Key concepts in taking an organization to Greatness.

1. “Why some companies make the leap…
and others don’t?”

2. AGENDA
•The Research
•GTG Framework
•GTG Concepts
•Comparison
•Examples
•Unexpected Findings
•Quiz
•Ice Breakers

3. THE BOOK
•Written by Jim Collins
•Translated in 35
languages
•Result of 5-year intensive
research
•3 Million Copies Sold
•One of the most
influential business book
before the 21st century

5. “Our five-year quest yielded many insights,
a number of them surprising and quite
contrary to conventional wisdom, but one
giant conclusion stands above the others: -
We believe that almost any organization
can substantially improve its stature and
performance, perhaps even become great, if
it conscientiously applies the framework of
ideas we’ve uncovered.”
- Jim Collins

7. 1995 - 2000
1965 - 1995

11. COMPANIES STUDIED
GOOD TO GREAT COMPANIES COMPARISON COMPANIES
Abbott (3.98) Upjohn
Circuit City (18.5) Silo
Fannie Mae (7.56) Great Western
Gillette (7.39) Warner-Lambert
Kimberly Clark (3.42) Scott Paper
Kroger (4.17) A&P
Nucor (5.16) Bethlehem Steel
Philip Morris (7.06) RJ Reynolds
Pitney Bowes (7.16) Addressograph
Walgreens (7.34) Eckerd
Wells Fargo (3.99) Bank of America
* 15-year return compared to general stock market

16. LEVEL 5 – EXECUTIVE
Builds enduring greatness through a blend of
PERSONAL HUMILITY and PROFESSIONAL WILL.
LEVEL 4 – EFFECTIVE LEADER
Vigorous pursuit of clear and compelling vision,
stimulating higher performance standards.
LEVEL 3 – COMPETENT MANAGER
Organizes people and resources towards effective pursuit
of pre-determined objectives.
LEVEL 2 – CONTRIBUTING TEAM MEMBER
Works effectively with others for the achievement of its objectives.
LEVEL 1 – HIGHLY CAPABLE INDIVIDUAL
Knowledge, Skills and Good Work Habits

17. PERSONAL HUMILITY
And
PROFESSIONAL WILL

18. • CEO of Kimberly Clark
• Stodgy old paper company
whose stock has fallen 36%
behind the general market over
past 20 years.
• Other management team told
him that he lack qualifications
• Among the 10 Greatest CEO of
all times

19. •CEO of Fannie Mae
•Company is losing $1M dollar
daily when he joined but earned
$4M every business day 9 years
after.
•Set up his successor for success
•“I want to look out from my porch
someday and look at Fannie Mae
and say “I used to work there”.

21. • CEO of Chrysler
• Talented yet egocentric
• Chrysler rose to height halfway
of his tenure
• Diverted his attention
• Made himself one of the most
celebrated CEO’s in America’s
history
• His book sold 7 Million copies
• Chrysler fell 31% behind the
market and return to glory
5 years after his retirement

23. THE 11 GTG CEO’S
Most remarkable CEO’s of the century:
• George Cain
“Did I have a lot to do with it?”
• Alan Wurtzel
“There are plenty of people in this
• David Maxwell company who could do my job better
than I do.”
• Colman Mockler
“I hope I am not sounding like a big
• Darwin Smith shot.”
• Jim Herring,
• Lyle Everingham.....
....but almost no one ever remarked about
them...

28. 1. Right people on the bus
2. Wrong people off the bus
3. Proper seats for the right
people

30. •Foresaw that banking industry
would eventually undergo wrenching
change
•Focused on “injecting an endless
stream of talent” directly into the
veins of the company
•He hired the most talented
management team in the industry
instead of mapping strategy for
“That is how you
change
build the future.”
– Dick Cooley •Wells Fargo outperformed the
market 3 times when banking
industry fell 59% behind

31. •Followed “Weak Generals, Strong Lieutenants”
model
•Strong lieutenants will stick around if weak
generals are picked.
•Weak generals for Bank of America would wait for
direction instead of seeking solution to problems.
•After losing over $1 Billion in mid 80’s, they
recruited a gang of strong generals (from Wells)
•They refer themselves as “Wells of America”
•BA began to climb upward again

32. • One genius is the driving force in company’s
success
• Does not need a management team
• Does not give serious thought on
succession planning
• Effective unless genius isn’t
there to make decision

33. LEVEL 5 + A “GENIUS WITH
MANAGEMENT THOUSAND HELPERS”
(Good to Great Companies) (Comparison Companies)
LEVEL 5 LEADER LEVEL 4 LEADER
FIRST WHO FIRST WHAT
Get the right people on the bus. Set a vision for where to drive the
Build a superior executive team. bus. Develop a road map.
THEN WHAT THEN WHO
Once you have the right people in Enlist a crew of highly capable
place, figure out the best path for “helpers” to make the vision
greatness. happen.

