you must maintain unwavering faith that you can and will prevail in the end, regardless of the difficulties, AND at the same time have the discipline to confront the most brutal facts of your current reality.
*The hedgehog concept (Simplicity within the three circles): Just because something is your core business does not mean you can be the best in the world at it. And if so, then your core business cannot form the basis of a great company, It must be replaced with a simple concept that reflects deep understanding of three intersecting circles.
*A culture of discipline: when you combined a culture of discipline with an ethic of entrepreneurship, you get the magical alchemy of great performance.
*Technology accelerators: good to great companies never use technology as the primary means of igniting a transformation. Yet, paradoxically, they are pioneers in the application of carefully selected technologies.
*The Flywheel and the doom loop: in the good to great transformation there was no single defining action, no grand program, no one killer innovation, no solitary lucky break, no miracle moment. The process resembled relentlessly pushing a giant heavy flywheel in one direction, turn upon turn, building momentum until a point of breakthrough, and beyond.
*From good to great to Build to last: the author proposes here the following process line: Good to Great concepts, Sustained Great Results + Build to Last Concepts= Enduring Great Companies.
The timeless “physics” of GOOD TO GREAT: in this title the essence of the book is described: “This book is about how you take a good organization and turn it into one that produces sustained great results, using whatever definition of results best applies to your organization.”
Habit 2: Begin with the end in mind. In the phase of search there was the research for information to develop the investigation, in order to be able to do such a search they had to know exactly what they wanted to achieve with the investigation. It was a group of people working on the project, so they had to internalize habit 4, 5 and 6 to be able to function as a group: with a Win/Win philosophy, all together working towards their goals (Habit 3), in putting together the information and elaborating the ideas, they had to listen to each other and understand each one point of view (Habit 5); because it is in understanding the other when we learn and are able to make ourselves be understood. It’s the only way a group can function, through mutual understanding and synergy. Synergy allows us to open our minds to new possibilities, new alternatives; that together with emphatic listening made this experience came through.
In the second phase, they made the research to compare different kind of companies we see the organization and scheduling, the effective management present in Habit 3. Also in this phase the work group had to reevaluate their thinking about corporate greatness, this shows that they found a mistake in their pre-concepts and modified instantly, that enlarges their circle of influence and is part of being proactive (Habit 1).
In the third phase we can see the Habit 6 synergy, also the mutual understanding again (Habit 5), the self-awareness (Habit 1), all together on their weekly research-team debates, where they putted together the information collected, made an analysis of it. Collins itself made a presentation to each group, drawing potential conclusions and asking questions, that shows the leadership and doing the right things (Habit 2). The facts they came across also shows the internalization of the seven Habits: celebrity leaders who ride in from the outside where negatively correlated with taking a company from good to great, the opposite happened with CEOs promoted from inside the company, we can see here the synergistic way of thinking, proactive nature, the effective leadership and self management, the exercise of independent will and how being from inside the company gave them a different perspective, asking themselves what not to do and what to stop doing, they gained interpersonal leadership, empathic communication and creative cooperation (Habits 6, 7).
The fourth phase of their research speaks out Habit 7: is the integration of all of the Habits together, they went from chaos to concept. Collins first became self-aware of the need to understand how all the companies he studied went from good to great (HABIT 1: be proactive), and he first set a goal: find out what did the good to great companies share in common that distinguished them from the good companies (Habit 2: Being whit the end in mind), he putted together a group of collaborators in order to start the search (Habit 3: Put first thing First) delegating tasks, identifying roles and goals, scheduling, adapting. They made wrong assumptions and mistakes, they were able to realized that and change (Habit 1). They started this project working in six persons groups, with the end in their minds, and the mentality of all working towards that end, not competing in getting the best results (Habit 4: Think WIN/WIN), because the individual best results had not place here, the only great result was the research that made the book came through. With the information researched, Collins made reports and analysis, and had weekly meetings with each group where they discussed the reports and analysis performed by Collins, that showed real effective interpersonal communication (Habit 5: Seek first to understand, then to be understood), effective interpersonal leadership (Habit 4), and synergistic communication (Habit 6: Synergy). All of these describe the steps into going from chaos to concept, and why this last phase is the connection off all Habits, into Habit 7: they could create a concept because Collins had clear the principles of leadership and management and together with his group of collaborators, developed the principles of interpersonal leadership, empathic communication and creative cooperation; that allowed them to finally get the concept they were looking for.
