In our work with management teams one of the thought leaders we use is Jim Collins and his book ‘Good to Great’, an in depth analysis on a set of elite companies that made the leap to great results and sustained those results for at least fifteen years. How great? After the leap, the good-to-great companies beat the stock market by an average of seven times in fifteen years, better than twice the results delivered by a composite index of the world’s greatest companies including Coca-Cola, Intel and General Electric.
In the book, Collins described how greatness is not a function of circumstance, but is largely a matter of conscious choice and discipline, which is great news for us mere mortals, as it tells us we have the potential to build a great company (rather than awaiting luck to favour us).
Without providing a synopsis of the book, Good to Great introduces several concepts including;
Level 5 leadership: An executive who builds enduring greatness through a paradoxical blend of personal humility and professional will, this individual is preparing the future legacy for the sake of the company, not for self-benefit and is fanatically driven toward producing sustained results. This works best when supported by effective leaders, competent managers, contributing team members and highly capable individuals (getting the right people).
Confront the brutal facts: Accepting the current reality and seeing it as what it is objectively.
The Hedgehog Concept: The ‘great’ companies acted more like a hedgehog than a fox, whereas a fox will pursue many ends at the same time, and see the world in all it’s complexity the hedgehog simplifies a complex world into a single organising idea, a basic principal or concept that unifies and guides everything… reducing all challenges and dilemmas to a simple hedgehog idea. The hedgehog concept is found at the intersection of three circles and more than a strategy it’s really an understanding.
An organisation can find its Hedgehog Concept by making three separate assessments. First, it can understand what its people are truly passionate about. Next, it can identify what it does better than anyone else. And last, it can determine where it’s good at generating revenue.
Just because something is your core business – just because you’ve been doing it for years or perhaps even decades – does not necessarily mean that you can be the best in the world at it. And if you cannot be the best in the world at your core business, then your core business cannot form the basis of your Hedgehog Concept.
BHAG: by extracting the potential of the Hedgehog Concept out 10 to 30 years, a company can develop a Big Hairy Audacious Goal which drives the economic engine, you are passionate about and you have the capability to be the best in the world at. The BHAG is the ‘North Star’ the company is aiming for in the long term.
Flywheel: “The Flywheel” is a very useful analogy which describes how driving a new strategy is like getting a huge flywheel into motion. Initially, there is no movement – many people think that the strategy is absurd – it is almost impossible to imagine the flywheel at speed. With great exertion of will, the CEO is able to deliver some results that get the flywheel moving. They appear small and trivial initially, but create the credibility to move to more ambitious results. As more and more results accumulate, more and more people throw their weight behind the wheel and the momentum of the flywheel builds and builds.
Doom Loop: The opposite of the flywheel effect where companies lack the discipline required to produce the flywheel effect. Instead they launch change programs with huge fanfare, hoping to ‘enlist the troops’. They start down one path only to change direction.
After years of lurching back and forth, these companies discover that they’ve failed to build any sustained momentum. Instead of turning the flywheel, they’ve fallen into a Doom Loop: Disappointing results lead to reaction without understanding, which leads to a new direction—a new leader, a new program—which leads to no momentum, which leads to disappointing results. It’s a steady, downward spiral.
To go from good to great requires transcending the curse of competence. It requires the discipline to say, ‘Just because we are good at it – just because we’re making money and generating growth – doesn’t necessarily mean we can become the best at it.’ The good-to-great companies understood that doing what you are good at will only make you good; focusing solely on what you can potentially be better than any other organisation at is the only path to greatness.
The exact same world that had become so simple and clear to the good-to-great companies, remained complex and shrouded in the mist for the comparison companies. For all their change programs, frantic gesticulations, and charismatic leaders – they rarely emerged from the fog … setting their goals and strategies more from bravado than from understanding.
Of course the key element in building a great company is discipline. The first step was getting the right people, doing the right things the right way. This was a process of Disciplined People, Disciplined Thought followed by Disciplined Action. With so much emphasis on quarterly results in listed companies, and a great deal of emphasis on BHAG’s in non listed companies (with a strong growth ambition), what is most important is the not north star (BHAG) but more importantly the compass (the Hedgehog).
Why? Because at the intersection of Hedgehog and discipline greatness can be achieved, as mentioned earlier it is a combination of conscious choice and discipline, not a lofty BHAG that could inspire people to create miracles (without the discipline to execute).
As martial artist & actor Bruce Lee famously said “I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times.” That ‘one kick’ should be your Hedgehog.
Brad Giles works with CEO’s and management teams to develop & execute a winning strategy at offsite planning sessions. Learn more at www.evolutionpartners.com.au
BHAG® is a registered trademark of Jim Collins & Jerry Porras