34. WALGREENS ECKERD
(Cork Walgreen) CORPORATION
(Jack Eckerd)
Picked the right people to Picked the right stores to
hire buy
Which people should go in Which stores should in
what seats what location
Best executive team in the Had no executive team
industry
Selection of a great With bunch of capable
successor helpers

35. • Made every decision
• From small enterprise to #295 in the Fortune
500 in just 6 years
• Completed 10 acquisitions in 10 years
• No serious thought given to succession
• Failed 66% behind the market when he left
the company

36. 1. Set up steel factories in provinces with farmers
who go to bed early, rise at dawn and get right to
work without fanfare
2. Idea of “You can teach farmers how to make a steel
but you can’t teach work ethic to people who don’t
have it in the first place”
3. Pays more than any other steel company in the
world, with bonus tied directly with productivity

37. Three (3) Practical Disciplines
on how to be rigorous in
people decision.

38. When in doubt,
don’t hire – keep looking.

39. No company can grow revenues consistently faster
that its ability to get enough of the right people
to implement that growth and still become a
great company.
If your growth rate in revenues consistently
outspaces growth rate in people, you simply will
not – indeed cannot – build a great company.

40. CIRCUIT CITY SILO
(Alan Wurtzel) (Sidney Cooper)
Goal - Build the best, most Goal – To grow as fast as
professional management possible
team in the industry
Spent the bulk of his time Focused his time on the
hiring the right people right stores to buy
Took off like a rocket and Could not even perform
beat the general stock basics - Deliveries
market at 18.5:1
“Always Looking for Great Bought by a foreign
People” company

41. When you know you need to
make a people change,
ACT!!

42. We have wrong person on the bus and we know it. Yet we
wait, we delay, we try other alternatives, we give a 3rd and 4th
chance hoping that situation will improve, we invest time in
trying to properly manage this person but we fail. We go
home and we find our energy diverted by thinking (or talking
to your spouse) about that person.
Worse is, all the time and energy we spend on that one
person takes the energy away from developing and working
with all the right people.
We continue to stumble along until this person leaves on his
own or we finally act after waiting for so long. Meanwhile,
our best people will wonder and ask “WHAT TOOK YOU SO
LONG?”.

43. •Letting the wrong people hang around is
unfair to all the right people
•Waiting too long before acting is equally
unfair to the people who need to get off the
bus
•Two key questions – Would you hire that
person again? Would you feel terribly
disappointed if that person leaves?

44. Put your
best people
on your
biggest opportunities,
not your
biggest problems.

45. Identified international markets as the
best opportunity for growth even with
less than 1% of total co. Revenue
Came up with brilliant answer to “Who”
and not “What”
Assign his number one executive,
Joe George Weissman who was running 99%
Cullman of the company that time
Few years later, Marlboro became the
best selling cigarette in the world, 3 years
before it became number one in US

46. UNEXPECTED FINDINGS:
1. There is no link between executive compensation and
the shift from good to great. The purpose of
compensation is not to motivate the right behavior from
the wrong people, but to get and keep the right people.
2. The old adage “People are your most important asset” is
wrong. The right people are.
3. “Right Person” has more to do with character, traits and
inner capabilities than with specific knowledge,
background and skills.

49. 1950’s - Largest 1950’s – Unspectacular
retailing corporation in grocery chain, half the
US size of A&P
1960’s – Began to falter 1960’s – Began to lay the
foundations to become
Lagged behind the great company
market
25 years later, generated
cumulative returns 10x
the market and 8x better
than A&P

50. •Old company facing •Old company facing new
new reality (111 years) reality (82 years)
•All assets invested in •All assets invested in
traditional grocery traditional grocery stores
stores •Brutal fact – this model
•Brutal fact – this model was going to become
was going to become extinct
extinct •Confronted the brutal
•Never dealt with the fact heads on and change
facts its whole system
•Failed to adapt •Became very successful

