What did not happen “inside the black box” in going from good to great. Meaning, these are things that were NOT discovered about businesses that were assumed to be true:
1. No fancy CEO came in from outside
2. Executive compensation played no factor
3. Strategy played no critical factor, not even long-term strategy
4. Did not primarily focus on what to, nor what to not do and stop doing
5. Technology may have accelerated growth but didn’t cause it
6. Not mergers and acquisitions
7. Not about managing change, motivating people, or creating alignment
8. There was no set revolutionary process that was launched
9. Because they were in the right industry
What DID happen?
1. Level 5 Leadership
Level 5 leadership (See book notes on Tribal Leadership) builds enduring greatness through humility and professional will, much like Abraham Lincoln.
Personal modesty and fearlessness, success for the company before personal gain.
Level 5 leaders look “out the window” to give credit and “look in the mirror” to take the blame.
2. First. “Who?”…then, “What?”
First, get the right people on the bus, get the wrong ones off the bus. Then, put the right ones in the right seats. The people happen before the structure.
This process allows you to change direction when needed. There is then no need to manage or motivate. Wrong people won’t make a company great. You don’t need to manage the best people. It is unfair to the best performers to keep dead weight around and unfair to dead weight because they could use that wasted time searching for a place they fit in.
3. Confront the Brutal Facts, Yet Never Lose Faith
You must deal with the “scary, squiggly things” in your current reality, that haunt your business and industry. Create a culture where the truth is heard. In order not to de-motivate: lead with questions and not answers. Engage in dialogue and debate, not coercion. Conduct autopsies, without blame. Argue. Build red flag mechanisms. Great companies use adversity to define moments of their success and don’t play the victim.
4. The Hedgehog Concept
Be the hedgehog, not the fox. The hedgehog simplifies a complex world and unites it into one unifying vision and guards it in a prickly manner, while the fox does the opposite. Foxes are scattered, diffused, and inconsistent. Simple crystalline concept: a. What can you be best in the world at? b. What drives your economic engine? c. What are you deeply passionate about? The best companies stick with what they understand and let their abilities, not their egos, determine what they attempt. The Hedgehog concept is an iterative process, not an event.
5. Culture of Discipline
Avoiding a constricting hierarchy, while allowing a free-flowing entrepreneurial spirit to shape the company. Hire self-disciplined people who don’t need to be managed, and manage the system. Disciplined thought and disciplined action. Good companies lack the discipline to realize their potential to be great, while great companies rinse their cottage cheese. The fact that something is a once in a lifetime opportunity makes no difference if is not in the 3 circles. Great companies are highly undiversified.
6. Technology Accelerators
Adapt to technology and link it to your hedgehog concept. Tech acts as an accelerator of momentum and not a creator of business. Great companies do not put tech out front, nor do they react to new tech their competition enacts. Crawl, walk, run.
7. The Flywheel and the Doom Loop
It’s not usually one big turn of the wheel that bridges the gap to greatness, it pushing inch-by-inch over long stretches of time that get the wheel started towards success. There was no miracle moment, no launch, no name for the event. Just a gradual push. Under-promise, over-deliver. To get people to line up for change, keep turning the flywheel, exhibit success and people will get on board. The Doom Loop is reactionary, shifty, and moves without full understanding or momentum. Great companies merge or acquired companies after they had developed their hedgehog concept, after the flywheel had gained momentum, to accelerate growth. There is no need to motivate employees or rally the troops because success from the flywheel takes care of that.
8. Apply principles from Good To Great when starting out, and institute principles from Built To Last to build an enduring company.