Book Review 2 - Good to Great by Jim Collins

My first review and recommendation was Made in America which was partially an autobiography of Sam Walton. I gave some thoughts on both the book and Walmart based on my personal experiences while working in the Walmart corporate offices in Bentonville, Arkansas.

The second review and recommendation is also personal to me. Jim Collins was a Stanford professor who mentored the founders of Asurion where I worked from 2018-2023. The company culture and fundamental beliefs were formed to align with those written in Good to Great.

The premise of the book was to find common themes and criteria that distinguished companies that went from good to great. Collins and his team searched for companies with a 15 year returns equal to or below the general market that, after a distinct transition point, recorded 15 year returns at least three times the general market. They found 11 companies that met that criteria. They then identified a “comparison company” for each of the 11. The comparison company had to be similarly resourced and situated and their returns remained at or below the general market after the same transition point. Finally, the researchers examined 6 “unsustained comparisons” which were companies that beat the market after the transition point but who failed to sustain the full 15 year threshold.

Jim and his research team were able to identify 6 essential steps taken by each company that sustained a transition point and went from good to great. The results revolve around the concept of disciplined people, disciplined thought and disciplined action. The book emphasizes the importance of having the right people on the bus, in the right seats, and ensuring that everyone is aligned with the company’s vision and goals. Collins introduces the “Hedgehog Concept” which is derived from a famous essay by Isaiah Berlin. Successful companies know their core economic driver and customer. They say “no” to opportunities that do not align with the Hedgehog concept.

Collins emphasizes the importance of building a culture of discipline where employees take ownership and accountability for their actions. He describes the Flywheel Effect, which represents the cumulative impact of consistent efforts over time. Great companies build momentum through a series of small wins, reinforcing their success and creating a sustainable competitive advantage. This was the main principle around which Asurion was built.

The book discusses the importance of technology as an accelerator, rather than a creator, of greatness. This is where the book was ahead of its time. Collins understood the need to build technology into your business for an advantage, but that technology by itself would not make a company great. I like leadership books that can support the findings with rigorous facts. Collins certainly delivers them in Good to Great.

I will call out that the book was published in 2001 and its research stopped in 1995 so there is a lack of recent examples and many of the highlighted companies eventually failed. This should not overshadow that the book is a thought-provoking and influential read for aspiring entrepeneurs.