51. 1973-1998
25 years later, generated cumulative returns 10x the market like a
rocket and 8x better than A&P, while A&P lagged behind the market

53. •Postage meters •Address-duplicating machines
•Year 1973 – similar revenue and •Year 1973 – similar revenue and
headcount headcount
•Imminent reality of losing their •Imminent reality of losing their
monopoly monopoly
•Management meetings – 15 •Charismatic leader – Roy Ash
minutes discussion about •Set a vision to dominate IBM,
accomplishments and 2 hours Xerox and Kodak
about “scary squiggly things” •Refused to confront that his plan
that might impede future results has a little chance of success and
•Year 2000 – with 30,000 was doomed to fail
employees and revenue of $4 •Year 2000 – only 670 employees
Billion and revenue of &100 million
•Company closed
•Ash thrown out of the office

54. Pitney Bowes
Pitney Bowes outperformed Addressography by 3,581 to 1. (3,581 times better)

55. “There is nothing wrong with pursuing a
vision for greatness. After all, the good-
to-great companies also set out to
create greatness.
But, unlike the comparison companies,
the good-to-great companies
continually refined the path to
greatness with the brutal facts of
reality.”

56. How to Create a Climate Where the
Truth is Heard
Lead with questions, not answers
Engage in dialogue and debate, not
coercion
Conduct autopsies, without blame
Build “Red Flag” mechanism

57. Each MBA student will have a bright red sheet of paper, with
the following instructions:
“This is your red flag for the quarter. If you raise your hand
with your red flag, the classroom will stop for you. There are
no restrictions on when and how to use your red flag; the
decision rests entirely in your hands. You can use it to voice
an observation, share a personal experience, present an
analysis, disagree with the professor, challenge a CEO guest,
respond to a fellow student, ask a questions, make a
suggestion, or whatever. There will be no penalty whatsoever
for any use of a red flag. Your red flag can be used only once
during the quarter. Your red flag is nontransferable; you
cannot give or sell it to another student.”

58. Key psychology for leading
companies from good to great...

59. • Named after Jim Stockdale
• Highest ranking US military officer
during Vietnam war
• Tortured over 28 times during his
8-year imprisonment
• No prisoner’s rights, no set release
date, and no certainty he would even
survive to see his family again.
• Never lost faith during his ordeal:
“I never doubted not only that I would get out,
but also that I would prevail in the end and
turn the experience into the defining event of
my life, which, in retrospect, I would not
trade.”

60. He noted that it was always the most
optimistic of his prison mates who failed
to make it out of there alive.
“They were the ones who said, „We‟re
going to be out by Christmas.‟ And
Christmas would come, and Christmas
would go. Then they‟d say, „We‟re going
to be out by Easter.‟ And Easter would
come, and Easter would go. And then
Thanksgiving, and then it would be
Christmas again. And they died of a
broken heart.”

61. Retain absolute
faith that you can
and will prevail at
the end...
And at the same
time...confront the
brutal facts of
reality whatever
they might be.

62. Life is unfair – sometimes to our advantage and
sometimes to our disadvantage. We will all
experience disappointments and crushing events
somewhere along the way.
What separates people is not the presence or
absence of difficulty but how we deal with them.

66. What are
you
deeply
Passionate
about?
What
What you drives your
can be the Economic
best in the engine?
World at?

67. You cannot manufacture passion
or motivate people to feel
passionate.
You can only discover what ignites
your passion and the passions
around you.

68. CIRCUIT CITY
Best at implementing 4S Model (Service, Selection, Savings and Satisfaction
FANNIE MAE
Best capital market player in anything that pertains to mortgagest
GILETTE
Best at building premier global brands of daily necessities of sophisticated
technology
KIMBERLY CLARK
Best in the world at paper-based consumer product
NUCOR
Best in technology to produce low cost steel
PHILIP MORRIS
Best at “sinful” products like tobacco, beer, coffee and chocolate (Marlboro,
Miller, Maxwell House and Toblerone)
WELLS FARGO
Best at running a bank like a business.
ABBOTT LABORATORIES
Best at creating portfolio that lowers cost of health care

69. COMPANY ECONOMIC DENOMINATOR
ABBOTT Profit per employee
CIRCUIT CITY Profit per economic region
GILETTE Profit per customer
KIMBERLY CLARK Profit per customer brand
KROGER Profit per local population
NUCOR Profit per ton of finished steel
PHILIP MORRIS Profit per global brand category
WALGREENS Profit per customer visit
WELLS FARGO Profit per employee