That is as far as the investigation goes. In each chapter overview there are also correlations with the seven Habits.
*Level 5 Leadership: the kind of leader that turn good companies into great ones are the ones proactive (Habit 1), self-effacing, blend of personal humility and professional will, characteristics gain by self-awareness, principle center life, and mission statement development (Habits1 and 2).
*First Who… Then What: most of the leaders, as we already sow, came from inside the companies, so they first got the right people and putted them in the right places, and then developed a new vision and strategy. This is an example of being with the end in mind (Habit 2), putting the first thing first (Habit 3); first getting the right people, then developing the vision and strategy; they knew the people, and to achieve greatness they had to put the right people in the right places, it is useless to try to make a change without having the correct “tools”, the result would be even worse than the problem we were trying to solve in the first place. This reflects not only effective leadership, but also effective management, and concentrating in the important activities (Habit 3).
*Confront the Brutal Facts (Yet Never Lose Faith): you must maintain unwavering faith that you can and will prevail in the end, regardless of the difficulties is a clear statement of being with the end in mind (Habit 2); only that way we can pass the difficulties, and learn from them, not let them stop us. AND at the same time have the discipline to confront the most brutal facts of your current reality, that’s the ability to change restraining forces into driving ones (Habit 6), by seeking mutual benefit (Habit 4), empathic listening and seeking a common place of comprehension (Habit 5) and the synergy of interaction (Habit 6), that how they were able to face the problems immerse in the change and in the daily activities.
*The hedgehog concept (Simplicity within the three circles): replacing the core business of a company when it doesn’t work, takes a deep understanding of the intersection of three factors: what are you deeply passionate about, what you can be the best in the world at, and what drives your economy engine. The intersection of this three circles is in correlation of the intersection of the three circles that defines Habits: Knowledge: what we want to do and why we do it = what you can be the best in the world at; desire: the want to do = what are you deeply passionate about, skill: how to do it = what drives your economy engine. So, the transition from good to great require transcending the course of competence, it takes to achieve the seven Habits all together to get effectiveness, not only in the core business, but also in the general aspects of the company.
*A Culture of Discipline: to get a culture of discipline is necessary to achieve self-awareness (Habit 1); to exercise the independent will (if the right people is in the right place, they will use that will to be self discipline to work effectively, because they are working towards a common goal (the Win/Win thinking), (Habits3 and 4); to choose interdependent synergy to develop an entrepreneurship ethic, that’s how a great performance is achieve (Habits 6 and 7).
*Technology Accelerators: the great companies are the pioneers in the applications of carefully selected technologies, but the change never is based in the application of that technology. That is also part of the effective management and leadership, making the right things (Habits 3), the accessories follows. When all the company is based in seeking the mutual benefit, all parts falls in the right place.
*The Flywheel and The Doom Loop: in the good to great transformation there was no single defining action, no grand program, no one killer innovation, no solitary lucky break, no miracle moment. The same happens with achieving the 7 Habits to become a Highly Effective Person, it takes a process that must be performed one step at the time, and must be lived daily.
The timeless “physics” of GOOD TO GREAT: here again we can find the correlativeness with the 7 Habits, neither the two books where an invention of the respective authors, Covey just put into seven habits facts of life, he realized along his experience. Collins, on the other hand, made a research, and exposed it as facts to go from a good to a great company. That’s why both books are valid no matter the time period they are being read or the economy context in which are being applied.
Chapter 2: "LEVEL 5 LEADERSHIP"
Why Collins and his research team focus on Level 5 Leaders? Because every good to great company in their research had Level 5 leadership during the pivotal transition years.
