The Timeless Principles of Good to Great

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When launching a business, most entrepreneurs strive for greatness. The goal is never to be mediocre.

But Jim Collins, the author of Good to Great, claims many companies wind up doing just that, reaching "good" but never becoming great. 

In short – they stagnate.

So what causes a business to flounder? Or conversely, to thrive? 

A Blueprint for Greatness

To uncover what makes these “great” companies so special, Collins and his research team hand-picked a sample of elite companies—called the good-to-great companies.

To make the cut, these companies had to meet two key criteria:

• Achieve remarkable business performance
• Sustain that growth for over 15 years

Some examples include Gillette, Walgreens, Kroger, and Philip Morris.

The research team also studied businesses with unsustained performance over a similar period, referred to as "comparison companies." By comparing both groups, they aimed to identify the factors leading to success and failure.

As a result, the good-to-great framework was developed.

This framework outlines a series of precise steps or timeless principles that any company can follow to maximize its success.

The book is filled with surprising findings, insights, and case studies. While it's impossible to summarize them all, here are the key takeaways from the core elements of the framework:

• Level 5 Leadership
• First Who…Then What
• Confront the Brutal Facts
• The Hedgehog Concept
• A Culture of Discipline
• Technology Accelerators
• The Flywheel and the Doom Loop

Although the book primarily studies large, publicly traded organizations, Collins assures readers that these ideas can be applied to small and early-stage companies as well.

This book is for any entrepreneur or business leader looking to drive success for their company. For those interested in reading the entire book, it is available for purchase on Amazon.

Level 5 Leadership

To start, Collins admits he was "shocked" to discover the type of leadership required to turn a company into a great one.

Through a series of interviews, Collins’s research team identified the key qualities that define Level 5 Leadership—the leadership style needed to make a company truly great.

"The good-to-great executives were all cut from the same cloth," Collins states.

The Surprising Traits of Level 5 Leaders

One of the most unexpected findings was that these leaders possessed a "paradoxical blend" of character traits.

We often assume that outstanding leaders have big personalities—outgoing, charismatic, and gregarious. However, Collins found that many Level 5 Leaders were the opposite:

• Self-effacing
• Reserved
• Quiet
• Even shy

Yet, these traits should not be mistaken for weakness. These leaders also exhibited relentless determination, ambition, and professional tenacity, balancing out their modest nature.

Comparing Good-to-Great Leaders vs. Comparison Leaders

The leaders in comparison companies were strikingly different.

"In over two-thirds of the comparison cases, we noted the presence of a gargantuan personal ego that contributed to the demise or continued mediocrity of the company."

Many of these leaders were talented yet egocentric, and while their companies performed well under their leadership, the success was not sustainable. Once they left, performance declined rapidly.

In contrast, good-to-great leaders focused on:

• Setting up the next generation of leaders for success
• Doing whatever it takes to make the company great
• Prioritizing company success over personal wealth or status

Where Do Level 5 Leaders Come From?

Collins found that most Level 5 Leaders:

• Came from within the company
• Were promoted internally
• In some cases, inherited leadership through family

By contrast, comparison companies frequently hired leaders from outside the organization.

The "Damaging Trend" of Celebrity Leaders

Collins concludes the chapter by highlighting a concerning trend:

Many companies have a bias toward "celebrity leaders"—outsiders with high profiles. However, Collins warns that this type of leadership is negatively correlated with transforming a company from good to great.

He urges businesses to consider these findings carefully when appointing new leaders.

First Who…Then What

Collins began his research with a key assumption: greatness comes from implementing a grand vision or strategy.

But his team discovered something completely different.

Their research revealed that executives who drove positive, lasting growth:

• First got the right people on the bus
• Removed the wrong people from the bus

The Right People Come First

Before implementing any strategy or vision, good-to-great companies prioritized finding and managing great people.

• They didn't hire in haste—they took their time to find the right people.
• The “right person” was defined by character traits and innate capabilities rather than hard skills or knowledge.

At the same time, these companies were firm about removing the wrong people.

Too many businesses:

• Delay firing underperformers
• Hope the situation will improve
• Spend excessive time trying to "manage" the wrong hire

Collins firmly believes:

"The right people don't need to be tightly managed or fired up."

In short, great employees are self-motivated, honest, and proactive—they don’t need to be micromanaged.

The "Genius with a Thousand Helpers" Model

In contrast, comparison companies followed a different approach—what Collins calls the "genius with a thousand helpers" model.

