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The corporate world is always looking for an answer to the compelling question, "how can mediocre companies achieve greatness?" Are there companies, which can rewrite the history of long-term mediocrity and achieve long-term superiority? And if so, what are those fundamental characteristics that give any company the intrinsic strength to move from good to great.
A look at a set of elite companies who made the leap from good to great results and sustained it for a period for at least fifteen years, vis-à-vis companies who either could not make a leap from good to great or showed short term shift but could not sustain such performance, indicates that good-to-great companies undergo a process of that is divided into three broad stages viz. disciplined people, disciplined thought and disciplined action.
Disciplined People
Selfless Leaders: It is truly surprising to discover that every good-to-great company experienced similar style of leadership during the crucial transition years. Compared to the high profile, dazzling celebrity leaders, good-to-great leaders seem to have a completely different personality. They display highest level of executive capabilities manifesting a paradoxical mix of personal humility and professional will. Unlike celebrity leaders, these leaders are self-effacing, quite, reserved and even shy. They are incredibly ambitious but first and foremost for the company and entirely devote themselves in developing organizational excellence. These selfless leaders develop successors to ensure even greater success in the future, whereas most of other egocentric leaders set up their successors for failure. Hence, the companies led by the selfless leaders enjoy sustained superior performance, which goes much beyond the tenure of a particular leader. Compared to these self effacing, modest leaders, most of the ordinary company leaders are obsessed with personal ego and fail to overcome continued mediocrity of their companies. The leaders of “good to great" companies are fanatically result oriented and are ever ready to do anything, however difficult, to make the company great. Whilst they achieve such overwhelming success, they attribute credit for such success to factors other than themselves while taking blame for anything going wrong. As against this, the CEOs of ordinary companies do just the opposite and take all credit themselves and assign all the blame to other factors.
Such leadership exits all around us. Many people have the potential to bloom as a self-sacrificing, visionary leader. Unfortunately, there is a tendency to only focus on the larger than life, celebrity leaders. In fact, leaders who come in from outside are negatively correlated with transition from good to great. In case of ten out of the eleven good-to-great companies, the CEOs grow from inside the company, while the ordinary companies hire outside CEOs six times more often.
People First: Contrary to the popular belief, the good-to-great leaders do not begin by developing new vision and strategy. Instead, they begin the transformation by first focusing on getting the right people on the bus, the wrong people off the bus and then decided where to drive it. The key point here is that the question of “who" is to be taken comes before the “what" question. First who, then what is consistently applied in the good-to-great companies. The ordinary companies adopt the “genius with a thousand helpers" model - a genius leader develops the vision and gathers capable “helpers" for realizing the visions. Hence, the model is no more effective when the leader moves out. The good-to-great leaders are indeed rigorous but not merciless when it comes to people related decisions. They do not use layoff or restructuring as the primary means for improving the company's performance. The ordinary companies use layoffs much more frequently. In good-to-great companies, though people have difference of opinion and argue relentlessly in search of best option, they integrate as a team regardless of parochial interests. Surprisingly, no regular pattern is insisted upon while deciding executive compensation during the period of transition from good to great. Compensation cannot inspire right behavior in the wrong people. That is why, in the first place, it is extremely important to find the right people. Whether someone is the “right person" is more to do with his innate capabilities, values and traits than specific knowledge and skill.
Disciplined Thought
Confront the brutal facts: An honest effort to determine the truth of the present situation is imperative for change. All good-to-great companies start their journey towards greatness by confronting the brutal facts about their current reality. For transforming a company, it is an absolute must to create an appropriate culture where people are heard continuously and as a result the truth comes out. The good-to-great companies face similar distress as the ordinary companies but they handle such situations differently and come out as better companies. They possess the psychology what is called Stockdale Paradox: maintaining total conviction that they can and will prevail irrespective of the difficulties and at the same time confronting the brutal facts of the existing reality. One key aspect of leadership of good-to-great companies is encouraging people to confront the brutal facts of the current reality and act accordingly. It is to be remembered that the charisma of a leader can also prevent people from exposing the brutal facts to the leader and to that extent his charisma becomes his liability. If the company has right people, they are already self-motivated. They will feel de-motivated if the brutal facts of reality are ignored.