Some of the Level 5 leader’s characteristics are: an individual who blends extreme personal humility with intense professional will, self-effacing individuals who display the fierce resolve to do whatever needs to be done to make the company great. They channel their ego needs away from themselves and into the larger goal of building a great company, they are incredibly ambitious, but their ambition is first and foremost for the institution, not themselves.
Level 5 refers to the highest level in a hierarchy of executive capabilities that Collins identified in his research:
Fully developed level 5 leaders fully embody all five layers of the pyramid.
Level 5 leaders are study in duality: modest and willful, humble and fearless. Their key trait is: ambition first and foremost for the company and concern for its success rather than for one’s own riches and personal renown. They want to see the company even more successful in the next generation, that’s why they seek the best successors and give them the best knowledge they can.
In contrast, leaders of good companies, concerned more with their own reputation for personal greatness often failed to set the company up for success in the next generation (usually they set their successors up to failure or chose weak successors, or both). They are often “I-centric”, instead of talking of “we” referring to their companies; they talk about their accomplishments instead of referring at them as companies accomplishments.
Level 5 leaders hardly ever talk about themselves, and don’t take credit for the companies’ successes, if not in terms of workgroups. They are seemingly ordinary people quietly producing extraordinary results.
They are not just about humility and modesty. It is equally about ferocious resolve, an almost stoic determination to do whatever needs to be done to make the company great. They are fanatically driven, infected with an incurable need to produce results and make the company great.
Collins and his group of research do not support the idea that you need an outside leader to come in and shake up the place to go from good to great. In fact, going for a high- profile outside change agent is negatively correlated with a sustained transformation from good to great.
Level 5 leaders look out the window to apportion credit to factors outside themselves when things go well (and if they cannot find a specific person or event to give credit to, they credit good luck). At the same time, they look in the mirror to apportion responsibility, never blaming bad luck when things go poorly.
Collins concluded that potential Level 5 leaders exist all around us, if we just know what to look for, and that many people have the potential to evolve into Level 5.
The integration of the two books in this chapter
We can see in some of the characteristics of Level 5 leaders clearly the ones present in Habits 1, 2 and 3: personal humility, self-effacing (self-awareness; Habit 1; principle center life; Habit 2), they do whatever it takes to make the company great (proactive nature; Habit 1; understanding of destination; Habit 2), channel their egos into a larger goal of building a great company (plan ahead, selecting goals; Habit 3), they are incredibly ambitious, but their ambition is first and foremost for the institution, not themselves (mission statement, Habit 2; effective self management; Habit 3). We can clearly see that level 5 leaders have achieved private victory and independence. They are principle center people, with the clear idea of what is their ultimate goal (begin with the end in mind Habit 2), with effective self management, and a very proactive nature, all the characteristics of the first 3 Habits Covey defines as “achieving private victory”; well these leaders have gain it.
Level 5 leaders are study in duality: modest and willful, humble and fearless. Their key trait is: ambition first and foremost for the company and concern for its success rather than for one’s own riches and personal renown. They want to see the company even more successful in the next generation, that’s why they seek the best successors and give them the best knowledge they can. This shows the Win/Win thinking and seeking mutual benefit (Habit 4). They are not only concerned by their own welfare, but by the company’s as well, prioritizing the company’s success. The good leaders think Win/Loose, they only care for their own success, and forget about the company’s future great results in that path.
Level 5 leaders hardly ever talk about themselves, and don’t take credit for the companies’ successes, if not in terms of workgroups. They are seemingly ordinary people quietly producing extraordinary results. They are able to do so by seeking understanding and by delegation, only a person able to understand the other can make himself be understood, and has to inspire openness; through that and by synergistic communication and work, they are able to function as a group, and that’s probably why they talk in terms of workgroups and on terms of themselves (Habits 5 and 6).
In the last two paragraphs we can see the practice of the habits of public victory, so in the concept of Level 5 leadership we find the seven habits all.
The executives who ignited the transformations from good to great did not first figure out where to drive the bus and then get people to take it there. No, they first got the right people on the bus (and the wrong people off the bus) and then figured where to drive it. If they figured out first what, people might join the company because of the direction it was taking, but, if the company changes directions in the way, those people would bring conflict. That’s why always they should figure out who the right people is, because those people is going to change direction together with the company.