• A Level 4 Leader is hired.
• The leader develops a vision and recruits a team to execute it.
• The company performs well while the leader is present.
• Performance collapses once the leader departs.

This approach creates short-term success but no lasting foundation.

Utilizing Talent for Maximum Impact

Good-to-great companies also knew how to utilize talent effectively.

Instead of putting their best people on their biggest problems, they placed them on their biggest opportunities.

As Collins states:

"Building opportunities is what makes you great."

If you want to achieve greatness, your most talented people must focus on critical, high-impact assignments.

Confront the Brutal Facts

Some argue that entrepreneurs must be a little delusional to stay motivated—believing in their business so deeply that they stop at nothing to succeed. In short, optimism is critical in entrepreneurship.

However, in this chapter, "Confront the Brutal Facts," Collins explains that optimism must always be tempered with realism for a business to achieve greatness—what he calls the "Stockdale Paradox."

Seeing Reality vs. Wearing Rose-Coloured Glasses

We often see things as we want them to be, not as they actually are.

The good-to-great companies understood when to remove those rose-coloured glasses. They were able to:

• Be brutally honest about challenges and risks.
• Make bold, strategic moves based on reality, not wishful thinking.

Collins states:

"it is impossible to make good decisions without infusing the entire process with an honest confrontation of the brutal facts."

In contrast, comparison companies often failed because their leaders refused to face reality.

• They clung to their vision even when evidence showed it wasn’t working.
• They jumped from strategy to strategy, always chasing a "quick fix" rather than addressing core business problems.
• They ignored market realities, leading to poor long-term decisions.

Moreover, the "celebrity" CEOs in the comparison companies cultivate a different climate; the strength of these charismatic personalities can create an environment where people will "filter the brutal facts" from leadership.

Collins warns leaders with big personalities can be "as much a liability as an asset." 

The Power of a Truth-Telling Culture

In contrast, Level 5 Leaders foster a culture where employees feel:

• Safe to speak the truth, even when it's difficult.
• Encouraged to challenge assumptions, rather than blindly following leadership.
• Empowered to help the company evolve and improve, instead of ignoring reality.

By confronting the brutal facts, businesses put themselves in the best position to adapt, grow, and ultimately succeed.

The Hedgehog Concept

Before a company can leap into positive growth, it must first develop its Hedgehog Concept.

In simplest terms, a Hedgehog Concept is a company's "one big thing"—the core focus that it can truly excel at.

It sounds simple and intuitive, right?

Yet, Collins’s research shows that most companies fail to focus on one thing. Instead, they are driven by:

• Fear of failure
• Desire to minimize risk

The Consequences of Lacking Focus

As a result, these companies:

• Fail to make bold decisions and spread themselves too thin.
• Focus on short-term profits rather than long-term value.
• Look for quick solutions but lack consistency.

Without a clear focus, businesses get pulled in too many directions. Growth stalls, and eventually, the business falls apart.

Collins explains why this phenomenon happens.

Many companies focus on what they "want" to be the best at, not necessarily what they "can" be the best at.

This distinction is crucial.

Collins states:

"Good-to-great companies set their goals and strategies based on an understanding of what they can be the best at; comparison companies set their goals and strategies on bravado."

And just because something is your "core business" doesn’t mean you can be the best in the world at it.

The "Curse of Competence"

This is why many companies fail to make the leap to greatness.

• They stick to what they are already good at.
• They fail to explore areas where they could be truly great.

By clinging to competence, they miss out on real excellence.

The Hedgehog Concept Takes Time

Collins emphasizes that discovering a company’s Hedgehog Concept is not instant—it’s a process.

"It's an inherently iterative process, not an event."

On average, it takes four years for good-to-great companies to crystallize their Hedgehog Concept.

The chapter concludes with an intriguing remark. Collins states:

The moment you solidify your Hedgehog Concept won't feel monumental.
Instead, it will feel like "a quiet ping of truth."

A Culture of Discipline

During their investigation of good-to-great companies, Collins and his team noticed something striking—the "continual use" of certain words:

• Disciplined
• Rigorous 
• Diligent
• Systematic
• Consistent
• Focused

Interestingly, he notes these words were "strikingly absent" from the material on the comparison companies. 

"People in the good-to-great companies became somewhat extreme in the fulfillment of their responsibilities," he explains.

Nevertheless, many companies fail to become great because they hire undisciplined workers. But worse, they delay letting them go.

