GOOD TO GREATGOOD TO GREATChapters 4-6Chapters 4-6

By Jim CollinsBy Jim Collins

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Level 5Leadership

First Who…Then What

Confront theBrutal Facts

HedgehogConcept

Culture ofDiscipline

TechnologyAccelerators

Disciplined PeopleDisciplined People Disciplined ThoughtDisciplined Thought Disciplined ActionDisciplined Action

BuildupBreakthrough

Confront theBrutal Facts

Chapter 4: Confront the Brutal Facts

Confront the Brutal Facts

Must create a culture wherein people have a tremendous opportunity to be heard and, ultimately, for the truth to be heard.

Setting off on the path to greatness requires confronting the brutal facts of current reality.

Chap.4: Confront the Brutal FactsChap.4: Confront the Brutal Facts (Yet never lose faith)

Fred Purdue of Pitney Bowes said, “When you turn over rocks and look at all the squiggly things underneath, you can either put the rock down, or you can say, ‘My job is to turn over rocks and look at the squiggly things,’ even if what you see can scare the (stuffens’) out of you” (p. 72).

Confront the Brutal Facts Confront the Brutal Facts (Yet never lose faith)(Yet never lose faith)

“Yes, leadership is about vision. But leadership is equally about creating a climate where the truth is heard and the brutal facts confronted. There’s a huge difference between the opportunity to ‘have your say’ and the opportunity to be heard” (p.74).

Confront the Brutal Facts Confront the Brutal Facts (Yet never lose faith)(Yet never lose faith)

Creating a climate where truth is heard: 1. Lead with questions,

not answers. 2. Engage in dialogue

and debate, not coercion.

3. Conduct autopsies, without blame.

4. Build “red flag” mechanisms.

The Stockdale Paradox Jim Stockdale Jim Stockdale stoically

accepted the brutal facts of reality while maintaining an unwavering faith in the endgame—that he would prevail despite the brutal facts.

Who didn’t make it out? The optimists.

Those who think it will all be a quick fix and everyone will be out by Christmas are the ones that lose heart and fail.

3

Remember The Stockdale Remember The Stockdale ParadoxParadox Retain faith that

you will prevail in the end, regardless of the difficulties.

AND at the same time confront the most brutal facts of your current reality, whatever they might be.

Martin Luther King, Jr.Martin Luther King, Jr.

DiscussDo you believe King displayed the

Stockdale paradox mentality during the Civil Rights Movement?

Why or why not?

Confront the Brutal Facts (Yet never lose faith)

“There is a sense of exhilaration that comes in facing head-on the hard truths and saying, ‘We will never give up. We will never capitulate. It might take a long time, but we will find a way to prevail.’” P.81

Confront the Brutal Facts Confront the Brutal Facts (Yet never lose faith)(Yet never lose faith)

What are some of the brutal facts that we must face?

Using The Stockdale Paradox phrase a statement about one of these brutal facts?

What mills might we need to sell? What restaurants might we need to close? What “corporate raiders” need to be fought off?

Level 5Leadership

First Who…Then What

Confront theBrutal Facts

HedgehogConcept

Culture ofDiscipline

TechnologyAccelerators

Disciplined PeopleDisciplined People Disciplined ThoughtDisciplined Thought Disciplined ActionDisciplined Action

BuildupBreakthrough

HedgehogConcept

Chapter 5: The Hedgehog Concept

Chap. 5: The Hedgehog ConceptChap. 5: The Hedgehog Concept “The fox knows many things,

but the hedgehog knows one big thing.”

Foxes pursue many ends at the same time and see the world in all its complexity. They are scattered or diffused, moving on many levels.

Hedgehogs simplify a complex world into a single organizing idea, a basic principle or concept that unifies and guides everything.

For a hedgehog, anything that does not somehow relate to the hedgehog idea holds no relevance.

The Hedgehog ConceptThe Hedgehog Concept

“Precisely, the Hedgehog concept is a simple, crystalline concept that flows from deep understanding about the intersection of the three circles.” P.95

The Hedgehog ConceptThe Hedgehog Concept You can be passionate about all you want, but if

you can’t be the best at it or if it doesn’t make economic sense, then you might have a lot of fun, but you won’t get great results.

If we can’t be the best at it, then why are we doing it at all?

A Hedgehog Concept is not a goal to be the best, a strategy to be the best, an intention to be the best, a plan to be the best. It is an understanding of what you can be the best at.

What are your three circles?What are your three circles?

What can you be the best in the world at?

What drives your economic engine?

What are you deeply passionate about?

Hedgehog Concept

Getting the Hedgehog Concept takes an average of four years.