Another key point is the degree of sheer rigor needed in people decisions in order to take a company from good to great.
In general good to great companies built deep and strong executive teams, many of the good companies followed a “genius with a thousand helpers” model. The towering genius, the primary driving force in the company’s success, is a great asset; as long as the genius sticks around.
Regarding incentive system, they found that the good to great executives received slightly less total cash compensation ten year after the transition than the good companies. Not that executive compensation is irrelevant. Once you’ve structured something that makes basic sense, executive compensation falls away as distinguishing variable in moving an organization from good to great. It is related with the “First Who” principle. If you have the right executives they will do everything within their power to build a great company, not because of what they will “get” for it, but because they simply cannot imagine settling for anything less. Their moral code requires building excellence for its own sake. The good to great companies understood a simple truth: the right people will do the right things and deliver the best results they’re capable of, regardless of the incentive system.
Good to great companies are a tough place to work. But they are not ruthless cultures, they’re rigorous cultures. To be rigorous, not ruthless means that the best people need not to worry about their positions and can concentrate fully on their work. There are three practical disciplines for being rigorous rather than ruthless: 1-when in doubt, don’t hire, keep looking; 2-when you know you need to make a people change, act; 3-Put your best people on your biggest opportunities, not your biggest problems.
In this chapter we can see Habit number 3: Put First Thing First. When Collins and his research group explained that the good to great companies first choose the right employees is a clear example of them applying Habit 3: they realized the important thing to do and put it in the first place.
These also shows an effective management , prioritizing the important but not urgent activities, those which gives time to plan ahead and help to prevent crisis, it is better to take the time to evaluate who the right people is and then prioritizing the destination.
Having in mind what they wanted to achieve (Habit 2), great companies could understand the importance of prioritizing the important activities, and also choosing the right people, and therefore just then begin planning their destination.
Regarding the incentive problems, the good to great employees always give their best regardless the incentive plan because it’s a matter of principles for them. This shows they are principle center people (Habit 2), they are self-aware and therefore they always give the best of themselves.
The great companies are rigorous, not ruthless; that means that the best people need not to worry about their positions and can concentrate fully on their work. This is also related with Habit 2, the principle center people only concentrates on giving the best results. On the other hand the company knows their destination (Habit 2), so they know to prioritize the best people giving them the biggest opportunities, that’s why the employees only have to focus in their work, they know the rest comes along.
According to Collins’ investigation the breakthrough results come about by a series of good decision, diligently executed and accumulated one on top of another. Good to great companies did not have a perfect track record. But on the whole, they made many more good decisions than the good companies. Even more important, on the really big choices, they were remarkably on target. This happened because good to great companies displayed two distinctive forms of disciplined thought. The first is that they infused the entire process with the brutal facts of reality. The second is that they developed a simple, yet deeply insightful, frame of reference for all decisions.
When you start with an honest and diligent effort to determine the truth of the situation, the right decisions often become self-evident. And even if all decisions do not become self-evident, one thing is certain: You absolutely cannot make a series of good decisions without first confronting the brutal facts.
There is nothing wrong with pursuing a vision of greatness. After all, the good to great companies also set out to create greatness. But, unlike the good companies, the good to great companies continually refined the path to greatness with the brutal facts of reality.
Regarding the Leaders, the moment a leader allows himself to become the primary reality people worry about, rather than reality being the primary reality, there is a recipe for mediocrity, or worse. This is one of the key reasons why less charismatic leaders often produce better long term results than their more charismatic counterparts. For those with a strong, charismatic personality, it is worthwhile to consider the idea that charisma can be as much liability as an asset. The strength of personality can sow the seeds of problems, when people filter the brutal facts from leaders. Leaders can overcome the liabilities of having charisma, but it does require conscious attention.