70. •Breakthrough Strategy - •Acquire lumps of stores
Best, most convenient – 46 here 36 there – with
drugstores with high profit no unifying theme
per customer visit •Lurched after growth
•Became the best in the •Purchased American
world at convenient Home Video Corp.
drugstores •Produced &31 million in
•Exceeded the market losses
over 15 times beating •Eckerd ceased to exist
great companies like as an independent
Coke, Intel and GE. company

73. Author of the book Good to Great (1)
What are the 3 broad stages of transformation from being
good to great company (2-4)
Two distinguishing characters of Level 5 leader (5-6)
Three steps to implement the “First Who then What”
concept (7-9)
What do you call this psychology that states “ Retain
absolute faith that you can and will prevail at the end... And at
the same time...confront the brutal facts of reality whatever
they might be. (10)
Three dimensions of the Hedgehog Concept (11-13)

76. What does the title
“Culture of Discipline”
bring to your mind?

79. AIRLINE PILOT

80. AN AIRLINE PILOT
•Heads $84 Million piece of machinery
•Sits in a cockpit surrounded by dozes of
complicated gauges switches
•Begins with pre flight checklist,
systematically moves through methodical step
by step procedure
•Cleared for departure, he begins working with
air traffic control
•Once aloft, communicates continually with
flight-control centers
•Hits a ferocious thunder and hail storm, wings
tilt to the left and right*
•Did some maneauvers until it safely lands

82. •Dave Scott
•Won Hawaii Triathlon 6 times
•Would ride his bike 75 miles,
swim 20,000 meters and run 17
miles
•No weight problem
•Believed that low-fat diet
would give him extra edge
•Literally rinse his cottage
cheese to get the extra fat off

83. •Froze executive salaries for 2 •Preserved their posh
years executive kingdom
•Shut the executive dining •CEO’s office has large
room and replaced with food attached conference room,
service caterer oriental rugs, floor-to-ceiling
•Closed the executive elevator windows, with a sweeping
•Sold the corporate jets panorama view of
•Banned green plants from Golden Gate
Executive Suite •“Why rinse the cheese when
•Threw fancy-binded reports life is so good?”
•“Would you spend your own
money this way?”

84. • Good to Great companies had Level 5
leaders who built an enduring culture of
discipline
• Comparison companies had Level 4
leaders who personally disciplined the
organization through sheer force

85. EXAMPLES:
1. Stanley Gault of Rubbermaid – imposed strict disciplines,
arrives work at 6:30 am and worked 80 hours a week and
expects his managers to do the same. Rose dramatically
but also declined when he departed.
2. Lee Iacocca of Chrysler – imposed his towering personality
to discipline the organization, overhauled the management
structure, instituted strict financial controls, improved
quality measures, conduct mass lay off, etc.
3. Ray MacDonald of Burroughs – controlled the
conversations, told all jokes and criticized those not as
smart as he. Company succeeded but no culture of
discipline to endure beyond him, failed 93% below the
market after he left

86. MANTRA :
“Anything that does not fit with our Hedgehog Concept, we will not do.”

88. •Stopped the Annual Forecast
Game with Wall Street
•Unplugged titles of executives
•Unplugged layers in the
organization
•Unplugged Kimberly from all
paper industry trade
associations
DARWIN SMITH
Kimberly Clark

89. Good to Great companies institutionalized the discipline of
“Stop Doing” through the use of unique budget mechanism.
“Budgeting is a discipline to decide which
arenas should be fully funded and which
should not be funded at all....determining
which activities best support the
Hedgehog concept and should be fully
strengthened and which should be
eliminated entirely.”

90. Stop
Doing List
Is more
important than
To Do List

94. The key question is :
Does the technology fit directly with
your Hedgehog Concept?
If yes, then you need to become a pioneer
in the application of that technology.
If no, then you can settle for parity or
ignore it entirely.

98. No Technology can:
• Make you a level 5 leader!
• Turn wrong people into right people!
• Instill discipline to confront the brutal facts!
• Create a culture of discipline!

99. “If you ever find yourself
thinking that technology alone
holds the key to success, then
think of the US-Vietnam war.
The Americans lost to the
Vietnamese despite superior
technology.”

100. •Technology by itself, is never a primary root cause of
either greatness or decline
•Across 48 interviews with GTG executives, 80% did
not even mention technology as one of the top five
factors in the transformation.
•“Crawl, walk, run” can be a very effective approach,
even during times of rapid and radical technological
change.