Collins warns that keeping the wrong people can undermine long-term success in several ways:

1. It forces rigid management styles to control underperformers.
2. Over time, this "command and control" style kills the entrepreneurial spirit.
3. The best employees leave, while the wrong ones remain, leading to even more bureaucracy.

This is a simplified explanation of a complex phenomenon, nonetheless, Collins believes companies can largely avoid this problem by hiring disciplined, diligent people in the first place.

"the right people don't need to be tightly managed or fired up."

Discipline Starts with Leadership

Collins also reveals companies must establish a culture of discipline via their executives. It's the leadership's duty to "set a clear tone from the top." In other words, leaders must lead by example. 

A great example is Carl Reichardt, CEO of Wells Fargo, who made bold changes during difficult times:

• Eliminated executive perks
• Shut down executive dining rooms
• Closed executive elevators
• Sold corporate jets

Reichardt made it clear:

"We're not going to ask everyone to suffer while we sit on high."

This principle echoes insights from Work Rules! by former Google Head of People, Laszlo Bock.

• Visible signs of hierarchy create an “us vs. them” culture.
• This erodes community and belonging and lowers motivation.
• Removing unnecessary hierarchy fosters unity and engagement.

A Culture of Discipline vs. Tyranny

Collins closes the chapter with an important warning:

"Do not confuse a culture of discipline with a tyrant who disciplines."

In a true culture of discipline, everyone displays diligence and intensity, not just the CEO. He warns that larger-than-life CEOs who lead through "sheer force of personality usually fail to produce sustained results."

Technology Accelerators

In his research, it became apparent to Collins that technology played a pivotal role in leading the good-to-great companies towards sustained growth

But it might not be in the way you assume.

Collins explains, rather than chasing technology fads or jumping on trends just because competitors were doing it, these good-to-great companies carefully leveraged technology to accelerate their momentum.

“Good-to-great companies used technology as an accelerator of momentum, not a creator of it.”

He also affirms these companies didn't fall into a “technology trap.”

In short, they didn’t blindly adopt whatever was trendy at that moment. And they thought critically about how technology fits within the three circles of their Hedgehog Concept. While mediocre companies were more reactive with technology – they “lurch about, motivated by fear of being left behind.”

Technology alone does not make a company great.

To truly harness the power of technology, businesses must:

1. Develop a clear Hedgehog Concept.
2. Stay within the three circles.
3. Use technology to propel momentum, not create it from scratch.

When used strategically under these conditions, the right technology becomes a powerful accelerator of success.

The Flywheel and the Doom Loop

In his study of "elite" businesses, Collins aimed to find the "one big thing" that led these companies to hit a breakthrough. 

But, he came up empty-handed.

This realization led him to conclude that breakthroughs don't come from one singular action. Instead, they result from "persistent pushing in a consistent direction." 

At some point, with enough steady force, "the flywheel builds momentum, eventually hitting a point of breakthrough."

The Doom Loop: The Shortcut That Fails

In contrast, the comparison companies followed a different pattern, what he termed the "Doom Loop." 

In the Doom Loop, companies take a shortcut and skip the arduous process of building momentum. In short, they tried to jump straight to the breakthrough. 

Collins warns this approach never works. 

For example, he gives accounts of comparison companies that tried creating a breakthrough via misguided acquisitions. Or by hiring a new CEO who ended up "stopping the flywheel." 

He states he found some version of the Doom Loop in every comparison company studied.

Success Is Often Invisible While It’s Happening

One of the most interesting findings from good-to-great leaders was that:

They weren’t even aware that a major transformation was underway.

In other words, they didn't chase short-term greatness and their success became apparent only after the fact.

This reinforces Collins’s central idea: true greatness is built over time, not achieved overnight.

Final Thoughts

The major takeaway from Collins's book:

You can't skip hard work.

Greatness cannot be manufactured — at least not with single-stroke solutions. It's a multi-step, organic process. 

Greatness is the fruit of small, continuous steps in the right direction.

It's the product of consistency and discipline, like a harmonized rowing team — each team member pulling their weight equally toward the same goal.

While simple in concept, greatness takes discipline to put into practice. It requires:

• Finding the right leaders and people.
• Facing brutal facts with honesty.
• Focusing on what your company can be truly great at (your Hedgehog Concept).
• Pursuing that goal with unwavering determination.

By following these principles, any company can transition from good to great—but only with consistent effort and discipline.