The truth must be heard in a great company. Leaders must create a climate where the truth is heard and the brutal facts confronted. To create that climate Collins’ offers basic practices: Lead with questions, not answers; engage in dialogue and debate, not coercion; conduct autopsies, without blame (look for the roots of problems); build “red flag” mechanisms (turn information into information that cannot be ignored).In confronting the brutal facts, the good to great companies left themselves stronger and more resilient, not weaker and more dispirited. Collins’ invites to practice Stockdale Paradox: retain faith that you will prevail in the end, regardless of the difficulties and confront the most brutal facts of your current reality, whatever they might be.
The breakthrough results achieve by a series of good decision diligently executed and accumulated one on top of another, this shows the ability to work as a group, interpersonal synergy, seeking new alternatives and changing their “rocks in the way” (restraining forces) into learning and “mountains to climb and succeeds” (driving forces) (Habits 6, 4 and 2). That also is a reflection of proactivity and principle center companies, which takes the good as much as the bad and turn it into valuable information and plan of action to go forward (Habits 1 and 2).
Good to great companies displayed two distinctive forms of disciplined thought. The first is that they infused the entire process with the brutal facts of reality. The second is that they developed a simple, yet deeply insightful, frame of reference for all decisions. They began with the goal of succeeding at the end (Habit 2) so they could confront the brutal facts of reality and became stronger.
The truth must be heard in a great company. Leaders must create a climate where the truth is heard and the brutal facts confronted. They have to value the differences (Habit 6), and have in mind a Win/Win philosophy, seeking mutual benefit (Habit 4), that speaks of an effective leader, and right employees that feel comfortable participating in the company. That’s also why charismatic leaders often don’t get great results; because of their charisma people tend to keep the reality from them, so the empathic listening fails (Habit 5).
Collins’ invites to practice Stockdale Paradox: retain faith that you will prevail in the end, regardless of the difficulties and confront the most brutal facts of your current reality, whatever they might be. This is clearly the Habit 2 postulate: Begin with the end in mind, they have a clear vision of where they want to go, and with that in mind they can overcame whatever problem they might step into.
The Hedgehog Concept is based on Isaiah Berlin’s essay, and basically divides people in two kinds: the hedgehogs (simplify a complex world into a single organizing idea, a basic principle or concept that unifies and guides everything), and the foxes (pursue many ends at the same time and see the world in all its complexity; never integrate their thinking into one overall concept or unifying vision). Hedgehogs understand that the essence of profound insight is simplicity. They see what is essential and ignore the rest.
Those who built good to great companies where hedgehogs. They used their hedgehog nature to drive toward what Collins calls the Hedgehog Concept for their companies. Those who led good companies tended to be foxes, being scattered, diffused and inconsistent.
A Hedgehog Concept is a simple, crystalline concept that flows from deep understanding about the intersection of three circles: what you can be the best in the world at, what drives your economic engine and what you are deeply passionate about.
Every company would like to be the best at something, but few actually understand what they actually have the potential to be the best at and what they cannot be the best at, And it is this distinction that stands as one of the primary contrast between the good to great companies and the ones that remained good or worse. Just because something is your core business, and you been doing it for decades, does not mean that you can be the best in the world at it. And if you cannot be the best in the world at your core business, then your core business cannot form the basis of your Hedgehog Concept. A Hedgehog Concept is not a goal to be the best, a strategy to be the best, an intention to be the best; it is an understanding of what you can be the best at.
The Hedgehog Concept requires a severe standard of excellence. It’s not just about building on strength and competence, but about understanding what your organization truly has the potential to be the very best at and sticking to it. The good companies stuck to businesses at which they were “good” but could never be the best, or worse, launched off in pursuit of easy growth and profits in arenas where they had no hope of being the best.
Each good to great companies built a fabulous economic engine, regardless of the industry. They were able to do this because they attained profound insights into their economics.
What drives your economic engine can be quite subtle, sometimes even unobvious. According to Collins you have to ask yourself: If I could pick one and only one ratio, profit per x, to systematically increase over time, what x would have the greatest and most sustainable impact on your economic engine? This single question leads to profound insight into the inner workings of an organization’s economics.