102. A massive metal disk
30 feet diameter
2 feet thick
5,000 pounds in weight
It’s your job to turn this
wheel and get it going as
fast and long as possible
Turning this wheel is
like moving a company
so it will begin to
produce results

103. Good to Great
transformations do not
happen overnight or in one
big leap.
Rather, it starts one
movement at a time,
gradually building up
momentum till there is
breakthrough.

105. •Egg sitting there
•No one pays attention
•Egg cracks open
•Out jumps a chick
•Media
•“The Transformation”
•“The Remarkable Evolution”
•“Stunning Turnaround”
•GTG companies had no name for their
transformation, no launch event, no tag
line, there were no miracle moment!

106. ABBOTT
“It wasn’t a binding flash or sudden revelation from
above”. Our change was a major change, and yet in
many respects simply a series of incremental
changes...”
FANNIE MAE
“There was no one magical event, no one turning
point, It was a combination of things. More of an
evolution, though the end results were dramatic.”
WELLS FARGO
“It wasn’t a single switch that was thrown at one
time. Little by little, the themes became more
apparent and stronger....”

112. Is your organization on a FLYWHEEL or on a DOOMLOOP?
You are in a Flywheel, if you:
•Follow a pattern of build up, leading to breakthrough
•Confront the brutal facts to see what steps must be taken
to build momentum
•Attain consistency with a clear “Hedgehog Concept”,
staying within the 3 circles
•Follow the pattern of disciplined people, thought and
action
•Harness appropriate technologies to your Hedgehog
concept
•Spend little energy trying to motivate or align people; the
effect of Flywheel is infectious
•Maintain consistency over time.

113. Is your organization on a FLYWHEEL or on a DOOMLOOP?
You are in a Doomloop, if you:
•Skip build up and jump right into breakthrough
•Implement big programs, radical change efforts, dramatic
revolutions and chronic restructuring
•Embrace fads and engage in management hoopla, rather
than confront the brutal facts
•Demonstrate chronic inconsistency, lurching back and
forth, and straying outside the 3 circles
•Jump right into action, without disciplined thought, or first
getting the right people on the bus
•Spend a lot of energy trying to align and motivate people,
rallying them around new visions
•Sell the future to compensate for lack of results in the
present

118. Please fill up the
EVALUATION FORM

119. It is about having disciplined people engaged in disciplined
thought and who then take disciplined action (14)
A very effective approach in considering technology in our
business (15)
Concept of going from build up to breakthrough (16)
Two popular doomloops to avoid (17-18)
What are the 7 concepts of being good to great company?
(19-25)

121. Author of the book Good to Great (1) JIM COLLINS
What are the 3 broad stages of transformation from being good to great
company (2-4) DISCIPLINED PEOPLE, DISCIPLINED THOUGHT AND DISCIPLINED
ACTION
Two distinguishing characters of Level 5 leader (5-6) PERSONAL HUMILITY OR
MODESTY AND POLITICAL WILL
Three steps to implement the “First Who then What” concept (7-9) RIGHT
PEOPLE ON THE BUS, WRONG PEOPLE OFF THE BUS, RIGHT SEAT FOR THE
RIGHT PEOPLE.
What do you call this psychology that states “ Retain absolute faith that you can
and will prevail at the end... And at the same time...confront the brutal facts of
reality whatever they might be. (10) STOCKDALE PARADOX
Three dimensions of the Hedgehog Concept (11-13) WHAT YOU CAN BE THE
BEST AT, WHAT ARE YOU PASSIONATE ABOUT, WHAT DRIVES YOUR ECONOMIC
ENGINE

122. It is about having disciplined people engaged in disciplined thought and who
then take disciplined action (14) – CULTURE OF DISCIPLINE
A very effective approach in considering technology in our business (15)
CRAWL, WALK, RUN
Concept of going from build up to breakthrough (16) FLYWHEEL
Two popular doomloops to avoid (17-18) MISGUIDED ACQUISITIONS AND
LEADERS WHO STOPS THE FLYWHEEL
What are the 7 concepts of being good to great company? (19-25) LEVEL 5
LEADER, FIRST WHO THEN WHAT, HEDGEHOG CONCEPT, CULTURE OF
DISCIPLINE, TECHNOLOGY ACCELERATORS, FLYWHEEL

123. THANK YOU!!!!!