Good to Great by Jim Collins

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Bookreview: Jim Collins: Good to Great

Airport bookstalls groan with volumes revealing the keys to corporate greatness. This book, and its predecessor Built to Last which Jim Collins wrote with Jerry Porras, are by far the best in this genre. Good – perhaps not great – to merit reading in their own right.

Good to Great is centres on a comparative analysis of eleven companies. Collins selects once-dull organisations, such as Kimberley Clark and Gillette that subsequently outperformed.

The usual fault of such manuals is their obvious prescriptions. Of course successful firms kept close to their customers and motivated employees. But unsuccessful firms didn’t fail because they rejected these objectives. They failed because they couldn’t achieve them.

Collins penetrates these banalities because he questions the congratulatory self-description of winning businesses. For example, most of his eleven companies didn’t have visionary CEOs determined to turn the business round Few were aiming at the cover page of Fortune, most were consensus builders from inside the organisation.

Another defiance of conventionality is encapsulated in the so-called Stockdale paradox. Admiral Stockdale survived a long period of imprisonment in Vietnam. He had determination to survive, but claimed that it was ‘the optimists’ who failed to see it through. The Stockdale paradox contrasts those who focus with determination on a realistic objective with the fantasists whose slogan is that if you can dream it, you can do it.

For Collins, the core of such realistic objectives is found in the intersection of three circles. The focus has to be something that the company can do better than anyone else, something that is capable of being its revenue engine, something that employees and managers feel passionate about.

One problem fundamental to the Collins and Porras method of analysis is survivor bias – the statistical problem encountered when your sample is drawn from the ranks of the successful. What worked for some firms may have failed for many others.

It is also a pity that Collins’ only measure of performance is share price performance. The stock market is not a measure of how a company is doing, but of how the market thinks it is doing. And anyone who thought these were necessarily the same thing has suffered a rude awakening in the last two years.

Still, Good to Great is the best new business book I have read this year. Don’t be put off by the airport bookstall style. You will want to keep this one after you have arrived at your destination.

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