Throughout the good to great companies, passion became a key part of the Hedgehog Concept. You can’t manufacture or motivate people to be passionate. You can only discover what ignites your passion and the passions of those around you.
It took about four years in average for the good to great companies to clarify their Hedgehog Concepts. Getting a Hedgehog Concept is an inherently iterative process, not an event. The essence of the process is to get the right people engaged in vigorous dialogue and debate, infused with the brutal facts and guided by questions formed by the three circles. Collins found one useful mechanism for moving the process along: a device that he called Council. The Council consists of a group of the right people who participate in dialogue and debate guided by the three circles, iterative and over time, about vital issues and decisions facing the organization.
The Hedgehog Concept is based on Isaiah Berlin’s essay, and basically divides people in two kinds: the hedgehogs and the foxes. Hedgehogs understand that the essence of profound insight is simplicity. They see what is essential and ignore the rest. This is in correlation to begin with the end in mind (Habit 2). Those who have a clear understanding of the destination, focus their efforts and abilities in achieving them (the hedgehogs), those who doesn’t have a clear destination cannot focus only on that and pay attention to several things and cannot achieve what they should achieve, simply because they don’t know.
A Hedgehog Concept is a simple, crystalline concept that flows from deep understanding about the intersection of three circles: what you can be the best in the world at, what drives your economic engine and what you are deeply passionate about. This has a big similarity to the three circles that define a habit:
What you can be the best in the world at, is in correlation with the knowledge element of a habit, which indicates what to do and how to do it. Even if you have the knowledge it doesn’t mean that you are doing the right thing, it could be something you are good at, but it doesn’t mean it is the right thing to do.
Each good to great companies built a fabulous economic engine, regardless of the industry. They were able to do this because they attained profound insights into their economics. It is related to the skill element of a habit. It’s to have the ability to deep understand how to do it.
You can’t manufacture or motivate people to be passionate. You can only discover what ignites your and their passion. This is related with the desire element of a habit, it’s what really gives you satisfaction in doing it. It fulfills your deepest desires and passions.
The Council that Collins suggests consists of a group of the right people who participate in dialogue and debate guided by the three circles, iterative and over time, about vital issues and decisions facing the organization. This Council has to apply the Win/Win philosophy to be able to work seeking the best for the company, it also has to apply Habit 5, seek first to understand and then to be understood, otherwise each member would try to impose their point of view and wont pursuit the company welfare.
A Hedgehog Concept is not a goal to be the best, a strategy to be the best, an intention to be the best; it is an understanding of what you can be the best at. (Habit 2: understanding the destination).
Entrepreneurial success is fueled by creativity, imagination, bold moves into uncharted waters, and visionary zeal. As a company grows and becomes more complex, it begins to trip over its own success. What was once great fun becomes an unwieldy ball of disorganized stuff. Lack of planning, lack of accounting, lack of systems, and lack of hiring constraints create friction. Problems surface. The companies begin to hire MBAs and processes, procedures, checklist, and all the rest begin to sprout up like weeds. What was once an egalitarian environment gets replaced with a hierarchy. The exciting start-up transforms into just another company, with nothing special to recommend it. The cancer of mediocrity begins to grow in earnest.
According to Collins’ research what is important is to build a culture of discipline. This means building a culture of discipline around the idea of freedom and responsibility, within a framework. Fill that culture with self-disciplined people who are willing to go to extreme lengths to fulfill their responsibilities (this self-discipline people don’t need to be managed, so the company can focus in managing the system, not the people). Do not confuse a culture of discipline with a tyrannical disciplinarian. Adhere with great consistency to the Hedgehog concept. Create a “stop doing list” and systematically unplug anything extraneous.
Besides discipline people, those people need to have discipline thoughts. This is needed to confront the brutal facts of reality, while retaining resolute faith that you can and will create a path to greatness. Finally there is discipline action. People in the good to great companies become somewhat extreme in the fulfillment of their responsibilities.
The good to great companies have level 5 leaders who built an enduring culture of discipline; the good companies have level 4 leaders who personally disciplined the organization through share force. Discipline is essential for great results, but discipline action without disciplined understanding of the three circles cannot produce sustained great results.