The right peopleEngaged in vigorous

dialogue and debate Infused with the

brutal factsGuided by questions

formed by the three circles

It is an iterative process by The Council:

Hedgehog Concept

TheCouncil

All Guided by the Three Circles Ask Questions

Dialogue &Debate

Autopsies& Analysis

ExecutiveDecisions

An IterativeProcess

The Hedgehog ConceptThe Hedgehog Concept At what you can be best in the world. This

standard goes far beyond core competence — just because you possess a core competence doesn’t necessarily mean you are the best in the world at that competence. Conversely, what you can be best in the world at might not even be something in which you are currently engaged. The Hedgehog Concept is not a goal or strategy to be the best at something; it is an understanding of what you can be the best at and, almost equally important, what you cannot be the best at.

The Hedgehog ConceptThe Hedgehog Concept What drives your economic engine? To get

insight into the drivers of your economic engine, search for the one denominator (profit per x, for example, or cash flow per x) that has the single greatest impact. If you could pick one and only one ratio to systematically increase over time to make a greater impact, what would that ratio be? This denominator can be subtle, sometimes even unobvious. The key is to use the denominator to gain understanding and insight into your economic model.

The Hedgehog ConceptThe Hedgehog Concept What you are deeply passionate about. Good-to-

great companies did not pick a course of action, then encourage their people to become passionate about their direction. Rather, those companies decided to do only those things that they could get passionate about. They recognized that passion cannot be manufactured, nor can it be the end result of a motivation effort. You can only discover what ignites your passion and the passions of those around you.

The Hedgehog ConceptThe Hedgehog Concept

The essence of the process is to get the right people engaged in vigorous dialogue and debate, in fused with the brutal facts and guided by questions formed by the three circles. P.114

The Hedgehog ConceptThe Hedgehog Concept

“Kno w ‘ o ne big thing ’ a nd s tic k to it.” P. 119

The Hedgehog Concept

Which is more important: the goal to be the best at something, or realistic understanding of what you can (and cannot) be the best at?

The Hedgehog Concept

Can each sub-unit and each person have a hedgehog concept?

The Hedgehog Concept

How is the Hedgehog Concept applicable in a church?

a hospital?retail?

Level 5Leadership

First Who…Then What

Confront theBrutal Facts

HedgehogConcept

Culture ofDiscipline

TechnologyAccelerators

Disciplined PeopleDisciplined People Disciplined ThoughtDisciplined Thought Disciplined ActionDisciplined Action

BuildupBreakthrough

Culture ofDiscipline

Chapter 6: Culture of Discipline

Culture of Discipline

People who “rinse their cottage cheese”

Not about a tyrant who disciplines

Getting disciplined people who engage in disciplined thought and who then take disciplined action, fanatically consistent with three circles

Culture of Discipline

Requires people who adhere to a consistent system.

Gives people freedom and responsibility within framework of that system.

Involves a duality.

FREEDOM (AND RESPONSIBILITY)FREEDOM (AND RESPONSIBILITY) WITHIN A FRAMEWORK WITHIN A FRAMEWORK

Disciplined People: Not trying to discipline the wrong people into

the right behaviors, but getting self-disciplined people on the bus in the first place

Disciplined Thought: You need to confront the brutal facts of

reality, while retaining resolute faith that you can and will create a path to greatness

Disciplined Action: Primary subject of this chapter The comparison companies often tried to skip

this jump right to disciplined plan

Culture of Discipline

Budgeting is to decide which arenas fit Hedgehog Concept and should be fully funded and which should not be funded at all.

“Stop doing” lists are more important than “to do” lists.

“Anything that does not fit with our Hedgehog Concept, we will not do.”

Includes willingness to shun opportunities that fall outside the three circles.

A Culture of DisciplineA Culture of Discipline

“Avoid bureaucracy and hierarchy and instead create a culture of discipline. When you put these two complementary forces together—a culture of discipline with an ethic of entrepreneurship—you get a magical alchemy of superior performance and sustained results” (p.121-122).

A Culture of DisciplineA Culture of DisciplineThe Good-to-Great Matrix of Creative Discipline

High

Culture ofDiscipline

Low Low Ethic of High

Entrepreneurship

HierarchicalHierarchicalOrganizationOrganization

Great Great OrganizationOrganization

Bureaucratic Bureaucratic OrganizationOrganization

Start-upStart-upOrganizationOrganization

A Culture of DisciplineA Culture of Discipline

“You focus on what you’ve accomplished relative to exactly what you said you were going to accomplish – no matter how tough the measure” (p.122).

A Culture of DisciplineA Culture of Discipline

“The point is to first get self-disciplined people who engage in very rigorous thinking, who then take disciplined action within the framework of a consistent system designed around the Hedgehog Concept” (p. 126).

A Culture of DisciplineA Culture of Discipline

“They displayed a remarkable discipline to unplug all sorts of extraneous junk” (p.139).

A Culture of DisciplineA Culture of Discipline

Do you have a “stop” doing list?

What should be on the list?