Understanding the Hedgehog concept: The good-to-great companies are more like simple, dowdy creatures called hedgehog that sticks to the “one big thing" it knows. Whereas, the ordinary companies are like cunning foxes that lack consistency though know many things. On an average, it takes about four years for the good-to-great companies to form a Hedgehog Concept. All good to great companies show deep understanding of the three intersecting circles of the simple Hedgehog Concept, which is not a vision or strategy, but an understanding.
It is imperative to have a clear understanding of what a company is best in the world and what it cannot be best at. The “best in the world" concept demands more stringent standard than core concept. If a company is not the best in the world in its core business then it cannot form the basis of its Hedgehog Concept. The good-to-great companies often produce absolutely great results in not so great industry. It is just not required to be part of a great industry to produce sustained great results. But such companies develop a spectacular economic engine and identify one denominator, however subtle or un-obvious, that will have single greatest impact. The rigors of strategic planning per se do not differentiate the good-to-great companies from the ordinary companies.
Disciplined Action
A culture of discipline: An organization full of self disciplined people who are capable of taking disciplined actions, display astounding intensity and fanatically consistent with the three circles of the Hedgehog Concept, is the key to sustained great results. A culture of discipline has its inherent duality. It demands people to stick to a consistent system; yet, it provides people the desired freedom and responsibility within the system. A bureaucratic culture is required to cover up lack of discipline in an organization, which is essentially a result of having the wrong people. Any organization need not suffer from humiliating and stifling bureaucracy if it has right people on the bus and wrong people off the bus. A culture of discipline, under no circumstances, is to be confused with the tyrant who personally disciplines. It is all about engaging disciplined people capable of disciplined thoughts and disciplined actions. The most important form of discipline is displayed by the good-to-great companies is their fanatic adherence to the Hedgehog Concept and not considering opportunities, however lucrative, outside the three circles. It is found that more consistent is an organization in its adherence to the three circles, the more it will get opportunities to grow. The purpose of budgeting in a good-to-great company is to determine its best fit with the Hedgehog Concept and not the earning potential of such activities.
Technology Accelerators: The outlook of good-to-great companies towards technology is different than the average companies. The key consideration of their selection of a technology is its direct fit with their Hedgehog Concept. No would-be good-to-great companies start their process of transformation with pioneering technology; neither are they swayed by technological fads. Yet all these companies become pioneers in technology once they are convinced how it fits with the three circles of their Hedgehog Concept. Unlike mediocre companies, they do not react from the fear of being left behind; they respond with serious considerations as to how the new technology will help in converting the unrealized potential into result. Even if the leading edge technologies pioneered by the good-to-great companies are available to the ordinary companies, it will not produce the same result. The belief that technological changes are the reason for decline of some of the great companies is not supported by the evidence. It is important to appreciate that technology by itself is never the main cause for great or declining performance of a company.
The Flywheel And The Doom Loop
The amazing transformation of the good-to-great companies often seems to be dramatic to an outsider, but the insiders look at it as an organic, cumulative process. Such transformations are essentially arising from a sustainable process following a pattern of buildup and breakthrough. It is like pushing a giant, heavy flywheel. Initially, it takes tremendous effort to move it turn by turn, but if tenaciously pushed in one direction for a long period of time, the flywheel gathers great momentum and eventually hits the point of breakthrough. In contrast, ordinary companies follow a doom loop. Instead of accumulating momentum by pushing the flywheel turn by turn, they try to avoid the strenuous and time-consuming process of buildup and want to jump immediately to breakthrough. They typically wish to attain breakthrough with large, fallacious acquisitions; whereas, good-to-great companies mainly used large acquisitions to give further push to an already fast-spinning flywheel. These companies achieve sustained great results by their persistent effort in one direction over a long time and certainly not because of a single program or event, one eureka innovation or any miracle happening. The flywheel effect is not in conflict with short-term pressures of Wall Street; in fact it helps in managing such realities.

This paper is condensed/abstracted from the book titled Good to Great written by Jim Collins, HarperCollins Publisher Inc., New York, 2001. All rights of the author and the publishers are reserved.