The good to great companies at their best followed a simple mantra: anything that does not fit their Hedgehog Concept, they would not do. They would not lunch unrelated business. They will not make unrelated acquisitions. They would not do unrelated joint ventures. If it doesn’t fit, they just don’t. The more an organization has the discipline to stay within the three circles, the more it will have attractive opportunities for growth. The challenge becomes not opportunity creation, but opportunity selection.
The leaders of the good to great companies, made an extensive use of a “stop doing” list (as much as of the “to do” lists). They displayed a remarkable discipline to unplug all sorts of extraneous junk. The good to great companies institutionalized the discipline of “stop doing” through the use of a unique budget mechanism, and through it determine which activities best support the Hedgehog Concept.
By building a culture of discipline around the idea of freedom and responsibility, within a framework, good to great companies are complying with Habit 2, because they know their people is principle center people, and assume personal leadership, taking responsibilities without consuming too many management time.
Fill that culture with self-disciplined people (this self-discipline people don’t need to be managed, so the company can focus in managing the system, not the people). This is reflection of an effective self-management (Habit 3), as much of the people as of the organization. That is a good way to seek mutual benefit as well (Habit 4), if everyone has the self-discipline and self-management it takes they are going towards the same goals.
But we must not confuse a culture of discipline with a tyrannical disciplinarian. The good to great companies choose an interdependent synergy to develop an entrepreneurship ethic (Habit 6 and 7), there was no need to force people to be discipline, they choose to be discipline by themselves.
Collins invites to create a “stop doing list” and systematically unplug anything extraneous. It is part of putting the first thing first (Habit 3) focusing in the important but not urgent activities which allow to plan ahead and prevent crisis.
The good to great companies at their best followed a simple mantra: anything that does not fit their Hedgehog Concept, they would not do. They would not lunch unrelated business. They were able to do so because they began with the end in mind (Habit 2) Recognizing their destination they managed to never lose the correct path.
Technology-induced change is nothing new. The real question is not: What is the role of technology? Rather, the real question is: How do good to great organizations think differently about technology?
In every good to great case, Collins found technological sophistication. However, it was never technology per se, but the pioneering application of carefully selected technologies. Every good to great company became pioneer in the application of a specific technology.
When used right, technology becomes an accelerator of momentum, not a creator of it. The good to great companies never began their transitions with pioneering technology, for the simple reason that you cannot make good use of technology until you know which technologies are relevant. And those are the ones that link directly to the three intersecting circles of Hedgehog Concept.
The pioneering application of technology can be seen as just one more way in which the good to great companies remained disciplined within the frame of their Hedgehog Concept. Conceptually, their relationship to technology is no different from their relationship with any other category of decisions: discipline people, who engage in discipline thought, and who take discipline action. If a technology doesn’t fit squarely within the three circles, they ignore all the hype and fear and just go about their business with remarkable degree of equanimity. However, once they understand which technologies are relevant, they become fanatical and creative in the application of those technologies.
According to Collins study technological change does not play the principal role in the decline of the once-great companies. Technology is important, you can’t remain a laggard and hope to be great. But technology by itself is never a primary cause of either greatness or decline.
In this chapter we can see that if we have the goal we want to achieve in mind, the rest falls in part by itself. In the case of the good to great companies, they did not follow technology, technology followed them. The reason for this is that as they had the end in mind, the results they wanted to achieve clarified (Habit 2), and they were able to organize themselves.
That’s also an explanation of why the good to great companies often had the best and most improved technology, mainly because they were not focusing on technology, but in their Hedgehog Concept, so like that focus on their goal they were able to introduce the best technologies into their progress. This also shows the ability of putting first things first (Habit 3), as organized companies; they exercised an effective management which allowed them to achieve first greatness through their Hedgehog Concept, accelerated by the technology they implemented.
This is merely the implementation of any habit element: discipline people, lead to discipline thought, which leads to discipline action. So there was no need to base the path to greatness in the wrong concept of technology, but they found the way to put technology at their service.